Objection: LVT can't raise enough revenue

The Objection

Modern governments spend a large share of GDP — often 35–50%. Critics argue measured land rent is only a few percent of GDP, far too little to replace income, payroll, and consumption taxes. On this view the "single tax" is a 19th-century idea that cannot fund a 21st-century state.

The position being objected to is George's own. In Progress and Poverty he holds that land rent is not merely the best tax base but an ample one: "In every civilized country, even the newest, the value of the land taken as a whole is sufficient to bear the entire expenses of government. In the better developed countries it is much more than sufficient" — the practical proposal being "to abolish all taxation save that upon land values" (Progress and Poverty, Book VIII, Ch. II), which George then tries against the canons of taxation (Book VIII, Ch. III). The modern dispute is whether that 1879 sufficiency claim survives 20th-century national-accounts measurement.

The objection has distinguished sponsors. Paul Krugman, while conceding the theory: "I don't think you can raise nearly enough money to run a modern welfare state by taxing land. It's just not a big enough thing" (2017, as carried in Doucet's book, Ch. 11).[1] Mark Blaug, in the discipline's standard history of thought: "Provided there is no deception that such a tax would raise much revenue except in rapidly growing cities, there would seem to be nothing wrong with the principle of site value taxation" — endorsement of the principle, wrapped around the revenue doubt (Economic Theory in Retrospect, Ch. 3).[2]

Why People Worry About This

National-accounts rent looks small (a few percent of GDP) because it is measured net of the very taxes and distortions at issue, because much rent is imputed and never traded, and because assessment practice under-records land relative to structures. Whether those are measurement artifacts (the Georgist view) or the true size of the base (the critics' view) is exactly what the dispute is about.

The Response

The picture is more favourable than the headline figure suggests, though honest advocates concede full replacement is uncertain:

1. What LVT raises, it keeps. A comparative point from the wealth-tax literature: the SWAY realist review (an MSc-placement report for Reform Scotland, weighted accordingly) finds recurrent net wealth taxes in OECD practice lost 44%+ of theoretical revenue to avoidance and underreporting, while no comparable avoidance channel exists for an immobile land base — whatever LVT's yield ceiling, its realization rate compares favourably with the mobile-base alternatives it would replace.
2. Measured rent understates true rent. Gaffney (2009) argues conventional figures omit large categories — under-assessed urban land, public land and resource rents, spectrum, and transport corridors. Foldvary's distinction between kinetic and potential rent formalises the gap: the measured ("kinetic") rent that flows today excludes the rent currently suppressed by taxation and regulation, which a rent-capturing tax would surface.
3. The modern estimates are not small. Doucet's twelve-method synthesis puts US land value at $24–44T (2020), or roughly $1.2–3.5T/yr in rent at 5–8% cap rates — defense-plus-Social-Security at the low end, up to ~80% of all government revenue at the high end (Chs. 14–15);[3] the wiki's full evidence page carries the range of estimates with their assumptions. Independent national calculations point the same way: Dwyer's study of Australian land and resource rents finds them large enough to replace existing taxation, and the general-equilibrium estimate of Tideman, Akobundu, Johns & Wutthicharoen puts the welfare gain from shifting broad-based taxes onto land at ~14% of net domestic product — figures that presuppose a land base far larger than the "few percent of GDP" the objection takes as given. Hard national land-value totals reinforce the point: the US Bureau of Economic Analysis's Larson estimate puts American land at roughly $23 trillion (2009), Albouy, Ehrlich & Shin find urban land alone worth over twice GDP, and Prosper Australia's line-by-line Total Resource Rents of Australia tallies land, resource and monopoly rents at 23.6% of GDP — enough, on its accounting, to cover 87% of all three levels of government.
4. ATCOR expands the base. Because other taxes ultimately fall on rent, abolishing them raises land values — and the LVT base — so the static figure understates capacity (the thesis Gaffney names and states). Gaffney's earlier (1998) chapter works the mechanism algebraically and argues the land-tax base rises by more than the abated building-tax revenue once timing, excess-burden, and synergy effects are added in — a formal version of the same claim.[6] George himself anticipated the mechanism, unnamed, in 1879: abolishing other taxes, he predicted, "would lead to an increase in the value of land — a new surplus which society might take for general purposes" (Progress and Poverty, Book IX, Ch. I) — a prediction, not a finding, cited here as the claim's historical root rather than as independent evidence for its size.[7] (ATCOR is itself a hypothesis needing empirical testing, as Doucet's own exposition concedes.)
5. It needn't be the only tax. Most modern Georgists argue for LVT as a major revenue source, not a literal single tax. Even partial replacement captures most of the efficiency gains, since the deadweight loss avoided is largest for the most distortionary taxes replaced first — Doucet's direct reply to Krugman.[1]

Limits and Caveats

• The high-end estimates lean on advocacy sources (Fitzgerald's TRRA, Tideman's private estimate via Counting Bounty) and should be reported as such.
• ATCOR, the strongest expansion argument, is the least empirically tested.
• Blaug's "rapidly growing cities" point has real content: rent is geographically concentrated, so a national LVT's yield depends heavily on metro land markets.

Net Assessment

LVT can evidently fund a substantial share of government and should arguably be a primary revenue source. Whether it can fund all of it remains genuinely contested and depends on accounting choices; the strongest critics (Krugman, Blaug) accept the principle while doubting the arithmetic, which locates the real dispute in measurement, not theory.

See Also

• Land Is Not a Big Deal Anymore (Krugman Objection) — the broader claim that land itself is now economically trivial in a services economy, distinct from this page's narrower revenue-sufficiency dispute
• Single Tax · ATCOR
• Land rent could fund government — the evidence page
• Land is a Big Deal (book) · Blaug, Economic Theory in Retrospect (book)

Sources

1. Lars A. Doucet, Land is a Big Deal (2022), Ch. 11 — used for the Krugman quotation and Doucet's reply (A-claims; Heavy scan). Book page — primary source for the quotation: Michael Scott Moore, "This Land Is Your Land," Pacific Standard, from Moore's 2008 Berlin interview with Krugman. psmag.com
2. Mark Blaug, Economic Theory in Retrospect (5th ed., 1997), Ch. 3 — used for the Blaug quotation (A-claim; scan provenance pending owner attestation — see book page). Book page
3. Lars A. Doucet, Land is a Big Deal (2022), Chs. 14–15 — used for the $24–44T / $1.2–3.5T estimates (C-claims: the author's synthesis of twelve methods; assumptions on the book page). Book page
4. Mason Gaffney (2009), "The Hidden Taxable Capacity of Land: Enough and to Spare" — wiki summary · PDF — used for the hidden-rent categories (C/D-claims, advocate-economist).
5. Henry George (1879), Progress and Poverty, Book VIII, Chs. II–III — the sufficiency claim and single-tax proposal being objected to; quotations verified verbatim against the full text (Project Gutenberg #55308) (public domain, EDITORIAL §3b).
6. Mason Gaffney (1998), "The Philosophy of Public Finance," Ch. 7 in Fred Harrison (ed.), The Losses of Nations (Othila Press, 1998) — used for the algebraic ATCOR derivation showing the land-tax base rise exceeds the abated building-tax revenue (C-claim, theoretical). wiki summary
7. Henry George (1879), Progress and Poverty, Book IX, Ch. I ("Effects of the Remedy — Production") — used for George's own 1879 anticipation of the base-expansion (proto-ATCOR) mechanism, quoted and explicitly labeled as a prediction rather than evidence (D-claim, public domain, verified verbatim against the repository full text, EDITORIAL §3b).