Financing Public Capital through Land Rent Taxation: A Macroeconomic Henry George Theorem
AbstractFinancing productive public capital through distortionary taxes typically creates a trade-off: the optimal investment is determined as a compromise between efficiency-enhancing public investment and perturbing market efficiency, but is never socially optimal. In contrast, such a trade-off can often be avoided if public capital is financed by taxing rents of a fixed production factor, such as land. Here, we provide a macroeconomic version of the Henry George Theorem. Specifically, we prove that the socially optimal level of the public capital stock can be reached by a land rent tax, provided land is a more important production factor than public capital.
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Bibliographic InfoPaper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 4280.
Date of creation: 2013
Date of revision:
land rent tax; public investment; Henry George Theorem; social optimum;
Find related papers by JEL classification:
- H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
- H40 - Public Economics - - Publicly Provided Goods - - - General
- H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
- Q24 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Land
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