The Beauty of Value Capture - Edward Miller

From the Institute for Ethics & Emerging Technologies:

As anyone familiar with classical political economy knows, true property rights are rooted in self-ownership. You own yourself, and by extension you own what you make through labor or voluntary transactions thereof. Land, however, is not a fruit of labor.


One might reasonably suppose that land, being unlike other things that are called property, would have special economic characteristics. Classical economists recognized this to be the case, and spoke at length about the implications of it. Neoclassicals and their Austrian copycats insisted on lumping everything together under the solitary label of “property,” which served to obscure these implications. They simply bicker about how best to achieve equilibrium and Pareto efficiency, given “value-free” analysis of the system that exists. Some might call that dispassionate analysis; others might call that bean-counting for elites.

More from Edward Miller can be found on his site, Embrace Unity.

Occupying Common Ground

http://opinion.publicfinance.co.uk/2011/11/occupying-common-ground/

The protesters camping outside St Paul’s Cathedral in London are voicing the views of many people – and pointing the way towards real local democracy

What has the Occupy movement outside St Paul’s Cathedral and other places got to do with the work of the local authority treasurer?

The answer might seem to be ‘not much’ – but that would be a serious error of judgement. Those protesters have the world of the local authority well within their sights. If serious proposals come from these camps and these influence public debate, this is an area where real demands for change may be made.

On my last visit to Tent City University (where I had the honour of speaking), a very serious debate on the issue of land value taxation was in progress. It has been a recurrent theme of discussion there.

That tax is, of course, a direct alternative to council tax, which is, as many of those involved in the discussion were all too aware, profoundly regressive. The charge it makes on those with low incomes tends to be much higher proportionately than that made on higher income owners in larger properties.

That puts this tax firmly in the whole 99%/1% inequality arena that is at the core of the concerns of the Occupy movement. Our suspicion is that this will have lasting repercussions.

But that is not the end of the interest  the Occupy movement has for those working in local authorities. The process of democracy itself is under scrutiny in these camps, which are themselves explorations in consensus decision-making.

 Richard Murphy

Altoona, PA - First to rely solely on LVT

From the Altoona Mirror:

Some calls were from people who - believe it or not - thought they were paying too little, City Clerk Linda Rickens Schellhammer said. They worried the city would come after them later.
Some people called to complain, some to express puzzlement, some from curiosity, said Finance Director Omar Strohm.
The confusion came from an increase that seemed to come from nowhere, according to Mike Baldner, chief assessor for Blair County. There would have been more calls, but reductions in the house tax offset the increase in land tax for many, Baldner said.
Actually, it offset the increase for most, according to a report from the Center for the Study of Economics.
This year, 72 percent of residential parcels - not including vacant lots - got a cut, according to the study. The biggest group got a $10 decrease approximately, the report stated.
Most of the "screaming" came from those with vacant lots, according to Baldner. Their properties were in the crosshairs of the increase.

On Facebook? Take a look at the LVT group. Great discussions and information. Supporters of land value taxation are welcome to join the group.

From OpEd News:

A Great Georgist Introductory Video!
Here's one of the best little videos I've seen in a long time on what Land Value Taxation is and why we need it.  It's well worth spending 10 minutes - I can't wait for the promised part 2!  http://www.youtube.com/watch?v=itO7OoKtNUc&feature=youtube_gdata_player
I met some of the student creators at last summer's class at the Henry George School in New York City when this was just a bare-bones 10 second animation.  Great job, guys!  Let's publicize this. 

We're back. Not that we were ever really gone, but we have failed to maintain this particular blog. There has been plenty of activity regarding land value taxes during these last couple of years. For other great current information, see the How to End Poverty site. Awesome work being done there by some truly awesome people. Check it out, then check back here for upcoming news.

More economic freedom coming to Korea than U.S.?

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.

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.

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.

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.

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.

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.

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."

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.

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]

--Albert J. Nock, "The Gods' Lookout" February 1934