Letter from a Young Distributist: Georgism and Distributism

This leads immediately to a very important conclusion of an ethical nature: however true it may be that man is destined for work and called to it, in the first place work is "for man" and not man "for work". Through this conclusion one rightly comes to recognize the pre-eminence of the subjective meaning of work over the objective one. Given this way of understanding things, and presupposing that different sorts of work that people do can have greater or lesser objective value, let us try nevertheless to show that each sort is judged above all by the measure of the dignity of the subject of work, that is to say the person, the individual who carries it out.

Laborem Execrens, 1981

I'd argue that transitioning is an extremely hard problem. The Georgist system taxes property at extreme rates. In particular, the taxes on property ownership are supposed to capture the entire value of renting the property. This means that people owning property with a mortgage would suddenly be forced to sell their property at the near zero prices that Georgism is designed to foster. This is likely to lead to many unhappy homeowners as well as significant loss of capital for all the entities banks sell mortgages to. I think this problem is severe enough that in order to transition to a Georgist society a government might need to absorb every mortgage in the country.

Mortgage debt in the US is currently estimated at 17.6 trillion dollars, slightly more than half of the 30.5 trillion US national debt. Such an expense would be vaguely possible, but extremely sizeable.

I don't see a good way to get to Georgism without government absorbing the mortgages as the fallout to the economy of all that debt suddenly having little in the way of assets underlying it is a huge problem. I do agree I exaggerated with my claims of $0 since the improvements on the property would have some non-zero value, but land represents the majority value of most houses and the land value would be effectively reduced to zero by the change in value from the taxation. That would be enough to put most mortgages underwater and the asset would no longer sell for the cost of the mortgage. I don't see government doing this and just saying "too bad, investors absorb the loss".

While you're completely correct, I don't think this is a reason to abandon the enterprise (other extremely hard problems: sending a human safely to the moon; democratic rule of law; the elimination of slavery).

While I ideologically support the so-called "Single Tax" model, it is indeed extremely difficult to imagine how this would be implemented at the federal level (especially in our current gridlock climate). I'd instead advocate going the other direction, and implementing it locally: property taxes already exist at the level of states and municipalities. These local taxes can gradually migrate to being calculated based on unimproved value, rather than including improvements. This can include whatever necessary carve-outs to reduce unintended side effects (grandfathering existing owners, partial exemptions for owner-occupancy and retirees, etc).

Under any model, the real tension is the zero-sum game between existing owners, and aspiring owners: the former want property values to go up, the latter want property values to go down. (We see the same dynamics at play in zoning laws, NIMBYism, etc.) As with any perverse incentive, or institutionalized rent-seeking, reform is extremely difficult, but by no means impossible.