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.

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.•

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.

Fear of immigration

The fear of immigration is explained by Ricardo's Law of Rent, which nobody understands any more. Incomers create a land shortage which tends towards higher rents and drives down wages. This is not a problem if a system of land value taxation (LVT) is in place, because

1. the rising rents become buoyant source of public revenue to pay for infrastructure and services
2. the immigrants add to the stock of wealth being produced.
3. land and premises are always available at competitive rents, so that there is never a shortage of work opportunities or places to live.
Otherwise, immigration becomes a source of conflict, as the newcomers are competing for homes and jobs.

Here is a video which explains Ricardo's Law of Rent.



The EU should have required both Freedom of Movement and LVT. The first without the second is a recipe for failure.