Combining Economic Efficiency and Social Justice
Abolish Taxes, Collect Land-Rent Instead
A selected excerpt from "A Green Taxation and Benefits System," appearing in Green Economics: Beyond Supply and Demand to Meeting People's Needs, edited by Molly Scott Cato and Miram Kennett.
by James Robertson
Arguments for the abolition of taxes are based on considerations of fairness and efficiency.
To tax incomes, profits and value added, is to penalize people whose efforts have made a contribution -- in other words, have added value. By contrast it fails to penalize people who, by using resources themselves, have made them unavailable to other people -- in other words, have subtracted value.
That is socially unjust. It is also economically inefficient, because it reduces incentives to do useful things that add value and to make efficient, sparing use of resources.
Income Tax especially, but also to some extent VAT, sales tax and others, are taxes on work. By skewing the economy against human work in favor of capital-intensive and energy-intensive forms of production, those taxes help to create unemployment and keep it high.
Additionally, the cumberspome administrative requirements of the existing taxes are economically inefficnent and unfair. Many thousands of people, in private and public sectors alike, are now unproductively engaged in handling them.
This is a tax on the annual rental site value of land. The annual rental site value is the rental value which a particular piece of land would have if there were no buildings or improvements on it. It is the value of a site, as provided by nature and as affected for better or worse by the activities of the community at large.
Like the arguments for Citizens Income and for the abolition of taxes on income, sales, VAT, etc., the arguments for a land-rent tax are to do with fairness and economic efficiency.
Most of the reward from rising land values now goes to those who own land, while most of the cost of the activities that create rising land values do not. This is because rising land values -- for example in prosperous city centers or prime agricultural areas -- are largely created by the activities of the community as a whole and by government regulations and subsidies, while the higher value of each particular site is enjoyed by its owner.
Speculation on rising land values distorts land prices, generally making them significantly higher than they would otherwise be.
A land-rent tax would form an essential part of a Green taxation system.
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