Joseph Stiglitz Praises Henry George
The Generalized Henry George Principle:
One of the general principles of taxation is that one should tax factors that are inelastic in supply, since there are no adverse supply side effects. Land does not disappear when it is taxed. Henry George, a great progressive of the late nineteenth century, argued, partly on this basis, for a land tax. It is ironic that rather than following this dictum, the United States has been doing just the opposite through its preferential treatment of capital gains.
But it is not just land that faces a low elasticity of supply. It is the case for other depletable natural resources. Subsidies might encourage the early discovery of some resource, but it does not increase the supply of the resource; that is largely a ma!er of nature. That is why it also makes sense, from an efficiency point of view, to tax natural resource rents at as close to 100% as possible. The well-designed auctions described earlier enable government to capture most of the rents derived from government owned assets.
Generalized Polluter Pay Principle:
The generalized Henry George principle identifies a class of taxes that does not impede economic efficiency. But there is a class of taxes that actually increases economic efficiency—taxes which discourage activities that generate negative externalities.16 The most important category of such taxes are those on environmental externalities. Within this area, the most important are those associated with carbon emissions, with their impact on global warming and climate change. It ma!ers less whether those generating the pollution pay a carbon tax or buy emission permits that are auctioned; either can generate large amounts of money and simultaneously improve economic performance.