Harberger Tax

Enforce productive use of assets.

Harberger Tax is an economic concept according to which, the owner of a given asset pays a tax calculated based on the self-assessed value of that asset.

It is an economic model whose main goal is to enforce the productive, efficient use of resources and minimize speculation. Harberger Tax forces every owner to declare the value of their possessions. The declaration is entirely discretionary - everyone declares the value according to their own judgment. It is also public - every declared value is announced publicly.

The declared value forms the base for the tax calculation. The legislative body (in our case, the asset issuer, via the Hourglass Protocol on-chain program) establishes its percentage level and calculates its value for each asset depending on the value declared by the owner.

As mentioned, the declaration of value is public. After declaring the value of an asset, the asset is automatically put up for sale at the declared price. Any market participant who wants and can pay this amount can force the sale therefore acquiring the asset.

Harberger Tax is implemented in the Hourglass Protocol as a tool for extending ephemeral property rights. After acquiring temporary ownership rights through winning an auction, the new ephemeral owner is obliged to declare the price at which they are willing to relinquish ownership in favor of a third party. The declared value is used as a base for calculating the tax that the owner must pay to extend their ownership rights. At the same time, Hourglass is publicly put up for sale at the declared price, and every market participant has the opportunity to force this sale, immediately taking ownership.

Harberger Tax is an excellent economic tool allowing for a fair, market valuation of goods. If an asset is overvalued, its owner will incur financial losses due to the tax. If it is undervalued, a market participant will buy the asset and use it to generate greater value or sell it at a higher price.

Thus, the Harberger Tax, alongside the Perpetual Auction, creates a market where goods will always reach individuals who can use them more efficiently and productively, thereby generating greater value.