For those unfamiliar with the issue of land value taxation, please see the following two introductory articles:
------------------------------------http://landvaluetax.org/what-is-lvt/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.The advantages...
* 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.
]http://wealthandwant.com/HG/ST_what_why_1890.htmlThe Single Tax: What It Is and Why We Urge It
by Henry GeorgeAn article published in
The Christian Advocate in 1890 and thereafter reprinted in various magazines in the United Stated and England
I shall briefly state the fundamental principles of what we who advocate it call the Single Tax.
We propose to abolish all taxes save one single tax levied on the value of land, irrespective of the value of the improvements in or on it.
What we propose is not a tax on real estate, for real estate includes improvements. Nor is it a tax on land, for we would not tax all land, but only land having a vaue irrespective of its improvements, and would tax that in proportion to that value.
Our plan involves the imposition of no new tax, since we already tax land values in taxing real estate. To carry it out we have only to abolish all taxes save the tax on real estate, and to abolish all of that which now falls on buildings or improvements, leaving only that part of it which now falls on the value of the bare land, increasing that so as to take as nearly as may be the whole of economic rent
, or what is sometimes styled the “unearned increment of land values.”
That the value of the land alone would suffice to provide all needed public revenues—municipal, county, State, and national—there is no doubt.
To show briefly why we urge this change, let me treat (1) of its expediency, and (2) of its justice.
Below, in no particular order, are common objections to land value taxation, with rebuttals by me to each one:Isn't land ownership the foundation of property rights, and thus of a free society?
-ownership is. That is to say, the foundation of property rights (and the freedom which flows from those rights) is the property each person has in himself and, by extension, in the fruits his labor.
"Though the earth, and all inferior creatures be common to all men, yet every man has a property in his own person. This nobody has any right to but himself."
-- John Locke, 2nd Treatise of Government, Ch. 5
"The property which every man has in his own labour, as it is the original foundation of all other property, so it is the most sacred and inviolable."
-- Adam Smith, The Wealth of Nations, Bk 1, Ch. 10, Pt 2
"The property rights that each citizen has in himself are the foundation of a free society."
-- James Bovard, Freedom In Chains, p. 86
"Libertarianism begins with self ownership."
-- David Bergland, Libertarianism In One Lesson, 7th ed., p. 35
"There is only one fundamental right (all others are its consequences or corollaries): a man's right to his own life. Life is a process of self-sustaining and self-generated action; the right to life means the right to engage in self-sustaining and self-generated action--which means: the freedom to take all the actions required by the nature of a rational being for the support, the furtherance, the fulfillment and the enjoyment of his own life…Since man has to sustain his life by his own effort, the man who has no right to the product of his effort has no means to sustain his life."
-- Ayn Rand, Capitalism: The Unknown Ideal, pp. 321-2
"The right of life and liberty--that is to say, the right of the man to himself--is not really one right and the right of property another right. They are two aspects of the same perception--the right of property being but another side, a differently stated expression, of the right of man to himself. The right of life and liberty, and the right of the individual to himself, presupposes and involves the right of property, which is the exclusive right of the individual to the things his exertion has produced."
-- Henry George, A Perplexed Philosopher, p. 210Won’t the land value tax (LVT) make all land the "property" of the government (and thereby make us all "serfs" of the government)?
No, because the government will have no authority to dictate when, how, or by whom land itself is used; it will have only the authority to ensure that the rent
of land goes to everyone on an equal basis, since all individuals have an equal right
of access to land.
Henry George puts it this way on page 8 of The Condition of Labor
“We do not propose to assert equal rights to land by keeping land common, letting any one use any part of it at any time. We do not propose the task, impossible in the present day of society, of dividing land in equal shares; still less the yet more impossible task of keeping it so divided.
We propose—leaving land in the private possession of individuals, with full liberty on their part to give, sell or bequeath it--simply to levy on it for public uses a tax that shall equal the annual value of the land itself, irrespective of the use made of it or the improvements on it....We would accompany this tax on land values with the repeal of all taxes now levied on the products and processes of industry--which taxes, since they take from the earnings of labor, we hold to be infringements of the right of property.”
The only alternative to George's proposal is to treat land as the unconditional
property of a mere subset of the population. The problem with this alternative is that, when taken to its logical conclusion, we find that the fruits of individual labor must inevitably be treated as conditional
property for everyone else. Why? Because no one can produce wealth in the first place unless he or she first
has access to land
. Consequently, since all land is legally occupied, and since producing more land isn't an option, those who don't have titles
to land cannot legally access the earth -- and thus cannot legally sustain their own lives
-- unless they first "consent
" to pay a portion of their earnings to those who do
have titles to land. (This is why geolibertarians regard landed property as the “mother of all entitle
Land itself does not originate from labor; thus, "property" in land does not originate from labor, but from the law
that confers ownership to an individual or group. Landed property is therefore -- in the words of Albert Jay Nock
-- “law-made property,” and hence fundamentally distinct from “labor-made property.”
To compel a non-privileged subset of the population to pay rent to a privileged
subset for mere access to the earth is therefore to elevate law-made property above labor-made property. And since the latter is an extension of self-ownership, to elevate the former above the latter is to strike a blow at the very foundation of property rights:
"Disregard of the equal right to land necessarily involves violations of the unequal right to wealth."
To this some might object that the LVT does just that -- compels one group to pay rent to another group for mere access to the earth. While this objection may sound logical at first, it is fatally flawed. Why? Because it ignores a universal law of today's economy: the fact that land rent
gets paid either way
of whether or not it gets diverted into the public treasury.
Thus, it is not a question of “if” land rent gets paid, but to whom
and on what basis
If it is paid exclusively to titleholders on the basis of the earth on which all must live yet which none produced being the exclusive, unconditional property of those titleholders, then, for reasons given above, the property that non
-titleholders have in themselves and in the fruits of their labor is thereby violated. If, on the other hand, it is paid to the community on the basis of the individual members of that community each having an equal right to land, then said property right (the right to one's self and the fruits of one's labor) is thereby upheld for everyone
-- both titleholder and non-titleholder alike.
Another common objection is that, if government taxes the economic “rent” of land, it automatically becomes the owner
of land. This objection is based on the myth that the terms "rent collector" and "owner" are synonymous. While many rent collectors do, indeed, own the property on which they collect rent, there are, nevertheless, thousands of private rental agents and property managers all over the country who routinely collect rent on properties they do not own. Thus, one does not have
to be an "owner" to be a "rent collector." Government is no exception to this rule.
That doesn't mean the government of, say, North Korea does not assert ownership over the land on which it collects rent. It does. But it is not merely the authority to collect land rent, but the authority to dictate how land is used
, that makes the North Korean government an "owner" of land. Critics of the LVT repeatedly insist that you can't have one authority without the other, but as mentioned above, the rent-collection services provided by non-owning rental agents and property managers prove just the opposite.
This becomes easier to understand once you realize that "property" refers, not to a single right, but to a bundle
of rights -- the right to rental income being only one of them. The other rights include the right to possess, use, exclude, and transfer title. As any lawyer will tell you, those rights can be transferred in whole or in part.
"The concept of a bundle of rights comes from old English law. In the middle ages, a seller transferred property by giving the purchaser a handful of earth or a bundle of bound sticks from a tree on the property. The purchaser, who accepted the bundle, then owned the tree from which the sticks came and the land to which the tree was attached. Because the rights of ownership (like the sticks) can be separated and individually transferred, the sticks became symbolic of those rights."
-- Fillmore W. Galaty, Wellington J. Allaway, & Robert C. Kyle, Modern Real Estate Practice, 14th ed., p. 16
This is precisely why, in the U.S., it is possible for city councilmen to collect a portion of land rent through property tax levies, yet be lawfully excluded from the land itself by whoever holds title
to that land. Although the local government in this case has a legal right to a certain percentage of the land's rental value, the titleholder has all the other rights of the aforementioned "bundle."
Not only will the titleholder retain
those rights under a geolibertarian system, those rights will be strengthened
by (a) the fact that he will no longer be taxed for being productive, thus making it far easier for him to afford whatever the rental charge is, and (b) the fact that the law will require any and all surplus revenue to be distributed equally as a Citizen’s Dividend
. (The latter will provide a built-in incentive for citizens to bring enormous pressure to bear on government to limit
its spending, since less wasteful spending will mean a greater surplus, and thus a higher dividend.)Since people need food to sustain their lives, and since food, like land, is in limited supply, could not the same argument for taxing the value of land be used to justify taxing the value of food?
No, because (a) while food is in "limited" supply, it is not in fixed
supply; and (b) with food starvation is not
the only alternative to purchasing it from others, whereas with land it is
With food, one can always produce instead of buy. Not so with land. Some might counter that one can always produce to earn the wages needed to acquire land, but this presupposes the very issue in question – access
to land. While it is true people can always acquire land by earning the wages needed to rent or purchase it, one cannot earn wages to begin with unless one first
to land, which brings us right back where we started.
Food is a product of labor; land is not. Thus, the notion that one has an exclusive
right to the fruits of one’s labor is incompatible with the notion that there is a common
right to the value
of those fruits, while it is not
incompatible with the notion that there is a common right to the value of land.Won’t the LVT increase the price of land the way sales taxes increase the price of consumer goods?
No, just the opposite.
As Henry George explains here
, in order for a tax to drive up the price of something, it must either decrease supply or increase demand. Does the LVT decrease the supply of land? No, because the supply of land is fixed. Thus, the only way it can increase the price is by increasing demand. Yet not even those who oppose
the LVT argue that it increases demand, so it follows that the LVT does not
increase the price of land, since it neither decreases supply nor increases demand.
In fact, it actually lowers
the price of land by reducing the amount of privately pocketed rent that can be capitalized into a sale price.
Expressed in mathematical terms, the price of land p
equals the annual rent r
divided by the interest rate i
p = r / i
If there is a tax rate t
on the price of land p
, then p
equals the rent divided by the sum of the interest rate and the offsetting tax rate, or:
p = r / (i + t)
Thus, if the rent is $1,000, the interest rate is 10%, and the tax rate 40%, then the price would be 1,000/(.10 + .40), or $2,000. Without the tax, the price would be 80% higher
-- $10,000. (More on this here
This is why there is no long-term benefit to cutting the LVT, because people in general, and the working poor in particular, end up paying back in higher rents and land prices what they presumably get from the tax cut. (The working poor of California had to find this out the hard way after the passage of Proposition 13
Unfortunately, because the property tax fuses the tax on land values with the tax on improvements
, people have a tendency to equate one with the other, and thus falsely assume that a lower tax on land value yields the same benefits as a lower tax on improvements. It in fact has the opposite
effect. A lower tax on improvements rewards people for putting land to productive use, which means more jobs and higher wages; a lower tax on land value rewards people for holding land out
of use, which means less jobs
Single Tax advocate, Robert De Fremery, had this to say on the subject:
"At the opposite extreme of the claim that land value taxation is wrong because landholders would be the only ones paying taxes is the claim that landholders would be paying no taxes at all. It is claimed that they would merely raise their rents in proportion to the increase in taxes falling on their lands. But this is one thing all reputable economists agree can not be done. If site A (land only) in the heart of a city is worth $1,000 per month to whoever uses it, while site B (land only) on the outskirts of the city is worth only $100.00 per month, then site A is worth only $900.00 more per month than is site B. A change in the amount of taxes falling on these two landholders cannot affect the relative value of these sites. Suppose, for example, that an attempt were made to get $2,000 and $200.00 per month respectively for these two sites just because each landholder were required to pay taxes of $1,000 and $100.00 respectively to the city. Obviously, the tenants in site A would move to lower cost land. Site A is not worth $1,800 more per month than site B. If it were, the landholder would be getting it in today's market. Although a tax on land values affects the price of land, it cannot affect its rental value. There is no disagreement among professional economists on this point."