Adam Collyer left a comment on James Higham on "property rights"
Land Value Tax is basically a tax on assets rather than transactions, picking on a particular type of asset, namely land (1). Property rights are guaranteed by the State, not only in the case of land, but in the case of any other asset (2). Taking assets away from people is no more moral than taking the fruits of their labour (3).
What's more, I can't see any difference in principle between taxing land and say taxing the broadcasting spectrum, or landing slots at Heathrow, or any other asset whose supply is constrained naturally.(4)
1) Correct. And why is "land" different to other assets? It is because the location value of land has nothing to do with the efforts of any individual, and certainly not the individual who happens to own the land at any one point in time. The value of the location is the result of a nigh infinite number of other factors, positive and negative. What you own, or what you pay for when you buy or rent, is the enjoyment of, and the right to exclude others from the particular bundle of advantages, created by society in general. Pay unto Caesar, and all that.
You cannot put this on a par with any other asset, like a car or a television or a painting. In fact, there are hefty taxes on such 'assets', being things like VAT and the corporation tax/income tax paid by those who produced it, and which have to be paid all over again when they wear out and are replaced. Such taxes ought to be reduced or scrapped, of course.
2) Land-ownership rights are not just guaranteed by the State, they are created by the State. Without a State there can be no land ownership, it is every man for himself, and whoever has the biggest army, or is most determined to own it is, almost by definition, the State (e.g. when the colonialists claimed legal ownership of Northern America or Australia).
Although nominally, the State protects your other property (like a car or a fridge or a painting), if they are stolen, your chances of it being returned to you are minimal, which is why people insure these things. There is no need to insure the land itself (as opposed to the buildings), all you need is an entry at HM Land Registry and to pop round every now and then to check there are no squatters, in which case the police will chuck them out for you.
3) As to morals:
a) if the State has to collect money to pay for common expenditure, is it not moral to do so in a way that does not impose huge deadweight costs on economic activity, the free exchange of goods and services, and hence does not impoverish anybody? If taxation of incomes and production is reduced by £1 and taxation of land values increased by £1, then society becomes 50p or 80p richer (or however much the deadweight costs of such taxes are).
b) There's also the standpoint that land is not the "fruit of anybody's labour". It was just there and didn't belong to anybody until somebody with a big army came along and took it, so in owning (or occupying land) you are of necessity "taking assets away" from somebody else, the sum total of human wealth does not change. Conversely, if you go out to work, you are, in the main, adding to the sum total of human wealth.
4) Correct. For the purposes of this discussion, land values include broadcasting spectrum and landing slots at Heathrow.
But It's Not A Person...
1 hour ago
23 comments:
In a sense LVT is implicit in UK landownership. Freeholds aren't anything of the sort. They in practice a free tenancy in perpetuity from the Crown. That is you get a ground rent free infinite lease for nothing. In return the Crown (AKA The State) gives you rights of ownership, Title.
So why not charge (properly) for all that? And if by doing so we could scrap Income tax, VAT, CGT, IHT, corporation tax etc etc then I'm up for it. BTW it is implied that government spending would be slashed. Question? How do State tenants (e.g. council tenants) get taxed?
Nicely put. John Kay of the Financial Times (10 Nov 2009)wrote:
'You can become wealthy by creating wealth or by appropriating wealth created by other people. When the appropriation of the wealth of others is illegal it is called theft or fraud. When it is legal, economists call it rent-seeking.'
What the LVT argument is about is value. Land value increases over time more reliably than almost anything else. The value increases due to the myriad efforts of all of us. As WE create this value WE should share it ('Value' aka: 'economic rent', 'rent' as in John Kay's 'rent seeking' above). A good way to do this is make a charge (like a rent) and use this to pay for common needs rather than charge income tax, vat etc, etc. Drop these taxes & levy Land Value Tax. To stop frightening rent seeking land/homeowners never talk about LVT without coupling it with tax cuts elsewhere.
Question? How do State tenants (e.g. council tenants) get taxed?
If we assume that almost anyone getting a council house these days is living on benefits (am I being unfair here?) they are not net taxpayers anyway.
More generally, if the state owns the land (also e.g. an office building on land owned by Crown Estates), the tenants' tax is called rent.
L: "BTW it is implied that government spending would be slashed." Nobody really knows how much ground rents (i.e. LVT receipts) would be if all other taxes were scrapped. Maybe 20% or 30% of GDP, but GDP would be a lot bigger than now as well.
"Question? How do State tenants (e.g. council tenants) get taxed?" See what Ed says. The total rent includes the buildings rent and the location rent. There is no need to add location rent again.
TFL, agreed.
Ed, ta.
One small point, I don't think the police will be much help getting rid of your squatters - squatting is a civil not criminal offence. You have to go to court to get an eviction notice. The police MAY enforce that (if they feel like it - if its 20 transit vans and caravans from the 'travelling' community, then they may not be that interested in helping you).
Lola,
I'd split the "Crown" and the state.
LVT is paid to the "Crown", it's then returned to citizens equally as a dividend minus the costs of the state.
This would tend to mean over time less (economically harmful) Bureaucrat directed spending.
Sobers, agreed, you have to go to Court first (part of the state) and then the police (part of the state) evict them, unless they are gyppos (favoured clients of the state). Either way, whoever has the state on his side wins, and that's the landowner 99% of the time.
Thanks for the mention and most interesting discussion. A full reply tomorrow on my blog!
Can we imagine a production index, where 1.00 is perfect self sufficiency: you produce exactly what you need to survive. If a farmer lives on a farm that is big enough to give him enough food such that is production is 1, then with LVT he would have to produce an extra ~0.05 to pay a 5% tax. So he would have to expand his farm, more tax on this extra and there is an equilibrium (around 1.0526). I know that he would be paying council tax, etc. at the moment, but humour me.
However, what happens if the value of his farm goes up to 1.02 because someone sells their farm next door for more than it was worth before or because someone builds a road nearby that he never uses? Does he then have to expand his farm to the new equilibrium (1.0737)? Where does he find 0.0211 units of production to finance the new farm purchase? Is the value based on when it was bought, the value other people ascribe to it, the aggregate of the value of other similar property in the area, the maximum value that could be extracted from the property, etc?
EKTWP,
The tax would be based on market values. If the farm next door is sold for >1, then your hero would be daft not to sell as well. Or he shold have campaigned not to have the road built.
If he is so keen to stay where he is, then he pays for it, exactly like the people who bought the farm next door. You get what you pay for and pay for what you get.
The rise in Land Prices because there is a road nearby is saying that the land may be better utilised as housing than as Farmland.
Ignoring the fact that price is a signal is not wise.
But that's kind of my point. He paid for a farm that was exactly what he needed at the time and now he has to pay more, so needs a bigger farm. He didn't build the road or sell the other farm, but he has to pay more as a result.
If there were inflation then the size of his farm would have to expand exponentially, would it not?
So he shouldn't gain from selling it at a higher rate than he bought it?
He could but then what? Buy another farm where he produces exactly the same and once again gets taxed out of his farm. What if it's his retirement hope of if he wants to die there? I am trying to show that by being self-sufficient he will be taxed out of his home unless he has some kind of other capital (in the form of surplus farm or capital). i.e. with LVT with value being ascribed by others you can't be self sufficient, you must produce more than you need.
If you are taxed based on what you produce then you can be self-sufficient. A farm of ~1.0526 and a constant rate of tax of 5% of production would give you enough to exactly what you need (1)
EKTWP. let's put real life figures on what you said.
Our self-sufficient hero is almost completely autark and needs about one acre of intensively farmed land to feed himself and his Mrs. with a bit of food spare to sell to pay for electricity and aspirin (or whatever it is that he cannot produce himself). He and his Mrs collect £10,000 a year in State pension as well, and pays £50 a year in LVT. Is it going to make the blindest bit of difference if his rent goes up to £51?
He'd also collect a citizens dividend under my model (which would pay for fertiliser) which would rise in line with land inflation.
AC1, you call it CD, I call it State Pension. EKTWD just completely ignores it, thus taking us from the realms of "real life" to the fantasy world of "Home-Owner-Ism" or "greenie-socialist-back-to-the-land-ery".
No, probably not! This was obviously never meant to be a real life question. It just seems to me to force you to use your land productively unless you can afford some other way to pay for it. However given how small the sums are it doesn't seem to matter. Are you proposing that LVT is the only tax paid in a country?
For me, Yes it's the only Tax (and applies to IP too).
MW's less single-tax fanatic.
EKTWP: "[Land Value Tax] just seems to me to force you to use your land productively unless you can afford some other way to pay for it."
Most people like having a back garden. They are prepared to pay to have a house with a nice, big, and/or south-facing garden. That garden brings them enjoyment, although it does not produce anything of sale-able value or generate an income.
That is productive use of land, by definition (or else we'd all live in flats). People pay for the privilege of having a nice garden by going out to work to pay the rent or mortgage - having a nice garden is consumption expenditure.
"Are you proposing that LVT is the only tax paid in a country?" In the short term, no, I see it as a replacement tax. In the long run, yes, of course.
AC1, I hope that answers your question.
LTV should certainly replace deadweight taxes like Income, NI and VAT.
What about taxes based on use and to deter negative externalities? Would they not exist under this system?
Dan: "What about taxes based on use and to deter negative externalities? Would they not exist under this system?"
That's a bit vague. Land Value Taxers have no particular opinions for or against duties on petrol, fags, alcohol etc. As to proper physical 'externalities', if you suffer therefrom, you get an LVT reduction (almost by definition) and the rest is up to the usual planning laws, and anti-pollution laws etc.
and also the courts.
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