A better world is possible - Global Commons Institute

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Copyright Bruce Nixon 2010. All rights reserved. This electronic copy is provided free for personal, non-commercial use only. www.brucenixon.com because land prices (rents) will fall, as will the admin overheads of operating under the current tax system. The barrier to entry for many businesses is the sheer complexity and time-consuming nature of grappling with tax law, off which an army of tax advisers feeds. Advantages of LVT Here are just some of the benefits of taxing publicly created land value instead of privately created goods and services: Reduced land acquisition costs, because owners lose money if they hold land out of its most appropriate use. Rental values are unaffected at first, though they will likely rise later as LVT increases prosperity. Higher quality of built space, especially housing. Owners have every incentive to maintain and improve their property, as the improvements needed for productive use (including accommodation) are not taxed. Less urban sprawl. Conurbations - collections of people going about their business - produce higher land values than marginal land, which may have no value. Activities that need high-value land will concentrate where good planning wants them. This makes public mass transit systems more efficient and transport generally more sustainable. Hong Kong is a classic example: it has the highest proportion of public revenue from land values anywhere. Conservation land protected: whether for biodiversity, recreation or heritage, land whose use is legally constrained will pay less tax. However, land accessible to public parks has a value premium (e.g. Hyde Park), the tax on which pays for the park: 'beneficiary pays', is fundamental to LVT. Minimal tax avoidance or evasion. Land cannot be hidden or moved. Failure to pay results in a public debt attaching to the land title and diminishes its value by the amount of that debt - which cannot be 'written off', since land cannot be destroyed (only buildings can!) Higher employment levels and lower costs generally. The 'deadweight effect' of existing taxes bears most heavily on the poor, whose consumption of essentials (shelter, clothing, food) is greatly affected by the current system, which massively subsidises 'rent seeking' activity by landlords. For good reason, Henry George's classic work on LVT was called Progress and Poverty – See Earth Rights Institute website. The demise of what James Robertson calls 'the dependency culture': benefit payments of all kinds would decline as the poor enjoyed more opportunities and lower living costs. Most supporters of LVT would first abate income taxes on the poor, then phase out subsidies to landlords such as 'housing benefit', which produces no houses and only benefits landlords! Small businesses flourish, as compared to big business. Some 40% of the value of FTSE100 listed companies recently consisted of real estate (i.e., mostly land value) assets - often unconnected with the core business - while most small firms are tenants. Why is LVT not used more often? A recent study Land Value Taxation: Theory, Evidence and Practice edited by Richard Dye and Richard England, listed several reasons: Wealth, especially land wealth, accrues to the most powerful in any society. The rich resist LVT, pleading that many of their number are 'cash poor' and 'cannot pay'. In fact, there is a strong correlation between high lifetime income and high land wealth - very few cannot pay LVT, and these can easily be accommodated in any transition. LVT is always affordable by definition: just let the most productive user use the land, and collect the rent! 140
Copyright Bruce Nixon 2010. All rights reserved. This electronic copy is provided free for personal, non-commercial use only. www.brucenixon.com Annual site rental values are not currently measured or - for the taxpaying public - understood. LVT has sometimes been abandoned because tax values were not kept up-to-date or on a rental basis. Modern technology (computer mapping and spatial analysis of market data) makes it much easier to regularly update and publish 'value maps'. Sudden, dramatic changes in property taxes can impact alarmingly and often unpredictably on economic development. Unless the spatial planning system and the construction industry are both robust and flexible, unintended consequences of LVT may follow. The solution is to implement LVT gradually, transparently, and on a plan-led basis. There are bound to be losers as well as winners in any tax reform. Politicians are always nervous about losing votes. The full benefits of introducing LVT may not be seen within a single period between elections, especially if it is implemented late in the election cycle. Hence a wide consensus as to those benefits is first needed - especially where the losers are powerful and well organised. Elected officials as well as the voting public simply do not understand LVT; and it has been kept off the agenda. LVT offers major possibilities about which the public should be widely informed. There needs to be a cross party examination of it involving all stakeholders in our society to fully explore LVT. Part 3 – A Citizens Income It is time to do something different to end poverty in UK. Life for the fifth of the UK's population living in poverty is set to worsen because of the recession. The government defines poverty as having an income of 60% or less of the median. On this basis 13.2 million people in the UK live in poverty, 22% of the population. New Labour’s admirable, but typically complicated and ever changing efforts to eliminate poverty in UK, including child and pensioner poverty, did not succeed. They were largely based on tax credits, benefits and efforts to help people into work. These efforts may have contributed to the problem of poor school achievement, low social mobility and bad behaviour by making it even harder for parents working long hours to give their children sufficient support at home. The social and economic costs of our failure to develop our children are enormous. James Robertson reports that support for a Citizens’ Income, as a right, continues to grow, especially in Europe but elsewhere too. A Citizens or minimum Income would be paid to all citizens as a right, out of public revenue. It would include state pensions and child allowances. It would replace many other existing social benefits, and eliminate almost all tax allowances, tax reliefs and tax credits. The considerable potential for administrative cost savings needs to be evaluated. Humiliating dependency One of the greatest benefits of Citizens Income is that it would release many people from humiliating dependency on state handouts. Even more important, it would give citizens more freedom and encourage them to take full responsibility for their lives. A Citizens’ Income would recognise that, in a society of responsible citizens, some of the public revenue arising from the value of common resources should be shared directly among them. Politicians and government officials now channel huge sums in contracts and subsidies to private sector business and finance, as well as to public service organisations, to provide citizens with public services. Much of that public money could be distributed directly to citizens to spend in a market economy that would become more responsive to their needs than it is today. The state would be able to let the market economy operate more freely, with less intervention. At the personal level a Citizens’ Income would allow people, if they wished to reduce the time they spent working as employees and, with a basic income, make it easier to become self-employed. Or they could opt for more free time. With more time and energy to supply themselves and their families with some of the 141
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