A single-issue non-party/all-party organisation based in the UK, we propose that the rental value of land should be collected and used as the principal source of public revenue, as a replacement for present taxes on wages, profits, goods and services. This policy is a prerequisite if chronic economic problems are to be eliminated.
How? Nearly every country in the world is affected by poverty and unemployment; widening divisions between rich and poor; boom-slump cycles; housing shortages; inadequate infrastructure; and damage to the environment. These economic ills persist, seemingly intractably, despite unprecedented developments in science and technology. All of them are ultimately related to the different economic behaviour of 'land' in contrast to man-made consumer and capital goods, whose supply can be, and normally is, varied and transported in response to demand.
Land is otherwise. No more can be made: each plot of land is unique and immovable. Its total supply is fixed. Consequently, the market in land behaves differently from the market in products. Land value comes from the natural and man-made advantages of location, which derive from the presence and activities of the community as a whole.
It follows that the value of land, its rent, is peculiarly suitable as the basic source of public revenue. This is not really taxation, but payment for the right to occupy land and enjoy the benefits of occupation; however, the policy is usually known as "Land Value Taxation" It operates as an annual charge on the rental value of land, assuming that each site was in its optimum permitted use. Since the idea cuts across all political divisions, the Campaign has no party political affiliations.
Tuesday, May 26, 2020
Sunday, May 26, 2019
How much will I pay?
How much any household would actually pay each year depends on two things:
1. Which taxes are replaced.
A modest LVT on housing, which just replaced Council Tax, SDLT, Inheritance Tax and the TV licence fee (the last two raise similar small amounts, about £4 bn per annum in the UK) would be about 20% of site premiums each year, or about 0.5% of current selling prices. Very few households would be winners or losers in the longer term.
2. How much that household's earned income (i.e. just about all income apart from rental income) is compared to the value of the home they occupy.
If damaging taxes on output and employment/self-employment (VAT and National Insurance) were replaced, then most working age households in average value homes (for that level of income) would pay a lot less in tax and, clearly, a minority would end up paying a lot more than at present.
This online calculator gives an indication of how much more or less tax a household would pay each year, depending on that household's earnings and the value of the home they occupy.
[Yes, that calculator has to be updated and put into LVTC format, I'm working on it]
1. Which taxes are replaced.
A modest LVT on housing, which just replaced Council Tax, SDLT, Inheritance Tax and the TV licence fee (the last two raise similar small amounts, about £4 bn per annum in the UK) would be about 20% of site premiums each year, or about 0.5% of current selling prices. Very few households would be winners or losers in the longer term.
2. How much that household's earned income (i.e. just about all income apart from rental income) is compared to the value of the home they occupy.
If damaging taxes on output and employment/self-employment (VAT and National Insurance) were replaced, then most working age households in average value homes (for that level of income) would pay a lot less in tax and, clearly, a minority would end up paying a lot more than at present.
This online calculator gives an indication of how much more or less tax a household would pay each year, depending on that household's earnings and the value of the home they occupy.
[Yes, that calculator has to be updated and put into LVTC format, I'm working on it]
Collection
Just because land itself does not spew out coins and notes, that does not mean that the tax can't be collected. Very briefly, on an administrative level, everybody will fall into one or more of the following categories, and all the collection methods would be administratively easy:
- Pensioners - tax can be deducted from state, occupational and private pensions via PAYE, with any deferred amounts being collected from proceeds of sale of house on death.
- Social tenants - tax can be collected as part of the rent (the rent includes LVT, by definition)
- Private tenants of registered land - tax would be collected from landlord (or withheld from Housing Benefit Payments)
- Private tenants of unregistered land - tenants would be asked for the identity of their landlord, who would be informed that if he does not pay the LVT due, his land will revert to the local council.
- Households in lower-value homes - tax would fall below personal allowances.
- Households with mortgages - any tax exceeding personal allowances collected via PAYE/Self Assessment returns or, for those with mortgages take out prior to the introduction of LVT, taken from mortgage payments made to the bank.
- Public sector workers - as above, LVT can be deducted directly from wages.
- Mortgage-free households - any tax exceeding personal allowances could be collected via PAYE/Self Assessment returns.
- Owner-occupier farmers and small holders - tax would probably fall below personal allowances, balance collected via Direct Debit/Self Assessment.
- Vacant premises and unregistered land. If the owner does not pay, a charge to cover arrears is taken over the land and if he does not come forward within twelve years, his title is void anyway under normal English land law (different in Scotland).
- Land owned by offshore trust etc. - if tenanted, then tax is collected from tenant. If vacant, see above.
- Pensioners - tax can be deducted from state, occupational and private pensions via PAYE, with any deferred amounts being collected from proceeds of sale of house on death.
- Social tenants - tax can be collected as part of the rent (the rent includes LVT, by definition)
- Private tenants of registered land - tax would be collected from landlord (or withheld from Housing Benefit Payments)
- Private tenants of unregistered land - tenants would be asked for the identity of their landlord, who would be informed that if he does not pay the LVT due, his land will revert to the local council.
- Households in lower-value homes - tax would fall below personal allowances.
- Households with mortgages - any tax exceeding personal allowances collected via PAYE/Self Assessment returns or, for those with mortgages take out prior to the introduction of LVT, taken from mortgage payments made to the bank.
- Public sector workers - as above, LVT can be deducted directly from wages.
- Mortgage-free households - any tax exceeding personal allowances could be collected via PAYE/Self Assessment returns.
- Owner-occupier farmers and small holders - tax would probably fall below personal allowances, balance collected via Direct Debit/Self Assessment.
- Vacant premises and unregistered land. If the owner does not pay, a charge to cover arrears is taken over the land and if he does not come forward within twelve years, his title is void anyway under normal English land law (different in Scotland).
- Land owned by offshore trust etc. - if tenanted, then tax is collected from tenant. If vacant, see above.
Content
About LVT
Housing
Taxes on Production
FAQs and objections
Blog and current affairs
Videos
Submissions
LVT supporters
Housing
Taxes on Production
FAQs and objections
Blog and current affairs
Videos
Submissions
LVT supporters
Inconsistencies
As part of the Brexit debate, we are being told by Remainers that we need to protect home producers, which is what the EU's Single Market has done for the past 40 years. In other words, imports are a bad thing and dumped goods are the worst of all. American President Donald Trump is saying much the same thing - that US industry should be supported, by keeping out imported competitive goods. On the whole, it is the Remainers who are most critical of Trump for his alleged populism.
There is an inconsistency somewhere.
It doesn't stop there, either. The EU has imposed sanctions on Russia; i.e. it is refusing to allow certain goods to be sold to the country, which has had a damaging effect on agriculture in some EU countries. The US is following suit. North Korea is also the subject of this kind of sanction. Which is a further inconsistency.
If imports are a bad thing and should be restricted by tariffs, then sanctions must be good for Russia, North Korea and anyone else on the receiving end of them. In which case why are they being imposed? If dumping is a bad thing and we want to damage the economies of those countries, surely they should be the recipients of dumped goods and we should be sending shiploads of stuff in their direction, produced at below cost? That would also satisfy Trump's desire to rejuvenate the US steel industry.
There is an inconsistency somewhere.
It doesn't stop there, either. The EU has imposed sanctions on Russia; i.e. it is refusing to allow certain goods to be sold to the country, which has had a damaging effect on agriculture in some EU countries. The US is following suit. North Korea is also the subject of this kind of sanction. Which is a further inconsistency.
If imports are a bad thing and should be restricted by tariffs, then sanctions must be good for Russia, North Korea and anyone else on the receiving end of them. In which case why are they being imposed? If dumping is a bad thing and we want to damage the economies of those countries, surely they should be the recipients of dumped goods and we should be sending shiploads of stuff in their direction, produced at below cost? That would also satisfy Trump's desire to rejuvenate the US steel industry.
What would a Georgist EU look like?
What would a Georgist European Union look like?
• countries raise the bulk of their public revenue from an ad valorem tax on the rental value of land.
• Contributions to the EU central fund in proportion to each country's aggregate land rental value.
• No tariffs charged on imports to or within the Single Market area.
• No restrictions on imports to the Single Market area, subject only to the country of origin, and contents being clearly marked, unless there is a major issue of public safety.
• No sales taxes within the Single Market area (with the possible exceptions of alcohol and tobacco).
• CAP scrapped.
• VAT scrapped.
I would settle for a ten year transition period.•
• countries raise the bulk of their public revenue from an ad valorem tax on the rental value of land.
• Contributions to the EU central fund in proportion to each country's aggregate land rental value.
• No tariffs charged on imports to or within the Single Market area.
• No restrictions on imports to the Single Market area, subject only to the country of origin, and contents being clearly marked, unless there is a major issue of public safety.
• No sales taxes within the Single Market area (with the possible exceptions of alcohol and tobacco).
• CAP scrapped.
• VAT scrapped.
I would settle for a ten year transition period.•
Taxed to dereliction
Most proponents of land value tax these days do not appear to understand the theoretical background to what they are advocating. This is usually revealed when they talk about a wealth tax on land, or propose that the tax should be levied as a percentage (usually between 1% and 5%, of the selling price).
The primary value of land is its gross annual rental value. The point about gross value is that the rental value includes rent already taken in tax. This was at one time well understood; the old local authority rates were based on gross value. Gross annnual value (GAV) was the rateable value, comprising actual rents plus rates payable, the charge being a percentage of the GAV.
Land value tax (LVT), properly administered, is a percentage of the gross annual land value, ie the rental value, excluding any buildings or improvements. In the case of farmland, actual rental value is usually little more than the value of the land itself, the difference being improvements such as farm buildings, drainage works, boundary walls, etc, which must be ignored in the valuation. Marginal farmland, such as uplands sheep grazing, has a rental value close to zero.
The bulk of land value is of urban land, the most valuable being city centre land in the City of London and the West End, followed by land used for manufacturing, retail and warehousing. These values are constantly changing; for example, retail values are apparently falling due to the growth of internet shopping, which will raise the value of land which is suitable for distribution warehousing
There are large tracts of urban land which are worth next to nothing, mostly in the north and south-west of England, Wales and in Scotland apart from the main cities. This is of critical importance, because it applies not only to a tax on land values, but to all taxes. If the tax take exceeds the rental value, the land will eventually go out of use. The advantage of land value tax is that no tax is taken at marginal locations, they are, in effect, tax havens. All other taxes attempt to collect tax from business activities at the margin. This is of course impossible, and so potentially productive sites are taxed into dereliction. And there is the explanation for the UK's grotesque regional economic imbalance.
The primary value of land is its gross annual rental value. The point about gross value is that the rental value includes rent already taken in tax. This was at one time well understood; the old local authority rates were based on gross value. Gross annnual value (GAV) was the rateable value, comprising actual rents plus rates payable, the charge being a percentage of the GAV.
Land value tax (LVT), properly administered, is a percentage of the gross annual land value, ie the rental value, excluding any buildings or improvements. In the case of farmland, actual rental value is usually little more than the value of the land itself, the difference being improvements such as farm buildings, drainage works, boundary walls, etc, which must be ignored in the valuation. Marginal farmland, such as uplands sheep grazing, has a rental value close to zero.
The bulk of land value is of urban land, the most valuable being city centre land in the City of London and the West End, followed by land used for manufacturing, retail and warehousing. These values are constantly changing; for example, retail values are apparently falling due to the growth of internet shopping, which will raise the value of land which is suitable for distribution warehousing
There are large tracts of urban land which are worth next to nothing, mostly in the north and south-west of England, Wales and in Scotland apart from the main cities. This is of critical importance, because it applies not only to a tax on land values, but to all taxes. If the tax take exceeds the rental value, the land will eventually go out of use. The advantage of land value tax is that no tax is taken at marginal locations, they are, in effect, tax havens. All other taxes attempt to collect tax from business activities at the margin. This is of course impossible, and so potentially productive sites are taxed into dereliction. And there is the explanation for the UK's grotesque regional economic imbalance.
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