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.
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