Land Value Taxation is a method of raising public revenue by means of an annual charge on the rental value of land.
Although described as a tax, it is not really a tax at all, but a payment for benefits received. It would replace, not add to, existing taxes.
Properly applied, Land Value Tax would support a whole range of social and economic initiatives, including housing, transport and other infrastructural investments. It is an elementary fiscal measure that would go far towards correcting fundamental economic and social ills.
The value of every parcel of land would be assessed regularly and the land value tax levied as a percentage of those assessed values.
“Land” means the site alone, not counting any improvements. The value of buildings, crops, drainage or any other works which people have erected or carried out on each plot of land would be ignored, but it would be assumed that all neighboring properties were developed as at the time of the valuation; other things being equal, a vacant site in a row of houses would be assessed at the same value as the adjacent sites occupied by houses.
The valuation would be based on market evidence, in accordance with the optimum use of the land within the planning regulations. If the current planning restrictions on the use were altered, the site would be reassessed.
The advantages…
- A NATURAL SOURCE OF PUBLIC REVENUE. All land makes its full contribution to cities and/or counties, allowing reductions in existing taxes on labor and enterprise.
- A STRONGER ECONOMY. If we tax labor, buildings or machinery and plant, we discourage people from constructive and beneficial activities and penalize enterprise and efficiency. The reverse is the case with a tax on land values, which is payable regardless of whether or how well the land is actually used. It is a payment, based on current market value, for the exclusive occupation of a piece of land. In the longer term, this fundamentally new and different approach to revenue raising will stimulate new business and new employment, reducing the need for costly government welfare.
- MARGINAL AREAS REVITALIZED. Economic activities are handicapped by distance from the major centers of population. Conventional taxes such as VAT and those on transport fuels cause particular damage to the remoter areas of the country. Land Value Tax, by definition, bears lightly or not at all where land has little or no value, thereby stimulating economic activity away from the center – it creates what are in effect tax havens exactly where they are most needed.
- A MORE EFFICIENT LAND MARKET. The necessity to pay the tax obliges landowners to develop vacant and under-used land properly or to make way for others who will.
- LESS URBAN SPRAWL. Land Value Taxation deters speculative land holding. Thus dilapidated inner-city areas are returned to good use, reducing the pressure for building on green-field sites.
- LESS BUREAUCRACY. The complexities of Income Tax, Inheritance Tax, Capital Gains Tax and VAT are well known. By contrast, Land Value Tax is straightforward. Once the system has settled down, landholders will not be faced with complicated forms and demands for information. Revaluation will become relatively simple.
- NO AVOIDANCE OR EVASION. Land cannot be hidden, removed to a tax haven or concealed in an electronic data system.
- AN END TO BOOM-SLUMP CYCLES. Speculation in land value – frequently misrepresented and disguised as “property” or “asset” speculation – is the root cause of unsustainable booms which result periodically in damaging corrective slumps. Land Value Taxation, fully and properly applied, knocks the speculative element out of land pricing.
- IMPOSSIBLE TO PASS ON IN HIGHER PRICES, LOWER WAGES OR HIGHER RENTS. Competition makes it impossible for a business producing goods on a valuable site to charge more per item than one producing similar goods on less valuable land – after all, producers and traders at different locations are paying different rents to landlords now, yet like goods generally sell for much the same price and employers pay their workers comparable wages. The tax cannot be passed on to a tenant who is already paying the full market rent.
- AN ESTABLISHED AND PROVEN SYSTEM. Local government variants of Land Value Taxation, known as Site Value Rating, are accepted practice in, for example, Denmark and Australia.
Is it fair…
Land (unlike goods and services) has no cost of production. If an ample supply of land of equal desirability were available everywhere, there would be nothing to pay for its use. In reality land acquires a scarcity value owing to the competing needs of the community for living, working and leisure space. Thus land value owes nothing to individual effort and everything to the community at large. It belongs justly and uniquely to the community. Conversely, the reward for individual effort can belong only to the one who earns it, to spend, save or give away as he or she may see fit.
Because of differences in positional advantages, fertility or natural resources, some locations are more desirable than others. Demand for access to these features gives land its rental value. Land Value Taxation, being assessed on these values, is fair in its incidence.
Solutions:
Finance any of the following items with a land value tax:
- Replace the franchise tax with a land value tax
BBC – Land value tax costs unveiled by Scottish Greens
BBC – Commission says council tax in Scotland ‘must end’
Forbes – Scotland’s Fall In Property Millionaires Shows That Land Taxes Work
The National – Letters II: Land value tax – a progressive way to fund public services
Herald Scotland – Is a tax based on value of land the best replacement for council tax?
London School of Economics – Why Scotland should adopt the Land Value Tax
The Guardian – A tax on all our houses? It made sense to Adam Smith
The Guardian – How to make the Queen and our dukes pay their way: tax their land
The Guardian – No wonder landowners are scared. We are starting to learn who owns Britain
The Guardian – Tax, auction and banking: how to release the value of Britain’s land
The Guardian – Could we build a better future on a land value tax?
The Guardian – A land tax is 200 years overdue
The Guardian – Institute for Fiscal Studies backs land value tax
The Guardian – A land value tax would prompt property firms to action
The Guardian – Gentrification is a global problem. It’s time we found a better solution
Adam Smith Institute – Tax simplification: the case for a land value tax
Daily Kos – Progressive Tax Reform: The Land Value Tax [with poll]
Demos – How Land Value Taxes Can Reduce Inequality
New Statesman – Why all progressives should support a land value tax
New Statesman – What’s the justification for a land value tax?
New Statesman – Leader: A case for taxing land
New Statesman – A land value tax should pay for London’s new garden bridge
Nw Stateman – The great property swindle: why do so few people in Britain own so much of our land?
Lincoln Institute of Land Policy – Land Value Taxation: Could It Work Today?
Lincoln Institute of Land Policy – Land Value Issues in Taiwan, Korea, and Japan
Lincoln Institute of Land Policy – Assessing the Theory and Practice of Land Value Taxation
Lincoln Institute of Land Policy – An Examination into the Effects of Land Value Taxation in the UK
Lincoln Institute of Land Policy – Land Value Taxation in South Korea
Lincoln Institute for Land Policy – Mexicali: A Success Story of Property Tax Reform
Lincoln Institute of Land Policy – Mass Valuation of Land in the Russian Federation
Tax Justice Network – Which countries have a Land Value Tax?
Bloomberg – To Fight Inequality, Tax Land
UK Green Party – Land Use and Taxation
Slate – How Much Money Could a Land Value Tax Raise?
Slate – Land Value Tax Won’t Fix San Francisco
Slate – Property Taxes Are A Barbarous Relic: Tax The Value of Land Instead
Slate – The Land Taxers of Fairhope
Salon – End the 1 percent’s free ride: Taxing land would solve America’s biggest problems
Economist – Why land value taxes are so popular, yet so rare
Economist – Why Henry George had a point
Institute for Economic Affairs – The case for a land-value tax
Financial Times – How a levy based on location values could be the perfect tax
Financial Times – Hong Kong approaches land value tax ideal
Next City – Why Don’t More Cities Tax Based on Value of Land Rather Than What You Put On It?
Telegraph – Imposing a land value tax would encourage building on brownfield sites
Telegraph – Vince Cable backs land tax for home owners
Telegraph – Land Reform Bill announced by Scottish Government
Land Value Tax: It’s Worked To Cut Taxes, Boost Economies
P2P Foundation – Successful examples of land value tax reforms
Connecticut Mirror – Land value tax bill takes aim at abandoned commercial sites
Connecticut Post – City looking at hiking taxes on vacant properties
Baltimore Sun – Can a land value tax save Baltimore?
Plea to scrap council tax and replace it with ‘fair’ alternative
Institute for Local Self Reliance – Land Value Tax
Institute for Local Self Reliance – Outlandish Taxes?
Portland Press Herald – Maine Voices: Land value taxation could bring a surge of new construction
Plan Philly – Land taxes: What they are, and why we’re hearing more about them.
Queensland Government – Land Value Tax
The Week – In praise of the land value tax
Holyrood – Scottish Greens publish their plans for income and property tax
Virginia Department of Forestry – Land Value Tax
New Zealand Herald – Bernard Hickey: Land tax the fairest route
New Zealand Herald – Bernard Hickey: Land tax is long overdue
The Australian Business Review – Land tax: now that really would be reform worthy of the name
Australia – New South Whales Office of State Revenue – Land Tax
Government of Western Australia – Land Tax
A land value tax could fix Australasia’s housing crisis
Wall Street Journal – It’s a Lonely Quest for Land-Tax Fans, But, by George, They Press On
Center for Labour and Social Studies – The case for a Land Value Tax
Boston Globe – Tax land, not buildings, to help cities thrive
Irish Independent – The land value tax will free space for building
Editorial: New Zealand Land tax for foreign buyers modest step in right direction
Wales Online – Buying a new house in Wales? You may have to pay a new type of property tax
Bangkok Post – Land and buildings tax won’t increase burden
Australian Financial Review – What a broad land tax would cost you
Canberra Times – Taxing the land the only fair solution
Pittsburgh Post Gazette – Federal taxation of land would be preferable to income taxation
Corporate Knights – Pricing property: The promise and peril of land value taxes
Hartford Officials Discuss Hiking Taxes On Vacant Properties, Bushnell Park Area Considered
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