PDA

View Full Version : Tax reform ideas / a Land Value Tax?



massrock
25-02-2010, 05:07 PM
What do you think about the arguments here?

What he's saying basically (as I understand it) regarding the current taxation system in most western style democracies, is that because the highest earners, and therefore tax payers, tend to own property, they in effect get back as much or more in property value increases due (ultimately) to government investment in infrastructure than they pay in taxes, while those with lower incomes, who will mostly rent their homes do not share in those gains and so end up actually subsidising the cost of public services for the rich.

The solution offered is along the lines of taxing land yearly at a rate based on it's rentable value, and to use that to replace present income tax, council tax and VAT.

He's got a book about it and I realise a youtube clip necessarily oversimplifies things but does that make some sense to you?

http://www.youtube.com/watch?v=6ZkfmY1PMng

Dishcuss.

vimothy
26-02-2010, 06:44 PM
LVT sounds pretty good to me...

massrock
26-02-2010, 07:16 PM
Some bits from the LVT campaign website. (http://www.landvaluetax.org/what-is-lvt/)


Is it fair?

Land (unlike goods and services) has no cost of production. If an ample supply of land of equal desirability were available everywhere, there would be nothing to pay for its use. In reality land acquires a scarcity value owing to the competing needs of the community for living, working and leisure space. Thus land value owes nothing to individual effort and everything to the community at large. It belongs justly and uniquely to the community. Conversely, the reward for individual effort can belong only to the one who earns it, to spend, save or give away as he or she may see fit.

Because of differences in positional advantages, fertility or natural resources, some locations are more desirable than others. Demand for access to these features gives land its rental value. Land Value Taxation, being assessed on these values, is fair in its incidence.


From Practical Politics Issue No. 26 March 1992 (http://www.landvaluetax.org/land-value-tax/additional-arguments-in-favour-of-lvt.html)


(c) The pragmatic argument: raising revenue in an efficient, superior way
Essential government services must be paid for somehow. The advantages of LVT are that

(i) it is cheap to collect;
(ii) its yield is certain and potentially large, over £2,000 per head per annum;
see: Costing The Earth, ed. R. Banks Shepheard-Walwyn, 1989) and The Land Value of Britain, 1985 -1990, by David Richards (E.S.S.R.A. paper, 1990) which gives a land rental value of £110 billion for 1989;
(iii) it cannot be avoided or evaded; and
(iv) it does not add to the cost of living, because, as all economists agree, it falls on those who have a beneficial interest in land and cannot be`passed on' by them in the form of higher prices.

The revenue raised replaces existing taxes, which fall on personal earnings and on the goods and services people provide for eachother by productive effort.
Work and enterprise are rewarded. Merely holding land becomes unprofitable.
Landowners, obliged to pay the LVT, need to generate the necessary income. Unused and under-used land has therefore to be put to an appropriate use.

Bit more from Fred Harrison on UK history.

http://www.youtube.com/watch?v=ki-Od1MMa78

rumble
02-03-2010, 05:00 PM
yes, I think it's probably a good idea, although I haven't studied it w hole lot. It also has a pretty long history and wide variety of supporters:

http://en.wikipedia.org/wiki/Georgism

Leo
02-03-2010, 07:11 PM
the highest earners, and therefore tax payers, tend to own property, they in effect get back as much or more in property value increases....

yes...except that recent history shows owning property is a risk, an investment that can go down as well as up. property owners stand to gain potential rewards because they take the risk. doesn't his premise work only if property values increase...as they almost always have, but not always.

full disclosure: i know pretty much nothing about this topic and am just speculating out my bum.

rumble
03-03-2010, 12:44 AM
well, if the value of the land does drop, then so does the tax burden

vimothy
03-03-2010, 12:05 PM
yes...except that recent history shows owning property is a risk, an investment that can go down as well as up. property owners stand to gain potential rewards because they take the risk. doesn't his premise work only if property values increase...as they almost always have, but not always.

Dunno about this. If I buy some land, hold on to it and sell it for profit, I haven't added any value. All I've done is contribute to more asset price inflation. Not only is no value added, but no capacity is utilised. The proportion of income spent on land might as well be buried in a hole as far as employment is concerned.

massrock
03-03-2010, 03:00 PM
well, if the value of the land does drop, then so does the tax burden
And if the value rises so does the tax, thus placing a check on property price bubbles (and land speculation) in the first place.

At least that's one of the big supposed benefits of an LVT that proponents cite.

massrock
03-03-2010, 03:18 PM
The people who lost out in the recent housing market downturn weren't really those that owned property anyway, they were people with mortgages. They ended up in further debt and property speculators had access to lots of cheap land which will only rise in value, until the next bust.

vimothy
07-04-2010, 05:25 PM
Apropos the LVT, I read a stat today: in Britain 0.3% of the population owns 69% of the land.

bob effect
07-04-2010, 09:36 PM
Apropos the LVT, I read a stat today: in Britain 0.3% of the population owns 69% of the land.

So no chance of LVT being introduced anytime in the next few thousand years then.

massrock
07-04-2010, 10:22 PM
.3%?

We can take 'em, easy.

Pretty shocking though. This has got to be one of the biggest political / economic issues in this country, if not the fundamental one.

Re: Georgism, I enjoyed this bit of commentary on the wikpedia page:


Although both advocated for workers' rights, Henry George and Karl Marx were antagonists. Marx saw the Single Tax platform as a step backwards from the transition to communism. He argued that, "The whole thing is... simply an attempt, decked out with socialism, to save capitalist domination and indeed to establish it afresh on an even wider basis than its present one."

On his part, Henry George predicted that if Marx's ideas were tried the likely result would be a dictatorship.

massrock
04-05-2010, 02:35 PM
Philippe Legrain, visiting fellow at the LSE, writing in the FT.


Third, introduce a tax on land values. Whereas taxing work is wasteful – less is produced and no tax is raised on the lost output – land is in fixed supply so a tax on it is less harmful (and impossible to avoid). Shifting the tax burden from labour to land would therefore boost economic growth, according to an OECD study.

Taxing land values could also limit property bubbles, which divert funds from productive investment in booms and then cause terrible busts – without discouraging development (unlike property taxes), mobility (unlike stamp duty) or investment (unlike interest rate rises).

It would also be fair. Whatever the merits of capitalism, there is nothing intrinsically desirable about the initial distribution of property rights. Britain’s history is such that land is distributed more unequally than in Brazil. There, 1 per cent of the population owns 49 per cent of the land; here, 0.3 per cent owns 69 per cent.

Land appreciates not through landowners’ striving, but that of others. As talented and industrious people have flocked to London, the value of the 300 acres of fields – now Mayfair and Belgravia – passed down to successive Dukes of Westminster over three centuries, has sky-rocketed to an estimated £6.5bn. Better, surely, to tax that windfall rather than the work of those who generated it? A land tax would also pay for much-needed infrastructure investments that raise surrounding land values.

Replenishing Britain’s public finances will involve painful choices. But it is also a chance to make tax fairer and less harmful to growth. Wise politicians should seize it.

http://www.ft.com/cms/s/0/09bca5a6-4342-11df-9046-00144feab49a.html