David R. Henderson  

The Case for a Basic Land Guarantee

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Reading Chapter V, "Of property," in John Locke's "Of Civil Government" for a conference a few months ago, I had an idea for getting the federal government to disgorge much of the property it owns: a Basic Land Guarantee (BLG).

We have heard much about the Basic Income Guarantee (BIG). Co-blogger Scott Sumner's brief discussion here overlaps my discussion here. One big problem that both Scott and I point to: any BIG that has a chance of being implemented would cause a huge expansion of federal spending and taxes.

The higher taxes result from the fact that the government has to take the money from people.

What about having the government give up some of what it already owns? The U.S. government now owns over 600 million acres of land. Let the government keep all the national parks and the various federal buildings and the land the buildings are on, as well as all the military and veterans' cemeteries. Throw in other categories I haven't thought of and the odds are that you would have the government keep no more than 200 million acres, which is 300,000 square miles. That leaves 400 million acres to be given to people. There are approximately 325 million people in the United States, about 300 million of whom are U.S. citizens or permanent residents. So every one of the 300 million U.S. citizens and permanent residents could get an acre. The government could hold a lottery to decide which acre a U.S. citizen or permanent resident got. Of course, some acres would be worth close to zero and some might be worth a couple of hundred thousand dollars. People would be free to sell their acres and various buyers would aggregate to do something useful with the land. Some acres, of course, might be subdivided.

As noted above, one big benefit of my BLG proposal is that it would get land out of the hands of the feds and into private hands.


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COMMENTS (26 to date)
Nick writes:

If it's a good idea for the government to transfer public land into private hands, then it's a good idea to do that, and economic theory suggests the most efficient way to do that is to sell the land to the highest bidder.

As a separate issue, if BIG is a good idea, then BIG is a good idea.

Why should we link the two policies? If the land is not sold, the US government doesn't lack ways to get money to distribute to citizens. They can borrow or tax the money. You object to this because you think borrowing or taxing is a big problem. Whether that's true or not is beside the point; the government could sell the land and use it to reduce the amount it taxes or borrows. No matter how the land is distributed, implementing BIG results in an increase in taxes or borrowing.

David R. Henderson writes:

@Nick,
If it's a good idea for the government to transfer public land into private hands, then it's a good idea to do that, and economic theory suggests the most efficient way to do that is to sell the land to the highest bidder.
Either way, it will end up in the hands of those who value it most. With my way, there’s a constituency for this; with your way, there’s much less of a constituency.
No matter how the land is distributed, implementing BIG results in an increase in taxes or borrowing.
I agree, which is one of the main reasons I oppose BIG. I’m proposing BLG.

michael pettengill writes:

In other words, welfare, government gives everyone free stuff.

Of course, the States and local communities will demand tax payments.

Someone with an acre of wasteland will demand government build roads. Let's say a hundred people put RVs on their plots of land in the desert, vote to incorporate, then vote for a property tax on the 10,000 acres of land to pay for roads, applying to the highway trust for the 90% match for building a post road to their 100 lots so the USPS, and UPS and FedEx can deliver their mail and Amazon orders.

Then apply for rural electrification grants, mostly to plant power poles to hold the fiber optic telecom and the WiFi base stations to deliver free wireless and gigabit Internet to the 100 residents, paid for with property taxes and cheap federal debt and grants for rural telecom.

Oh, and right of way can be taken by eminent domain pretty cheaply given there will be few buyers of land that will be taxed, and bypassed with roads if the landowners doesn't sell right of way dirt cheap.

Remember the history of homesteading. At the end, the land grants were 320 acres and 640 acres, but that was insufficient to make the land an asset.

Your proposal is more like the FDR subsistence homesteading program of 1933-35.

Nick writes:

@David R. Henderson

> I agree, which is one of the main reasons I oppose BIG. I’m proposing BLG.

A typo, I of course meant to write "No matter how the land is distributed, implementing BLG results in an increase in taxes or borrowing."

Whether you pay citizens with land or with money, there will be a big increase in taxes. If you pay the citizens with land, then the increase is compared to simply selling the land and using it to reduce taxes.

Putting that aside, giving people an acre of land seems a pretty inefficient way of transferring wealth. Ideally, we want them to re-sell it, but now there are coordination problems and transactions costs and hold-outs, etc... If the land should be privately owned, then better to just sell it. (And then, as a separate issue, use that money however is best, whether it be BIG or reducing taxes.)

Dan Sullivan writes:

It is far better to do what the country's founders proposed in the Articles of Confederation (Article 8), which is to tax all privately held land according to its value.

I would suggest taxing government-held land as well, and having a budget cap set by referendum. That would limit the amount of land anyone can hold, including the government, to the amount that person can profitably use after the taxes are paid.

Taxing land value was endorsed by John Locke himself, who wrote,

"It is in vain in a Country whose great Fund is Land, to hope to lay the publick charge of the Government on any thing else; there at last it will terminate. The Merchant (do what you can) will not bear it, the Labourer cannot, and therefore the Landholder must: And whether he were best do it, by laying it directly, where it will at last settle, or by letting it come to him by the sinking of his Rents, which when they are once fallen every one knows are not easily raised again, let him consider."

It was also endorsed by Adam Smith, Francois "laissez faire" Quesnay, Turgot, Penn, Franklin, Jefferson, Paine, many of the great libertarians through history, and more recently, by at least eleven Nobel Laureates in Economics, including Samuelson, Friedman and Buchanan.

Also, for every dollar of land value tax collected, we can eliminate a dollars worth of taxes that fall on human labor.

AntiSchiff writes:

David,

It would make more sense to just auction off the land and give each citizen an equal share of the proceeds, or perhaps give the proceeds disproportionately to the poor.

Toby writes:
It would make more sense to just auction off the land and give each citizen an equal share of the proceeds, or perhaps give the proceeds disproportionately to the poor.

My thoughts exactly. To auction off the land seems to involve far fewer transaction costs than assining the land by lottery and waiting for it to be moved to its highest valued use. And this way the role of luck can be taken out of the equation and individuals can each be given an equal share.

Though, if this is a good idea, then it is also a good idea for the government to borrow money to do exactly the same thing... The balancesheet of the government doesn't change as a consequence and it could always sell the land later to pay back the loan.

If I were a US citizen, then I'd rather see this money spent to reduce the debt though...

David R. Henderson writes:

@Nick,
Whether you pay citizens with land or with money, there will be a big increase in taxes. If you pay the citizens with land, then the increase is compared to simply selling the land and using it to reduce taxes.
No. Generally, the way economists assess something like this is to hold all else equal. Giving citizens money will require a big increase in taxes. Giving citizens land, holding the debt and the time path of deficits as it would have been, requires no increase in taxes, except the small increase to finance the employees who run it.

Colombo writes:

I agree with Professor Henderson's proposal but for one part: "Let the government keep all the national parks and the various federal buildings and the land the buildings are on, as well as all the military and veterans' cemeteries."

I believe all national parks should be awarded to environmentalists. Let them take care of what they love most without burdening everyone else.

As for federal buildings, I think the tenants should pay rent to the legitimate owners of the land where they are, who should be people who won that land in the lottery process, or whoever they sold that land to afterwards, without threat of violence. That would be fair.

As for military and veterans' cemeteries: pacifists should take care of them. Never forget the nasty truth of History.

One more thing: monuments, paintings, statues and sculptures that glorify murderers and liars should be destroyed, like the Lincoln memorial. I adhere to Thomas J. DiLorenzo's opinion on this.

Would it be a pity to destroy them? Sell them to the pious.

Am I being too stern?

benj writes:

It we want to live in a truly free and prosperous society, we'd share equally the value nature supplies for free. That is, we share this Earth as equals.

There are those that for ideological reasons do not want humans to be equals. Those people I personally define as Fascists.

Does moving State land into private hands make the World a more equal place?

Henderson believes that State ownership of Land must be a bad thing. How does he explain the success of Hong Kong or Singapore? Or Norway or Saudi regarding oil?

No need to nationalise Land, a 100% tax on it's rent value achieves a fair distribution of the value derived from it and allocates it at optimal efficiency, while leaving title deeds intact.

Nick writes:

@David R. Henderson

Generally, the way economists assess something like this is to hold all else equal.

I agree, but you are the one who is not holding all else equal. You are taking two, entirely distinct policy proposals, and considering their effects together.

Those policy proposals are

1. The government should guarantee some wealth (whether through land, or through cash) transfer to its citizens.
2. The government should divest itself of public land.

It's a basic economic fallacy to lump these two together and argue that BLG is somehow neutral in its effects on the size of the government. The opportunity cost of an action is the next best alternative to taking that action. Assume that, in fact, (2) is a good policy, so that the government should not own public land. The next best alternative to BLG is for the government to simply sell the land and use the money to lower taxes. Therefore, BLG has exactly the same cost, in terms of taxes raised, as BIG.

David R. Henderson writes:

@Nick,
I agree, but you are the one who is not holding all else equal. You are taking two, entirely distinct policy proposals, and considering their effects together.
Actually, I’m not. I led by saying why I thought BIG was a bad idea and then transitioned to BLG.

Nick writes:

@David R. Henderson

You're not getting the point here, but you also didn't respond to it, so I don't know what else to say.

Here's an analogy: Let's say I really like apples, and equally dislike oranges.

Someone suggests I eat an orange. I say, "No, I don't like oranges."

They say: "Why don't you eat an apple with the orange? You like apples just as much as you dislike oranges."

I say: "Whether I eat an apple or not, I still don't want to eat an orange!"

Apples are government divestment of public land. Oranges are wealth transfers to citizens. You say you like government divestment of public land, and dislike an increase in taxes that wealth transfers necessitate.

But, holding fixed one policy (government divestment of public land), the other policy increases taxes no matter who owns the government lands!

An alternate way to see this is that the opportunity cost of your BLG proposal is simply selling the land and lowering taxes. It's a basic economic fallacy to say that, since BLG is nominally revenue neutral, that it does not increase the size of government.

David R. Henderson writes:

@Nick,
You’re right that I don’t get your point.

Nick writes:

@David R. Henderson

It's Econ 101, and normally, it's the sort of thing I'd expect to see you arguing in response to a fallacious newspaper editorial.

Jon Murphy writes:

@nick-

I'm with Prof. Henderson here. I don't understand your point and your analogy just made me even more confused.

I don't understand why the government discharging assets is necessarily going to lead to a big increase in taxes (the only thing I can think of is if the government were doing something on those lands to earn revenue).

Nick writes:

@Jon Murphy

There is something the government can do on those lands to earn revenue -- sell them. Or rent them for private use.

Joshua Woods writes:

@Nick

I can see your argument - if the land is worth $100 Bn at market prices then by gifting the land to the public the government is foregoing $100 Bn it could raise and the use to cut taxes by $100 Bn. So far so equal. Both proposals provide $100 Bn to the public and both improve the economy's supply side by allowing the land to reach its most productive use.

But Prof Henderson's proposal has two further advantages:

1. It leaves the distribution of wealth where it is by raising everyone equally which tax cuts would not.

2. It actually has a chance of making it past the median voter which simply selling the land and cutting taxes does not.

I think that's where you are talking past each other

Nick writes:

@Joshua Woods

Two good points, and I can think of several others, all of which might make an interesting blog post, but none of which Prof. Henderson discussed. My contention is with his claim that the advantage of BLG over BIG is that it won't increase taxes.

Chris Wegener writes:

Who fights the fires?

Jon Murphy writes:

@Nick-

I agree the government could use the funds to pay down some debt or lower taxes in the short term, but that's not the same as saying it'd increase taxes.

Nick writes:

@Jon Murphy

From an economic perspective it is. The same trade-off between higher taxes and a wealth transfer to citizens exists whether the transfer is in land or money, and whether the government already owns the land or not. This is a classic econ 101 question. Obviously that doesn't mean it's true, and you don't have to buy into the economic way of thinking about this, but Prof. Henderson generally does, which is why I'm critical.

Hazel Meade writes:

I really like this idea, although I am not sure there is nearly as much land worth owning as suggested by the 600 million acres.

A lot of land is wasteland or impassable mountainous terrain. Most of the rest that is not national parks is designated wilderness, wildlife preserve, or wildlife management zones. Which means you have to fight environmentalists and hunters to sell it. There's a giant wilderness area in eastern Arizona where they reintroduced wolves a few years ago. Nevermind Jaguar habitat. Conservationists aren't going to give that up without a fight, and I'm sure there's a similar story for every other location.


Hazel Meade writes:

It would make more sense to just auction off the land and give each citizen an equal share of the proceeds, or perhaps give the proceeds disproportionately to the poor.

I don't agree. Land can be farmed to produce a continuous income that makes a poor person (potentially) financially independent. Cash will simply be spent. Consider that a person growing their own food on a small garden plot is untaxed and not subject to the minimum wage. That person could simply be left alone to feed themselves instead of being supported on welfare. Or at least welfare payments could be somewhat lower.

Now, you're going to object that the land could be more productively farmed by someone else and then food stamps provided to the poor person instead. Which is what we have now with SNAP. But that leaves the poor person a dependent with no skills, and there is something to be said for fostering independence and self-sufficiency. Instead of the current system, one where the poor person is allowed to grow *and sell* his own food would be far more respectful of human dignity. Get rid of a few agricultural regulations, give away plots of land and give them a chance to at least feed themselves if not sell some of their produce and improve their own livelihoods.

Caveat: This model assumes what we're giving away is arable land and that opposition from conservationists can be overcome.

Hazel Meade writes:

@Nick,
You seem to be saying that selling land is exactly the same as raising taxes in terms of it's effect of the size of government.

This is nonsense. Once the government sells land, it doesn't own it anymore, and cannot control it. The money raised is temporary and will end when the supply of land ends. Moreover it doesn't come out of anyone's pocket, so there's that too.
The size of government is not purely a function of how much income it has. The size of government is a function of what it does and can do. If the government owns less stuff, there is less stuff it has power over, less stuff it can do,m independent of how much money it raises in income.

Nick writes:

@Hazel Meade

You seem to be saying that selling land is exactly the same as raising taxes in terms of it's effect of the size of government.

This is nonsense.

You're correct -- it is nonsense. I also never said it. Selling the land and, e.g., using the proceeds to lower taxes, would lower taxes. Prof. Henderson seems to believe this is the best policy.

Selling the land and using the proceeds to institute a massive new transfer program (BIG), on the other hand, would increase taxes, relative to Prof. Henderson's next most preferred policy.

Not selling the land and simply randomly assigning it to people (BLG) would also increase taxes relative to Prof. Henderson's next most preferred policy.

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