The Korea Times has an article regarding a report calling for increasing land value taxes and decreasing income taxes.
Song Eui-young, an economics professor at Sogang University, "said that when the property tax rate is doubled to 2 percent, there will be more room to cut income tax rate by 6.6 percentage points ― equal to increasing the income of next generation by 9 percent, according to Song.
"He added that the younger generation, who don't have to shoulder property taxes, can save more, and then buy houses later.
"He referred to Milton Friedman, who said that land value taxation is the "least bad" tax.
"The advice comes amid the huge fiscal deficit that the government is facing after cutting income and corporate taxes.
"The government is scheduled to pull down the income tax rate to 33 percent from 35 percent, while the United States and the United Kingdom are raising their income tax rate ceiling."
Pretty sad when we find more economic clarity coming from Korea than Washington.
Even scarier when you consider recent calls for increasing the base for sales taxes in Indiana by extending the tax to services.
Let me make my position perfectly clear - as bad as income taxes are, sales taxes are diametrically opposed to the concept of free markets. No tax interferes with a free market more than a sales tax, which places the weight of taxation on the very act of trade. Sales taxes incur dead-weight losses because they interfere with free market activity.
On the other hand, no tax interferes less with free market activities than a land value tax. Henry George's Single Tax would remove all taxes from capital and labor. Only land value taxation recognizes the individual right to the property one produces.
Wednesday, October 28, 2009
Monday, July 13, 2009
Predistribution, not redistribution
Fred Foldvary, whose name shows up more than once in the Great Links on this site, has a wonderful article on the Free Liberal. No excerpt does it justice. Read the full article.
University of Vermont Paper Concludes "Single Tax" Still Viable
The paper, entitled "Potential Revenue Collection Through a Single Tax on Land" (Conor Casey) goes beyond the first step of land value taxation and renews Henry George's call for one, and only one, tax - that on the value of land. The report concludes:
Economic rent is something that’s not easy to calculate with 100% accuracy. However, by looking at the available data and taking the context in which it was recorded into account, one can arrive at a reliable estimate for potential value. In the case of collecting Vermont land rents, the potential revenue is close to $1.07 billion compounded 5% annually. This represents a huge increase in revenue for the state, which could feasibly replace all other revenue sources in the state budget. Collecting economic rent from land is a perfectly viable way to fund most, if not all state obligations. The only obstacle in the path of economically efficient rent collection is political will.
While replacing property taxes with land value taxes is a worthy goal - eliminating all taxation, save that on the value of land, should remain the ultimate goal. It is the only way that we will ever achieve a truly free market in goods and services. A free market cannot exist as long as labor or its produce are taxed.
Economic rent is something that’s not easy to calculate with 100% accuracy. However, by looking at the available data and taking the context in which it was recorded into account, one can arrive at a reliable estimate for potential value. In the case of collecting Vermont land rents, the potential revenue is close to $1.07 billion compounded 5% annually. This represents a huge increase in revenue for the state, which could feasibly replace all other revenue sources in the state budget. Collecting economic rent from land is a perfectly viable way to fund most, if not all state obligations. The only obstacle in the path of economically efficient rent collection is political will.
While replacing property taxes with land value taxes is a worthy goal - eliminating all taxation, save that on the value of land, should remain the ultimate goal. It is the only way that we will ever achieve a truly free market in goods and services. A free market cannot exist as long as labor or its produce are taxed.
Democratic Freedom Caucus Supports Land Value Tax
The Democratic Freedom Caucus Platform includes the following section:
2) Economic Liberty
Just as an individual should have the right to control his or her own body, each individual should also have the right to control the fruits of his or her labor. People should have the freedom to engage in voluntary economic exchanges, and to form voluntary economic organizations, whether for non-profit or profit purposes, as long as they respect the equal rights of others.
a) Property Rights Based on Justice. There are two forms of property:
1) human-made products, such as cars, houses, and machinery; and
2) land, which refers to spatial locations, along with the natural resources within those locations - therefore, land was not produced by any person.
Out of justice and practicality, it is proper to allow an individual to keep the rewards from his or her labor. So, there should be the least taxes possible on labor, because taxes on labor take the fruits of labor. Such taxes are not only unjust, but also lower the incentive to be productive. Taxes on income, sales, or buildings all take away the rewards of labor and productivity, so they are the most harmful kinds of taxes. The least harmful tax is a tax on land location value or on extraction of natural resources, because those are not products of labor, but are fixed resources.
Land is fundamentally different from products made by human effort, because no person can produce land, meaning locations and natural resources. So, property in land needs to be treated somewhat differently from other types of property, in order to prevent over-concentrated ownership of land and natural resources.
2) Economic Liberty
Just as an individual should have the right to control his or her own body, each individual should also have the right to control the fruits of his or her labor. People should have the freedom to engage in voluntary economic exchanges, and to form voluntary economic organizations, whether for non-profit or profit purposes, as long as they respect the equal rights of others.
a) Property Rights Based on Justice. There are two forms of property:
1) human-made products, such as cars, houses, and machinery; and
2) land, which refers to spatial locations, along with the natural resources within those locations - therefore, land was not produced by any person.
Out of justice and practicality, it is proper to allow an individual to keep the rewards from his or her labor. So, there should be the least taxes possible on labor, because taxes on labor take the fruits of labor. Such taxes are not only unjust, but also lower the incentive to be productive. Taxes on income, sales, or buildings all take away the rewards of labor and productivity, so they are the most harmful kinds of taxes. The least harmful tax is a tax on land location value or on extraction of natural resources, because those are not products of labor, but are fixed resources.
Land is fundamentally different from products made by human effort, because no person can produce land, meaning locations and natural resources. So, property in land needs to be treated somewhat differently from other types of property, in order to prevent over-concentrated ownership of land and natural resources.
Connecticut Legislature Okays LVT for New London
New London, CT now has the ability to use Land Value Taxation. According to an article in "The Day":
Used successfully in about 20 Pennsylvania communities as that state worked to recover from the collapse of its steel industry, the intent is to drive redevelopment. In commercial districts, property owners of vacant buildings or empty lots are often reluctant to make improvements until they see solid signs of progress around them. Without confidence in success, why improve or construct a building if it means higher property taxes?
But under LVT the larger share of the burden shifts to the land. Speculators, sitting on unused or underutilized properties, find taxes going up on their undeveloped lots. It is then in their interest to improve their properties or sell to someone who will.
LVT can be fashioned somewhat differently in residential neighborhoods, but with the same intent to encourage the improvement of properties. Some communities opt to utilize it only in business districts.
To its credit, the City Council set politics aside and unanimously supported the LVT concept. With that backing, Re-New London lobbied the state legislature to allow the new tax system in Connecticut cities. Lawmakers opted instead to allow New London alone to use it as a pilot project, if it so chooses.
The Center for the Study of Economics, working with Re-New London, has drafted several potential tax models for New London. The council recently sent the matter to its Economic Development Committee. To begin the process the city must file an application with the state. It should do so soon.
Used successfully in about 20 Pennsylvania communities as that state worked to recover from the collapse of its steel industry, the intent is to drive redevelopment. In commercial districts, property owners of vacant buildings or empty lots are often reluctant to make improvements until they see solid signs of progress around them. Without confidence in success, why improve or construct a building if it means higher property taxes?
But under LVT the larger share of the burden shifts to the land. Speculators, sitting on unused or underutilized properties, find taxes going up on their undeveloped lots. It is then in their interest to improve their properties or sell to someone who will.
LVT can be fashioned somewhat differently in residential neighborhoods, but with the same intent to encourage the improvement of properties. Some communities opt to utilize it only in business districts.
To its credit, the City Council set politics aside and unanimously supported the LVT concept. With that backing, Re-New London lobbied the state legislature to allow the new tax system in Connecticut cities. Lawmakers opted instead to allow New London alone to use it as a pilot project, if it so chooses.
The Center for the Study of Economics, working with Re-New London, has drafted several potential tax models for New London. The council recently sent the matter to its Economic Development Committee. To begin the process the city must file an application with the state. It should do so soon.
Sunday, July 5, 2009
University of New Hampshire Professor Supports Land Value Tax
Richard England, University of New Hampshire Professor, co-edited a book published by the Lincoln Institute of Land Policy entitled "Land Value Taxation: Theory, Evidence and Practice".
In an interview, England states, "We’ve done simulation studies in Manchester and Berlin, simulated moving from traditional property taxes to two-way. It’s just computer simulations, but the best I can tell, it would encourage income growth and employment growth and it might even, and this is against intuition, could even increase land prices. On the one hand, it’s taxing land more heavily, but if in the process it’s encouraging income and employment growth, it could even increase land prices. If it did, that would really be a win-win. It doesn’t get much better than that."
Land Value Taxation means lower taxes for most, higher taxes for some, but all benefit.
In an interview, England states, "We’ve done simulation studies in Manchester and Berlin, simulated moving from traditional property taxes to two-way. It’s just computer simulations, but the best I can tell, it would encourage income growth and employment growth and it might even, and this is against intuition, could even increase land prices. On the one hand, it’s taxing land more heavily, but if in the process it’s encouraging income and employment growth, it could even increase land prices. If it did, that would really be a win-win. It doesn’t get much better than that."
Land Value Taxation means lower taxes for most, higher taxes for some, but all benefit.
Saturday, July 4, 2009
From Cato's Letter No. 62
Those who understand Henry George's call for a single tax on the value of land, and its implications regarding property rights, might wonder if George didn't have the following paragraph from Cato's Letter No. 62 in mind.
"The fruits of a man's honest industry are the just rewards of it, ascertained to him by natural and eternal equity, as is his title to use them in the manner which he thinks fit: And thus, with the above limitations, every man is sole lord and arbiter of his own private actions and property. A character of which no man living can divest him but by usurpation, or by his own consent."
George was also adamant that labor and its produce not be taxed. His single tax guaranteed that labor and capital receive their full reward.
"The fruits of a man's honest industry are the just rewards of it, ascertained to him by natural and eternal equity, as is his title to use them in the manner which he thinks fit: And thus, with the above limitations, every man is sole lord and arbiter of his own private actions and property. A character of which no man living can divest him but by usurpation, or by his own consent."
George was also adamant that labor and its produce not be taxed. His single tax guaranteed that labor and capital receive their full reward.
Sunday, May 10, 2009
York, PA Mayoral candidate supporting LVT
In a York (PA) Dispatch article, mayoral candidate Matthew Mann proposed replacing property taxes with land value taxes. According to the article, "...Mann suggested exploring land value taxation, which would shift the financial burden away from the city's poorest property owners and permanently remove tax increases for improving one's property."
Saturday, April 18, 2009
From the Left
Once more, I can't help but post a tidbit from another blog. Just like libertarians cannot be categorized as conservative or liberal, land value taxation cannot be categorized as left or right. From the Left Focus blog :
"Today, nearly every economist in the world, whether liberal, conservative or radical, agrees that public finances should be largely derived from resource rents. The radical capitalist Milton Friedman argues that "In my opinion the least bad tax is the property tax on the unimproved value of land", whereas the neo-Keynesian Paul Sameulson argues that "pure ground rent is in the nature of a 'surplus,' which can be taxed heavily without distorting production incentives or reducing efficiency". The conservative Robert Solow has claimed "For efficiency, for adequate revenue, and for justice, every user of land should be required to make an annual payment to the local government equal to the current rental value of the land he or she prevents others from using", whereas the radical antifascist Jewish refugee and economist Franco Modigliani stated "It is important that the rent of land be retained as a source of government revenue". Finally, the maverick socialist William Vickery claims "While the governments of developed nations with market economies collect some of the rent of land, they do not collect nearly as much as they could, and they therefore make unnecessarily great use of taxes that impede their economies - taxes on such things as incomes, sales, and the value of capital goods."
Each of the people just quoted are Noble laureates in economics. One can reasonably make the assumption that they have some idea of what they are talking about. If that is insufficient evidence however, consider that in 1991 no less than thirty five of the top economists of the United States - all either Noble prize winners, professors, or deans and across the political spectrum - wrote to to the then President of the Soviet Union Mikhail Gorbachev urging him in the transition to a market economy to retain public ownership of land and to derive a market-based common income from land-rents. Unfortunately, in the replacement of Gorbachev by Boris Yelstin the latter capitulated to demands to a cheap sell off natural resources, the results of which are empirically and readily available; mass impoverishment and even malnutrition in what used to be the second most powerful nation on earth."
"Today, nearly every economist in the world, whether liberal, conservative or radical, agrees that public finances should be largely derived from resource rents. The radical capitalist Milton Friedman argues that "In my opinion the least bad tax is the property tax on the unimproved value of land", whereas the neo-Keynesian Paul Sameulson argues that "pure ground rent is in the nature of a 'surplus,' which can be taxed heavily without distorting production incentives or reducing efficiency". The conservative Robert Solow has claimed "For efficiency, for adequate revenue, and for justice, every user of land should be required to make an annual payment to the local government equal to the current rental value of the land he or she prevents others from using", whereas the radical antifascist Jewish refugee and economist Franco Modigliani stated "It is important that the rent of land be retained as a source of government revenue". Finally, the maverick socialist William Vickery claims "While the governments of developed nations with market economies collect some of the rent of land, they do not collect nearly as much as they could, and they therefore make unnecessarily great use of taxes that impede their economies - taxes on such things as incomes, sales, and the value of capital goods."
Each of the people just quoted are Noble laureates in economics. One can reasonably make the assumption that they have some idea of what they are talking about. If that is insufficient evidence however, consider that in 1991 no less than thirty five of the top economists of the United States - all either Noble prize winners, professors, or deans and across the political spectrum - wrote to to the then President of the Soviet Union Mikhail Gorbachev urging him in the transition to a market economy to retain public ownership of land and to derive a market-based common income from land-rents. Unfortunately, in the replacement of Gorbachev by Boris Yelstin the latter capitulated to demands to a cheap sell off natural resources, the results of which are empirically and readily available; mass impoverishment and even malnutrition in what used to be the second most powerful nation on earth."
Monday, April 13, 2009
Paying double
Apparently, most Americans enjoy paying for government services twice. At least, that's what happens when we fund government with income taxes, sales taxes, or taxes on our homes or businesses. When government provides a valuable service (what constitutes a valuable government service is a whole other argument, that I do not intend to address here), that value attaches to the land. Infrastructure improvements increase the value of land. Good schools, low crime, maintained roads, working sewers, professional fire protection services, and other services commonly provided by governments are reflected in higher land prices.
The owners of land benefit from these services whether they have made any contribution towards them or not. The value of the land they own increases with no productive activity required. The absentee owner of a vacant plot of land is the obvious example, but the effect is the same on all land, whether apparent or not. Yet all these services that enrich those who hold title to the land are paid for by taxes on the productive activities of those who live and work there. In other words - labor and capital subsidize the landowners.
We tax those who are working, saving, and investing. If you are fortunate enough to work and save enough to buy your own piece of land, you get to pay for all those services again in the increased price of land.
Land value taxation is the only form of taxation that does not induce this double-jeopardy. Only LVT correctly and justly reclaims the value created by government services (or more accurately, created by the growth of the community). We have two choices. We can either continue to tax the productive activities of individuals in order to support the community and enrich the landowners, or we can choose to recover the value created by the community in order to support itself. The great advantage of LVT is that it penalizes no one for working, saving, or investing.
The owners of land benefit from these services whether they have made any contribution towards them or not. The value of the land they own increases with no productive activity required. The absentee owner of a vacant plot of land is the obvious example, but the effect is the same on all land, whether apparent or not. Yet all these services that enrich those who hold title to the land are paid for by taxes on the productive activities of those who live and work there. In other words - labor and capital subsidize the landowners.
We tax those who are working, saving, and investing. If you are fortunate enough to work and save enough to buy your own piece of land, you get to pay for all those services again in the increased price of land.
Land value taxation is the only form of taxation that does not induce this double-jeopardy. Only LVT correctly and justly reclaims the value created by government services (or more accurately, created by the growth of the community). We have two choices. We can either continue to tax the productive activities of individuals in order to support the community and enrich the landowners, or we can choose to recover the value created by the community in order to support itself. The great advantage of LVT is that it penalizes no one for working, saving, or investing.
More from Rochester, NY
From Green Village Consulting:
"Also consider that a property tax so heavily weighted on buildings and improvements and so little on land encourages dilapidation, underutilization, speculation and sprawl. At the same time, those who put time and money into making their properties, neighborhoods, and city durable and beautiful are rewarded with hiked assessments and taxes. What’s more, under the current system, we give tax breaks to a select few to achieve the kinds of urban development that the land value tax would enable across the board–LVT essentially gives the tax break to everyone without the city giving up the tax revenue."
"Also consider that a property tax so heavily weighted on buildings and improvements and so little on land encourages dilapidation, underutilization, speculation and sprawl. At the same time, those who put time and money into making their properties, neighborhoods, and city durable and beautiful are rewarded with hiked assessments and taxes. What’s more, under the current system, we give tax breaks to a select few to achieve the kinds of urban development that the land value tax would enable across the board–LVT essentially gives the tax break to everyone without the city giving up the tax revenue."
In England
The House of Commons hosted a seminar presented by The Coalition for Economic Justice on land value taxation. "The House of Commons seminar held last Tuesday was aimed at parliamentarians and policymakers. It examined the advantages of land value taxation, how it might be introduced and how transitional problems could be dealt with."
Almost one hundred years ago, England appeared to be moving towards a major shift from taxes on productive activities to taxes on land values. Winston Churchill was a passionate and outspoken supporter of land value taxation. World events interrupted the movement. Maybe current events will bring the movement back.
Almost one hundred years ago, England appeared to be moving towards a major shift from taxes on productive activities to taxes on land values. Winston Churchill was a passionate and outspoken supporter of land value taxation. World events interrupted the movement. Maybe current events will bring the movement back.
If Pittsburgh can do it
From the Rochester (NY) City Newspaper, comes an article about a public presentation given on land value taxation. It points out that, "Most of the conversions to LVT in the US have occurred in Pennsylvania. Harrisburg and Pittsburg have converted to LVT, and their comebacks have been credited to the switch. Philadelphia is about to make the shift, which would make it the largest city in the US to convert to LVT."
A shift away from income and sales taxes (taxes on productive behavior) towards land value taxation would be a smart move in any place at any time, but current economic conditions make it an especially important move now.
A shift away from income and sales taxes (taxes on productive behavior) towards land value taxation would be a smart move in any place at any time, but current economic conditions make it an especially important move now.
Sunday, March 8, 2009
Royal Libertarians
Normally, I will pass on posting anything found on other blogs, but this one has such a great collection of quotes from Adam Smith, Thomas Jefferson, and Albert Nock that I have to give it a nod.
I am especially fond of this one from Nock:
This imperfect policy of non-intervention, or laissez-faire, led straight to a most hideous and dreadful economic exploitation; starvation wages, slum dwelling, killing hours, pauperism, coffin-ships, child-labour--nothing like it had ever been seen in modern times...People began to say, if this is what State abstention comes to, let us have some State intervention.
But the state had intervened; that was the whole trouble. The State had established one monopoly--the landlord's monopoly of economic rent--thereby shutting off great hordes of people from free access to the only source of human subsistence, and driving them into factories to work for whatever Mr. Gradgrind and Mr. Bottles chose to give them. The land of England, while by no means nearly all actually occupied, was all legally occupied; and this State-created monopoly enabled landlords to satisfy their needs and desires with little exertion or none, but it also removed the land from competition with industry in the labor market, thus creating a huge, constant and exigent labour-surplus.” [Emphasis Nock's]
I am especially fond of this one from Nock:
This imperfect policy of non-intervention, or laissez-faire, led straight to a most hideous and dreadful economic exploitation; starvation wages, slum dwelling, killing hours, pauperism, coffin-ships, child-labour--nothing like it had ever been seen in modern times...People began to say, if this is what State abstention comes to, let us have some State intervention.
But the state had intervened; that was the whole trouble. The State had established one monopoly--the landlord's monopoly of economic rent--thereby shutting off great hordes of people from free access to the only source of human subsistence, and driving them into factories to work for whatever Mr. Gradgrind and Mr. Bottles chose to give them. The land of England, while by no means nearly all actually occupied, was all legally occupied; and this State-created monopoly enabled landlords to satisfy their needs and desires with little exertion or none, but it also removed the land from competition with industry in the labor market, thus creating a huge, constant and exigent labour-surplus.” [Emphasis Nock's]
--Albert J. Nock, "The Gods' Lookout" February 1934
Monday, February 16, 2009
Wanted: A New Economic Theory?
An interesting article appears in the February 6 Sydney Morning Herald. It comments on the inability of the major economic theories to predict recessions such as the current one. It remarks on Prime Minister Kevin Rudd's economic stimulus package, though it might as well have been directed at Barack Obama's - in search of an economic theory to support it.
I loved where it points out that, "Economics is far too political, and its practitioners far too personally invested. They already know what causes recessions - the left knows it's the policies of the right and the right knows it's the left."
But, more importantly, it points out how the economic effects of land are disregarded. It describes the pervasive role of land in all major economies. While the article does not endorse LVT, or even mention it, it is a great reminder that land is a necessary factor of production and not a form of capital.
It would have been nice if they had mentioned Henry George's view of political economy and the critical role of land, but then again, they were looking for some justification for government intervention, which George's Single Tax simply does not provide.
It sadly reminds me of the results of a quiz I offered to members of the local Libertarian party a couple months ago. One question asked what the essential role of the government was in the economy. Most who took the quiz tried to come up with some role. As I recall, only one person answered that there was no essential role for government. Economies exist both before and without government intervention quite nicely.
Just as sadly, it seems that a large majority of people out there believe the government must act to save the economy - that the recession is a failure of the free market. I'd be happy if I could just find an example of a free market. If the exchange of goods is subject to a sales tax, it is not a free market. If the employment of others in order to produce, distribute, or sell goods is taxed, it is not a free market. Any market subject to involuntary government regulation, inspection, or licensing is not free. If inventory or capital is taxed, the market is not free. What's left?
I loved where it points out that, "Economics is far too political, and its practitioners far too personally invested. They already know what causes recessions - the left knows it's the policies of the right and the right knows it's the left."
But, more importantly, it points out how the economic effects of land are disregarded. It describes the pervasive role of land in all major economies. While the article does not endorse LVT, or even mention it, it is a great reminder that land is a necessary factor of production and not a form of capital.
It would have been nice if they had mentioned Henry George's view of political economy and the critical role of land, but then again, they were looking for some justification for government intervention, which George's Single Tax simply does not provide.
It sadly reminds me of the results of a quiz I offered to members of the local Libertarian party a couple months ago. One question asked what the essential role of the government was in the economy. Most who took the quiz tried to come up with some role. As I recall, only one person answered that there was no essential role for government. Economies exist both before and without government intervention quite nicely.
Just as sadly, it seems that a large majority of people out there believe the government must act to save the economy - that the recession is a failure of the free market. I'd be happy if I could just find an example of a free market. If the exchange of goods is subject to a sales tax, it is not a free market. If the employment of others in order to produce, distribute, or sell goods is taxed, it is not a free market. Any market subject to involuntary government regulation, inspection, or licensing is not free. If inventory or capital is taxed, the market is not free. What's left?
Claverton Energy Research Group endorses LVT
The Claverton Group (a UK association of energy, environmental, transportation, and academic institutions) proposed a nationwide switch to LVT as a resolution to the current economic crisis. A resolution passed at the November 2008 meeting of the Coalition for Economic Justice reads:
“The current economic crisis highlights, again, the inadequacies of the economic system which is unstable and deeply flawed. It is clear that events are demonstrating the common feature of repeated economic booms and depressions in the speculative rise in land prices.
In order to address this problem we need to suggest to the wider world that it is possible to create a new approach that delivers both economic justice and prosperity for all. This solution must be based upon the annual collection of land value for public purposes.
This meeting agrees that there is an urgent need to convince policy makers of this, and for them to develop (with our assistance) policies to capture unearned land values. Such policies would enable taxes on labour and enterprise to be minimised. Investment in necessary public infrastructure would thus be recovered for public benefit.
We believe, however, that it is unproductive at this stage for our respective groups to attempt to agree how to achieve this. An agreement by the main parties on the need for a nation-wide tax on the value of land would trigger completion of the registration and valuation of land within a single parliament. We therefore commit to trying to persuade all parties to agree to this being a manifesto commitment.”
The last paragraph of the resolution is particularly interesting because it points out how LVT can be supported by a variety of groups that may otherwise have little in common. The same is potentially quite true here. Virtually all political parties have an interest in a switch to LVT. Liberals can appreciate that government funding need not be reduced. Conservatives can appreciate that tax collection costs and the size of government could be greatly reduced. Libertarians can appreciate the reduction in the size of government as well as the greater protection of individual property rights and the reduced government interference in the free market. Greens can appreciate the reduction of urban sprawl. Remember that when Henry George ran for Mayor of New York, he did so as a Labor Party candidate. Why was that? His single tax on the value of land would have eliminated all taxes on labor. See my website for endorsements of LVT from across the political spectrum.
Locke and Franklin revisited
A great article, "Stupid Property Owners", by Gavin Putland at the Land Values Research Group site, reminds us of something John Locke said:
"It is in vain in a country whose great fund is land to hope to lay the publick charge of the Government on anything else; there at last it will terminate. The merchant (do what you can) will not bear it, the labourer cannot, and therefore the landholder must: and whether he were best to do it by laying it directly where it will at last settle, or by letting it come to him by the sinking of his rents, ... let him consider."
One of Adam Smith's canons of taxation was that the burden of taxation should be as direct as possible. Putland's article reviews the collateral costs involved in taxing anything other than the value of land.
As our own Benjamin Franklin once said, "Our legislators are all landowners, and they are not yet persuaded that all taxes are finally paid by the land ... therefore, we have been forced into the mode of indirect taxes. ...All the property that is necessary to a man for the conservation of the individual and the propagation of the species, is his natural right which none may justly deprive him of; but all property superfluous to such purposes is the property of the public.”
"It is in vain in a country whose great fund is land to hope to lay the publick charge of the Government on anything else; there at last it will terminate. The merchant (do what you can) will not bear it, the labourer cannot, and therefore the landholder must: and whether he were best to do it by laying it directly where it will at last settle, or by letting it come to him by the sinking of his rents, ... let him consider."
One of Adam Smith's canons of taxation was that the burden of taxation should be as direct as possible. Putland's article reviews the collateral costs involved in taxing anything other than the value of land.
As our own Benjamin Franklin once said, "Our legislators are all landowners, and they are not yet persuaded that all taxes are finally paid by the land ... therefore, we have been forced into the mode of indirect taxes. ...All the property that is necessary to a man for the conservation of the individual and the propagation of the species, is his natural right which none may justly deprive him of; but all property superfluous to such purposes is the property of the public.”
Wednesday, February 11, 2009
Changing the debate
LVT represents a paradigm shift in raising public revenue. Current methods of taxation pit groups against each other. For any public project or benefit, those that benefit rarely pay the bill. It is an art among politicians to provide for their constituents or certain voting blocs by obtaining funding for their pet projects from other groups. Few care to pay for their own benefits. If that were the case, far more people would realize that they could achieve their goals through free-market channels far more economically than through government programs.
But the most disturbing thing about the most popular methods of raising government revenue is that they tend to discourage the very things we should be encouraging. Sales taxes hamper exchange. Exchange is a good thing. The best encouragement we could give to acts of exchange is to remove any interference in the form of taxation. Sales taxes also incur deadweight losses - the cost in lost sales is more than the benefit in raised revenues.
Income taxes are no better. They discourage increased labor and reduce jobs. Flat rate income taxes place an inordinate burden on those with low incomes. Progressive income taxes put an increasing burden on the most productive people. Both are bad. Efforts to create a more "fair" income taxes have resulted in a tax code too large and too intricate for anyone to completely understand.
Property taxes, as currently administered, penalize investment and improvements. Yet those are the very things we want and need. Remove the penalty from property improvements and jobs are created. That's why politicians create abatements and tax increment financing deals for the politically connected.
So, sales, income, and property taxes discourage exchange, labor, and job creation. On the other hand, LVT removes the burden of taxation from exchange, allows labor and capital to receive their full reward, and actually encourages improvements.
Better yet, we no longer tax the "rich" to pay for poor relief, we no longer tax everyone to provide corporate welfare, and we reduce the political favoritism that plays such a large part in our current tax policies. Taxes are no longer taken from productive behavior, but from the community-created value inherent in the value of land. Recovering the value created by the community, and using it to provide greater community benefits, is the only fair tax.
Under LVT, government revenue and spending become relatively fixed, increasing or decreasing only as land values rise and fall. With good governance, they will rise. With poor governance, they will fall. Arguments over whether to tax more or less, or to spend more or less, become moot. The only question becomes, how do we best provide for the entire community? If government actions reduce land values, the impact becomes obvious.
In truth, government programs become self-funding. Provide well-maintained roads, good schools, low crime, quality fire protection, clean air, and clean water; land values will rise. Failure to provide these things will only reduce land values.
What few understand is that, under current tax policies, we pay twice for these things. Good services raise land values. If that value is not recovered by the community, it will go to the land owner, who did not create the value. Then you pay again for the services in sales, income, and property taxes.
But, again, the question becomes, not which group to tax in order to pay for another group's benefit, nor whose taxes to reduce in order to lessen the negative effects of our current tax policies, but what can we do to benefit the whole community? How can we best use the value the community has created?
Homeowners will no longer be asked to bear the burden of providing the money for schools. Smokers will no longer be asked to bear the burden of providing health care for the poor. Diners will no longer be asked to bear the burden of building a new stadium. Productive individuals will no longer be asked to bear the burden of those who produce nothing. Providing the best services with the greatest efficiency would be the common goal. Competitive communities would likely opt to reduce services in order to provide basic functions well.
But the most disturbing thing about the most popular methods of raising government revenue is that they tend to discourage the very things we should be encouraging. Sales taxes hamper exchange. Exchange is a good thing. The best encouragement we could give to acts of exchange is to remove any interference in the form of taxation. Sales taxes also incur deadweight losses - the cost in lost sales is more than the benefit in raised revenues.
Income taxes are no better. They discourage increased labor and reduce jobs. Flat rate income taxes place an inordinate burden on those with low incomes. Progressive income taxes put an increasing burden on the most productive people. Both are bad. Efforts to create a more "fair" income taxes have resulted in a tax code too large and too intricate for anyone to completely understand.
Property taxes, as currently administered, penalize investment and improvements. Yet those are the very things we want and need. Remove the penalty from property improvements and jobs are created. That's why politicians create abatements and tax increment financing deals for the politically connected.
So, sales, income, and property taxes discourage exchange, labor, and job creation. On the other hand, LVT removes the burden of taxation from exchange, allows labor and capital to receive their full reward, and actually encourages improvements.
Better yet, we no longer tax the "rich" to pay for poor relief, we no longer tax everyone to provide corporate welfare, and we reduce the political favoritism that plays such a large part in our current tax policies. Taxes are no longer taken from productive behavior, but from the community-created value inherent in the value of land. Recovering the value created by the community, and using it to provide greater community benefits, is the only fair tax.
Under LVT, government revenue and spending become relatively fixed, increasing or decreasing only as land values rise and fall. With good governance, they will rise. With poor governance, they will fall. Arguments over whether to tax more or less, or to spend more or less, become moot. The only question becomes, how do we best provide for the entire community? If government actions reduce land values, the impact becomes obvious.
In truth, government programs become self-funding. Provide well-maintained roads, good schools, low crime, quality fire protection, clean air, and clean water; land values will rise. Failure to provide these things will only reduce land values.
What few understand is that, under current tax policies, we pay twice for these things. Good services raise land values. If that value is not recovered by the community, it will go to the land owner, who did not create the value. Then you pay again for the services in sales, income, and property taxes.
But, again, the question becomes, not which group to tax in order to pay for another group's benefit, nor whose taxes to reduce in order to lessen the negative effects of our current tax policies, but what can we do to benefit the whole community? How can we best use the value the community has created?
Homeowners will no longer be asked to bear the burden of providing the money for schools. Smokers will no longer be asked to bear the burden of providing health care for the poor. Diners will no longer be asked to bear the burden of building a new stadium. Productive individuals will no longer be asked to bear the burden of those who produce nothing. Providing the best services with the greatest efficiency would be the common goal. Competitive communities would likely opt to reduce services in order to provide basic functions well.
Rochester City Council to consider LVT
DEVELOPMENT: Rochester's new land rush?
The Rochester City Newspaper reports on the benefits of Land Value Taxation and a planned presentation to the City Council. An interview with a local LVT advocate points out how current property tax policies discourage investment, while LVT only encourages investment and improvements.
Tuesday, February 10, 2009
Taxation rules distort the way the market operates
A great letter to the editor of the Financial Times. Governments blame current problems on the free market, though they are anything but free under current tax policies, both here and overseas. The distortionary effects of income and sales taxes are incredible. Just more of the many problems governments create, then claim they must intervene in order to fix.
Sunday, February 8, 2009
Thomas Paine
I've always been a huge fan of Thomas Paine. I've read everything that I could get my hands on that he wrote. A true libertarian - a defender of individual rights. He came here from England, did his part to support our Revolution, then went to France to do it all over again. Not content to battle man's tyranny over other men, he went on to fight against religious tyranny over men's souls.
Yet, one of his writings, Agrarian Justice, always seemed a little out of place. I never made proper sense of it until I read Henry George's Progress and Poverty. Only then did I truly understand the fund that Paine felt should be subject to taxation - the same fund George outlined so clearly. The same fund that Adam Smith and a host of other classical economists considered to be rightfully subject to taxation. LVT is not a tax that punishes, but a tax that corrects an ongoing wrong. Better yet, for free-market advocates, it is a tax that does not burden exchange.
In Paine's words, "Cultivation is at least one of the greatest natural improvements ever made by human invention. It has given to created earth a tenfold value. But the landed monopoly that began with it has produced the greatest evil. It has dispossessed more than half the inhabitants of every nation of their natural inheritance, without providing for them, as ought to have been done, an indemnification for that loss, and has thereby created a species of poverty and wretchedness that did not exist before.
"In advocating the case of the persons thus dispossessed, it is a right, and not a charity, that I am pleading for. But it is that kind of right which, being neglected at first, could not be brought forward afterwards till heaven had opened the way by a revolution in the system of government. Let us then do honor to revolutions by justice, and give currency to their principles by blessings."
A century later, George showed how this applied, not just to agricultural lands, but to all land subject to exclusive ownership, especially in the cities and centers of commerce. Further, as much an advocate of individual rights as Paine, George wanted to end all other forms of taxation. What you produce is yours to do with as you wish. You are free to earn all you can from your physical and intellectual labors. The product of your labor is yours to save, use, sell, or bequeath as you choose. No one, and no government, has any right to any part of what is rightfully yours.
To the extent that any one, or any government, lays claim to the product of another's labor, slavery still exists.
Yet, one of his writings, Agrarian Justice, always seemed a little out of place. I never made proper sense of it until I read Henry George's Progress and Poverty. Only then did I truly understand the fund that Paine felt should be subject to taxation - the same fund George outlined so clearly. The same fund that Adam Smith and a host of other classical economists considered to be rightfully subject to taxation. LVT is not a tax that punishes, but a tax that corrects an ongoing wrong. Better yet, for free-market advocates, it is a tax that does not burden exchange.
In Paine's words, "Cultivation is at least one of the greatest natural improvements ever made by human invention. It has given to created earth a tenfold value. But the landed monopoly that began with it has produced the greatest evil. It has dispossessed more than half the inhabitants of every nation of their natural inheritance, without providing for them, as ought to have been done, an indemnification for that loss, and has thereby created a species of poverty and wretchedness that did not exist before.
"In advocating the case of the persons thus dispossessed, it is a right, and not a charity, that I am pleading for. But it is that kind of right which, being neglected at first, could not be brought forward afterwards till heaven had opened the way by a revolution in the system of government. Let us then do honor to revolutions by justice, and give currency to their principles by blessings."
A century later, George showed how this applied, not just to agricultural lands, but to all land subject to exclusive ownership, especially in the cities and centers of commerce. Further, as much an advocate of individual rights as Paine, George wanted to end all other forms of taxation. What you produce is yours to do with as you wish. You are free to earn all you can from your physical and intellectual labors. The product of your labor is yours to save, use, sell, or bequeath as you choose. No one, and no government, has any right to any part of what is rightfully yours.
To the extent that any one, or any government, lays claim to the product of another's labor, slavery still exists.
Former Indy Mayor supporting LVT?
Former Indianapolis Mayor Bill Hudnut entered a post on the Urban Land Institute's blog, The Ground Floor, supporting an increase of the tax on land while reducing the tax on improvements - a Pittsburgh-style land value tax. He refers to a 1972 Urban Land Institute Research Monograph that studied Australia's use of site value taxation, and a quote from Mason Gaffney (see Links). While it is refreshing to see a politician with Hoosier roots endorsing LVT, it is a shame he did not go a little farther back in its history. Even Pittsburgh began using the two-tier tax system in the early part of the last century, though not to any great effect until they increased the difference between the two rates.
Poll
Be sure and take the poll. Hint: the correct answer is not land value taxation. That is part of the beauty of land value taxation - it removes the burden of taxation from economic exchange. All other commonly used forms of taxation do hamper exchange. Hampering exchange is a bad thing. Our Founding Fathers had the right idea. The Constitution may have funded the federal government through tariffs and excise taxes, but the original Articles of Confederation did not. Be sure and check the link to "Saving Communities", which delves deeply into the original mechanism for funding the federal government and calls for a return to the "Founder's Plan".
Welcome!
Welcome to the Lower Taxes to the Ground blog! Soon we will be posting news items. For now, spend some time viewing the links.
Subscribe to:
Posts (Atom)