Wednesday, 24 December 2014

"Simplicate and Add Lightness"

My simple Pro-LVT rationale.

1. The Factors of Production are Land, Labour and Capital.
2. Land is a Monopoly
3. Labour and Capital create wealth.
4. Wealth creation is 'Profit'
5. Taxes can only be raised from the Profits of Private Business.
6. 'All profits return to rents'
7. Rents and Taxes are therefore synonymous
8. Hence, It is self evidently better to tax Rents, not Profits (aka Wealth Creation).

Discuss.

Update: (Following useful comment by Ben Jamin)

1. The Factors of Production are Land, Labour and Capital.
2. Land is a Gift of Nature and a Monopoly
3. Labour and Capital combine to create wealth through Exchanges..
4. Wealth creation is otherwise known as 'Profit'.
5. 'All profits return to rents',  That is Rents can only be collected from the Profits of Private Business and will be maximised and vary with location.
6. Taxes can only be collected from the Profits of Private Business.
7. Rents and Taxes are therefore both charges on wealth creation and therefore synonymous
8. Hence, It is self evidently better to tax (Private) Rents, not Profits (aka Wealth Creation).

Any more for any more?

Update 2 (27/12/2014  22.47)

Thanks for all your inputs.  I will work on them.

What I am trying to do is to evolve a short layman's language and logical rationale for LVT that can be made quickly.  An 'elevator pitch' for LVT if you like.  LVT - despite what we may think - needs 'selling' (a thing I am quite good at), and getting your presentation pat is crucial.  BTW, you can't sell crap ideas or products for very long. You soon get found out.  And the secret to successful selling is repeat business and recommendations from customer to customer.

9 comments:

Ben Jamin' said...

'All profits return to rents'

Some, perhaps a majority, but surely not all?

There are loads of simple ways to look at LVT.

For example.

We currently tax positive externalities, like work and capital formation, as if they were a bad thing.

While we the mother of all negative externalities, exclusive occupation of land, goes largely untouched.

A recipe for dysfunction.

Of course, you then have to explain to people why exclusive possession of land is a negative externality. (and exclusive possession of capital isn't).

But at least this way it stops a load of faux-lib KLNs in their tracks.

Very effective strategy against hardcore Neo-Classical economists.







Lola said...

BJ. All very true, but, I am trying to avoid phrases like ' negative externalities'. I am looking for a simple, logical and short set of statements that everyone can understand. Especially the Man on the Clapham Omnibus.

Mark Wadsworth said...

Yes, rents = tax = rents.

So while it would be nice to have a zero tax economy, that is impossible as you cannot have a rent-free economy (or not a modern and civilised one).

So the bare minimum of taxation is the amount of rent being collected/enjoyed. Which might as well be collected in tax for the reasons given.

Mark Wadsworth said...

Or you can point out that the least bad kind of tax is one which does not eat into a business' capacity to pay its costs, reinvest and grow, and which only collects absolute surplus income.

Payments for locational advantage are a balancing figure, i.e. that element of profits which are not needed for reinvesting etc, and for which the land owner does nothing in return (but for which the 'government' does quite a lot.

So it's only fair that the 'government' gets that payment.

Mark Wadsworth said...

Another thought, from Mason Gaffney's book which BJ lent me, is that physical "land" or "location" is not really a factor of production in the same way as labour and capital (which are largely interchangeable), it is more of a catalyst, in that it is required for the other two to be used/created/consumed, but the location itself is physically unchanged.

What is consumed is "rent" which is land multiplied by time.

Pablo said...

You have said that (1) the factors of production are Land, Labour and Capital, but then at (3) Labour and Capital combine to create wealth through Exchanges. Somehow, somewhere, the land has disappeared! It cannot be implicit; it must be explicit, so, Labour acts upon Land, through the medium of Capital to create Wealth...

Ben Jamin' said...

Oh, you want one liners? Here's a few.


1. If we shared the value nature provides for free, we would no longer be forced to share our the value we produce ourselves.

2. We should only pay for the land we use, instead of being penalised for what we contribute.

3. Only the value we create together should pay for the services we share together.




Mark Wadsworth said...

Something else strikes me.

Let's go with the traditional view that the factors of production are land, labour and capital.

Labour and capital are provided by individuals who have made conscious decision and effort to provide their labour or capital and are paid for it in wages or interest (or else those services would not be provided at all).

But it is "land" itself which provides the land services, not the "land owner". As land is inanimate is does not require payment for its services, so by definition, neither does the "land owner".

So the payment for land services might as well be into a common pot.

Random said...

Land can't move - unable to avoid.