Additional arguments in favour of LVT
Practical Politics Issue No. 26, March 1992, was a special Issue for the General Election held on 9th. April. It sought to summarise the case for the assessment and collection of land values for public revenue purposes, in replacement of existing taxation, the policy often known as `land value taxation’ or `site value taxation’, referred to here as LVT. Here the tone is more ‘political’ than is expressed on other pages of this website.
THE BASIC CASE FOR LVT
(a) The moral, ethical argument
Whether there was a formal Creation or not, whether there was a Divine Creator or not, it is indisputable that the Earth was not made by Man.
From this it follows (i) that all men have equal rights in the bounty of Nature; and (ii) that no man can with moral legitimacy lay claim to private ownership of any part of that which Nature has freely provided. These principles are universal. Our immediate concern, however, must be to ensure their application where we have the political authority, namely within the United Kingdom.
We use the term land to mean the material universe apart from man and his products. The exertion of labour by man is what confers legitimacy on the claim to ownership: a man may not own what neither he nor any other man created.
(b) The economic argument, from observation and inference
The value of land is of course influenced by such purely natural factors as the terrain, soil type, climate, and minerals. It is,though, the presence and activity of the population as a whole which actually confer differential values on sites. Land value is determined by the demand for living and working space. It measures the advantages of a particular piece of land over that of the poorest land in use.
Land values are affected by the provision of services such as water, gas, and electricity. They are protected by the police, the fire and hospital services, and flood control. Communications (road, rail, river or sea port, aerodrome) are especially significant, and every improvement to the infrastructure will result in higher land values overall in the areas affected (though individual sites will not benefit equally, and a few may even lose value in the short run).
We notice how North America has developed in the 500 years since Columbus; how in the U.K. the recent preference for trade with continental Europe instead of the Commonwealth has affected the fortunes of East Anglia and Merseyside; how Aberdeen and its hinterland have been changed by the discovery and exploitation of North Sea oil; how the growth of service industries at the expense of much `heavy’ or `smokestack’ industry has resulted in the redistribution of jobs and of people; whilst at a local level, we see how one-way streets, parking regulations, and moving a pedestrian crossing can affect the relative attractiveness of competing shop sites.
The individual landowner, in his capacity as owner of land, clearly is powerless to create his own land value, although if he were also to exert labour or provide capital he would, in those distinctly different roles, play his small part as a member of the larger community. The landowner as such, though, performs no useful function. His sole `contribution’ to the process of wealth creation is to charge labour and capital for access to what Nature has already provided free, at a price which reflects the extent of past, current, and anticipated future levels of economic activity – values which ought rightfully to be public, have to be `bought back’ from landowners before anything new can be done!
(c) The pragmatic argument: raising revenue in an efficient, superior way
Essential government services must be paid for somehow. The advantages of LVT are that
(i) it is cheap to collect;
(ii) its yield is certain and potentially large, over £2,000 per head per annum;
see: Costing The Earth, ed. R. Banks Shepheard-Walwyn, 1989) and The Land Value of Britain, 1985 -1990, by David Richards (E.S.S.R.A. paper, 1990) which gives a land rental value of £110 billion for 1989;
(iii) it cannot be avoided or evaded; and
(iv) it does not add to the cost of living, because, as all economists agree, it falls on those who have a beneficial interest in land and cannot be`passed on’ by them in the form of higher prices.
The revenue raised replaces existing taxes, which fall on personal earnings and on the goods and services people provide for eachother by productive effort.
Work and enterprise are rewarded. Merely holding land becomes unprofitable.
Landowners, obliged to pay the LVT, need to generate the necessary income. Unused and under-used land has therefore to be put to an appropriate use.
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SOME KEY POINTS OF PRESENTATION
The essential concept is that the production of Wealth is the result of the application of Labour to Land. Some Wealth is consumed. That part which is put back in to the productive processor is in the course of exchange, is Capital.
Wealth is divided, Rent to Land, Wages to Labour, Interest to Capital. The words themselves do not matter, but the ideas do. That accountants do not distinguish land and capital, that rents are paid on buildings as well as land, that returns to labour may be called salaries or fees and include perks, ought not to confuse politicians and economists (unless they wish to be deceived, of course!). In particular it is essential to distinguish Land, Capital, and Wealth, and also therefore Rent and Interest.
Clarity of thought defeats a smokescreen of verbiage.
We are paying over land values now, but in a haphazard way and to the wrong people! Anybody renting a piece of land has obviously to pay the landowner, and site rents are included in payments made for use of buildings. If a property is being purchased with the help of a bank or building society, the loan repayments include a land value element. Even if land is fully paid for, the freeholder has to carry an `opportunity cost’ which is the income forgone through having his money tied up in capitalised land rent. What happens to-day is that we pay land values, which rightfully are public, to the private landowner, and then suffer taxes on our private earnings, goods, and expenditure, to finance public needs. It is ridiculous.
Landowners are not to blame: but the system of landlordism is.
Land values are not government’s to give away. Morally they belong to us all equally and in theory should be paid out on a per capita basis as a sort of reverse poll tax. It is purely for convenience that we argue that government keep them for essential public revenue requirements.
The moral basis for LVT is payment for benefits received. The landholder pays a duty in return for exclusive enjoyment of the natural and social advantages of his site. What he achieves thereafter, he is free to enjoy untaxed.
Land has its own ability to pay: its value is derived from and reflects its capacity to produce a return with the appropriate investment of labour and capital. LVT restores meaningful recognition that all land is vested in the Crown.