Killer arguments against LVT, not (73)

Sobers is starting to ask the right questions in the comments to an earlier post:

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.

Well there's your answer.

A car factory funds itself by making cars. A plumber funds himself by fixing taps. Everyody does what he does best. So why doesn't 'The State' charge for the value of services it provides and in which it has a monopoly, i.e. protecting exclusive possession of land?

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?

Sobers is getting ahead of himself and is jumbling 'taxing' with 'spending'. I trust he's happy with the concept of the NHS charging patients for services, in which case why can't 'The State' charge landowners for services? Where's the big difference? Anyway, I'll deal with this point further down.

'The State' is not a thing in itself. It is merely a convenient way of people organising things. Most of us are happy to stick to the rules and we employ policemen, army and so on to protect us from those that don't. This is a mutually beneficial state of affairs and enables us to become wealthier, happier etc that if we all hand to stand guard 24/7 over 'our' land with a shotgun.

Going back to my car factory, the factory owner charges customers market rates for the cars he sells; he pays the workers market wages; and he keeps the profits for himself.

With land, it is people and the productive economy (with the government as referee or coordinator, i.e. to ensure that roads and railways and sewage works get built) which creates the value. Landowners are merely consumers of that value - so why should all the value created by 'The State' accrue to landowners (by massively undercharging them)? Remember that without people and a productive economy and a peaceful 'state', land would be worthless.

In Sobers' view, it is preferable for the car factory to provide their cars for below cost (or even free) so that all the value accrues to the lucky owners of cars (whoever they are); for the workers to be taxed on their wages (to pay for the roads, petrol and repairs for the car owners); and for the owner of the factory to go empty handed.

It is quite easy to explain why Land Value Tax is "less bad" than income tax, so by replacing income tax with LVT, we have sorted out 'the workers' (who thus pay rent on land they consume, and not rent on their own skill and efforts). The productive economy would not be affected by LVT, it would merely pay for the privilege of occupying more favourable locations (so hands back the extra income it receives from exercising that privilege and excluding competitors).

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.

OK, we've dealt with the position of the 'consumers' and the 'workers' in my car/land analogy, we now have to deal with the 'owner'.

It is quite clear who owns the car factory (the entrepreneur, the shareholders etc) and in a normal world, they receive the net profits or dividends. Would these shareholder tell their sales teams to drop the prices they charge as they are happy to do without profits? Methinks not.

But who is 'the owner' of 'The State'? Surely it is all of us, whether 'land owners' or not (and most of us are, to some extent). So if each of us owns a 1/62 million share of the ownership of 'The State' and 'The State' has the power of charging for the value that we all create (either in our capacity as productive workers, law abiding citizens or as voters) why should it not do so and dish out the 'profits' as a Citizen's Dividend?

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?

We've covered defence already (on which we spend tuppence ha'penny, it's the foreign wars and macho posturing that cost the big bucks).

A Citizen's Dividend is an admirable replacement for the welfare state.

Of course, the government is pretty useless at running things in which it does not have a monopoly, such as education and so on, and we'd do far better to accept that education is a merit good, and dish out a certain amount of cash as 'education vouchers' (and pay a slightly lower Citizen's Dividend) or we would go the whole hog and just pay out a full Citizen's Dividend and leave it up to people to decide for themselves (personally I prefer the former option).

The same goes for the NHS. It is up to citizens to decide, democratically, whether they would rather have a lightly lower Citizen's Dividend and for the government to provide a basic level of healthcare, or whether they would rather take a higher Citizen's Dividend and take their chances with insurance companies and competing providers (or any combination of the above, whereby we recognise that health is a merit good and subsidise it with health vouchers).