The Harberger Tax

The Harberger Tax

Harberger taxation is a form of taxation for private goods (such as luxury cars, or NFTs), where:

  1. The item in question is continuously set on auction (anyone can buy it at any time)
  2. The item’s owner can set the sell price to whatever they want, but
  3. A recurring tax is levied on the item, set at a percentage of the sell price.

This tax creates an incentive to set the sell price at the optimal point, because

  • If it’s too high, no one will buy it (which the owner might want) and the tax will be higher (which the owner probably doesn’t want).
  • If it’s too low, the tax won’t be as high but the item will probably get scooped up by someone who either wants it more or thinks they can resell it.

Here are a couple of articles on the Harberger tax that go into much more detail:

Projects That Use Harberger Taxation

Questions to Research

  1. Does a Harberger tax/”patronage royalty” (seems like a much better wording) make sense to combine with impact certificate NFTs? Why or why not? Or should the holder earn a royalty? It’s a public good, not a private good. So others should assess the value? Seems like the inverse of the Harberger Tax for private goods situation?