Introduction of Land Value Taxation. Its fair, hard for the rich to avoid and boosts productivity!
What is Land Value Taxation?
Land Value Taxation is a method of raising public revenue by means of an annual charge on the rental value of land.
Although described as a tax, it is not really a tax at all, but a payment for benefits received. It would replace, not add to, existing taxes.
Properly applied, Land Value Tax would support a whole range of social and economic initiatives, including housing, transport and other infrastructural investments. It is an elementary fiscal measure that would go far towards correcting fundamental economic and social ills.
The value of every parcel of land in Britain would be assessed regularly and the land value tax levied as a percentage of those assessed values.
"Land" means the site alone, not counting any improvements. The value of buildings, crops, drainage or any other works which people have erected or carried out on each plot of land would be ignored, but it would be assumed that all neighbouring properties were developed as at the time of the valuation; other things being equal, a vacant site in a row of houses would be assessed at the same value as the adjacent sites occupied by houses.
The valuation would be based on market evidence, in accordance with the optimum use of the land within the planning regulations. If the current planning restrictions on the use were altered, the site would be reassessed.
• A NATURAL SOURCE OF PUBLIC REVENUE. All land makes its full contribution to the Exchequer, allowing reductions in existing taxes on labour and enterprise.
• A STRONGER ECONOMY. If we tax labour, buildings or machinery and plant, we discourage people from constructive and beneficial activities and penalise enterprise and efficiency. The reverse is the case with a tax on land values, which is payable regardless of whether or how well the land is actually used. It is a payment, based on current market value, for the exclusive occupation of a piece of land. In the longer term, this fundamentally new and different approach to revenue raising will stimulate new business and new employment, reducing the need for costly government welfare.
• MARGINAL AREAS REVITALISED. Economic actitivities are handicapped by distance from the major centres of population. Conventional taxes such as VAT and those on transport fuels cause particular damage to the remoter areas of the country. Land Value Tax, by definition, bears lightly or not at all where land has little or no value, thereby stimulating economic activity away from the centre - it creates what are in effect tax havens exactly where they are most needed.
• A MORE EFFICIENT LAND MARKET. The necessity to pay the tax obliges landowners to develop vacant and under-used land properly or to make way for others who will.
• LESS URBAN SPRAWL. Land Value Taxation deters speculative land holding. Thus dilapidated inner-city areas are returned to good use, reducing the pressure for building on green-field sites.
• LESS BUREAUCRACY. The complexities of Income Tax, Inheritance Tax, Capital Gains Tax and VAT are well known. By contrast, Land Value Tax is straightforward. Once the system has settled down, landholders will not be faced with complicated forms and demands for information. Revaluation will become relatively simple.
• NO AVOIDANCE OR EVASION. Land cannot be hidden, removed to a tax haven or concealed in an electronic data system.
• AN END TO BOOM-SLUMP CYCLES. Speculation in land value - frequently misrepresented and disguised as "property" or "asset" speculation - is the root cause of unsustainable booms which result periodically in damaging corrective slumps. Land Value Taxation, fully and properly applied, knocks the speculative element out of land pricing.
• IMPOSSIBLE TO PASS ON IN HIGHER PRICES, LOWER WAGES OR HIGHER RENTS. Competition makes it impossible for a business producing goods on a valuable site to charge more per item than one producing similar goods on less valuable land - after all, producers and traders at different locations are paying different rents to landlords now, yet like goods generally sell for much the same price and employers pay their workers comparable wages. The tax cannot be passed on to a tenant who is already paying the full market rent.
• AN ESTABLISHED AND PROVEN SYSTEM. Local government variants of Land Value Taxation, known as Site Value Rating, are accepted practice in, for example, Denmark and Australia.
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.
I can't see the sense in this. I agree with the well put 'against' comments below. You pay tax presumably when you buy land. If you don't get sufficient income to cover the tax what then.? Some people work all hours to survive, this would add to prices , if they can get it . notoriously difficult in some markets . How do you value it ? Solar and wind are now increasing values that there's a shortage in some areas of affordable land to rent for food production. This sort of meddling has unforeseen consequences as usual.
lynne nicholls commented
Alex Fletcher commented
Excellent summary. There must be some momentum for the campaign for land and resource rent taxation considering the number of government reports advocating it since the Global Financial Crisis. There has been the UK's Mirlees Report, the New Zealand Tax Working Group paper and Australia's Henry Tax Review all advocating for the taxing of monopoly rents. In Australia at the state level, the Lambert Tax Review (N.S.W.) and the ACT's Quinlan report all to some extent call for economic rents.
The IMF, World Bank, and OECD have also released reports on similar lines:
@Roger Roberts - excellent question. I am not fighting anyone. I have no religion. Nor do I support any political party, doctrine or ideology, the very things at the root of no change. So I will never support a policy that forces people to submit to authority, no matter how benevolent. Why would anyone accept LVT before knowing for what it is a remedy, and they would be right not to, because that would not be a free choice, it would be force, the result slavery. And if they do gain that understanding somehow, if they are not evil they will do whatever is best without fuss anyway and that might be LVT it might not be. So proposing a remedy before people affirm what exactly the problem is, is rather a dumb idea. It will never get adopted because without that knowledge it will be resisted by the majority. Hang on a mo, that's exactly what history testifies to, time and again. Worse still, without understanding, to force it onto the people will become an extremely dangerous thing. LVT was highly prominent before both world wars. Have you not noticed how LVT fans, Money reformers, social activists, charity, eco warriors go around trying to force improvement on other people... before attempting the same on themselves? If you want to "help", surely start with improving yourself before asking others to do so. Social improvement can only be made permanent when we truly make up our own minds to improve ourselves before asking others to, to go to the root inside ourselves. Yes this sounds impossible, but compared to what, throwing that obligation onto the state or a tyrant? Look around you. All it requires is a commitment by anyone who wants it. So you cannot change people. Only they can change themselves. Do you get the idea? I will fully understand if its confusing. Of course it is, we have been taught to submit to a master over a better life. Yes, to commit to changing ourselves, by ourselves, this is the most difficult thing I can imagine anyone attempting.
Meg Howarth commented
Everyone signing this please ask your MP to back Caroline Lucas' private members' bill on land-value tax (LVT). Details and background here:
A Land Value Tax for England – Fair, Efficient, Sustainable http://andywightman.com/?p=2351
A 'mansion tax', recently defeated in parliament, was only ever a half-way house - and political posturing by Labour to embarrass the Lib Dems, which they've rightly done. If Labour is serious about reducing economic inequality - which is driven by unearned income, including from property - it can have no principled or practical reasons not to back this bill. To the contrary - its failure to do so would expose it to the same justifiable charges of hypocrisy it's currently levelling at Lib Dems over the 'mansion tax' proposal.
Disclaimer: I am not a member of the Green or any other political party!
Roger Roberts commented
This has been Liberal Policy for years and now its time has come
It is a simple tax and provided the politicains do not try and add it on instead of reducing other taxes it will be a great boost to the economy
Let us hope that we can get the campaign moving.
The trouble i have with the comment from anonymous is i am not sure whose corner he is fighting. The speculators hanging on to land banks where planning permission has been given will have to do something with it because they will be losing money if they dont
James Robertson commented
I would gladly support a 38 Degrees campaign for LVT.
The only tax that that actually encourages production. The original "supply side" proposal.Couple it with reductions on taxes on work and capital, and watch the economy soar!
What problem is LVT resolving? I do not believe it can be this simple. It sounds way too radical. What about the poor old lady on fixed income. There cannot possibly be enough revenue to fund government from LVT. Surely the landlord will just pass the tax onto his tenants, how will they pay it. Tax should be paid on ability to pay, that is a practical problem not a moral one. Few people own the most land and are the powerful controlling the entire political, educational and media machine left and right. You are the weakest of the weak, how will you overwhelm them? This looks like communism, to force people to give up their investment in property. These people worked extremely hard for it, taking it is theft. Surely its best to fund government from peoples hard work and enterprise, than take it from the free market rise in property values, at least working people have the ability to pay it. I looked at the history of these "proven" cases. They all failed miserably, why are you trying to deceive us. Boom bust cycles are caused by banks printing money, do you not watch the TV and listen to our professor of economics? I can easily avoid it by moving the asset to a tax haven, duh. Ask the great Richard Murphy stalwart campaigner for tax justice! By owning land I can provide for its best use by others and rent is due for that service. Land owners pay heaps of council tax already, not to mention income tax, why are you fining working people even more with this socialism. How are you going to value the land, its impossible to separate the value of the building from the land value. Do we really need another army of tax spies prying into our private lives. Surely it is the capitalist that is destroying the economy not the land owner, why not protect the landowner for a change. Have you heard of the Location Value Covenant? http://www.systemicfiscalreform.org/Home/location-value-covenants. It sounds similar but with many of these problems addressed
Toby Lenihan commented
I agree with all of this. And the most important reason is that no man made the land.It was made by a HIgher Power for all & it's value goes up because of the efforts of the whole community & not the owner. Thus it's rent should be taken for the whole community, & by land is meant all natural resources. Everything man-made should not be taxed.You have a moral right to yourself & all that & you produce. The community has a right to the rental value of the land in the form of a tax. Morally & practically that's the only system that can end our economic & social ills.Another website on this is www.henrygeorge.org
Alanna Hartzok commented
Excellent campaign! For details about our Economics and Conscious Evolution Conference on land value tax on 24-28 July in London go to: www.theIU.org or email me.
Heather Wetzel commented
Very clear explanation of this much needed tax reform. An annual Land Value Tax is fairer for tenants (commercial and residential) and other non property owners as well – it is the economic activity of the whole of society that generates land wealth not the ‘owners’ of land.
DBC Reed commented
Now The Economist has included LVT in its Growth Manifesto (9th March), this
"tax" is on the mainstream agenda .The OECD and IMF have issued favourable statements on it too.It is no longer possible to dismiss LVT as a fringe concern.
This eloquent statement of the case gets my vote.
Very well explained. Thank you!
I'll support this campaign too.
People are beginning to realize that a big mistake has been made in thinking that we can have a Free Market when the impact is that the vast majority of people are reduced to poverty.
I've been writing about this too, at http://www.globalartscollective.org
"All land makes its full contribution to the Exchequer, allowing reductions in existing taxes on labour and enterprise. "
This tax will win my vote anytime...
Dave Wetzel commented
An excellent proposal especially as the revenue from land rent could be used to reduce income tax and sales taxes.
Henry Law commented
Bring it on.
Andrew Rendel commented
This would be an amazing campaign for 38 Degrees to support!
When public money built the Jubilee Line extension in London, the value of privately held land surrounding it increased by an estimated £10bn. It is crazy that we tax people's work but not these publicly funded windfalls.
Mark Wadsworth commented
Excellent summary, sign me up to that.