The counterpart of just and efficient taxation is just and efficient government spending, Henry George, the 19th century economist, saw government spending and taxation as two sides of the same coin.

This manifests itself in three policy positions: abolish all taxes on labor (which are considered harmful) in favour of taxes on land and natural resources, where the revenue from these taxes is divided among the citizens.

I will now present these policies in detail and justify them as an elegant solution to the great societal problems of our time.

As mentioned in the previous article on taxation the compensation to society collected through the taxes on land and natural resources should be divided among the citizens equally, as all citizens lay equal claim to the commons they are excluded from.

Modern Georgists tend to agree that the revenue from these taxes should be used to fund necessary government functions such as national defense and the judicial system; then the remainder should be given to the people as a cash payment like a universal basic income, or to fund public goods and
services.

This is called the “Citizens’ Dividend”; the value of this compensation would be easily predictable and should increase as the value of the land increases, providing a secure footing from which everyone can prosper. The income provided from the citizens’ dividend can serve a number of purposes.

For the poor, the income can be used to meet basic needs and for upskilling, helping them rise above their current condition and increasing social mobility. For the middle class, it can supplement their income, improving work-life balance or facilitating career transitions.

The citizens’ dividend gives workers more bargaining power, as they are not solely reliant on their jobs, significantly reducing unfair working conditions.

For the upper class, the citizens’ dividend will not constitute much, especially considering the land tax they may be paying. In the end, those who need it most benefit the most. For aspiring entrepreneurs, the citizens’ dividend serves as a gateway into the market, increasing competition, making goods cheaper, and creating more jobs.

The citizens’ dividend is an efficient way to ensure social security and prosperity for all, reducing the need for the bureaucracy of private insurance and public welfare systems.

Opinions on which public goods and services should be provided may vary; personally, I believe they should be limited to essentials that all citizens can enjoy, such as public transportation, roads, and streetlights. Nevertheless, returning the value of the land to all citizens is the core principle of the citizens’ dividend.

You may notice that the citizens’ dividend is very similar to universal basic income (UBI). In fact, the only difference is the source of funding. UBI is primarily funded by taxes on labor, such as income tax, whereas the citizens’ dividend is sourced solely from taxes on land and natural resources.

The key difference lies not in the direct benefits of the cash payment but in the incentive, structures created by these different tax systems.

Taxes on labor present diminishing returns for additional work, meaning fewer people are willing to work more. This reduces supply, as almost everything requires labor to produce. The result is twofold: first, the tax base shrinks, reducing the budget available for UBI; second, while demand increases due to UBI, supply is constrained, causing inflation.

However, taxes on land and natural resources do not have these problems. Land and natural resources do not diminish in value due to taxation, and since land taxes encourage efficient land use (see previous article), the supply of goods and services tends to increase.

Because all production requires land, this prevents inflation, making the citizens’ dividend a viable version of UBI without its downsides.

Though no country currently has a citizens’ dividend in place, many have similar programs known as sovereign wealth funds, primarily funded by taxes on oil and gas. For example, Norway uses resource rents to fund its national pension, and Alaska’s oil-funded Permanent Fund pays residents a UBI-style dividend, closely resembling George’s concept of a citizens’ dividend.

Several other U.S. states also have similar programs funding various public goods and services. Even when real-world examples do not fully implement the citizens’ dividend, it is easy to see how these programs could be vastly improved if the full value of land and natural resource rents were pooled into them.

In summary, Georgist fiscal policy seeks to free labor from burdensome taxes, replacing them with taxes on land and natural resources (the commons) to fund government functions and compensate the public for their exclusion from common resources. This approach encourages efficient resource use and creates greater opportunities for people to work and prosper.

As a result, it increases competition, production, social mobility, and social security while reducing unemployment, inefficiency, and poverty. With numerous examples of partial implementations achieving incredible success, one must ask: what heights of prosperity await if fully realized?