The Lost Generation

[Injin]

It is outlined by Mason Gaffney in The Corruption of economics

A synopsis -

'The mystery of persistent economic failure can now be explained. Professor Mason Gaffney charges his colleagues with using a theoretical apparatus that is fatally flawed. But he goes further: he accuses the founders of neo-classical economics - the paradigm taught in schools and universities - of acting in bad faith. They distorted the science of econnomics to protect vested interests, and prevented governments adopting policies that would yield prosperity for everyone. How did it happen? A century ago the programme which synthesized social justice with efficient market economics was endorsed by millions of people in Britain, the United States, Ireland and Australia. Their champion was Henry George. Armed with the language of classical economics, he challenged the power elites whose riches were built on the poverty of the masses. To stop Henry George the fortune hunters hired professors to pervert the language of economics and confuse democratic debate. The use of this corrupted economics continues to this day, explain the authors, who analyze recent attempts to intimidate reforming politicians such as Nelson Mandela.

If the full potential of the market economy is to be enjoyed by everyone, taxes must be transferred from consumption and production onto the rent of land. This was the theory - developed and endorsed by the greatest economist - that the landlords would not tolerate, their stratagem succeeded. But, in debasing their discipline, economists deprived themselves of the ability to diagnose problems, forecast trends and prescribe solutions, thereby condemning the 20th century to protracted periods of economic malaise. Mason Gaffney is the editor of "Extractive Resources and Taxation". Fred Harrison is the author of "Land and Liberty" and "The Power in the Land". '

An excerpt -

http://www.politicaleconomy.org/gaffney.htm

Not land, violence.

land is no more the cause of the trouble in this syetm than god was in the religious one.

Edited February 10, 2010 by Injin

[Executive Sadman]

TGP you are missing the point entirely. The idea is a tax on all land, not a tax on renting land from landowners. In Henry George's own words, "We must make all land common property." It would have taken you a mere few moments to do a bit of research- probably a lot quicker than writing that reply:

http://en.wikipedia.org/wiki/Henry_George#The_Single_Tax_on_Land

The fact is, land is in the possession of a small number of people- just what gives them the right to lay claim to this Earth on which we were all born? You go back far enough, and it's just a bunch of thugs kicking out the other people who need a place to live, because the king or whoever else has said that this parcel of land can now be theirs- the whole idea is pretty abhorrent really, and a Land Tax is considered a fairly passive way to redress the balance.

Its an alluring idea, i just dont get how we could possibly go from a situation where the landed gentry recieve subsidies to farm, to not farm, to plant woods, to maintain habitats for wildlife, to one where they are taxed. Its seems inconcievable. The only realistic way we can make land common owned is how Mugabe has done it.

[Injin]

Its an alluring idea, i just dont get how we could possibly go from a situation where the landed gentry recieve subsidies to farm, to not farm, to plant woods, to maintain habitats for wildlife, to one where they are taxed. Its seems inconcievable. The only realistic way we can make land common owned is how Mugabe has done it.

Yes, by having one strong man take over and then he will fairly give....it...back...to ....oh ..wait..

The problem is tax, not what is taxed.

[Stars]

The problem is tax, not what is taxed.

But there is a deeper problem ..land-ownership conffers what is esentially a legal power of taxation (land rent collection)

The argument for levying tax on land is simply, If we are going to levy a tax, the source should be something that is already a privately collected tax. So in effect you are both right and wrong - the problem is tax, but simply removing the things we call tax wont remove tax (there will be one (private) tax left)

Edited February 10, 2010 by Stars

[Stars]

What stops them passing the cost on to the end users of the land? , like VAT is passed onto consumers, or if council tax was to be paid by landlords it would be added to rent. Corporation tax for example is reflected in the higher cost of goods as it is factored into the end price.

A tax on land can't be passed to users because the tax also lowers the exchange price of land and this undermines the owners ability to raise price

[TGP]

OK,

First.......... I was responding to the idea as it was presented. As a tax on rent of land.

If it was presented badly, thats not my fault. It was presented as a tax on rents.

If we're now saying "Oh, sorry.... my mistake...... it's not a tax on rents it's a tax on land" then some of my initial points are non-operable. But some still remain. In particular.....

2) As I noted on another thread (entirely coincidentally only about an hour ago)...... if there are no substitute goods taxes on goods get passed to the consumer, if there ARE substitutes taxes on goods get passed to the producer.

So..... if apples and oranges are substitutes...... if you levy a tax on apples, the producer must swallow that tax in his profit. If he passes it on, he will lose business to the orange producers as his good becomes more expensive and people switch to the substitute. If there is NO substitute for apples, this is not the case. The producer can raise the price of apples (and retain his original profit margin despite the tax) as people have nowhere to go, they still have to buy the apples if they want fruit. The consumer pays the tax.

There is.... famously....... no substitute for land. If I want to build a factory I need land. Nothing else will do, it has to be land. Consequently, why would this end up as a tax on the "landlords" rather than on the "renters" ? The assumption seems to be that it will. Why ? Why wouldn't the landlords simply raise the rent to cover the taxes ? Where would the tenants go ? Where is the "substitute" for land that allows them to switch away from it if the cost of renting land is far too high ?

.... is still operative with a land tax. As land has no substitutes, why wouldn't the full cost of the tax be passed onto the "consumers" of land ? The renters, the production facilities on the land and so on.

They still have no choice. They still can't switch to a substitute to avoid the tax being passed onto them. It still amounts to a tax levied on production/consumption just at an earlier part of the process.

What are they going to do to avoid it ? Build their factory floating in the air ?

I'd also add....... if the target is to get the rich paying taxes....... this was a more viable mechanism when the hallmark of the rich was land ownership, and not capital ownership. Today the economic value of land is a small proportion of the capital value in an economy. Bill gates has $30bn. How much of that is land he owns ? I'd guess next to none of it. My dad is worth £300k. Almost all of that in the value of his house and the land it stands on.

In fact I'd suggest that, today, this would be a highly regressive tax.

I suspect a guy worth £200k has almost all of that tied into land values (his house)........ but a guy who is worth £200m has a much smaller percentage of it tied into land values. A flat rate applied to all land may well end up being a burden of 50% of income for the poor b*stard owning his own home, but 10% of income for the rich b*stard that keeps a much higher proportion of his wealth in stock, gold and other assets not tied so directly to land....... Although the original intent at the turn of the century was to force the tax burden onto the "Aristocratic Rich" the major outcome today may be to force the tax burden onto the middle class (with almost all their wealth tied to land) and the poor (whose major expense is renting that land). No wonder Milton Friedman liked it.

And....... in common with many revolutionary ideas of both good and bad sorts in economics...... it would only make sense to do this on a global scale. The effect of doing this in one country would be to force all the "high land requirement industries" out to other tax regimes, and making the economy friendly to "low land requirement industries". That may not be a survivable (and certainly wouldn't be a pleasant) economic shock.

Agriculture in the UK would be dead for a START...... as it largely consists of huge tracts of unimproved land than return low profit goods like cabbages.

There is also the issue of what you would do with all the "jingle mail" created. I'd suspect a fair portion of the land would immediately become uneconomic to own, costing more in taxes than it provides in income. What would be the effect of 50-60% of the entire economic land area of the UK being donated to the state or possibly the church/charities (as the only entities that wouldn't have to pay taxes on it) ?

This could still lead to the ratchet effect I noted earlier (reproduced below edited to conform with the new tax we are discussing)

4) This minimises the productivity of industry by the progressive ratcheting of higher taxes on land. If the whole public sector is to be supported from a land tax....... that will make land expensive to retain, but much lower in capital value....... which will force people to give up title to land to a non-taxed entity (the tax payments aren;t worth the sale price)........ which will lower the tax base....... which will force (in order to continue to pay for the public sector) a rise in the taxes on land...... which will force more landowners to give up their ownership...... which will lower the tax base......which will raise taxes on the remaining land owners....... and so on........ until you are receiving 0 taxes and the only productive industry going on in the nation is that which is extremely non-land-intensive.

People HAVE to have income....... they HAVE to consume........ they HAVE to produce.

They do not HAVE to own land if it's economically unproductive to do so due to high taxes on it. When the tax is higher than their income, they'll just walk away from the land.

In fact........... the final upshot of this system might be that the state ends up owning ALL the land.......... and so has to begin levying taxes elsewhere (returning to the current system) while it (as the only non-tax paying institution) rents out the land to all the tenants all over again.

You'll have swopped a multi-centered, pluralistic and diverse ownership of land for a monolithic ownership of land, run by the state.......... and still ended up with the same taxes at the end of the process.

You'd have swopped your local landlord, out for a profit......... for a state landlord you can't escape by taking your business elsewhere....... and who is not operating within a free market paradigm, but within a monopolistic state owned paradigm.

Whether this is a good or a bad thing depends on your view of the state....... I'm guessing that for most of you the idea of NuLabour being the sole economic custodians of all the nations land........ the nations only landlord..... gives you the heebie-jeebies.

Thats without pointing out that this would economically ruin everyone who actually owns land today, essentially bringing on an economic catastrophe of gargantuan proportions. Proportions high enough (I suspect) to fuel a revolution dedicated to "putting the damn taxes back where they were" led by 3-bed semi owners marching on downing street with pitchforks.

Do you have a response to these........ still plain language........ but now slightly different.......objections ?

I suppose they can be sorted into two classes........

1) The upheaval arguments. Will the pain of the change be so much to bear that the change appears to be too damaging to be carried out ?

and

2) Would it work in the end in any case ?

It reminds me of nothing so much as things like communism and anarchism in that regard. The pain to get there is high....... and as far as we can see before starting it, the benefits may not materialise if we go through the pain of setting the system up.

Yours,

TGP

[Stars]

There is.... famously....... no substitute for land. If I want to build a factory I need land. Nothing else will do, it has to be land. Consequently, why would this end up as a tax on the "landlords" rather than on the "renters" ? The assumption seems to be that it will. Why ? Why wouldn't the landlords simply raise the rent to cover the taxes ? Where would the tenants go ? Where is the "substitute" for land that allows them to switch away from it if the cost of renting land is far too high ?

[/i]

.... is still operative with a land tax. As land has no substitutes, why wouldn't the full cost of the tax be passed onto the "consumers" of land ? The renters, the production facilities on the land and so on.

Because now owners who no longer have a use for land must sell or face costs - this reduces the price by removing non users from the market

There is nothing remotely controversial about this btw

They still have no choice. They still can't switch to a substitute to avoid the tax being passed onto them. It still amounts to a tax levied on production/consumption just at an earlier part of the process.

For users, there is already (in the sense you mean it) no choice but to pay the tax (rent), except presently the tax is privately pocketed by a landowner.

The landowner cannot raise the price he charges because for this to happen the supply of land must reduce in response to the tax and it can't.

What are they going to do to avoid it ? Build their factory floating in the air ?

This problem already exists for users and so it represent no additional cost

[Injin]

But there is a deeper problem ..land-ownership conffers what is esentially a legal power of taxation (land rent collection)

The argument for levying tax on land is simply, If we are going to levy a tax, the source should be something that is already a privately collected tax. So in effect you are both right and wrong - the problem is tax, but simply removing the things we call tax wont remove tax (there will be one (private) tax left)

No, tax is indeed theft and extortion.

For some reason you think that I am in favour of private extortion and only have an ethical problem with the state. Not so, I have an ethical problem with the state because it's extortion - because all extortion is immoral.

The problem is all theft and extortion including tax then, does this make things more easy to follow?

You can't fix that problem by appointing one men and his friends to do it on everyone elses behalf. land tax as an idea is insane.

[Injin]

A tax on land can't be passed to users because the tax also lowers the exchange price of land and this undermines the owners ability to raise price

land tax also gets more income for the land taxman if prices rise.

So it will happen mercilessly if you bring in a land tax.

[ken_ichikawa]

land tax also gets more income for the land taxman if prices rise.

So it will happen mercilessly if you bring in a land tax.

??? you mean like in HK where they have a high Land value tax and people pay sod all taxes?, the thing is rents in HK especially commercial rents approach gang rape/bukkake party levels.

A box of 6x6ft costs smegging £400 a month to rent.

[Injin]

??? you mean like in HK where they have a high Land value tax and people pay sod all taxes?, the thing is rents in HK especially commercial rents approach gang rape/bukkake party levels.

A box of 6x6ft costs smegging £400 a month to rent.

Told you.

If you simply include tax as a subest of extortion rather than an extra you see what I said is true.

[Stars]

??? you mean like in HK where they have a high Land value tax and people pay sod all taxes?, the thing is rents in HK especially commercial rents approach gang rape/bukkake party levels.

A box of 6x6ft costs smegging £400 a month to rent.

HK is not a glass case example of land taxation. Only some land in hk is taxed and the government restricts access to 'new' land in a very 'odd' way.

All the same, HK is without a doubt a massive success.

If you were camparing locational advantage, you would have to compare land in much of hk to the very centre of London to get anything like the same..now compare prices like for like

[Stars]

land tax also gets more income for the land taxman if prices rise.

So it will happen mercilessly if you bring in a land tax.

And the application of the tax reduces the price....

[Injin]

And the application of the tax reduces the price....

Nope.

It reduces the availability of funds for other purchases.

You might as well say that getting mugged brings your weekly shopping bill down.

[TGP]

Because now owners who no longer have a use for land must sell or face costs - this reduces the price by removing non users from the market

No it doesn't..... if he's selling it because the income from it is lower than the tax owed on it, who would buy it ? No-one. They'd be buying into the same loss making proposition.

It certainly WOULD reduce land prices. In many cases to less than 0, you'd have to PAY people to take it off your hands.

In practice....... they'd just donate it to the state, who can't levy taxes on itself.

There is nothing remotely controversial about this btw

Depends what you mean by controversial. It's not controversial in theory..... when it's applied in practice, and every 3 bed semi owner in the country finds his house is now worth less than the replacements costs of the materials in it it may get RAPIDLY controversial.

For users, there is already (in the sense you mean it) no choice but to pay the tax (rent), except presently the tax is privately pocketed by a landowner.

The landowner cannot raise the price he charges because for this to happen the supply of land must reduce in response to the tax and it can't.

Why can't he raise the price ? He owns the land. He can do what he wants.

If the tax makes the current rent unprofitbale, a loss maker, he will raise the rent. The tenant will either pay or leave.

If he pays..... the tenant is paying the tax.

If he leaves..... the landlord donates the now "negative worth" land to the state....... and the poor renter has to go and rent somewhere else, where he pays the tax.

Yours,

TGP

Edited February 10, 2010 by TGP

[Stars]

No, tax is indeed theft and extortion.

For some reason you think that I am in favour of private extortion and only have an ethical problem with the state. Not so, I have an ethical problem with the state because it's extortion - because all extortion is immoral.

The problem is all theft and extortion including tax then, does this make things more easy to follow?

I follow that, but i think i keep making the same point in response to this, and i think you keep mistaking it for another point and not really grocking my sense.

IF there is to be taxation and land ownership, then the taxation should fall on the already installed private extortion of land ownership, so government funds itself from its an already installed extortion rather than adding another. In this sense YES, it does matter what the tax falls on.

[Injin]

I follow that, but i think i keep making the same point in response to this, and i think you keep mistaking it for another point and not really grocking my sense.

IF there is to be taxation and land ownership, then the taxation should fall on the already installed private extortion of land ownership, so government funds itself from its an already installed extortion rather than adding another. In this sense YES, it does matter what the tax falls on.

We already have the logical outcome of the system you propose.

You have a choice, you can either

1) Decry coercion and extortion. Full stop. no ifs or buts

2) Forget about changing anything, because any coercive system winds up exactly like the current one,no matter how it starts off.

What you are basically asking for is a retun to an early part of the inevitable cycle of coercive centralism. Which is nice, but is doomed to come straight back to this point once more.

[Big Orange]

Didn't it all start to get worse for the United States of America (which began to slowly decline since end of the Vietnam War) when Ronald Regan began to lower taxes? Since then the tax cuts (especially for vested interests) have done little to stave off economic collapse and is one facet of "Crony Capitalism" (with less tax revenue leading to the decline of services and infrastructure for the poor and middle class).

Edited February 10, 2010 by Big Orange

[Stars]

No it doesn't..... if he's selling it because the income from it is lower than the tax owed on it, who would buy it ? No-one. They'd be buying into the same loss making proposition.

Bingo..and so the price goes down and down..

It certainly WOULD reduce land prices. In many cases to less than 0, you'd have to PAY people to take it off your hands.

Many cases?...So long as the tax is lower than the rental value of the land the exchange price will be above zero, though it can be arbitrarily close to zero.

Thank you for gracefully conceeding the point about landlords adding the tax to price. Clearly they can't

In practice....... they'd just donate it to the state, who can't levy taxes on itself.

If nobody wants to use the land, the tax that would fall on it would be zero.

Depends what you mean by controversial. It's not controversial in theory..... when it's applied in practice, and every 3 bed semi owner in the country finds his house is now worth less than the replacements costs of the materials in it it may get RAPIDLY controversial.

Lets talk about the costs of physical replacement - a car is not worth more than its replacement cost, why should a house be?

Don't you agree that It is a gross distortion that some physical artifacts end up being worth far more than their cost of physical replacement? It's a bit odd isn't it?

Why can't he raise the price ? He owns the land. He can do what he wants.

He can demand what he wants, but he wont get

You explained why the price can't rise earlier

Edited February 10, 2010 by Stars

[Injin]

Didn't it all start to get worse for the United States of America (which began to slowly decline since end of the Vietnam War) when Ronald Regan began to lower taxes? Since then the tax cuts (especially for vested interests) have done little to stave off economic collapse and is one facet of "Crony Capitalism" (with less tax revenue leading to the decline of services and infrastructure for the poor and middle class).

People at the end of the 70's chaos wanted a smaller state and lower taxes.

Reagan and Thatcher lowered taxes, but borrowed more and played with the money supply instead - and both expanded the state.

[ken_ichikawa]

People at the end of the 70's chaos wanted a smaller state and lower taxes.

Reagan and Thatcher lowered taxes, but borrowed more and played with the money supply instead - and both expanded the state.

So whats the solution? for everybody to be issued an AK74 a box of 1000 bullets a couple of RPG-29s and then for the government to be dissolved?

[wren]

Didn't it all start to get worse for the United States of America (which began to slowly decline since end of the Vietnam War) when Ronald Regan began to lower taxes? Since then the tax cuts (especially for vested interests) have done little to stave off economic collapse and is one facet of "Crony Capitalism" (with less tax revenue leading to the decline of services and infrastructure for the poor and middle class).

USA oil production peaked in 1970. It used to be the world's biggest oil producer. I believe that a general economic decline started in the '70s due to dropping oil production.

[TGP]

Many cases?...So long as the tax is lower than the rental value of the land the exchange price will be above zero, though it can be arbitrarily close to zero.

But why can't the rate on the land mean the exchange price is BELOW 0 ?

You are talking a flat tax rate on land. £x an acre.

As the land has variable income..... depending whats on it........ there is no reason why the value of some land will then drop below 0 as the tax is more than the income that can be derived from it. This won;t lead to it being SOLD, who'd buy it ? It's a loss-making peice of land. People will "post the keys" top the government, the only institution that doesn't have to pay tax on it.

If we're funding 40% of GDP off the single remaining tax on land....... thats going to be a lot of land that actually has a negative value.

Lets say this drops 10% of UK land into a negative value.

That 10% gets left to the state with jingle mail......... leaving the state needing to raise 10% more tax........ which it can only do by raising tax rates on the remaining 90% of taxable land 11%....... pushing more lands value below 0......... causing more jingle mail going to the state (which is the only person not able to pay the tax)...... causing higher land tax rates........ all the way down to the point where the state has almost all the land (except, maybe high density accomodation and highly income intensive factories).

I am not sure why you regard this as an optimum outcome.

If nobody wants to use the land, the tax that would fall on it would be zero.

How ? You were taxing the land at a flat rate, not the structures on the land........ the land itself.

In addition.......... wouldn't this hammer use of the land ?

i.e........ you COULD make a p[rofit on that land (say growing cabbages) but with the tax thats unprofitable. So you leave it fallow. Don;t pay the tax.

How does the economy benefit from not having any cabbages ? How does it benefit from a peice of land that cannot be sold as it has 0 value ?

What happens to the tax rates on all the other bits of land as more and more bits drop out as uneconomic ? They go up.....making more uneconomic (so they lie fallow) ..... causing rates to go up......... etc.

This is just the "posting the keys back to the govt." thing but WITHOUT the possibility of the govt. at least creating some economic activity on it.

At least the govt. could rent it back to people at an affordable rate....... if you lowered the tax rate on unproductive land to 0....... they couldn;t even do that with it. The guy would hold on waiting for the revolution to come and kick the idiots out, at which point he'd still own it. It's a recipuie for forcing all the land in the UK to be left falllow by a continual ratcheting up of the taxes on teh remaining productive land until ALL uses for it are unproductive as the tax is so high.

Yours,

TGP

[Stars]

But why can't the rate on the land mean the exchange price is BELOW 0 ?

You are talking a flat tax rate on land. £x an acre.

No.

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

Edit to add - Sorry to appear terse, i thought a direct, unambiguous answer was best here.

Edited February 10, 2010 by Stars

[Tired of Waiting]

So whats the solution? for everybody to be issued an AK74 a box of 1000 bullets a couple of RPG-29s and then for the government to be dissolved?

Hopefully we can find an easier way.

Once you have money enough, then it is easy to play the system (with clever accountants, tax havens, UK "non-dom" status, etc.). If you are very poor, you can also play the system, benefits, housing support, money for babies, and cash in hand jobs, etc.

The problem is if you are in between (like me and my wife), and you make a living from salary and/or self employment. Then you pay taxes through your nose. We are trying to find ways of saving something. But it is difficult. If we don't find a way in a couple of years, we will emigrate. And millions of people like us are considering it.