Post-Corona Balanced-Budget Super-Stimulus: The Case for Shifting Taxes onto Land

Summary

This 2021 CEPR discussion paper (DP 16652; also SSRN 3954888) 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 Monetary Policy Committee member (Goodhart) and an IMF economist (Kumhof) — to a Georgist proposal, pairing them with two long-standing figures in the land-tax tradition (Tideman, a public-finance economist; Hudson, author of Killing the Host).

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, because the supply of land is fixed and cannot shrink in response to the tax.

Where It Sits in the Literature

The paper is the modern successor to a long line of "excess-burden" arguments in the Georgist tradition. Its most direct ancestor is Tideman & Plassmann's Taxation and the Losses of Nations (1998), which calculated the deadweight losses of conventional taxation across the G7 and the output available from shifting revenue onto land rent — the same author (Tideman) and the same core mechanism, now expressed in a calibrated general-equilibrium model rather than a static loss estimate.[1]

It also supplies the macro-modelling anchor for the wiki's revenue and productivity claims. Lars Doucet's Does Georgism Work? points readers to this paper as "the worked-out policy paper" behind the case that land rent could fund a serious share of government, and it is cited on land rent could fund a large share of government as the macro-model tax-shift case.[2] The efficiency logic — that shifting from taxes on labour and capital onto land raises output — is the modelled complement to the empirical taxing land raises productivity evidence and to the ATCOR hypothesis that abolishing other taxes enlarges the recoverable land-rent base.

Why It Matters

The paper's significance is less any single magnitude than its provenance: mainstream macroeconomists, using the toolkit of central-bank and IMF modelling, reach the conclusion that a land-tax shift is a free lunch in efficiency terms. It reframes LVT from a fringe single-tax proposal into a standard optimal-taxation result — the least-distortionary way to raise a given amount of revenue — and does so in a venue (CEPR) read by policy economists rather than only by Georgists.

See Also

• Nicolaus Tideman · Michael Hudson — two of the authors
• Taxation and the Losses of Nations (Tideman & Plassmann) — the direct ancestor
• Deadweight Loss — the efficiency property that drives the result
• Land rent could fund a large share of government · Taxing land and rents increases productivity — the claims this modelling supports
• ATCOR — the base-expansion effect the tax-shift relies on
• Does Georgism Work? (Doucet) — routes readers here as the policy synthesis

Sources

1. Charles Goodhart, Michael Hudson, Michael Kumhof & Nicolaus Tideman (2021), "Post-Corona Balanced-Budget Super-Stimulus: The Case for Shifting Taxes onto Land," CEPR Discussion Paper 16652. SSRN — used for the proposal that shifting taxation onto land can act as a balanced-budget stimulus (raising the land tax from ~0.55% to ~5.55% of GDP while cutting income taxes), its calibrated-model method, its authorship and institutional provenance, and its lineage from Tideman & Plassmann's Losses of Nations (1998).
2. Wiki corpus: Does Georgism Work? (Doucet) — used for the fact that Doucet points readers to this paper as the worked-out policy synthesis; land rent could fund a large share of government — used for this paper's role as the wiki's macro-model tax-shift reference.