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Contents
LAND VALUE TAX: PART ONE
Introduction
Land Value Tax (LVT) is a proposal to tax the value of land itself, ignoring buildings or improvements on it.
The idea dates back to the 19th century and has attracted economists across the political spectrum. Proponents argue that because land’s value is created by the community (through development, infrastructure, and demand) rather than by any individual owner’s effort, taxing that value is both fair and economically efficient.
From the “Single Tax” theory of Henry George to modern experiments in places like Hong Kong, LVT has a rich history.
This article explores its theoretical foundation, historical attempts to implement it, endorsements by figures like Winston Churchill and Milton Friedman, use in other countries, practical considerations, and what studies say about its revenue potential in the UK.
Henry George and the “Single Tax” Theory
In 1879, American political economist Henry George published Progress and Poverty, a book that became enormously popular and sparked a movement.
George observed that as the economy and population grew, landowners seemed to gain wealth effortlessly while poverty persisted.
He concluded that the economic rent of land (the income one can collect simply by owning land) was “unearned” wealth that rightly belonged to the community.
His solution was the “Single Tax”: a 100% tax on land’s unimproved value, replacing all other taxes.
In theory, this would capture for public use the value that society creates, while leaving wages and productive capital income untaxed.
George argued this shift would spur productive activity, discourage land speculation, and fund government amply. He wrote that such a land tax could raise so much revenue that it might even generate surplus for public works.
Though few governments adopted George’s full single-tax program, his ideas (later termed Georgism) heavily influenced reformers and economists.
The core notion remains influential: that taxing land value, which cannot be hidden or destroyed, is both just and economically efficient.
Monopoly’s Origins: The Landlord’s Game and Henry George’s Ideas
In the early 1900s, Henry George’s principles even found their way into a board game.
In 1904, an American named Elizabeth “Lizzie” Magie patented The Landlord’s Game, a real-estate and taxation game explicitly designed to teach Georgist ideas.
Magie was a follower of Henry George and wanted to illustrate how unchecked land grabs and rent-seeking would enrich landlords at the expense of tenants and the broader community.
The game’s mechanics demonstrated that landowners could profit without working – for example, by charging rent as others improved the surrounding area – a scenario meant to expose the injustice of the prevailing system.
She hoped players (even children) would grasp the unfairness of such unearned gains and see the logic of a land value tax.
Decades later, Magie’s creation was commercialised (with a rather opposite message!) as the now-famous board game Monopoly.
Nonetheless, the origin of Monopoly was avowedly political: it began as The Landlord’s Game, a “practical demonstration of the present system of land grabbing with all its usual outcomes and consequences,” directly inspired by Henry George’s economics.
In Magie’s version, there were actually two sets of rules: one where a single landlord could wind up owning everything (monopoly, as in the modern game), and an alternate rule set where all players benefited when wealth was created (illustrating George’s single-tax idea).
This educational tool-turned-household game is a curious legacy of LVT – a reminder that debates over land and rent have even seeped into popular culture.
The 1909 “People’s Budget”: Lloyd George and Churchill’s Land Tax Proposal
In the United Kingdom, Henry George’s ideas gained traction among social reformers and influenced the famous People’s Budget of 1909.
Chancellor of the Exchequer David Lloyd George, with the support of rising politician Winston Churchill, sought to fund new social welfare programmes (like old-age pensions) by increasing taxes on the wealthy – notably by taxing land.
The 1909 Budget included a tax on the “unearned increment” – that is, the increase in land value that landowners enjoyed due to development around them, not due to their own work.
In essence, it was an attempt at a modest land value tax alongside higher income taxes on the rich.
Lloyd George argued it was only fair for landlords to “contribute to the taxation of the country on the basis of the real value” of their land holdings.
The political context was explosive.
The landowning aristocracy, represented strongly in the House of Lords, saw this proposed land tax as a direct threat. At the time, the House of Lords had an absolute veto over finance bills. The Conservative opposition (aligned with many large landowners) accused the People’s Budget of being radical and socialist, and the House of Lords vetoed the budget, precipitating a constitutional crisis and the Parliament Act 1911.
Their formal objection to the land value tax was that implementing it required a nationwide land valuation scheme that they claimed did not belong in a budget bill. In truth, this was a convenient procedural excuse; the underlying reason was clear – the land tax directly targeted the vested interests of Britain’s great landowners.
After a political showdown – including two general elections in 1910 – the Liberal government eventually prevailed in passing the budget (and in curbing the Lords’ power through the Parliament Act of 1911).
A land valuation was indeed conducted, and an Increment Value Duty (a tax on land value increases) was enacted in 1910.
Winston Churchill, then a Liberal Cabinet member, was one of the strongest voices in favour of land value taxation as a matter of justice. He argued that it was wrong for landowners to pocket rising land values that they did nothing to create while industrialists and workers paid all the taxes.
Churchill famously lambasted the “land monopolist” who “sits still and does nothing” while nearby development by others boosts his land value; “he contributes nothing to the process from which his own enrichment is derived,” Churchill remarked, calling it an “enrichment which comes to the landlord… without either effort or contribution on his part”. He described the position as the “mother of all monopolies”.
In Churchill’s view, this was fundamentally unfair – he contrasted it with a working professional’s income, which had to be earned through service and competition. The land tax, to Churchill, was a way to right this imbalance by taxing “unearned” income from land rather than placing the burden solely on labour and enterprise.
Despite these high hopes, the 1909 land tax scheme ultimately failed to take root. The implementation ran into practical and political headwinds.
Administratively, the land valuation (“Domesday Survey”) took years and proved very complex; the new tax yielded little revenue and was easily avoided or deferred – since it mostly applied when land changed hands. Many landowners simply held onto their land rather than sell and trigger the tax.
By 1920, the Increment Value Duty was repealed entirely.
In the words of one retrospective analysis, early 1900s Britain became a “case study in how administrative complexity can derail land value taxation” – the valuation process was costly and contentious, and loopholes turned the tax into something of a damp squib.
Moreover, the outbreak of World War I and shifting political winds meant land tax reform lost momentum.
The House of Lords’ fierce resistance in 1909 succeeded in defanging the reform; and although the Lords could not block finance bills in the future (thanks to the Parliament Act 1911 law), the powerful interests of landowners continued to exert influence over policy.
The episode showed that any attempt to introduce LVT would face serious political challenges from those who stood to lose – a reality that likely remains true today.
Even now, a bold land tax in the UK would provoke opposition from landowners (from major landlords to ordinary homeowners worried about house prices), suggesting that while the constitutional hurdle is gone, the political and public-relations battle would be just as intense.
LVT Around the World: Hong Kong and Other Examples
While no country has implemented a pure George-style single tax, variations of land value taxation exist around the world.
Perhaps the most cited example of an LVT-like system is Hong Kong. Hong Kong’s government owns virtually all land and leases it to private users, collecting substantial revenue in the process.
Instead of annual property taxes based on total value, Hong Kong raises money through upfront land premiums (when granting leases or selling development rights) and an ongoing “ground rent” of about 3% of land value in certain areas.
In addition, Hong Kong charges quarterly rates (a type of property tax) on occupiers, which effectively tax the rental value of land and buildings. Together, these mechanisms mean that a large share of the city’s public revenue comes from land.
In fact, for much of Hong Kong’s modern history, 30% to 50% of government revenue has been derived from land leases, land premiums, and rates – allowing the city to fund infrastructure and services while keeping income and sales taxes low.
By capturing land value increases (for example, when a new metro station makes an area more desirable, the government can charge developers higher lease fees for building there), Hong Kong has been able to finance expensive projects like its public transit system largely through land revenues.
Many economists have pointed to Hong Kong as a real-life validation of Georgist principles: the city prospered with low tax rates on work and enterprise, using land values as a revenue base instead.
Hong Kong consistently ranked as one of the world’s freest economies, with observers noting that heavy land-value taxation (in the form of public land leasing) did not hinder growth – if anything, it coincided with rapid development.
However, it’s important to recognize Hong Kong’s unique circumstances (a scarcity of land, colonial legacy of state land ownership, and a hot property market) – not all of its experience may translate neatly elsewhere.
Still, Hong Kong demonstrates that substantial public revenue can be raised from land values with relatively low administrative burden.
Beyond Hong Kong, several other places have implemented forms of land value taxation:
- Singapore operates a system somewhat similar to Hong Kong’s. The government owns the majority of land and sells 99-year leaseholds. It also taxes property annually (with higher rates on land value for investment properties). Like Hong Kong, Singapore’s heavy state involvement in land has been influenced by Georgist thought; notably, Singapore’s early development included a robust land acquisition program, and today it enjoys high public revenue from land sales and stamp duties. An analysis by the Lincoln Institute noted Singapore once achieved an effective land tax rate of around 16%.
- Estonia is a modern example of a nationwide LVT. After the fall of the Soviet Union, Estonia introduced a land value tax in the 1990s to fund local governments. The tax is applied to the unimproved land value (exempting buildings) at rates set by municipalities (capped around 2.5% per year). It has become a key source of revenue for Estonian cities and is credited with encouraging efficient land use. Notably, even residential land is taxed (though small home plots have partial exemptions), and 100% of the revenue goes to local budgets. Estonia’s experience shows that a simple LVT can be administered in a modern European context – the country regularly updates land valuations and integrates the tax into its property registry system.
- Denmark has long had a form of land tax at the municipal level. Danish property tax (ejendomsskat) splits land and buildings, and the land portion (sometimes called a “ground tax”) is taxed based on its value. Rates vary, but land value tax in Denmark can be around 1% or more of the land’s assessed value per year. This system, in place for decades, illustrates that separating land value from total property value is quite feasible (Denmark and others use mass appraisal techniques for assessment). Denmark’s land tax provides revenue for local services and is considered one of the reasons Denmark consistently scores well on economic efficiency in taxation.
That’s enough excitement for Part One – I’ll pick up some of the practical issues of LVT, and there will be a guest appearance by Milton Friedman. How good am I to you?
