First off, I absolutely agree that any changes should be phased in slowly. Even better would be a randomized controlled trial — i.e., an experiment — across states or counties, so that we could test the impact of these changes (also starting small). So flip a bunch of coins and the federal government could tell Wisconsin but not Michigan, and so on down the line, to implement a consumption tax or land tax or nothing at all, and distribute as a basic income, and then after a couple years we look at some indicators like GDP or surveyed well-being to evaluate the “treatment” states/ counties against control groups. This is what GiveDirectly is doing with their basic income pilot in Kenya, though they can’t tweak the taxation side.

It seems like your LVT WMD scenario assumes that the wealthy want to hold land just so they pay more tax and therefore have more power over the government. I’ve never heard a wealthy person say this; they’d much rather invest their money in working capital that yields return. Sure some wealthy people and organizations hold huge swaths of land (like our president-elect, or the Church of Scientology), but that’s typically because of the tax benefits of holding land today, since it’s grossly undertaxed and even has special loopholes like the mortgage interest tax deduction. A sufficiently high LVT would encourage people of any wealth to hold land only if they make good use of it, since they’re effectively paying rent to the government. As wealthy people are more likely to hold onto land without doing anything with it, just for speculation, they’d very likely end up owning less land, making it available to lower-income people to actually use.

I’d place a consumption tax on a similar level as income tax: as long as it’s flat, it’s going to be more efficient than the status quo, but never as efficient as taxing land or other externalities like carbon. A 40% consumption tax would reduce consumption, just as the current income tax reduces work incentives; taxing land doesn’t reduce anything, since its supply is constant. But if it were to be done, I’d favor something like the FairTax, which estimates a 30% tax is needed, with no exceptions. It gets away with no exceptions by issuing a “prebate” — basically a basic income — which covers the tax up to the value of a person’s poverty-level consumption, e.g. $226/mo for a single adult. As you mention, they also project some productivity gains from tax code simplification. To finance a full basic income, the consumption tax would have to be considerably higher, but a small version of this would be a nice place to start.

Economist. Founder and president of the UBI Center. Studied at MIT and UC Berkeley. YIMBY. Former Google data scientist.

Love podcasts or audiobooks? Learn on the go with our new app.