11 August 2009

Compass and The Lib Dems Back Land Value Tax

Mark Wadsworth brings my attention to this research from Chris Huhne (in comments below it has been pointed out that David Cooper headed the research, Chris is the Presdient of the Campaign) of the Lib Dems (if only the Lib Dems had waited another week for those postal ballots, Chris would have been leader instead of Mr Anon Clegg).

Ashley Seager in the Guardian brings my attention to an almost simultaneous piece of research by Labour left pressure group Compass that comes to the same conclusions on the need for a Land Value Tax to replace Council Tax and Stamp Duty and reduce Income tax for lower and middle earners.

The levels of inequality of wealth dwawf even income inequality and explain why Labour's attempts at solving inequality through tax credits and public spend have had such little effect.

We can all, whether from left or right of the political spectrum like the simplicity and economic efficiency of a land value tax, but more than that, the fairness appeals to egalitarians, the lower income tax and scrapped stamp duty appeals to hard hit middle income liberals and conservatives, and the scrapped council tax appeals to low earners in dingy flats paying almost the same as people in mansions.

So, who is against? Both the Labour leadership and the Tories are silent on the issue. The Labour leadership fear the wrath of our imperial tabloid press and wealthy individuals now pull the strings of both Labour and Tory policy with their large donations, the Tories more so of course. At least, Labour still have union funding to combat this. But the unions in their own way can be just as conservative on these issues and part of the establishment.

The people hit hardest by a land value tax are the wealthy and they control the political elite so don't expect change any time soon.

The beauty of a land value tax unlike other taxes is that the rich cannot avoid paying it and it would stabilise our housing economy and stop people from idly profiting at others expense just by sitting on land. So not only efficient, fair and economic, there is also a moral aspect to this tax. Lets move away from taxing things we like - ingenuity, invention and productive activities, to things we dislike - environmental degradation, anti-social behavior and unearned windfalls. It is only a thought!

6 comments:

  1. Neil, the really *beautiful* thing about LVT though, if implemented at an appropriate level, is that whilst it might be needed now to boost tax revenues rather than replace some, as we come out of this recession and start paying down the debt we can come out of it as a much lower tax economy be reducing the "bad" taxes on labour and capital investment.

    This is because of all the beneficial side-effects ascribed to LVT - new economic activity will tend to go to the low tax places, which happen at the moment to be the places in receipt of most state funding. The cost of that basic need, shelter, will be reduced; and with lower income taxes people in work will be able to afford to save more towards their own financial independence (including their pension savings) and those out of work not be penalized for taking for example part time jobs which at the moment would affect their benefits with little concomitant benefit due to tax on the new income.

    As land becomes "free" to the least well off effectively, so also we will see improvements in health outcomes (there is a direct correlation at the moment between land values and life expectancies for example that will be evened out). Town centres will liven up - out of town supermarkets do not pay any tax at the moment on their vast car parks which would change under LVT so removing one protectionist piece of corporate welfare in favour of the big retailers that can afford such locations to th e benefit of those who cannot offer such a free perk like parking in the centre of towns.

    It's all good - your Labour Land Campaign stalwart Dave Wetzel has been heard to opine that even if we collected land tax and threw it all into the ocean we'd still have a far more equitable, entrepreneurial and rewarding economy for all.

    Jock
    PS - I think the research you quote from ALTER is actually by my far superior successor as ALTER Secretary, David Cooper, rather than Chris. Chris's name is at the top of the report because it is listing our honorary officers and Chris Huhne is ALTER President.

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  2. Jock, apologies to David Cooper, will correct post. LVT sounds fantastic, any interest in it from the Tories?

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  3. ALTER will be releasing a book with chapters/essays on each of the sectors of the economy that would benefit from LVT in time for conference.

    Regarding the Tories - there is not a huge amount of interest. We formed a cross party campaign group just before Christmas called the "Coalition for Economic Justice" which held a seminar in the Commons aiming to get an all-party parliamentary group, but no Tory MPs turned up.

    I think Richard Body used to be a supporter, and we do have a Cambridgeshire Tory councillor on the CEJ. I guess when you see the distribution of land wealth in that pamphlet it's easy to see why. We are not far off being just as inequitable a society now in those terms as we were in 1909 when Lloyd-George and Churchill tried to get some form of LVT implemented in the Peoples' Budget only to have it thrown out by the House of Lords (the last time they were able to do so to a finance bill). So it rather shows how imporrtant the aristocracy felt it was to defeat it if they were willing in the end to have such a power removed permanently as recompense!

    It was promoted by Adam Smith though, even if the Institute named for him in the UK doesn't ever mention it! But there are plenty of thinking economists and campaigners on the "right" who do think it a good idea - they tend to gravitate towards UKIP though from what I can see (Tim Worstall and of course Mark W for two). George himself is regarded as a libertarian - and indeed really up until the Depression few libertarians wouldd not have understood that there was something fundamentally wrong with land distribution and the protection of landed interests.

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  4. Neil, ta for link.

    There ain't a snowflake's chance in Hell that the Tories would go for it; they are The Blue Wing Of The Homeowner's Party, and from their mutterings so far, it appears that they want to reduce property taxation rather than increase it (i.e. TV licence, Council Tax and Business Rates freezes; increase IHT threshold; reduce Stamp Duty Land Tax).

    I dislike all of these taxes for one reason or another, but I use LVT to replace them like-for-like; rather than reduce them/hike VAT.

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  5. You might like some of these quotes on LVT from Arthur Henderson. I've often been told by Labour people in the past not to quote the fact that Philip Snowden was a great free-trader and land-taxer because he is almost universally loathed in the party. Presumably the same does not apply to Henderson:

    "The Labour Party says that if the great landowners of this country desire to put fences round the most productive soil in the world … they must pay for the pleasure of doing so. Accordingly, it is proposed to have the land valued, and to ask the owner to pay a tax on that valuation. I think that by the pressure of the taxation and rating of land-values the owners would soon find that the land held out of use was not so necessary to their pleasure as they thought. I venture to suggest that they would quickly commence to seek buyers or tenants. The plentiful supply of land that would come on the market would enable farmers to obtain their holdings at a reasonable price or rent instead of having to enter into possession on the inflated values with which you are acquainted. I assert, without fear of contradiction, that nothing would give a greater stimulus to the agricultural industry than the freeing of the land. More farms would be opened up; more opportunities of employment would offer for the agricultural worker; the countryside would become a hive of industry instead of a grave of disappointed hopes. The root of the rural problem is where all roots are to be found - in the Land."

    [Mr. Arthur Henderson, at Cromer, 17th March 1922]

    "The taxation of land-values would not impose any further burden upon the agricultural industry. . . .The landowner would have to pay it. He could not pass it on to the farmer, and he could not make the agricultural worker pay it by means of a reduction in his standard of life. I challenge anyone to say that a tax on economic rent is paid by anyone else than the receiver of the rent. But the Labour Party would go further than that. The present system of assessment and rating produces an inequality of burdens which are injurious to agriculture. Improvements are positively discouraged. The burden of rates is often heaviest where it can least well be borne. A farmer who improves his land or erects an additional building for the housing of his live stock finds immediately that his assessment is raised. The Labour Party holds that it is suicidal for the nation to penalise by increased taxation occupiers of land who effect improvements which add to its value. We propose a drastic revision of the entire system of assessment and rating in order that the taxation of land may be used to unrate the improvements made by the occupier. "

    [Mr. Arthur Henderson, at Cromer, 17th March, 1922]

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  6. and...

    "Under our present system improvements are penalized. If a shopkeeper extends his premises, or a farmer increases the value of his farm by erecting improved buildings or draining the land, the rates are immediately increased. That is a tax on private enterprise with which I do not agree. Private enterprise of a character not subversive of the public good I would encourage. It little becomes the wealthy landlords who oppose the shifting of the burden of the rates from houses, factories, shops, and machinery on to the value of the land, to criticise the speech I made at Newport. Why f I recently attached my name to a Bill for the taking of rates off machinery. Is that an attack on private enterprise? "

    [Mr. Arthur Henderson, at Newcastle By-election, January 1923]

    "The principle and policy of the United Committee have no more sincere supporter than myself. The taxation of land-values has been a vital need ever since the private ownership of land formed an integral part of the social system, but the aftermath of a great war has brought us problems which have dragged its urgent necessity more into the light and indicated the essential truths of the doctrine taught by Henry George."

    [Mr. Arthur Henderson, Letter to the International Conference on the Taxation of Land-values at Oxford, August 1923]

    "The taxation of land-values with, of course, the exemption of improvements, does not receive my support merely as a plan for raising additional revenue. It is designed to achieve far greater results. It seeks to open the way to the natural resources from which all wealth springs. The labour is here, and with it the wilt to work, but the land still lies locked in the grip of a tenacious and unrelenting monopoly, while unemployment and poverty haunt us with a terrifying persistence."

    [Mr. Arthur Henderson, ib.]

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