Tax reform ideas / a Land Value Tax?

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.

Click to expand...

(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.

Click to expand...

rumble said:

well, if the value of the land does drop, then so does the tax burden

Click to expand...

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.

Click to expand...

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.

Click to expand...