Society’s Surplus Income: 50% of GDP. What’s Its Fate?
|December 6, 2013||Posted by Staff under Rent recovery or avoidance|
How much does society spend for the nature it uses? For the land and resources? In the jargon, how much “ground rent” is produced in the economy? There is no answer in the economic literature.
But if America was a tax-free zone, the tax base would become this natural rent. People would use the money to bid up the price of locations when they buy homes and sellers would jack up their asking price to the greatest amount anyone would be willing to pay. In the US in 2013, tax revenue was $5.3tn (GDP: $16.2tn).
How much of a nation’s revenue currently is visible as land rent? This is rent that is not collected by government. The prudent estimate is that rents in private pockets amount to about 20% of national income.
If we take a random selection of 10 rich nations, ranging from Australia through the US to Sweden, Germany, and Japan, the average tax-take as a percent of GDP is 37%. If we add to this the rent that is not collected by government, of around 20%, we find that rent exceeds 50% of national income.
This first approximation of rent needs to be adjusted.
1. Taxes distort total income. They encourage the
- Under-use of urban land (which artificially raises rents). and they
- motivate behavior that damages the environment, as when polluters do not have to pay for dumping waste into the atmosphere (which artificially reduces rents).
2. A small part of tax revenue may actually fall on wage earners, rather than being shifted (ultimately) onto rent. People with no bargaining power are particularly vulnerable.
Such considerations add to, and subtract from, rent. Further assessment is required, but the outcome would not significantly modify the conservative estimate that rent is about 50% of total income. This is more than sufficient to cover existing government financial commitments.
On what terms would that revenue be raised? Through the land market, the people themselves negotiate the rents they are able to pay for the use of services available at each location. By this process of free negotiation, who paid, and how much they paid, would be settled by citizens, not politicians or the servants of the State.
Some official sources for tallying up such glossy numbers. With so much surplus income in society, just think how big your monthly Citizen’s Dividend could be!