The proposed Commonwealth of Belle Isle (near Detroit).

There are three sources of revenue. The first is user fees, which apply primarily to the monorail. A 10% sales tax provides a second source. Importantly, sales taxes encourage thrift and are collected outside the cost structure of the products. Real estate taxes provide the third, but the system is radically different than that employed in the U.S. Only the raw land value is taxed, not what the owner builds on it. This follows the principle of government only receiving compensation for what it provides. Government didn’t pay to construct buildings on the owner’s land, nor does it bear the risk of loss. We encourage development of property, not discourage it.

With no offense meant to Paul Romer, Michael Strong, or other folks in the movement to establish a free city, I have always felt that the best qualification to execute this project is experience in real estate development. The main proponent behind this concept has such a background.

Tip from Tyler Cowen.