Kansas City Should Expand, Not Remove, Land Taxes

The Missouri Record just carried an op-ed on land taxes by Prof. Joe Haslag and me regarding the choice next Tuesday in Kansas City. It is not our place to tell people how to vote — that is your decision, not ours. But it is important for people to know that this is not a revenue-neutral switch. The proposed elimination of the land tax and increase in sales tax will result in more total tax collections — at least in the short-term. Also, economists almost unanimously endorse land taxes as a way to raise public funds while limiting the economic harms that taxation creates. Anyway, we say it better in the op-ed. From the piece:

Almost every economist sees the advantage of land taxes. The general welfare calls for taxes that do the least harm in the form of affecting the quantities of goods or services that people ultimately care about. Nearly all economists agree that a land tax is one of those policies in which taxing land affects the value of the parcel, but does not affect the quantity of land. Henry George, Milton Friedman, Paul Samuelson, and Joseph Stiglitz all recognize the desirable properties associated with land taxation.

Those four famous economists come from very different angles, if labeled politically (which they would probably object to, but I digress). The Show-Me Institute has conducted analysis on the benefits of land taxation. (Please see pages 5-11 of Haslag’s study on how Kansas City can replace the E-tax.) It is poor public policy to get rid of an effective tax in favor of expanding other taxes. Why doesn’t Kansas City heed the lessons of the past and reduce more harmful taxes, like the earnings tax, in favor of increased land taxes? There is a wide body of economic research supporting that position.