From The FT:
Sir, James Bottomley (Letters, April 4) argues that taxation of imputed rents on owner-occupied property is unfair because it is no different in principle from taxes on any other kind of non-marketed activity such as housework.
He would be on stronger grounds if he distinguished the value of bricks and mortar from the value of land. Owner-occupiers enjoy different kinds of imputed rents on these two elements. Whereas buildings and their upkeep necessitate labour, land is “the free gift of nature”*. With a zero labour cost, its market price is, as the classical economist David Ricardo famously argued, a pure scarcity or monopoly value determined by variable demand relative to a fixed and immovable supply.
As such, both the actual and imputed values of land (rather than the buildings) are the natural source of state revenue. Being community-created* rather than the result of productive work and enterprise, land would not disappear if we all paid a fee for the benefits attached to our exclusive possession of it, just like the fees we pay for parking.
By contrast, to pay taxes on our work and enterprise (regardless of any related benefits) is to discourage them both.
Fiscal reform that switches public finance away from earned incomes and on to unearned Ricardian rents is the road to greater efficiency and fairness. By boosting economic activity it would also boost the demand for land and ensure that land rents are a buoyant and sustainable source of state revenues rather than the unstable speculative source of undeserved private fortunes.
Roger Sandilands, Professor of Economics, University of Strathclyde, Glasgow.
* To head off the Homeys at the pass, there is a distinction between the physical land, which is in itself has hardly any market value (and is truly a "free gift of nature", like fresh air) and the land "value" which is community-generated. For example, UK farmland goes for about £5,000 - £10,000 per acre, but the Candy Brothers paid £16,000 per square yard of land in Chelsea.
What have we wrought in the UK?
8 hours ago
18 comments:
As a "Homey" (thanks for the capital), oh to live in Chelsea.
Anon, I can't be bothered writing out "Home-Owner-Ist" in full every time.
Dear God, economic sense from a British university, and a Scottish one at that.
Perhaps the good professor could try and persuade his colleagues to ditch socialism and adopt a bit of Georgism. It might reaffirm my faith in the university system
Fiscal reform that switches public finance away from earned incomes and on to unearned Ricardian rents is the road to greater efficiency and fairness
All excellent, but the still use 'fairness' when I think they mean 'equitable', as in 'fair and just'.
CD, there are several of these academics, see also John Muellbauer.
L, indeed. 'Fairness' is one of the most chronically overused words in the English (political) language and I only use it if desperate.
MW - 'Fairness' is juvenile language. Life just isn't fair. get over it. And interfering by the likes of New Labour always makes life more unfair.
Can you imagine a tax for clean air benefits denied to the community in another way. Pollution?
Not just a carbon tax. But a diesel tax, nitrous oxide, radiation, hfc etc all rolled into one or something like that?
These things cannot possibly make us more healthy * in large doses. So there is a cost or loss of access to the community on the whole.
* except possibly for radiation hormesis
http://en.wikipedia.org/wiki/Radiation_hormesis
Lola
Perhaps a better word for fairness is neither equality. But
Equal access to natural opportunities or
Fair access to natural opportunities
You know, every can have them equally or fairly. So long as they are willing to compensate others for denying them access?
The cost of this fairness is the Rental Value as we know.
It don't really matter what we call something. What matters is what we mean by it. And then sticking to that meaning.
MW, Wealth, Value and Capital are more abused terms to add to the list.
RS - I did not argue for equality, that's almost worse than 'fairness' and is just as much a weasle word. What I am arguing for is 'equity', or 'equitable'. This means fair and just.
Lola
Yes I realised that back there no probs. I was trying to point out that there is nothing wrong with these words at all.
Problems starts when we refuse to define them with clarity. Or define them in one way and use them in another without telling anyone we are using them sneakily to support prejudicial views.
I'm very happy with all these terms. I am very unhappy with they way they are abused by people who should know better. That is why I give them a hard time, every time.
If you have time this might explain better:
http://www.henrygeorge.org/pchp2.htm
Is land "free" if it must first be drained, or fenced, or hedged, or defended from erosion or landslip, or have the boulders dragged out of it, or have windbreaks built or grown? I think of farmland in my boyhood - a lot of it had been conspicuously not free to those who reclaimed it from the wild. Hell, someone cleared the woodland off it.
D, yes, for the zillionth time, that is why there is no pressing need to tax farmland (which is worth less than £10,000 per acre).
But do you seriously imagine that land in Chelsea sells for £70,000,000 per acre (i.e. seven thousand times as much as farmland) because whoever sold it to the Candy Brothers cleared it of weeds first?
Nope, it's because of the efforts of everybody else. If you transport that acre of Chelsea in its existing condition to Outer Mongolia its value falls to tuppence ha'penny, with or without weeds.
Homey again, if I "allowed" access to my home and the land upon which it is built, who would want to gain access and why?
Apart from doggers, internet thieves and general perves.
Would I have to "allow" access to burglars, druggies, the homeless, etc?
What happens when they have trashed the place, eaten all my food, sorry, our food, blocked the dunny and quaffed all me booze?
Is it goodbye sucker, no flowers, no phone calls and on to the next wanker that had the temerity to actually work like fuck and provide for his family?
My dander is really, really up.
RS - OK we're arguing from the same side! Words change the thing. That's what's behind Newspeak, and why Darling Brown Balls used 'investment' when it was 'spending'. Wankers. (Now that is an accurate word. Darling Brown Balls are three of the biggest wankers there are/were).
Yes the term "wankers" in the common sense is well understood and used well. It only varies by degree of wanking. (:
In the economic sense please add Cameroon, Boy George and any pseudo journalist or commentator reporting on nuclear power lately. There was a staggering example from FoE, wanking to the highest degree on rt.com today.
RS. Philosphy. There are only three sorts of people in the world. People you like. People you don't like. And wankers.
All politicians and those that want to get, free of charge, their hands on other people's property are wankers, better dead than Red.
Anon, yes, the world would be a better place if the Home-Owner-Ists (who are actually Blue Socialists) were all dead, that goes without saying.
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