By Kelvin Tai - Economics and Management Student @ Harris Manchester College, Oxford
The Monopoly board game is an incredibly popular family pastime, with new iterations in card form and different themes from Star Wars to Game of Thrones. Everyone starts with an equivalent amount of cash, but as Go is passed, Broadwalk is taken and hotels are built, the players with less cash and properties often find themselves paying an exorbitant amount of rent on the path to bankruptcy.
This game was designed by a progressive woman by the name of Elizabeth Magie. Aside from the version we know today, she also created an anti-monopolist version where wealth creation results in a reward to all players. This was meant as a protest against the monopolies of the day held by Carnegie and Rockefeller. What inspired the creation was the works of Henry George on a tax on land value.
The Land Tax was proposed by George in 1879 in his book Progress and Poverty, a measure that targets land as a unique asset class. However, such a tax on the value of land has not been widely implemented to date. This development came from the realisation that even as society advanced, much of the rewards of growth accrued to landlords who could simply raise rents.
George proposed that the tax be levied on the unimproved value of land; that is the value of the underlying land without accounting for the value of developments such as a house or crops grown on it. This comes from the notion that the supply of land is fixed on Earth and taxation will not decrease the production of land, hence avoiding efficiency losses through distortion of economic incentives. In fact, a move to tax land on the highest and best use of land instead of its existing use would compel land into the hands of those who can utilize it the most efficiently. This would reduce land hoarding, where landowners control vast swathes of land, yet do nothing with it to drive up the price of their existing developments while waiting for the steady appreciation in value of their idle land.
One obstacle to implementation would be the difficulty in valuing land since land produces no intrinsic cashflows but is dependent on the developments on it. One proposal has been for owners to self-declare the value of land at each filing period. To prevent underreporting, other individuals can make bids for the land and the landowner is compelled to sell the land if the bid is higher than the value reported.
It is telling that of Elizabeth Magie’s two versions, the one that has survived is the monopolist version, with her original intent in highlighting the perils of a land monopoly lost in time. Perhaps this speaks to our beliefs surrounding property ownership and could explain why Henry George’s proposal has been rarely carried out.
Hughes, Cathy, Sayce, Sarah, Shepherd, Edward, and Wyatt, Pete. "Implementing a Land Value Tax: Considerations on Moving from Theory to Practice." Land Use Policy 94 (2020): 104494. Web.