What Should be Exempt from a Land Value Tax?

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Powis Castle, owned by Britain’s National Trust (image link)

The main Georgist policy proposal is the imposition of a full land value tax. Generally, taxes should be simple and free from exemptions, because tax exemptions incentivise people to divert resources into places that don’t pay tax. They mean more fees for lawyers and accountants, and less for productive activity. Sometimes they can lead to truly absurd litigation, like the famous case over whether Jaffa Cakes count as cakes (which are exempt from value-added tax) or biscuits (which do pay VAT). But are there areas where there is a Georgist case to be made for an exemption from LVT?

To answer this question, we need to go back to first principles and explain why Georgists support LVT. For the Georgist, the use of land rent for private benefit is at once economically inefficient, and immoral. Inefficient, because economic resources are sucked into land rent rather than gainful production. Immoral, because the institution of private land ownership (the moral foundations of which were shaky to start with) leads naturally to a class of rentiers living off the wealth produced by workers and capitalists.

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But if land rent is collected by the State for public benefit rather than private gain, then at a stroke we solve both problems. Land rent is now put to work in funding productive things like state education, national defence, or social insurance. This allows us to cut inefficient taxes on labour and capital (or distribute the land rent out equally as a citizens’ dividend). It becomes impossible for an individual to profit from land rent. Only the State — guided by the public interest as its criterion of action and constrained by democratic and constitutional measures — is allowed this privilege.

One way to accomplish this would be nationalising all land, as Maoist China attempted to do. Georgists take a more subtle approach: preserve the existing institution of privately-owned land, but seize the rents that flow from it through LVT. As Henry George put it, leave the shell but take the kernel. The market would still decide what the land is used for, and who gets the right to use it, but it would no longer be possible for a private individual to make money out of the land itself. The State would effectively become everybody’s landlord, granting long-term leases so that the owners of the land could manage it.

This means that LVT is not the core of Georgism. Georgists believe that land rent should be used for public benefit, and LVT is just a means to that end. It follows, however, that all land should not necessarily be subject to land value tax. If land is already being used to promote the common good, then there is no justification for it to be surrendered over to the State.

Public land

The most obvious example is land that is owned by the State, and is directly used for public purposes. The grounds of a State school; a public park; a navy base – it would be absurd to charge LVT on these things. In effect, one branch of the State would be transferring money to another branch.

There are also some landholdings which are owned by the State, but are only indirectly used for public purposes. Britain’s Crown Estate owns Regent Street in London, various British farms, much of the country’s seabed, a selection of shopping centres, and (in a historic quirk) all wild crustaceans found in Scottish waters. The Estate is in effect already subject to LVT: the revenue from its landholdings is returned to the Treasury, where it can fund the public interest.1

Georgists ought to approve of the Crown Estate: it charges market-rate rents, aims to put its land to the most efficient use possible, and returns the revenue to the public. Admittedly, the same cannot be said for all public land. As the Georgist economist Mason Gaffney put it:

"The public sector … has a reputation for wasting labor, and in some cases conspicuously does. But it pays the market for labor, while it borrows below the market. As to land, it still holds much more than anyone, tax free and unmortgaged, with little internal pressure or shadow price to reflect the foregone gains.

The military, for example, holds 20 percent of San Francisco and Washington, D.C., virtually idle. The annual value of this kind of lavish land input does not appear in the budget."2

The US military has since reduced its landholdings in San Francisco and Washington, but the essential point still stands: State land tends to be underutilised. It does not follow however, that it should be subject to LVT or to a ‘shadow price’ that is the equivalent of LVT. LVT and shadow prices allow us to put a price on the opportunity cost of the State’s landholdings; but they get us no closer to accounting for the corresponding benefits. If the National Accounts were to present the costs of landholdings absent their benefits, then the result would be a fire-sale of State land. Useful navy bases would be sold off, because we do not presently know how to put an objective value on the defence of the Realm. The government certainly needs to be disciplined; but LVT is not (at least at the moment) the way to do this.

Separate autonomies

The question of exemptions becomes more complicated when it comes to land that is privately owned. Most private land is used today for private interest and should thus be taxed. But in some rare cases we find non-State institutions, whose purpose of existence is the common good. I am going to consider two bodies in particular. They are both specifically British, but will doubtless have analogues in other countries.

The first is the National Trust. The National Trust is a charity, whose role is conservation. It is the largest private landowner in Britain: it owns historic stately homes around the country, the parks attached to them, and other sites of historic importance. It also owns land in our national parks, as well as a substantial fraction of the coastline. For the most part it deliberately doesn’t use this land to its full economic potential: instead, its goal is to conserve our countryside and other forms of our national heritage.

The National Trust would clearly either be wiped out under a full LVT, or would no longer be able to fulfil its mandate to conserve Britain’s heritage so effectively. It would need to sweat its assets. There would be pressure for development of some of its land, or for more intensive agricultural use. Visitors to its properties would need to be charged more. It would have to act more like an ordinary landowner than a charity.

It is unlikely however, that this would be tolerated by the electorate. Instead, I think the National Trust would be taken over by the government. If the government were sensible, none of its assets would need to be disposed of. As an arm of the State, the Trust’s landholdings would then be exempt from LVT. Visitors to the Trust’s properties might not even notice the difference, beyond a little crown inserted into the Trust’s logo.

But I think that this would be a very bad idea, for reasons that go far beyond any sentimental attachment to the National Trust specifically.

For a long time, certainly since shortly after the Second World War, there has been an assumption that the State is the only institution that can provide for the common good. While private charities fill in some of the gaps, their role is comparatively tiny. Indeed, it is a common Left-wing talking point that charity is a symptom of State failure: for some Leftists, the ideal is for private charity to be entirely unnecessary, because the State has expanded its reach to encompass all aspects of the public interest.

This assumption is very often merited. The State has virtues that mean it is often the most suitable institution for promoting the public interest. Its scale of action is an entire nation. It has broad legitimacy for its actions, backed up by popular consent, and is subject to restraints placed upon it by law and democratic politics. It can borrow more cheaply than any other organisation, and raise staggering amounts of money through taxation. It is simply more efficient for the State to pay for public pensions, or healthcare, or national defence.3

But it is wrong to assume that only the State can take care of the common good. As John Maynard Keynes put it:

"I believe that in many cases the ideal size for the unit of control and organisation lies somewhere between the individual and the modern State. I suggest, therefore, that progress lies in the growth and the recognition of semi-autonomous bodies within the State - bodies whose criterion of action within their own field is solely the public good as they understand it, and from whose deliberations motives of private advantage are excluded …

I propose a return, it may be said, towards medieval conceptions of separate autonomies. But, in England at any rate, corporations are a mode of government which has never ceased to be important and is sympathetic to our institutions. It is easy to give examples, from what already exists, of separate autonomies which have attained or are approaching the mode I designate — the universities, the Bank of England, the Port of London Authority, even perhaps the railway companies."4

Keynes’ use of the word ‘corporation’ simply means a body that has a separate legal personality, without any of the negative connotations the word has acquired in American English. In Keynes’ time, the Bank of England was an independent, privately owned company, which ostensibly operated much like any other private bank. As Keynes went on to say, however, ‘it is almost true to say that there is no class of persons in the kingdom of whom the Governor of the Bank of England thinks less when he decides on his policy than of his shareholders’: the Governor’s first priority would be avoiding public criticism, and criticism by the banking community. The long-term stability of the institution (and indirectly the interests of the public) took priority over shareholder value. The Bank had therefore evolved into something halfway between a purely private enterprise and a public concern. Keynes, it appears, wished to complete the transformation: for him, there would be no need to resort to nationalisation of the Bank (as happened in 1946) if the common good were made its explicit criterion of action.

Keynes’ ‘separate autonomies’ have much to commend them. They enable us to avoid the price we pay for blindly handing over custodianship of the common good to the State: centralisation, bureaucratisation, and politicisation. At its most extreme, the view that only the State can take care of the common good falls into a kind of absolutism: the absolute state takes care of the public interest, and the absolute individual takes care of his or her private interest.5 On the contrary, the public interest ought to be the concern of the public. These separate autonomies enable its expression without recourse to the State.

LVT should not usher in an expansion of the State in a way that crushes these separate autonomies. Turn back to the National Trust. It was founded by private citizens, to conserve places of beauty, and to ensure that the public would have access to them. Doing this is undeniably in the public interest. But the Trust is still independent from the State. It is a separate autonomy, providing for the common good through its landholdings. It was not on Keynes’ list, but would not have looked out of place had he included it.

Community Land Trusts operate on similar principles to the National Trust, but at a smaller scale. They are intended to sequester land value for the common good of a particular community, rather than for the whole nation. Typically, they might build below-market-rate housing, create a small park or playground, or maybe save a village pub from being redeveloped.

Institutions like this should be saved from extinction, and it should be possible to create more of them. Public parks and social housing developments seem particularly well-suited to this arrangement. If a body’s ‘criterion of action within [its] own field is solely the public good’, then the land it uses directly for its purposes ought to be exempt from LVT. The institution of private land ownership may in general be theft from the commons, but that is only true because of the private uses to which it is put. If land is put to use for the public benefit, then we should not care in principle that the public benefit is flowing from a body that is not the State.

Endowment land

There is, in addition to State land, and the land used for separate autonomies, a third category of land which should be exempt from LVT. This is what I call endowment land. It is typified by the landholdings of the older universities, and of their colleges. Endowment land is a commercial investment: the university or college makes money out of the land in the same way as any private landlord would do. It therefore excludes land used directly for education and research, which falls into the same category as land owned by the National Trust. The difference between the two concerns is whether the land is used directly for the purposes of the institution, or is endowment land, which is an investment made to fund the institution.

Endowment landholdings can be substantial: in 2023 the University of Cambridge (Britain’s richest university) owned £562 mn of investment property, much of whose value will be in the underlying land.6 One of its colleges, Trinity, owned nearly £1.1 bn of investment property in the same year.7 In America (many of whose universities were originally funded by federal land grants) large land endowments are common. MIT for example, owns $5.3 bn of real estate.8

I think there is a strong case to be made for exempting land endowments of universities from LVT. Universities are clearly working for the public interest, by providing education and promoting research. Their land rents are being used for a purpose of which Georgists should approve. Indeed, their land endowments are a positive thing. Without their endowments, tuition fees would need to rise dramatically, or the quality of education and research would need to fall.

In the case of universities, there are also good reasons why land endowment is actively preferable to other forms of funding. Universities must be independent: their academics must be able to teach and research without interference from the government. In itself however, it is not adequate for the government to give guarantees of academic freedom. Universities must also have enough funds to exercise their freedom effectively.

This rules out direct government funding because governments have a tendency to impose austerity on public bodies. I don’t want to get into an argument about the rights and wrongs of limits on government spending. But in some cases, it can clearly go too far, as it has in the court system of England and Wales. In June 2023, there was a backlog of 65,000 cases in the Crown Court (which handles serious criminal cases). 28% of these Crown Court cases took over a year to reach trial.9 These delays impair access to justice and (as witnesses’ memories fade) could compromise criminal defendants’ rights to a fair trial. Legal aid to pay the costs of those who cannot afford to hire lawyers has been cut, which has remarkably led to criminal lawyers going on strike for a month.10

If British universities were mainly funded by the Treasury, I have no doubt that something similar would have happened to them. I do not believe that a Chancellor of the Exchequer would defund a university because an academic wrote something they didn’t like; but I can readily believe that the Chancellor would reduce a university’s funding out of a general hostility towards State funding.

This doesn’t mean that all bits of the government should have their own independent revenue streams. An independent endowment means that it is very hard to downsize, merge, or abolish an institution. For the most part, this is a virtue: imagine if the Army were stuck at the size it was in the Cold War thanks to its endowment, or if there were no scope for the government to re-organise the welfare system because each separate benefit had its own protected revenue stream. Independent endowments largely remove fiscal decisions from the scope of democratic choice.

With universities, however, this is a virtue. Universities (especially ancient ones) are institutions that should not be downsized, merged, or abolished. They should be insulated from the cut and thrust of democratic politics, and be allowed to continue providing education and research as they see fit. They should be secure of their position in the very long-term: the University of Cambridge has been around for 800 years, and is probably one of the two institutions in Great Britain most likely to survive for 800 more.

Land is a particularly appropriate form of endowment for a university, because it is a long-term, stable investment. It is considerably more stable than publicly-traded equities. It is less risky than government bonds over the very long-run, because land cannot default. This is not to say universities shouldn’t invest in equities and bonds as well; but I think that land provides a sensible foundation for their endowments. The landholdings of universities should, then, be exempt from LVT, and the privilege of a landed endowment should be extended to newer universities, too.

I would hesitate before extending this kind of LVT-exempt endowment to many other types of institution. An obvious candidate would be scientific funding councils, for the same reasons as the universities. However, LVT exemption is a privilege that should be awarded with restraint. We must be satisfied both that the institution’s purpose is public benefit, and that it requires the ironclad guarantee of independence that an LVT-exempt land endowment gives it.

A Final Note

What these three categories have in common is that they remedy a small number of problems that could be created by LVT. While Georgists believe that the evils of private land ownership should be overcome, to try to correct injustice and inefficiency where none exists, is itself unjust and inefficient.


A fixed proportion of the revenue from the Crown Estate is distributed by the Treasury to the King, in order to fund the monarchy. The rest goes into the same pot of money as general taxation.


Mason Gaffney, ‘Toward Full Employment with Limited Land and Capital’ in Arthur Lynn (ed), Property Taxation, Land Use and Public Policy (University of Wisconsin Press 1976) 99, 115.


See Joseph Heath, ‘Three normative models of the welfare state’ (2011) 3(2) Public Reason 13.


John Maynard Keynes, The end of laissez-faire (Hogarth Press 1926).


To paraphrase F. W. Maitland, ‘Moral personality and legal personality’ in David Runciman and Magnus Ryan (eds), Maitland: State, Trust and corporation (CUP 2012) 62, 66.


Reports and Financial Statements 2022 (University of Cambridge 2022) 47.


Gil Richards and Nick Davies Performance Tracker 2023: Criminal Courts (Institute for Government 2023).

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A guest post by
Government consultant and future lawyer based in London.
Jan 17·edited Jan 17Author

I am definitely skeptical of arguments that universities intrinsically serve the public good in such a way that they require massive subsidies. In fact, I think it's very likely that universities- and the entire employment and education ecosystem- would be far better off if they didn't have functionally infinite subsidies to blow on endless bureaucratic expansion and shiny new buildings and amenities.

Jan 17Liked by Joseph Addington

When the government occupies land in SF or DC, productively or not, there is clearly an economic cost to the country because that land is denied to other productive uses. While it doesn't make much sense to collect an LVT since the funds would just be used to pay the LVT, it is still valuable to assess the land rent (what the LVT would be) and account that as an economic cost of our government's land use. This would give us insight into how we can achieve our governance objectives while balancing the land use costs.

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