Future Cities & Policy Scotland: Levy Land, Please!
|March 13, 2014||Posted by Staff under Good Press|
These two 2014 excerpts are from (1) Future Cities, Mar 3, by Walter Fieuw, and (2) Policy Scotland, Mar 4, by Ken Gibb of University of Glasgow.
How to Fund City Growth? Value Capture
Land value tax dates back to the early roots of modern cities, and it could end up financing our future.
Land value tax is leveraged against unimproved land value. “Land” is the unimproved site, not counting infrastructure or buildings; “Value” refers to the increased market value after public investment; and “Tax” is the payment due for exclusive occupation of the site.
The idea to capture value was first popularized by economist and social reformer Henry George (1839–1897) who was convinced that revenue generated from nature and land belonged to society. In his seminal work, Progress and Poverty, George argued that taxing land value deters speculative land holding.
Paul Romer, director of NYU Stern Urbanization Project, shares the view that strong, principled city charters based on value capture will change power relations in cities:
Building great cities requires brave leadership. Value capture can be a cornerstone of a new system for land taxation and progressive development financing. For, as Henry George taught us, the economic return of land should be shared equally, and not held in the grips of private owners.
Land Value Taxation
Going back to Tom Payne’s use of John Locke’s property rights arguments to justify taxing land, through Ricardo’s attack on unproductive economic rent from monopoly land owners and on to Henry George and the ‘crank’ idea to have a single tax through taxing land. Lloyd George, supported by Churchill, twice proposed an LVT for the UK prior to the First World War. After the Second World War, legislation was supposed to combine the granting of planning permission with some form of land development or betterment tax – four successive attempts subsequently to introduce and make work such taxation abjectly failed.
The core idea is taxing unproductive economic rent derived from land ownership. Taxing the economic rent in land values but leaving the structures untaxed should allow ‘society’ to capture a proportion of the gains landowners receive in uplift in values as a result of planning permission and the benefits of public infrastructure support. Thus, landowners with planning permission have an incentive to build and there is no tax disincentive to make the land productive.
It would be good to get a discussion going about how to make progress on rational tax reform.
Ed. Notes: If you’re going to tax people, it’s makes good sense to put location values into your tax base and boot other values out. Ethically, nobody made land and everybody (the presence of the populace) makes land valuable. Economically, the levy drives efficient land use and raises wages. What’s not to like? Plenty. People just are not interested. How to interest them? Probably downplay the tax. Instead, convert the recovered ground rent revenue into a resident’s dividend and up-play that — money in the pocket!