Cross posted at Nourishing Obscurity.
A common response to the proposal to scrap taxes on incomes or production and to tax land values instead are the cries of "It's my land! An Englishman's home is his castle! What right does The State have to come along and make me pay tax or rent on my own land?"
I would like to counter this well rehearsed bit of propaganda with the following example/analogy:
1. When India was originally partitioned, areas of land had to be allocated to one country or the other, and there was mass migration of Muslims to areas allocated to Pakistan (incl. what is now Bangladesh) and of Hindus to India (and lots of random killing along the way). So the proxy war that has been fought ever since over control of Kashmir illustrates the general principle that wars are fought over land rather than over anything else - I have no reason to assume that either side has the intention of enslaving the population of any territory it might gain. Both countries seem to grudgingly accept that the Line Of Control is more or less permanent, but there's always a nagging doubt that the Line of Control might be moved by force.
2. That just about exhausts my general knowledge of the situation, as highlighted by the fact that I used a picture of the Wagah Crossing, which is a hundred miles south of Kashmir.
3. But it does illustrate the general principle that control of land is the most basic function of government and comes before all else; wars are primarily fought over control of land or territory; a government wants to control all the land within its border (see also Pakistan/North Western Frontier); and if a government of a country controls land, then that land is part of 'the country (see e.g. British Overseas Dominions, all those little islands that geographically or culturally have little to do with the United Kingdom).
4. It is fairly irrelevant where individual Muslims or Hindus in Kashmir would like the Line of Control to be; where it ends up is decided by the two governments, acting, we would hope, in the interests of their whole populations, including those parts of the population who are not currently affected by the dispute, but who do not want to see their sons sent off to kill or be killed. Defending your border, or starting an offensive war has costs of course, but does this not give us a clue as to how the money ought to be raised? Oughtn't these costs be borne by those who have most to lose or to gain, i.e. land 'owners' in your half of Kashmir whom you are defending, or those people to whom you allocate land in any part of Kashmir that you take from the other country by force?
5. What relevance does this have to land ownership in the UK, or any other country which is safe against invasion by other countries (let's gloss over mass immigration for these purposes), you might ask?
6. The relevance is that even in country which has put all these territorial or tribal battles behind it (such as the UK), land 'ownership' can only happen under the protective umbrella of The State. It is not the case that land 'ownership' is something entirely independent of the existence of The State; which preceded the existence of The State; and on which The State tries to impose itself. The relationship - whether on a historical, political or economic level - is completely the other way round, as I will try to explain.
7. Please note that for these purposes, 'The State' is All Of Us. Arms of the government such as the police, the courts, planning departments deal with exceptions rather than the rule, which is that land 'ownership' can only work if all or nearly all of us respect others' rights.
8. I think we can agree that without the state-protected right to exclusive possession of land, our society and economy would collapse (even in Socialist economies where nominally everything belongs to The State, most people or businesses have exclusive possession of their home or their premises), so there are huge benefits to this, which accrue to tenants as well as owner-occupiers, but land 'ownership' itself only rides on the back of this; and the economic benefits of land 'ownership' are merely derived from and are secondary to the idea of 'exclusive possession'.
9. The benefits of land 'ownership' only accrue to owner-occupiers or landlords, as tenants have to hand over the value of the benefits they derive from the right to state-protected exclusive possession in cold, hard cash every month. What makes it worse for the tenants is a large part of what they are paying for is things which they have already paid for through their income tax (house prices are much higher if in the catchment area of a 'good' State school).
10. And while the economy and free markets in general (and the right to exclusive possession of land) are a positive-sum game, the total amount of land is physically limited so at best, it is a zero-sum game in practical terms. Any change in the selling prices of land does not add to or detract from overall wealth.
11. If you look more closely, you'll know that land 'ownership' is a negative sum game from the point of view of the productive economy (the source of all wealth, along with natural resources). As the productive economy grows, an ever larger share accrues to the rental value of land (which is usually capitalised into the selling price), as illustrated by my earlier post.
12. Home-Owner-Ists may dispute that there is a steady transfer of wealth from the productive economy to land 'owners', but is it not widely accepted that Consumer Price Inflation (which is based on the value of freely traded goods and services) rises more slowly than Retail Price Inflation (which includes rent and mortgage payments)? Is that not evidence enough?
Just sayin', is all.
Import the Third World
36 minutes ago
11 comments:
The purpose of the state is to protect property rights (i.e the Military and the Police) and to enforce the Law of Contract. That's it. That's all there is.
In re your last paragraph, in a proper free market society the real price of all goods and services falls over time, as capital is employed to increase the productive effort of workers and knowledge is gained. The only thing that rises in price as a free market society developes, is land.
And as you are as familiar (more familiar?) with he Georigist arguments around that, I really shoud not say any more. But, I reckon there are two factors. One the general scarcity of land and two the infrastructure improvements.
So why not simply capture that increase, or general rental premium for the whole of the society to which you belong?
Does that simplify your argument?
L, yes of course it simplifies the argument, but first of all people have to accept that 'the state' and 'land ownership' are synonymous.
PS, a third factor is increasing productivity, which happens even in the absence of infrastructure improvements (necessity is the Mother Of Invention, and all that).
PPS, the state has surprisingly little role in enforcing contracts (and has far too much of a role in interfering in the freedom of contract). Ultimately things work on the basis of trust and/or cash in hand payment (cf. drugs, prostitution), and many businesses go beyond mere contractual obligations in order to preserve good will. And all the legal rights in the world won't help you if your counter-party has gone bankrupt.
MW - PPS - Indeed, we all deal on a customary basis. I trust that someone will pay me for my services rendered, and in the main they do, even without a 'contract'.
I still hold that deflation is the real way for freedom and markets - 'doing more for less every day' - and that inflation is the result of State sanctioned fractional reserve banking and a complicit central bank.
It's the fractional reserve banking which is the killer here.
JH, FRB is, within limits, quite harmless. The problem is that banks do not operate the way we think they do, which is to collect money from savers and lend it on to productive businesses for investment, i.e. that deposists by one group create loans to another group.
What banks actually do is deliberately blow asset price bubbles, whereby the minute they find a willing borrower they lend him 'the money', knowing full well that the recipient of that cheque (the vendor of the house or shares) will deposit 'the money' straight back in the banking system, i.e. loans to one group create deposits by another group.
So if you fix the asset bubbles (which can be 90% fixed with LVT, nailed down with a Bank Asset Tax, which I am still designing), most of the downsides of FRB simply do not arise.
MW - Bank Asset Tax? Why not just return to us the freedom to make our own money? Gresham's Law would apply (as long as there was no 'official' rate of exchange between our (good)and the State's (bad) money and FRB and the Government would be automatically self correcting?
L, the problem is that it's the mortgage banks who are busily creating the bulk 'bad money'.
The state only creates 'bad money' by 'bad spending' (i.e. deficits) which is a separate issue; OR by trying to mop up the mess left behind when land price bubbles burst (see 1970s UK).
The link between bank money and state money can be broken quite easily by making it clear there will be no bank bail outs in future (on which we are 100% in agreement).
And in a perfect world, 'state money' would be restricted to coins and notes in issue, which is a matter of convenience as much as anything, and there would be no government borrowing at all.
Agree with Lola here. That is the sole function of gov't and no more.
MW are you still under the illusion that the Gov't controls the country land or people?
Isn't it the de facto Gov't that does all this plus enslaves people?
HOI is just how all this is manifested on the surface.
RS: "are you still under the illusion that the Gov't controls the country land or people?"
What a strange question.
I feel honour bound to break up this little LVT lovefest with some contrary views.
While I agree the State in effect guarantees private property ownership, I do not see that there is any necessary link between what the State does, and what it taxes. I can see no reason why the State cannot be funded by means other than LVT and still manage to enforce private property.
The State is involved in many things, should LVT fund them all? Why is it 'better' to fund the NHS from LVT than income tax or VAT?
You are making the arbitrary link that the State makes private property possible, therefore the property should be taxed to fund the State, in its entirety.
This makes no logical sense to me. At a push I can see that perhaps land should be taxed to the extent it costs the State to run the Land Registry etc. But why should land taxes pay for education, health, defence, social security?
(I would like to point out that the Land Registry charges fees, so I'm unsure if it even is paid for by the taxpayer at all, possibly it is self funding).
Sobers: "I do not see that there is any necessary link between what the State does, and what it taxes."
If the engineers, designers, investors and workers at the car factory produce cars, they receive income depending on the value of the cars they produce, and people who consume those cars pay for them.
Why should different rules apply to any other wealth or value creating activity?
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