Context:

The reason why wealth taxes have problems at least from the perspective of Georgism is that they target all assets broadly. Georgists would consider actually produced assets like capital goods to be stored-up labor that should be rewarded just like the general labor we think of, so we see that a wealth tax is harmful because it can discourage the creation of those actually productive assets that people make. But where taxing land fixes this is that land is finite, it’s not produced and is non-producible, and so taxing it can reduce inequality without hurting the economy (it could even help by discouraging speculators who hold good land out of use at the cost of productive workers and businesses) while keeping the tax base stable. It’s the wealth we can actually tax.

But while land is the biggest example, it’s not the only thing we can target to combine both efficiency and equality while providing a way to shift off taxing actually productive labor. Anything else which like land is finite, in that no one can make more of it, is prone to efficiency-reducing, inequality-increasing wealth extraction that we can target in different ways. For example, taxing all natural resources other than land (ore deposits, waterways, and all); mitigating (whether by taxation or abolition/replacement) exclusive legal privileges like patenting a particular innovation (e.g. patent trolls) or controlling a limited professional license; dealing with naturally monopolistic industries; etc. Another way to describe it is that any market where no new production makes entering it impossible (a good term for it is an entry monopoly) is prone to bad zero-sum behavior and is a target in the Georgist sights.

This all goes to show that we can differentiate between wealth production which stems from making new things and wealth extraction which stems from just controlling finite things. If we want to heavily reduce inequality while fully strengthening the economy: Don’t tax the things we make, tax (or mitigate) the finite things we take.