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.
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