Sunday, October 25, 2009

Land Value Tax gains further support

Could a Land Tax Support the Operations of Government?

This idea would revolutionize the tax system of any country: Taxes don't need to be pulled from your income. Henry George argued for a "single tax" on the value of land. Land, to George, was the resource for earning money, or just living: Only beggars could get by without renting a slice of it. Land was not just natural but limited, so it belonged, in the truest sense, to the nation. Other taxes put an undue burden on human activity: Income tax weighed on productivity (wages and profits); a sales tax put a burden on trade; a "property tax," which involves not just land but the structures on top of it, burdened development. In a booming city, land values rise with the tide of human activity, so the power of a government to build subways and schools would rise, too.

Posted by drewster @ 10:36 PM (1474 views)
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25 thoughts on “Land Value Tax gains further support

  • All the benefits perfectly summed up in the description above. Who could argue?

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  • What is the purpose of tax?

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  • Devo,

    I’m going to ignore your question and answer my own instead (maybe I can make it in politics?)

    Q. What are the origins of income tax in this country?
    A. Financing warfare.

    At least, that’s the answer according to Wikipedia.
    http://en.wikipedia.org/wiki/Taxation_in_the_United_Kingdom (scroll down to the bit headed ‘History’)

    Is it possible that if we stayed away from empire building and warfare, we could have avoided a national income tax altogether? OK. that’s a silly question, but how the devil did we get by until 1797 without income tax? I wonder what 18th century people would think of us if they could see us now.

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  • “Is it possible that if we stayed away from empire building and warfare, we could have avoided a national income tax altogether?”

    No one can say that we are in the process of empire building, and the public as a whole has little appetite for war.

    So we can abolish income tax !

    Hurrah!

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  • And road tax is to improve our roads.

    But our roads are in reasonably good shape.

    So we can abolish car tax!

    Hurrah!

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  • Now, let’s say your council tax costs £1000 per year out of your wages.

    What are you getting for your money?

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  • Devo – the key for me is that land and resources belong to the nation and people and so the economic ‘rent’ from land and resources should therefore go to all the people and not just a few. How they use this ‘tax’ could be up to them.

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  • Sorry devo, I meant to say

    “Is it possible that if we had stayed away from empire building and warfare, we could have avoided a national income tax altogether?”

    i.e. focus on our history. I must be getting tired. Goodnight all!

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  • 3. quiet guy said “I wonder what 18th century people would think of us if they could see us now.”

    They would say STR1 was right all along.

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  • Quiet guy,

    There were many other taxes long before income tax. The 14th century saw the Hearth Tax; the 17th century had the Window Tax. Furthermore each town and city had tolled gates, where traders had to pay duty on goods entering the city. Looking outside the UK, we find tax systems everywhere from the Ancient Egyptians to the Romans.
    Taxes are required for common goods and services that the market can’t provide or can only provide inefficiently. For example in Roman times, the aqueducts which supplied water to entire cities had to be paid for through taxation.

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  • shipbuilder,

    Yes you’re quite right. This article is about how to collect tax. How to spend it is another matter entirely.

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  • shipbuilder said …”the key for me is that land and resources belong to the nation and people and so the economic ‘rent’ from land and resources should therefore go to all the people and not just a few.”

    How would this work in practice?

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  • devo (if you don’t mind me answering the question you put to shippy),

    “How would this work in practice?” – LAND VALUE TAX!

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  • Devo, there are plenty of people who probably have a better idea of the details as it’s not a new idea, but a % of land value would be paid as a citizen’s income.

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  • At least three informed HPC bloggers: mark wadsworth, shipbuilder and drewster, are in favour of a land value tax.

    Are there any influential politicians promoting the cause?

    If not, why not?

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  • aww thanks devo! *blush*

    Liberal Democrat number-two Vince Cable recently floated the idea of a “mansion tax” which looks like a baby-step towards LVT. I’m not aware of any other politicians championing the cause though.

    The politicians I’ve spoken to (nobody famous) are scared of it because it upsets the elderly, who are most likely to vote.

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  • @16 crunchy

    Thanks for the link. This matter is definitely a subject for further research!

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  • crunchy,

    Good link. I’m a huge fan of Fred Harrison. He’s been championing LVT as a silver bullet for eliminating poverty in the third world too. It’s distressing to think that these simple ideas have been around for over 100 years (as per Henry George) but have barely been tried anywhere. (Interestingly, the state of Connecticut is beginning to experiment with LVT. Will be interesting to see how that comes along.)

    Other nice link: a free UK magazine called Land & Liberty published by the Henry George Foundation of Great Britain Limited. I must admit I’d never heard of it before, but it looks very relevant!

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  • @drewster

    “There were many other taxes long before income tax …”

    fair comment as usual but from what little financial history I’ve learned, warfare generally required more taxation of some form for all but the smallest ventures and our modern income tax system seems to be one of the fruits of industrialised mass warfare.

    It’s interesting that two of the examples you give, Hearth Tax and Window Tax, relate to property and even the tolled gates related to physical location in the sense that merchants would have been taxed to access the local market, if I’ve understood you correctly.

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  • Yes, income tax did originate as a “temporary” war tax, but in those days other govt spending was much lower – no welfare or that sort of stuff. Now we need taxation to fund all those things that the state provide, not forgetting of course that collectively we are the state.

    One reason politicians don’t seriously consider LVT is that the majority of the land is owned by people with considerable power. But that’s not the whole story: a large portion of the population are complicit, in that they see it as an attack on their right to own land/houses, disregarding or not even considering how this benefits a few aristocrats and nouveau riche.

    But just as LVT distributes wealth from those who sit on a pile, owning more than their fair share of a fixed resource, so should a progressive income tax system, transferring from those whose income represents more than their value creation.

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  • All this hilarious talk about “land taxes” makes me chuckle like a brother. If we can’t even realise and change the national insurance laws so that the poorer are no paying larger percentages than the richer how in jiminy cricket’s name do you think the land owning majority (for they are inumerate) are going to allow, what in fiscal terms would be the equivelant of a communist manefesto, land taxes to remove whole chunks of their wealth?

    Like lots of great thinking, marxism etc, the practical and pragmatic introductions of such thinking, in every concievable comparison in history (french revolution, communist revolutions etc) has resulted in either a more corrupt system than the one replaced or a resumption to the status quo!

    Like the incredibly purposeful and logical equal taxation that carbon taxes could bring to the planet, land taxes are simply too complicated for economies to switch over to or would themselves cause political and economic upheavels that could actually tear countries apart.

    “Hey, rich people, I want all your money in taxes or you are going to have to give me your land!”

    How about trying to limit the size of our population through taxation perhaps?

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  • @ 16 crunchy – I’m a fan of cooperativeindividualism.org Anyone with some time should go to the ‘SCI library’ link there. Michael Hudson also has a number of highly recommended articles on that site.

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  • mark wadsworth says:

    All good stuff.

    The question of “how to spend it” is easy:

    1. Cut other taxes (in the interests of fairness, cut other property or wealth related taxes first), then really bad taxes like VAT and EMployer’s NIC and finally income tax/corporation tax.
    2. The State should primarily use the revenues for doing things that make the UK, and each area within it, a more pleasant place to live. So more coppers, fewer five-a-day-advisors, for a start. More refuse collectors, fewer bin inspectors. And so on.
    3. If and when all other taxes have been reduced to nothing and The State has learned to act like any other business (increase spending on things that make an area more attractive up the point where the marginal return to extra spending is plus-minus nothing, i.e. there is no point in having “too many” coppers, if one extra copper costs £50,000 but only reduces household insurance bills in that area by £10,000, then that is enough coppers), either use the proceeds to pay off the national debt and/or pay it out as universal cash benefits.

    Simples!

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  • mark wadsworth says:

    @ Shining Wit “land taxes are simply too complicated for economies to switch over to”

    Wrong. In administrative terms, they are the easiest thing in the world to calculate. We already have a system for collecting them, i.e. Council Tax and Business Rates. Valuations could be taken from recent property sales in each area (which they already know for calculating SDLT, which ought to be scrapped, of course, and rolled into LVT).

    There’s no need for a “wholesale” switch, you can do it as quickly or as gradually as you like. We could kick off with a 1% property tax like in Northern Ireland or Switzerland or Denmark, that could just be gradually increased and assessments re-worked to strip out the bricks and mortar value.

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