agri subsidies wealthiest landowners loophole baronet

Tax England's green and pleasant land
land value baronet excess burden

Scrap income tax and introduce a location tax

Normally we try to attach one favorable article to each purely newsy article but lately supportive op-eds have been piling up! We trim, blend, and append a half dozen 2012 articles from the UK, from: (1) the BBC on agri-biz subsidies; (2) Farmers Guardian, Mar 5, on subsidies by D. Boderke; (3) Financial Times, Feb 23, on taxing land by S. Brittan (their opinion editor); (4) New Statesman, Feb 24, by M. Hasan; followed by several letters in the Financial Times and newsletters by proponents then (5) Money Week, Mar 1, on taxing land by M.S. Webb (editor-in-chief).

by the BBC, by David Boderke, by Samuel Brittan, by Mehdi Hasan, and by Merryn Somerset Webb

Samantha Poling reveals how millions of pounds of public money are being paid out to businessmen and millionaire farmers in an abuse of the farming subsidy system. Investors tell us how they have been paid without having to do any farming at all. And Samantha also sets out to see if she can take advantage of the subsidy system and become rich from the loophole.

The program also examines the rest of the subsidy system and hears criticism of large payments to wealthy individuals like the Queen and the Duke of Westminster simply on the basis of owning large amounts of land.

To see the program, click here .

Investigations carried out for the BBC’s Panorama program have shown, in 2010, 47 payments of more than £1 million were made to individuals and businesses under the Common Agricultural Policy.

The Queen has received around £7m in farming subsidies over the last 10 years for Sandringham Farms on her Norfolk estate, while the Duke of Westminster, one of the UK’s wealthiest landowners, received around £6m for his Grosvenor Farms over the same period.

Another who benefitted from the large subsidy payments last year was Sir Richard Sutton, a baronet who appears in the Sunday Times Rich List, who was given £1.9m in farming subsidies.

In England 37 recipients received at least £1m, 98 received more than £500,000 and 512 received more than £250,000. In the UK as a whole, 133 were given at least £500,000 and 709 received more than £250,000.

There is a loophole which means millions of pounds each year are being given to some individuals and companies who are not carrying out any farming activities in return.

To see the whole article, click here .

JJS: While the BBC covered the problem, many more covered the solution:

The Financial Times published an insistent article from editor Samuel Brittan.
To see the article, click here .

It discussed Brittan’s article above.
To see the whole article, click here .

A letter in the Financial Times beging, “From Mr Anthony Werner. Sir, In quoting Winston Churchill’s speech in support of Lloyd George’s 1909 Budget ...”
To see the whole letter, click here .

The Financial Times printed an insightful letter by Charles Bazlinton February 23.
To see the letter, click here .

The main point behind a land or location tax is that, in general, the price you pay for a property or piece of land (ie, the value the market gives it) is not about the land itself, but about where the land is. A house sitting on a piece of land might cost more or less the same to put up in Wales and London, and as a structure, be worth the same in both places.

But the house in London still sells for 20 times the one in Wales because of the wealth of activity around the land on which it sits. The community, the infrastructure, the buses, the airports, the schools, the hospitals, the ease of doing business -- the price you pay for the land is a function of all these social rather than private goods. As Nick Dennys puts it, “the mud beneath our feet is only worth what it is because of what goes on around it”.

This suggests that the value of a piece of land should perhaps be divided into two. The first part should be the value of whatever sits on the land (its houses, sheds, factories and the like). The second should represent the value given it to buy the surrounding civilisation (its 'location value').

There is a neat little example of the existence of location value in today’s FT. According to letter writer Charles Bazlinton, when a bypass is built around a town, residential property values in that town will rise by an average of 15% as a direct result.

This 15% uplift in the location value of the properties accrues to private property owners in the town. But given that the bypass will have been paid for by everyone’s taxes, why does one group of people (freehold property owners) make money out of it when everyone else does not?

From this comes the idea that the 15% uplift should be shared out among the community as a whole via a location value tax (LVT). That way, something the community has provided benefits the community rather than just the private landowners within the community.

This makes a kind of moral sense. But there is another argument for an LVT -- the idea of excess burden or the deadweight loss of taxation. It refers to the amount by which a country’s potential GDP is reduced by the distorting effects of various sorts of taxation -- effects that are stunningly high.

Our own Treasury puts the excess burden of taxation at around 30p per pound of tax collected. LVTs are thought to have very low excess burden -- or possibly none at all. A recent report out from the OECD (Tax Policy Reform and Economic Growth) made the point that, of all the four categories of tax (property taxes, consumption taxes, personal income tax, corporate income tax), property taxes are the least harmful to an economy.

There is even a very good argument to be made that an LVT is not just neutral but stimulative, in that land taxes work to shift investment out of property and into 'higher return activities'.

The main and the best objection to a location tax is that we have so many taxes already. This is quite right and we are utterly opposed to new taxes being introduced without old ones being dumped.

To see the whole article, click here .

JJS: Those frequent articles are encouraging. For a steady diet of information, here’re two sources:

The Robin Smith Institute - Real Reform
Abolish all taxation. Collect property value instead for government revenue.
To see the blog, click here .

Practical Politics 2011
To see the newsletter, click here .

JJS: It's getting harder and harder to resist hoping for fundamental reform there real soon!


Editor Jeffery J. Smith runs the Forum on Geonomics and helped prepare a course for the UN on geonomics. To take the “Land Rights” course, click here .

Also see:

When the value of good land rises …

Lower land prices so at last the cycle can turn

Living Longer to Avoid Taxes

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