Saturday, January 17, 2009

Social Cost

One of the concepts that we need to understand is that of social cost, that is the cost of certain activities that is born not born by the person doing the activity, but by the public in general, particularly the public in the area where the activity take place. An example of this would be the cost of pollution, which is often not born by the polluter, but by those who live in the area, especially people who are most exposed to the pollution.

One way to discourage this is by shifting taxes from being based on what people earn, spend, or have, to being based on what we pollute. Sometimes these are called green taxes, Pigovian; an example would be a carbon tax.

A land tax is an example of a green tax. It discourages buying land only for speculative purposes, since those who don't use it by building on it, or employing people one it, would have to pay more tax that what they do now. That means that taxes could be lowered on those who do use the land by building and/or employing. Land tax is also green because it encourages frugal use of land, resulting in compact growth, which means that more trips are walkable, bike-able, or would require shorter driving or transit trips.

Some other sites which advocate for Land Value Tax rather than Tax on Work are:

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