14 ASPECTS of LAND-VALUE TAXATIONaffecting Government, Land Owners, Community and Ethics
Theory of Land Value
As a community grows, the use of land and other natural resources is limited by the territorial claims of its occupants, the poor means for access to its bounty and the slow external communications. The government invests tax-payers’ money in various local and national infra-structures and the benefits from these improvements to the surroundings, gradually raise the living-standards of the population, allowing it to be more active. However, this enhanced productivity of the land is not returned to the community as a dividend on its public investment. Instead, this advantage is taken by a small number of land-owners whose monetary gain is in the form of a potential or actual ground-rent, which is the true measure of the land value. The ground-rent on urban sites becomes progressively greater with the more central locations, having been intensely developed due to their high-density populations.
Speculation in land values often results in choice sites being unused, which wastes their potential. The relatively few land owners and their production-managers also control the opportunities to earn of the landless majority of workers, whose labour needs access to the land and its improvements.
These two social injustices should be rectified by the introduction of land value taxation (LVT) instead of the main tax burden being placed on the earnings, goods-sales and ownership of built-up property. The following 4 economic aspects of LVT are as listed according to the above titled categories:
3 Aspects for Government:
1. Most of the ground-rent being collected as LVT, adds to the national income. It allows the taxes on earnings, purchases and family/corporate ownership of buildings to be reduced or eventually to be eliminated.
2. The cost of collecting the LVT is much smaller than for income tax and other production-related taxes. The ownership of each land parcel is registered. Using regularly updated maps, the rental value of each site (as if without buildings) is public knowledge. Then the LVT is simple to understand, the amount of tax easily found and its payment by the land owner impossible to avoid. The many problems arrising from legal and confusing escape-clauses in the other tax regimes require an army of tax inspectors. This is not needed with LVT, the the only additional jobs being the up-dating of the land-rent maps and tables of sites data.
3. With LVT, the national economy stabilizes and no longer experiences the 18 year housing boom and bust cycle, which was due to the changing prices that arose from speculation in land-values during town expansion. Without LVT this cycle initiates due to the growing land prices as building sites are used, however speculators begin to withhold the opportunities to use them and the prices inflate. After the speculators have sold land to them, the site developers eventually find the land too costly to use,. When in panic, they try to sell the real-estate, it quickly drops in price. Instablity from co-lateral borrowing on land value also decreases with LVT.
6 aspects affecting Land Owners:
4. LVT is progressive, the owners of the most potentially productive sites pay the most tax. None is paid on marginally productive sites, since their owners cannot claim ground-rent from possible tenants.
5. The land owner pays his LVT regardless of how the land is used. When the land is leased to tenants most of the resulting ground-rent is the tax. After LVT is introduced, the majority of the population benefit since they are consumers, whilst a minority who are monopolists and speculators in land values and their banks, sustain losses.
6. Without LVT, as time passes the speculators in land value withhold more sites from use. This raises the prices chargeable for access to all the sites, due to their increasing unavailability.When the community is not growing and more so when it is, the tax payers’ money is continuously being invested in the infrastructure. So the urban sites become more useful, scarce and valuable. When LVT is collected itstops the speculation in land prices because any withholding of land from proper use is too costly for its owner.
7. The transfer of tax from production activities and the introduction of LVT, reduces the sales price of sites. Then the government investment in infra-structure no longer influences the land sales-prices, even though their value (or potential usefullness) may continue to grow.
8. With LVT, land owners are unable to pass the tax on to their tenant renters, due to the competition for land use. The users of (untaxed) marginal site price their produce according to the costs of their labour, the use of the durable capital and the added transport needs. Owners/occupiers who access more productiuve land pay LVT/ground-rent and compete in their producton, so this tax cannot be added to what buyers willingly pay.
9. With the introduction of LVT, land prices will drop. Speculators in land values will tend to foreclose on their mortgages and to withdraw their money for reinvestment. Recent mortgage contracts will cease to be worth retaining and the banks holding these contracts will experience losses, after they reposess their properties and need to sell them quickly and cheaply. (The property prices depend on the natural demand for homes, the current rate of LVT and the response by the land owners, not all of whom speculate.) Depending on the rate of these changes bankrupcies can result. LVT should be introduced gradually to allow the investors sufficient time to transfer money to company-shares in durable capital goods, where their greater use will meet the increased demand for produce (see below).
3 aspects regarding Community
10. With LVT, there is an incentive to use the land for production, rather than it laying idle or being partly used. An optimum amount of urban land is brought into use, which reduces the spread of the suburbs onto rurual land and avoid vacant city centers. Some of the urban land was previously held out of use by land value speculators. As these sites become available, their costs decline resulting in the same competition for their greater use.
11. With LVT, greater working opportunities exist due to the cheaper land and an increased number of available sites. Consumer goods become cheaper because entrepreneurs have less difficulty in starting-up and running their businesses. Demand grows, unemployment decreases and with it a reduction in the polarization of our class-society and its degree of poverty.
12. As LVT is introduced, investment money is withdrawn from land and placed in durable capital goods.Then production with more modern tools becomes less costly. The investors in company-shares tend to be wage-earners (as well as banks and monopolists). Their decisions favour more competition and cheaper local production without heavy transport costs, whilst the monopolists have less control of prices and the unavailability of alternative goods. This is a natural trend of our free-marketing social system.
2 aspects of Ethics
13. The collection of taxes directly from productive effort and commerse is socially unjust. The associated philosophy favours coersive robery and is “Robin Hood” in style. LVT replaces this form of extortion by gathering the surplus rental income which comes without exertion. Consequently LVT is a natural system of money-gathering, which avoids the present-day distortion of business economics. It also implies the need for taking better care of the environment and that spoilers of nature should repair or pay for the damage.
14. Bribary and corruption cease with LVT. Before this wasdue to the leaking of news of municipal plans for housing development. However the speculation in land values is no longer worthwhile after LVT is in place.
Several detailed reasons are listed above but the really big advantages of a country having LVT in place is that there will be no more unemployment and that everyone will have a more equal chance to a decent living. Those who cannot work stand a better chance of help when there are no unemploynment doles being paid and working opportunities wasted. In other words LVT will create more social justice and eliminate much corruption.