Post-Corona Balanced-Budget Super-Stimulus: The Case for Shifting Taxes onto Land
A calibrated macro model showing that raising land tax while cutting income taxes delivers a large, balanced-budget economic stimulus.
Summary
This 2021 CEPR discussion paper (DP 16652) by Charles Goodhart, Michael Hudson, Michael Kumhof, and Nicolaus Tideman models the macroeconomic effects of shifting the tax base toward land. It is notable for bringing serious macro modelling — including a former Bank of England policymaker (Goodhart) and an IMF economist (Kumhof) — to a Georgist proposal.
Key Finding
Using a calibrated dynamic model, the authors show that raising the land tax from about 0.55% to 5.55% of GDP while cutting income taxes produces a substantial, balanced-budget stimulus: output and welfare rise without increasing the deficit. The gain comes from replacing distortionary income taxes (which discourage work and investment) with a land tax that has no deadweight loss.
Bears On
- Outcome: LVT can replace capital taxes without efficiency loss
- People: Nicolaus Tideman · Michael Hudson
Sources
- Goodhart, Hudson, Kumhof & Tideman (2021), "Post-Corona Balanced-Budget Super-Stimulus: The Case for Shifting Taxes onto Land," CEPR Discussion Paper 16652. SSRN