The Land Value Tax Campaign

20 Nov

I was recently fortunate to be party to a very logically structured and illustrative presentation on the idea of a universal land tax, which the members of the ‘Land Value Tax Campaign’ project to be collected at a rate of 100% of the rental value of land. Rent value is in this case calculated as the surplus engendered after wages, capital and a 10% profit have been deducted from an establishment’s total production. They hope that this would eventually replace other taxes on income and on capital and its returns – profits and dividends, which they see as less equitable and a waste of the resources that Mother Nature has so generously bestowed on us (‘land’ incorporates, in economic terms, all natural products including oil, minerals, even the fish in the sea.)

While I am unsure as to the feasibility of entirely making up the costs lost from traditional forms of taxation, it was refreshing to have such a dramatic break from orthodox economic thinking. The idea of a tax on ‘rent’ has its origins in the writings of Adam Smith and was taken up later by Marx. Nineteenth-century British politicians took up the campaign at several points, but for various reasons it was considered more viable to tax less concrete financial objects like earnings and returns on capital. Dave Wetzel who was the one laying out the argument puts this down to a conspiracy of landowners who refused to concede their ancestral privileges, and who moreover funded a school of economic thinking that rapidly became dominant regarding ideas about taxation. This is why, he argues, ‘trained economists’ are so hostile to the Land Value Tax Campaign.

This seems a little farfetched, and though the example Wetzel set out, of a series of agricultural fields of varying levels of fertility, made for some convincing figures regarding the additional funds that could be collected, should the tax on rent be set at 50%, and capital and wages not taxed, he made some pretty major assumptions: while not a farmer myself, it seems to me unlikely that one field would be so productive as to yield around ten times as much as another in which the exact same level of capital and labour was invested. Moreover, how does one go about quantifying these bounteous natural resources? It is far easier to keep track of the amount a company pays its fishermen and the upkeep of its boats than it is to count the fish they catch on a yearly basis. Another ‘resource’ that allegedly contributes to rent is the ‘electromagnetic spectrum’. Is he actually proposing a tax on light? Tall buildings, by the way, would not be taxed any more than small wooden sheds built on land with the same properties; the idea is not to collect any revenue directly from anything created by man, just the resource than enabled him to create it.

The essential flaw in the theory, though, the logistics of the terminology and actual accounting process aside, is that the major productive capacity of our economy today is not based on our natural resources – which he himself admits are not great. Most of Britain’s wealth is produced by the services and information industry, where profits are directly proportional to the labour and effort put into the process – in addition to the quality of the tools and machinery they provide. Taxing the land a factory is based on seems a nonsensical way to properly get a return on the efficiency of the manufacturing process. Wetzel argues that by not taxing returns on capital, or indeed the capital itself, CEOs would be encouraged to invest their profits in more innovative technology. Yet what would prevent them from simply churning it into greater bonuses for themselves? Without progressive levels of income tax there would be no way of evening out income differentials.

Moreover, would it not be possible for one to possess extreme wealth in capital form or in stocks and bonds, without having a large body of land to tax? This was probably the real reason landowners succeeded in preventing the ‘rent tax’ becoming enacted so many years ago – because most politicians understood it was a completely ineffective way of collecting a level of the country’s GDP proportional to the needs of the majority of the population. What exactly has changed since that then?… Lovely idea, Dave, but it seems to be based on the kind of economy we had in the Middle Ages. Perhaps some level of land tax would be feasible and a means of preventing unused plots from simply stagnating – as he rightly points out. And yes, some resources are more productive than others and this could be taken into account. Yet it is totally impractical to think a ‘land valuation tax’ could be the only way a government collects revenue.

http://www.landvaluetax.org/

Maybe if we razed all the buildings and went to live on allotments… it might help us meet our carbon emissions targets, who knows….

 

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3 Responses to “The Land Value Tax Campaign”

  1. Bill Batt November 23, 2011 at 4:25 am #

    I’m writing a paper on the subject of whether there is adequate tax base in land value which if collected could supplant other taxes. I should have it done soon. Contact me in a few weeks and ask me to pass it along to you. Meanwhile, check http://www.prosperCA.com and you’ll see where the State of California has estimated that a land value tax there would be enough, even though initially the proposed initiative would keep income taxes for those over $150 K. B.

    • jessking1311 November 23, 2011 at 9:26 am #

      Which country’s tax base in land value does your paper investigate? I can understand such a measure being feasible in California where there is a lot of valuable fertile land and a lower population density than the UK, but it might be more difficult in Britain…? Someone the Land Value Taxation Campaign organisation recommended also ‘A New Model of the Economy’ by Brian Hodgkinson. Anyway, looking forward to reading your paper.

    • jessking1311 December 16, 2011 at 9:42 am #

      Hi there,
      How is that paper on the tax base in land value – is it in the UK? – I would still appreciate your forwarding it to me to have a look at if you’ve come up with anything interesting. Also, what do you think about the idea of citizens’ tax councils as a means of encouraging greater local participation of residents in government? Might help deter voter apathy as well.
      Regards
      Jessica

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