Land Value Tax

= Henry George concluded that Land Speculation barred the entry of the poor from productive labor. He demonstrated time and again how a "Land Value Tax" or "Single Tax" would eliminate vast disparities of wealth by eliminating the unearned financial leverage some used to milk the wealth of others. [1]

Proposal by Feasta in Ireland: Land Value Tax : Unfinished business. By Emer Ó Siochrú, November 2004

URL = http://www.feasta.org/documents/landhousing/coritax.html

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Excerpt:

Predistribution instead of Redistribution

"Let us now look more closely at how Michael Davitt might approach our current land and planning benefit question. According to him, the principle underlying all funding and spending based on natural resources (natural capital) should be that of 'equity' not 'charity'; i.e. a rights-based approach. No individual human can claim to have created natural capital by their labour and/or capital therefore natural capital is fundamentally different from other forms of private property. However, as the collective consciousness of the Earth, humanity can claim a sort of common right to it.

The equal right of all men and women to the use of land is as clear as their equal right to breathe the air. It is a right proclaimed by the fact of their existence. For we cannot suppose that some men and women have a right to be in this world and others do not. 10

This common right of each human being to benefit from the Earth's natural capital should be protected and respected by legitimate governments at the appropriate level. Service infrastructures created by the state out of taxation receipts are also part of a common inheritance and are inputs into economic activities. From this basic premise comes the legitimacy for common resource taxes/rents and charges. Equity is achieved by pro-rata taxation/rents/charges (that recognize environmental limits) for the benefits derived from common resources, which are then allocated universally on an equal per capita basis. 11

This is NOT a Marxist prescription of 'from each according to their ability, to each according to their needs' but 'from each according to their use of common resources, to each their equal share'. 12 This individual right to common resources and/or economic inputs is not mediated by government or society.

...the idea that an individual has "property" in land only to the extent that there is, in the words of John Locke, "enough, and as good left in common for others." In that sense, the right to land is not a collective right, but an individual right that exists independently of the collective (i.e. "society"). The equality of this right is merely a limitation that arises from the presence of others with like rights. By contrast, a collective right to land dictates that an individual does not have a right to use any land unless society - either explicitly or by omission - has granted him the right to do so. 13

This concept appears to be a very difficult distinction for many media and political pundits to understand. It marks the boundary between the old 'red' economic analysis and the new 'green' economics of sustainability. James Robertson, a seminal economist within the movement describes this new fiscal paradigm as follows ;

This will involve a shift from redistribution to the idea of predistribution. Whereas redistributive taxes aim to correct the outcomes of economic activity, predistributive taxes and charges will share the value of essential inputs to economic activity. Whereas redistribution is dependency reinforcing, predistribution will be empowering. It will correct any underlying cause of economic injustice, inequality exclusion and injustice. 14

Redistribution takes the form of a guaranteed income to every citizen that replaces existing subsidized state benefits and services 15 . It has been called variously a citizen's Income or basic income and has a long history of discussion by politicians but has never been achieved in practice. 16

It makes such good economic and social sense, that some neo-liberal economists have re-named it and claimed it as their own, without acknowledging its provenance. The following is an excerpt by UCD economist Constantin Gurdgiev in a recent critique of CORI's input into social partnership wherein he outlines his recommendation for a Personal Purchase Account (PPA) to counter the proposals of - as he puts it - 'our semi-professional equality pundits'.

A PPA system will see the government allocating a single annual payment to the individual or a family. The recipient of these funds will be free to spend on purchasing public and private services according to their choice. ...Ultimately, the government's role in managing PPAs should be reduced to ensuring the minimum quality of service provisions, allowing private providers to compete on price and quality options, while encouraging consumers to shop around. Jobs created in the process will benefit those willing to move out of dependency. 17

Any reader who can spot the essential difference of the PPA to a citizen income (see footnote ) has more critical discernment than I have.

Other economists or political scientists might respond to a CI in alarm and cite the impoverishing effects of the Speerhamland Poor Law in Britain, repealed to no one's regret in 1834. The economic lessons of Speerhamland were so powerfully engrained in the minds of many British politicians as to have delayed the desperately needed humanitarian aid for the famine in Ireland 18 . The main lesson from this misguided benefit system has been, wrongly drawn, as the absolute need to distinguish the 'deserving poor' from the merely poor when allocating the proceeds from land taxes. The true lesson should have been that all, not only the deserving and merely poor, should share in the commonwealth. 19

What does all this say to us about land ownership and its benefits in Ireland? Firstly it makes the question of who has possession of the land far less important than whether they are using it wisely and efficiently. With a significant part of the economic rent from the land remitted back to each citizen equally, freehold ownership loses much of its monopoly power. Secondly, the benefits of new fairer land and resource taxes should be passed as directly and as universally as possible to citizens. Transition to the new fiscal system of course, must take account of existing structures and leave time for adaptation. But a start should be made immediately to take advantage of the current review of local government finance.

The principle for the spending of the revenues raised by the various LVT measures should be to return that portion of the value-added back to the authorities that created it as far as possible, and that what is left, being the pure economic rent derived from the natural or locational quality of land, should be shared out equally as the beginnings of a Citizens Income (or Basic income) to be used to purchase public and private and third sector goods and services.

Value-added by national investment such as national roads, airports, railways, hospitals, third level colleges, decentralised government offices etc. could form the basis of a revised local authority block grant to be used to equalise revenues across local authorities. Apportioning this value is a political decision to be negotiated at national and local level. Value-added by the local business and social community investment should, by the same token, be assessed and spent by a representative partnership local body such as the City and County Development Boards (CDBs) through a 'participative budgetary' process. An independent source of funds for local sustainable development investment might prove just the thing to rescue these partnership structures from total irrelevancy." (http://www.feasta.org/documents/landhousing/coritax.html)

References at http://www.feasta.org/documents/landhousing/coritax.html

Discussion

Benefits of LVT

"1. Eliminates the need for Income and Sales Taxes. Income and Sales Taxes take money out of circulation in the economy. By taxing only the rental value of the land and natural resources a person monopolizes governments would be more than able to fund their legitimate functions without. The Land Value Tax or Single Tax system only taxes what no one person may claim an exclusive right to - land, water, minerals, air, etc. and does not presume to seize what people create for themselves.

The Land Value or Single tax would be the ONLY tax because everything you earn would be yours to keep as the function of your labor. You would only be "taxed" on the annual rental value of what is not yours or anyone person's but which you monopolize and deprive others the use of. Overall, this would be a lower tax than they sum of all the taxes you currently pay.

2. Eliminates "Property" Taxes. The Land Value Tax or Single Tax is a tax on what no man can own, i.e. what God has created and left us stewards of in nature. "Property" taxes are taxes not on Land Value for the most part, but taxes on structures and improvements which were created by land users and - in George's system - rightfully belongs to them!

3. Eliminates The Tax Collection Bureaucracy. Government is already set up to collect local taxes on property. This would eliminate most Federal and State revenue offices and officers.

4. Puts People To Work. This tax levels the playing field. There is no incentive to artificially boost the rental value of land because that is what is taxed! This gives more individuals and businesss more access to land and the opportunity to do business. In turn more people go to work and are able to escape poverty.

5. Reduces Tax Evasion. People can't wire land overseas to a secret bank account. Landowners (even "slum lords") either pay their "fair share" or the use of the land is made available to others who will.

6. Eliminates Land Speculation. Under this system there is no incentive to speculate on land values. The market rental value of the land is paid as "tax" annually whether the land is sitting idle or in productive use. Under this system the land will be used in a productive fashion if only to pay the taxes or otherwise made available for others to use productively

7. Reduces The Federal Bureaucracy and Encourages Local Government Control. The Federal Bureaucracy is so strong because it "has the money". In this system, local governments collect the money and then (may) distribute it upwwards. This restores a balance of power to Local and State Governments." (http://hubpages.com/hub/Why-A-Land-Value-Tax)