Stiglitz on Economic Rent

A basic principle of economics holds that it is highly efficient to tax rents because such taxes don’t cause any distortions. A tax on land rents doesn’t make the land go away. Indeed, the great nineteenth-century progressive Henry George argued that government should rely solely on such a tax. Today, of course, we realize that rents can take many forms – they can be collected not just on land, but on the value of natural resources like oil, gas, minerals, and coal. There are other sources of rents, such as those derived from the exercise of monopoly power. A stiff tax on all such rents would not only reduce inequality but also reduce incentives to engage in the kind of rent-seeking activities that distort our economy and our democracy. 

– Joseph E. Stiglitz The Price of Inequality

[M]inor tweaks in the economic system are not going to solve the problem… The underlying problem is the whole structure of our economy, which has been oriented more at increasing rents than increasing productivity and real economic growth that would be widely shared in our society … one has always to think about issues of shifting so that, for instance, just a tax on capital might be shifted, and a lot of the models have shown this would happen, but a tax on land, rents, would actually address some of the underlying problems. This is the idea that Henry George had more than a hundred years ago, but this analysis that I have done ... goes one step beyond Henry George. Henry George argued that a land tax was nondistortionary, but this analysis says that a land tax actually improves the productivity of the economy because you encourage people to invest in productive capital rather than into rent generating. Well, the result of the shift in the composition of the savings towards more productive investment leads to a more productive economy and in the end leads to a more equal society.

– Joseph E. Stiglitz [Speech in Paris–April 8th, 2015]