Salon Magazine — End 1%’s Free Ride: Tax Land Value
|December 6, 2013||Posted by Staff under Uncategorized|
This 2013 excerpt of Salon, Nov 22, is by Jesse Myerson. It was republished in Alternet.
At present, neither party advocates the tax code so elegant it can reduce inequality, mitigate poverty, stimulate productivity, prevent asset price bubbles, stem community-shredding gentrification and drain the distended Wall Street cabal of its ill-gotten gains – in just one tax.
Land value. If we want a real overhaul/simplification of the tax code, the way to do it is to tax land value. It might be the only tax we need. No sales tax. No income tax. No payroll tax to fill a Social Security trust fund. No corporate income tax that, as we can plainly see, offshores profits. No need to tax labor and industry at all. Just tax the stuff that humans had nothing to do with creating, and therefore have no basis to claim ownership over at all. You’ll find that almost all of it is “owned” by the fabled 1 percent.
And boy are they sucking a lot of money out of it. By far the most valuable asset form in the U.S. is real estate, and the majority of that is the value of the land, as distinct from the value of the human-made buildings. Economist Michael Hudson has assessed that the land value of New York City alone exceeds that of all of the plant and equipment in the entire country, combined. No owner put any enterprise or cost into producing the land’s value – they simply bought it when it was cheap, sold it when it was dear, and waited for the check. “They” are the Finance, Insurance and Real Estate (FIRE) sector, and they capture 40 percent of the United States’ profits, despite the complete passivity of their profit-accumulation method.
Not only would a land value tax (LVT) drastically shrink that Wall Street bloat, it would have prevented the housing bubble in the first place. Land, after all, was the speculative commodity at play, not the houses themselves, which, as “Arrested Development” incisively suggested, were a bunch of crap. With an LVT, the cookie-cutter McMansions in suburban housing developments would only be worth the cost of their cheap paneling, artificial marble and the rest of it. Without one, they were wrongly assessed as being worth the value of the land they stood upon, which speculators bid up and up and up.
An LVT would stimulate urban property development without incurring the socially catastrophic ethnic displacement pattern we call “gentrification.” As that noted far-left rag the Economist notes, “Property developers … would be less inclined to hoard undeveloped land if they had to pay an annual levy on it.” Despite this, the new developments wouldn’t push rents up throughout the rest of the neighborhood, because the increased land value would be taxed. The rest of the apartment buildings in the area didn’t get any nicer. So why should they cost more? Urban land, scarce by definition, is very valuable. There is no reason to let a small group of rich landlords extract its value, when what created the value are parks, subways, local restaurants, and other things the landlords didn’t provide.
Nothing could simplify and demystify the taxation experience for Americans like making sure that the vast majority of us who don’t own the resources, who don’t collect rent and capital gains, who have to work to get our paychecks, wouldn’t ever have to mark April 15 on the calendar again.
The amount of revenue that can be raised by taxing the land is huge. Enough, for example, to support truly liberatory social spending, like a universal basic income, without risking inflation.
Ed. Notes: The reform to raising public revenue can get even simpler still. If you don’t like taxes at all, don’t use any. You can still recover the socially-generated value of land. You can charge land-use fees or require Land Dues, plus lease public land at full market value. You can record deeds and titles at full market value of the location, too. No need to tax.
Plus, land is not the only thing of value that was not created by anyone providing their labor or capital. There’s also government-granted privilege, such as corporate charters, patents and copyrights, utility franchises, and the power to print new money. These little official pieces of paper don’t require work (excluding lobbying) nor investment (unless you mean campaign contributions). Charge full market value — that’s the principle: quid pro quo — for those little pieces of paper, too, as you did to leases and deeds. Your public treasury will be stuffed to bursting.
And to make it yet simpler for everyone, collect the rents from owners monthly and pay the citizenry a dividend monthly from surplus public revenue. Most people would come out a little ahead. The poor would really do well. And those who’ve been calling the shots for so long would finally pay for the privilege of having lorded it over everyone else for so long.