Taxing land vs. cloud

2020-09-16

Following Donald Trump’s election and the victory of the Brexit campaign, some political pundits proposed that open vs. closed is the new left vs. right.

This was in part a response to the observation that many typically reliable left-wing voters, including blue collar labour union folk, had gone the other way.

It’s an interesting framework, though one that I think misses the mark.

I prefer Balaji Srinivasan‘s land vs. cloud, which is maybe orthogonal to that discussion but still a better description of an emerging and important demarcation.

The land is controlled by the state, and most political debates are constrained to its properties, whereas the cloud reaches across jurisdictions, and is therefore more anarchic.

I’ve mentioned in passing the desirability of land value taxation. This post is more about its necessity, and was spurred by this tweet (the second one).

34. An LVT is the only baseload tax regime that can sustainably fund governments for the next half-century. Commercial transactions and personal income will become increasingly illegible to the state, and you can't tax what you can't see.
— 🌷 🌇 🌐 (@mattparlmer) September 16, 2020

As more economic activity migrates to the cloud (think “remote”), it will become increasingly challenging for governments to track and tax that activity.

Land, of course, will remain in the land. And I believe that it will take on a larger role in providing governments with tax revenues.

This is a good thing, as land value taxes are less distortive and incur less deadweight loss than income or consumption taxes.

I like it when political reality nudges policy in the right direction.