The idea of Land Value Tax (LVT) Land Value Taxation is a method of raising public revenue by means of charges on the value of land. LVT is widely regarded as a very efficient form of taxation, not least because it's pretty much impossible to avoid/evade.
Land monopolists
Throughout history one of the most commonly proposed solutions to the problem of land monopolists is forced redistribution, where the land is simply taken by force and redistributed to the community, but LVT advocates take a different approach. They propose that that wealthy landowners who monopolise land shouldn't have their land taken by force, but that they should pay a tax to the community.
LVT would act as an incentive for them to either put the land to productive use in order to cover the cost of the tax, or to transfer ownership of the land to someone else who would put the land to better use.
Advocates
The idea of taxing the value of land has been around for thousands of years. The Apastamba Dharmasutra is one of the oldest Hindu documents in existence and in its section on property and taxes it states that "If any person holding land does not exert himself and hence bears no produce, he shall, if rich, be made to pay what ought to have been produced", which is an expression of the view that tax should be applied to the potential value of the land, not to the actual produce of the land.
The most famous LVT advocate was the 19th Century American economic philosopher Henry George. George was clearly influenced by the likes of Jean-Jacques Rousseau who decried the inequalities caused by land monopolisation in the 18th Century:
"The first man who, having fenced in a piece of land, said 'This is mine' and found people naïve enough to believe him, that man was the true founder of civil society. From how many crimes, wars, and murders, from how many horrors and misfortunes might not any one have saved mankind, by pulling up the stakes, or filling up the ditch, and crying to his fellows: 'Beware of listening to this impostor; you are undone if you once forget that the fruits of the earth belong to us all, and the earth itself to nobody'." RousseauOther early LVT advocates include the physiocrats (most notably Anne Robert Jacques Turgot and François Quesnay) the British economists Adam Smith (probably the second most egregiously misrepresented economist in history behind Karl Marx) and David Ricardo and the British-born US revolutionary Thomas Paine.
Modern advocates come from across the political spectrum. The Green Party have been long-term LVT advocates, the Corbyn-McDonnell Labour leadership are much more open to the prospect than any Labour leadership in decades. On the right, the free-market fanatic Milton Friedman advocated LVT saying "There's a sense in which all taxes are antagonistic to free enterprise – and yet we need taxes. ...So the question is, which are the least bad taxes? In my opinion the least bad tax is the property tax on the unimproved value of land".
Benefits
There are many potential benefits to Land Value Tax. It would discourage rentierism and land speculation, improve land use, raise wages and eliminate the need for taxes on productive activity. One of the biggest benefits of all is that it's a tax that would be almost impossible to avoid/evade because it's simply not possible to move vast tracts of land to tax havens like the British Cayman Islands.
The economist Fred Foldvary states that LVT encourages landowners to develop vacant/underused land or to sell it, and that it deters speculative land holding, dilapidated inner city areas return to productive use, reducing the pressure to build on undeveloped sites and so reducing urban sprawl.
One of the main benefits of LVT is that it would allow taxes on productive activity to be reduced or abolished. The idea of using a land tax to reduce or eliminate income and consumption taxes would clearly be to the benefit of millions of working people who own little or no land, but the wealthy landowner class obviously wouldn't like the idea at all.LVT is rightly regarded as one of the most efficient taxes imaginable because it doesn't deter productive activities by taxing them and because it would be almost impossible to avoid.
A fairer system
A tax system that targets the asset-rich rather than the hard-working, and that is pretty much impossible to avoid/evade would clearly reduce inequality and improve social mobility. People who work hard would be able to keep more of their income, while those who generate their wealth by idly monopolising land would have to pay tax to the rest of society for the privilege.
The current system of imposing taxes on income and consumption instead of land value clearly benefits those who derive most of their wealth from property and rent, and who have the financial means to pay tax advisers to hide their incomes in tax-havens.
Just look at the way the Grosvenor dynasty managed to avoid paying £3.6 billion in Inheritance Tax through the use of trust funds so that the young Hugh Richard Louis Grosvenor could inherit a £9 billion property empire from his father.
Society is set up in a way in which the poor and ordinary have to pay taxes on their income, and tax on their consumption, and another load of tax if they're lucky enough to inherit some wealth, meanwhile the tiny super-rich minority repeatedly sidestep paying their share of tax.LVT would massively reduce the iniquity of the tax system. If you own land, you pay tax on it. It doesn't matter whether the landowners register themselves as a company in a tax haven or not; it doesn't matter if the land is owned through an elaborate network of off-shore trust funds; if they own land in the UK they need to cough up the tax. If they don't pay the tax, the land can be incrementally taken in lieu of payment and redistributed to people who will bother to pay the tax.
Resistance of the land-rich
Given the incredible power of the inherited wealth aristocracy in the UK, the prospects of a fair land tax system being introduced here look very slim indeed.
The British political class is absolutely riddled with landowning aristocrats, especially the ruling Tory Party and the unelected House of Lords. The prospect of a Tory government introducing LVT is absolutely laughable (Tory MPs have twice wrecked Labour Party efforts to introduce LVT, once in 1931 and again in 1951).
The prospect of getting LVT through the House of Lords is not quite as ludicrously unlikely as the Tories introducing LVT, but Britain's bloated and unelected upper chamber is utterly riddled with wealthy landowners who would obviously be inclined to protect their own self-interest by fighting tooth and nail to scupper any proposed LVT legislation.
There are clearly a great number of unelected Lords who would prefer to see the burden of taxation put onto workers and productive businesses instead of onto their property empires.
The mainstream media is also heavily dominated by billionaire tax-dodgers with vast property portfolios. Any politician proposing LVT would have to expect a vicious propaganda war to be waged against them by the likes of Jonathan Harmsworth (Daily Mail, Metro), the Barclay Brothers (Telegraph, Spectator) and Richard Desmond (Express, Star).
Landowner subsidies
The introduction of a Land Value Tax would have loads of social and economic benefits, but it has been fiercely resisted by the powerful landowner class because they know that they'd be unable to avoid paying it. In fact the privileged European landowner class have resisted Land Value Tax so successfully that they've actually managed to establish for themselves a system of taxpayer funded Landowner subsidies!
In the past farmers received subsidies for their produce, which is problematic in its own way, but kind of makes sense. Nowadays there is no necessity for them to actually produce anything at all, the EU pays out vast subsidies to landowners simply for owning the land.
The UK electorate has voted to leave the EU, but thanks to the extraordinarily reckless lack of a government contingency plan for Brexit and the interminable foot-dragging over Article 50 we're still in it.
When the Tory government does eventually get around to developing an actual plan of action and then leaving, they've already made it clear that the taxpayer funded handouts to landowners are going to continue if not increase. It would be crazy to expect anything different from a political party that counts inherited wealth aristocrats and farmers as two of its most loyal demographics.
Instead of having a fair tax system based on taxing wealth, we've got a system based on taxing consumption and labour in order to actually hand out subsidies to idle land monopolists!
Henry George's Land Value Tax is a great idea because it taxes the super-rich on wealth that they simply cannot hide, but the European landowner class are so powerful that they've not only successfully resisted Land Value Tax, they've actually had politicians devise a polar opposite system to further entrench their privilege by diverting the money raised from taxes on consumption and labour into lucrative subsidies to be showered on wealthy landowners whether they put their land to productive use or not!
LVT and Basic income
The concepts of Land Value Tax and Basic Income often go together. In 1797 Thomas Paine wrote that every person should be entitled to a basic subsistence income funded by a tax on land "as a compensation in part for the loss of his or her natural inheritance by the introduction of the system of landed property".
The majority of modern-day Basic Income advocates suggest that it should be funded through some form of Land Value tax.
If you want to know more about Basic Income check out the following articles:
- An introduction to Basic Income (simple)
- Basic Income vs the current UK welfare system (a little bit complicated)
- A Basic Income Labour Market analysis (a bit more complicated)
Any political party with a genuine interest in the development of a fair and efficient tax system should at least consider the benefits of LVT.
The benefits would go much further than just making sure that the wealthiest in society actually pay tax, it would also significantly reduce the problem of land speculators hoarding land and inflating property prices, and it would drive the economy by encouraging people to put land to good use, and by removing taxes on genuinely productive activities.
The first step towards a fairer system is the abolition of the ludicrous system of taxpayer funded subsidies for land monopolists, and the second step it to set about reducing taxes on productive activities and their replacement with LVT.
As far as I'm concerned, any political party that supports landowner subsidies and rules out LVT cannot possibly be considered progressive. If any political organisation insists that it is the responsibility of the landless to subsidise the land monopolists, rather than the responsibility of landowners to compensate society for monopolising the land, there's absolutely no way they can be considered progressive.
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