Financing Public Capital through Land Rent Taxation: A Macroeconomic Henry George Theorem

Arbeitspapier

Financing 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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 4280

Classification and Topics

• Classification: Wirtschaft ; Taxation and Subsidies: Efficiency; Optimal Taxation ; Publicly Provided Goods: General ; National Government Expenditures and Related Policies: Infrastructures; Other Public Investment and Capital Stock ; Renewable Resources and Conservation: Land
• Subject: land rent tax ; public investment ; Henry George Theorem ; social optimum

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Mattauch, Linus ; Siegmeier, Jan ; Edenhofer, Ottmar ; Creutzig, Felix
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2013

Further information

• Handle: http://hdl.handle.net/10419/77659
• Last update: 10.03.2025, 11:42 AM CET