The Simple Logic of a Land Value Tax

Published 2024-03-30.

The lowest common denominator in political philosophy is the night-watchman state, also known as a minarchy, where the state protects us from aggression. We might argue about whether the state should offer infrastructure and social services, but, if we are going to have a state, at least it needs to provide security.

In practice, an important part of protection against aggression is protecting land. Whether it’s from burglars, squatters, vandals, or foreign powers, land needs to be protected.

How shall we pay for this protection? The most straight-forward way is to tax land according to its value. The more valuable the land, the more valuable the protection, and the more you’d be willing to pay. As an example, the state might tax landowners 20% of the rent the market would be willing to pay for the land. This is called a land value tax (LVT).

Today, most countries tax income instead. This is more complicated and expensive. Consider, for example, the privacy implications:

[Income tax] especially, I feel is a gateway drug to the surveillance state. One of the advantages of land value tax is you don’t even care necessarily who owns the land. You’re just like, “Hey 4732 Apple Street, make sure the check shows up in the mail. I don’t care how many shell companies in the Bahamas you've obscured your identity with, just put the check in the mail, Mr. Address.”

Whereas the income tax needs to do this full anal probe on everyone in the country, and then audits the poor at a higher rate than the rich, and it’s just this horrible burden we have. And then it gives the government this presumed right to know what you’re doing about everything you’re doing in this massive invasion of privacy.

Lars Doucet on the Dwarkesh Podcast

The logic of a land value tax is simple: The state protects the land. The more valuable the land, the more valuable its protection. Therefore, the state should tax the land.