What’s your take on rents? Too low? Too high? Just right?

Errrr — wrong. They’re too damn high.

Which brings us to today’s post. Ya ever play Monopoly? You ever wonder what kinda psychopath made such a stupid game? Well, turns out a woman named Lizzie Magie made it specifically to be a rage-baiting game — to promote Henry George’s ideas, namely the Land Value Tax. Decades later, someone stole the idea, stripped out the “anti-monopolist” ruleset that actually led to a fun, cooperative game, and left only the “screw over your friends by gobbling up all the property” ruleset. And he got rich.

Not a Georgist? Figures. Well, in 1890 Henry George was bigger than Jesus. Almost. His Progress and Poverty was the second-highest-selling book of the late 1800s, narrowly losing to the popular Torah sequel. He was a rock star — and much like the church, he had a religious group of followers to spread the good word of Georgism. Despite being a self-taught guy who just wrote some ideas about land taxes, he almost won Mayor of NYC as a dark-horse Labor party candidate (if not for being opposed by the Tammany Hall machine and literal ballot stuffing), and his funeral, at 200k people, was the biggest NYC had ever seen. He’s a bit of a nonpartisan figure who has a little something for everyone — from the die-hard socialist to the market-loving finance bro.

What was his whole spiel? Tax land.

Why? Because fuck land speculators, that’s why. An entire professional class of people who just sit on a plot of land for years without having to do anything.

The parking lot problem

As a NYC-er, I get really frustrated by the following situation: why are there a bunch of empty parking lots in Manhattan? Shouldn’t those, like… be housing instead?

Yeah, duh. But the reason is that property taxes are on buildings, not the land. So the owner of that parking lot pays very little in property taxes, despite sitting on prime real estate. They can just sit on that parking lot for the next 30 years while downtown Manhattan keeps going up in value.

What can we do instead? A Land Value Tax (LVT). The basic argument:

• You should be taxed on the value of the land underneath your building. Not on whatever you do with the land. Land in downtown Manhattan is pretty expensive, so that’d be a huge tax bill.
• The only way to pay such a big tax bill is to put the land to work. It’s valuable precisely because it could host a building with 100 families in it. A single-family home, or a parking lot business, would not generate enough revenue.
• So land isn’t taxed according to what it is (a parking lot), but according to what it could be (a big-ass building housing a lot of people). The parking-lot owner would need to sell to someone who’s actually going to do something with it.

Wait, this random guy was actually right?

Believe it or not, this self-taught dude not only launched a populist, pro-union movement around this one idea — the idea also happens to be well-supported by modern economics. Why is it good?

First off, land is scarce. And it’s really important for scarce land to be put to good use. If you take a piece of prime real estate and make it a private parking lot, you’ve in essence robbed the city of some joy. You have the right to do this, but it’s in the public’s interest to structure taxes so land gets used in useful ways.

Secondly, property taxes create tons of bad incentives. You’re telling the parking-lot owner that if they build any structure, their tax bill skyrockets? No wonder they’re content to sit on asphalt. With a land tax, the bill stays the same regardless of use — parking lot, six-story mixed-use building, or a shrine to Henry George, same tax. Property taxes are incredibly “distortionary.” What does that mean?

Well, when you tax something, you generally see less of it. Slap a 100% tariff on Chinese EVs — guess what, there are approximately zero running around. Tax cigarettes and alcohol with sin taxes and people consume less (though not that much less — demand is fairly inelastic; people need their fix). Tax building housing on a parking lot? Less housing.

But land? Tax it, and guess what — that Manhattan parking lot didn’t get swallowed by the earth. It’s still there. The supply of land is pretty much perfectly inelastic (unless you’re a fan of libertarian ocean-barge cities). In a graph, that looks like a vertical supply line — try to make the red triangle go away:

That red triangle is the deadweight loss — value that just evaporates when a tax scares off trades that would have happened. Tax almost anything and you get a triangle. Tax land and the triangle vanishes, because the supply can’t run away. The tax is pure transfer: rent that was going to a passive landowner now funds the city instead.

So it’s kinda a no-brainer. Tax plots of land based on potential, and you’ll see land get used to its potential. More housing, lower rents, fewer wastes of space and urban eyesores.

Some problems with LVT

I’m not a total shill. There are real issues.

• Politics. The people who’d pay an LVT — landowners — vote, donate, and organize at much higher rates than the renters who’d benefit. That’s a hell of a headwind for any reform, and after World War I redirected the country’s populist energy, the Georgist movement never got its momentum back.
• The “single tax” thing. Henry George wanted this to be the only tax. Like, no other taxes. That sounds kinda crazy to me. But I think we should definitely shift property taxes to gradually become land taxes over time.
• Administration. You need the government to estimate the value of the underlying land without being biased by what’s built on top. Modern statistical modeling helps a lot here, but there’s always the risk of local corruption — much like how property-tax assessments today are usually utter bullshit.
• The developer’s dilemma. If you single-handedly take an industrial apocalypse wasteland and turn it into a vibrant neighborhood, land values rise because you made the area good. Your taxes go up for a windfall you created, which could distort a lone developer’s desire to do that. Kinda an edge case, and solvable other ways.

”Won’t everywhere just look like Midtown?”

A common objection: ugly skyscrapers everywhere?

Well, an LVT doesn’t change the underlying zoning. If an area is only zoned for single-family homes, an LVT just encourages productive use up to the zoning maximum. (I also think we need zoning reform — but that’s a separate post.)

And actually, an LVT is a great way to capture the gains from zoning reform. When an area gets upzoned, you can build higher, which means the land is worth more. Absent an LVT, all that value from the government’s upzoning policy gets captured by whoever happens to own the land. An LVT makes it possible to claw part of that windfall back for the public.

Where it’s actually been tried

An LVT has only been tried in a few US places. There are examples of mixed-rate (“split-rate”) property taxes in various Pennsylvania municipalities, with research indicating they led to more productive housing patterns. And in Detroit — land of infinite parking lots and urban blight, where no one does anything with the land to avoid taxes — the city has been trying since 2023 to shift property taxes toward an LVT in a revenue-neutral way to break the spiral of blight and abandonment in the city center.

And in my hometown of NYC? My boy Zohran is cooking with Kathy. The state budget passed this April actually authorized land value capture to help fund the Interborough Express and the Second Avenue Subway extension up to 125th — projects worth over $12 billion combined. New subway stops make nearby land more valuable, so the city taxes a slice of that windfall to pay for the trains that created it. The public gets self-funding infrastructure, while landowners are still left better off. Econ 101 baybeeeeee.

Are you radicalized yet? Welcome to the second wave of Georgism — there are DOZENS of us! Let’s go make Lizzie Magie proud.