Harberger Taxes
Loading...DESIGNED BY ARNOLD HARBERGER
POPULARIZED BY GLEN WEYL AND ERIC
POSNER
Harberger Taxes function as a funding mechanism by taxing assets based on self-assessed values, encouraging efficient use and benefiting societal welfare.
Harberger Taxes, introduced by economist Arnold Harberger in the 1960s, are typically applied to land and real estate but can also be used for intellectual property and digital assets, including NFT marketplaces. The idea has gained traction through the works of economists Glen Weyl and Eric Posner.
This funding strategy is beneficial for any community aiming to enhance resource allocation, curb monopolies, and generate revenue for public goods. Communities can utilize these taxes to fund operations, expand their treasuries, or redistribute funds among members. This mechanism can also support sustainable resource use while ensuring that value creation is effectively rewarded without the need for traditional taxation.
Harberger Taxes create a new kind of “partial common ownership” somewhere between private and common ownership. The goal is to reduce inefficiencies from hoarding and speculative behavior. Under this system, assets remain available for sale at the owner’s declared value, creating a balance between ownership desire and tax obligations.
Harberger Taxes can be implemented onchain, where smart contracts handle the key processes: setting the sale price, collecting taxes, managing continuous market interactions, and reassessing ownership. The processes in this mechanism are highly customizable. To begin, owners must self-assess the value of their assets, such as land, intellectual property, or other valuable resources, and be willing to sell at that declared price. Then, a set percentage of this self-assessed value is taxed regularly, with the rate and frequency predefined.
Setting the right tax rate is crucial. If the rate is too high, it may discourage ownership, while a rate that’s too low might not motivate efficient resource use. There are also modified versions of Harberger Taxes aimed at reducing owner uncertainty. One option is a transition period that lets owners retain possession after a sale, allowing them to reclaim the asset by paying a percentage of the buyer’s declared value. Another approach ties the owner’s tax rate to the highest bid, giving them the choice to sell when they want as long as taxes are paid. These adjustments ensure owners, not buyers, control the sale.
The owner publicly declares the value of their asset, which determines their tax liability.
The owner pays a regular tax based on the declared value, typically a percentage of it.
The asset is always available for purchase at the declared price. If someone pays that price, they can immediately buy the asset.
Once purchased, the new owner declares a new value and begins paying taxes, while the asset remains available for sale under the same rules.
Harberger Taxes maintain a constant market environment where assets are always for sale. This keeps resources circulating, ensuring they end up with those who value them most and are willing to pay for them.
Owners are regularly taxed based on their self-declared asset value, pushing them to assess the true worth of their property accurately. If they overvalue it, they pay higher taxes, which encourages more efficient and productive use of the resource.
The constant possibility of sale and the tax on ownership can curb monopolies and lead to a more equitable distribution of assets.
GeoWeb is an open geospatial information network that fosters augmented, shared reality through the use of digital land registry smart contracts and partial common ownership. In this system, landholders must publicly declare a sale price for each of their land parcels using ETHx, a wrapped version of ETH that facilitates streaming payments. Landholders are required to pay a license fee to the network to maintain their parcel license. This fee is set at 10% of their declared sale price annually. They must also authorize a payment stream and keep ETHx in their wallet. Any market participant has the ability to initiate the transfer of a parcel by paying the current landholder their declared sale price.