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."

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.

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."

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.

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.