Land Value Taxation

URL = International Union for Land Value Taxation: http://www.interunion.org.uk

Description

Alanna Harzok:

"It is estimated that approximately 93% of taxes collected worldwide fall on labor and economic production. Removing the tax burden on all forms of labor and productive activity can greatly enhance private sector enterprise, especially small business. Freed from taxation, workers get increased purchasing capacity and investors more funds to invest.

Shifting taxation ONTO the economic base of land and natural resources has other positive consequences. Taxes would function as user fees for what is essentially common heritage resources. Investments in land speculation would be curbed, thus freeing funds for productive activities.

Taxing land sites according to land value promotes urban and rural land reform, providing affordable access to land for homes, businesses and farming. Sufficiently high resource rental fees, captured for public sector benefits, promote more careful and efficient use of natural resources by the private sector. Conversely, the undertaxation of natural resources leads to their over-exploitation. A high access cost for nonrenewable resources can also stimulate investment in renewable energy and other sustainable technologies, as less profit can be made on extracting irreplaceable resources.

The policy is to shift taxes OFF labor and productive capital (thus increasing everyone¹s purchasing capacity and wealth creation incentives) and ONTO land and natural resources (thus curbing speculation and private profiteering in the world¹s common heritage). Such a tax shift makes land prices affordable for housing, other basic needs production and infrastructure.

When we fail to tax land values adequately, as they rise during development, and tax wages instead, workers soon cannot afford housing and other basic necessities unless they work longer or go deeper into mortgage debt. What should be the true purpose of a market economy and development - to efficiently provide for the needs of all - is undermined. Under the current model which commodifies land and resources, land prices become a greater proportion of the costs of production as development proceeds.This primary cause of the widening rich/poor gap demonstrates the law of rent, a concept little understood even within the field of economics. As private profits accumulate from resource rents and interest payments, the gap between rich and poor keeps growing year by year.

Most "poor" countries are not poor. Rather, their people are poor, because the countries¹ valuable land and other natural resources are controlled by only a few. Land value taxation promotes both urban and rural land reform.

Land values rise because of population growth or concentration and because of infrastructure and other services provided by the public sector. Reducing taxes on wages and productive capital while recapturing the increase in land values (resource rents) BACK to the public sector assures both a fair and functional market economy and a continuing source of tax funds for the public sector.

The public fund can also be a source of low-interest loan financing to community members. Under this arrangement, the people themselves become beneficiaries of both resource rents and interest payments. The recapture of rises in land value and the revolving of loan monies all within the public sector enables countries to develop with less need for outside funds." (http://www.earthrights.net/docs/fin4devt.html)

Examples

"Harrisburg, the capital of Pennsylvania, was in 1980 on the Federal list as the second most distressed city in the United States. The city gradually reformed its municipal tax policy by shifting taxes OFF of buildings and ONTO land site values. Now taxes on buildings have dropped and land is taxed five times more heavily. With land sites freed from speculation and underuse and buildings less burdened by taxes, labor and capital went to work restoring the city, now considered to be one of the highest quality of life cities in the US.

Seventeen other municipalities in Pennsylvania have put this policy in place, all with proven benefits of economic regeneration as indicated by increased building permits and other criteria. This approach generates steady urban renewal in Sydney, Australia. Hong Kong and Singapore capture land rent primarily by nationalizing land and renting it out." (http://www.earthrights.net/docs/fin4devt.html)

Discussion

Proposed creation of a Global Resource Agency

Alanna Harzok:

"A Global Resource Agency, similar to the Alaska Permanent Fund, could collect global resource rents for distribution and investment. This would provide a stable source of finance for UN expenditures for peacekeeping, environmental preservation and restoration, and to finance justice institutions such as the World Court and the International Criminal Court. Some of the revenue might be distributed to all nations according to their populations, reflecting the right of every person in the world to a "global citizen's income" based on an equal share of the value of global resources.

A Global Resource Agency with this mandate would:

• encourage sustainable development worldwide;

• provide substantial financial transfers to developing countries by right and without strings, as payments by the rich countries for their disproportionate use of world resources;

• help to liberate developing countries from their present dependence on aid, foreign loans and financial institutions which are dominated by the rich countries;

• reduce the risk of another Third World debt crisis; and

• recognise the shared status of all human beings as citizens of the world.

This land ethic and policy has potential to benefit all and has deep roots in the history of economic justice. A full Jubilee 2000 and beyond plan would not only reduce or eliminate debt, but would also promote systemic reforms in land tenure and taxation. This is the kind of "structural adjustment" the people of the world really need.

The Financing for Development process could further this tax shift approach by (1) worldwide education and information, (2) encouragement of implementation on the local and national level, and (3) creation of a body of experts to assist with the transition to this policy. " (http://www.earthrights.net/docs/fin4devt.html)

More Information

For further information about these policy approaches and how they can be implemented contact the authors of this statement: In the US, Alanna Harzok (717-264-0957 or email: alanna@earthrights.net) and Pat Aller (212-496-8256), UN NGO representatives for the International Union for Land Value Taxation and in the UK, James Robertson, author, co-founder of New Economics Foundation, and consultant on alternative futures, economic & social change. Email: robertson@tp2000.demon.co.uk

• Land Value Taxation Around the World, Second Edition, edited by Robert V. Andelson, 1997, published by Robert Schalkenbach Foundation, http://www.schalkenbach.org