Land Value Taxation Campaign

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Land rent for public revenue

Economic effects of immigration

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The Campaign as such does not have a view on anything other than LVT, and certainly not something as sensitive and controversial as immigration. However, migration certainly has economic consequences. These underpin the whole question of how rent arises in the first place. In Progress and Poverty, Henry George devotes an entire chapter to the subject, under the title "The Unbounded Savannah".
 
In George's model, the first family to arrive settles on the best site. Subsequent arrivals are forced to occupy inferior sites, so that the better sites gain a rental value which is the productive advantage of those sites over and above the least productive site in use, ie the marginal site. However, the increase in population leads to increased production as all sorts of efficiencies become possible due to division of labour and the presence of people with increasingly specialist skills. All of these lead to a progressive growth in rental value.
Note that the savannah in the story is unbounded. Land is always freely available at the margin. The minimum wage is fixed by what can be earned at the margin. What if land is not freely available at the margin? Those without land are forced to work for others or pay rent to another, and wages fall to a lower value, as labour is willing to work for the least it will accept.
 
It is not difficult to see how this works out with an influx of immigrants. Wage levels fall. In a zone with free movement of labour such as the EU, people will move from the regions where they are lowest and will undercut the wages of existing workers in regions where pay is higher. Overall, wages will have a tendency to even out across the zone, which is what we are seeing. The lower wages will lead to higher profitability and this will tend to drive up rents. An influx of people will also drive up residential rents in response to increased demand.

This observation confirms the fears of the populist right though not for the reasons they give. The populist right, under slogans such as "British jobs for British workers", is working from the "lump of labour" theory - that there is only a fixed amount of work to go round. The curious thing is that the left wing parties, who claim to be acting in the interests of working people, are also the ones who favour free movement of people. Presumably they are acting out of some notion of the universal brotherhood of man. That is a worthy motive but it is not one that will appeal to the people who are suffering from the effects of the policy, primarily their own supporters. Seeing themselves abandoned, it is not difficult to understand the appeal of the populist right.

 

Begging according to Georgist principles

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Abour twenty years ago there was a man in Brighton who would go up to people in the street and ask them for ten pee. He cannot have been very successful as he later reduced his request to a pee. Perhaps he did not generate sufficient sympathy, being big, sturdy and obviously well-fed. Other beggars adopted different strategies. A popular one was to ask for the bus fare to Eastbourne as they had lost their return ticket, or, more daringly, the train fare to Southampton to see a dying mother. New Cross station in south London was a popular haunt. One beggar needed the fare to go to London Bridge for an appointment at Guy's Hospital; another lurked around the entrance, and, following a pace behind women with children in prams, ask people coming in the opposite direction for money to feed the child.

That sort of begging seems to have taken hold in the 1980s as the social fabric started to fray. In more recent times there has been a huge increase in beggars from Bulgaria and Romania, following their entry to the EU. This has brought begging into countries where it was unknown in modern times, including Germany and Scandinavia, where comprehensive welfare states had made it unnecessary.

People find it an irritation and embarrassment, and there is constant talk of doing something about it. But what? If people didn’t give, the beggars would go away, but obviously enough people are happy to drop a coin in their direction, for whatever reason. There are more who will buy them a sandwich or coffee. They can even perform a useful service, collecting empty bottles and claiming the deposits, or taking unwanted food sold as 3-for-the-price-of-2 offers. Others are a nuisance, when they come up to people in the street. There are rumours that they can act even more aggressively, for example, by escorting people to cashpointss and forcing them to take out money and hand it over.

There are claims that they operate as organised gangs, but these are disputed. It seems that they is some form of collaboration between the beggars – for example, in organising transport, and probably accommodation as well. More sinister is the probability that the best pitches - at the entrances to railway stations, shopping malls or next to busy bus stops, are controlled by heavies who take their cut of the takings. Therein lies a potential solution, because what they are doing is collecting a rental value.

What if Georgist principles were to be applied to bring the whole activity under control? All beggars within the city area would be required to purchase a license, valid for a month or two. They would get a badge with a photograph, registration number and expiry date, which they would have to display when at "work". There would be conditions which they would have to comply with – for example, they should not be allowed to approach people. If they broke the rules they would lose their licence.

What about those rental values? These arise in the busiest areas of the city. It would be necessary to designate zones where it was only permitted to beg at particular marked pitches. To use these sites, between, say, 8 am and 8 pm, an additional session permit would have to be purchased; these could be for an hour or two. Initially, the charges could be set as a rough-and-ready flat fee, but they would have to be reviewed regularly so that the charges more closely reflected the values of the different sites. Obviously a balance would have to be struck between optimising the charges and keeping the system as simple as possible. The permits might allow limited trading or other activities such as playing music.

In effect, the community would take over the role of protection currently provided by the criminal gangs, who would be forced out of business. This would be to the advantage of the beggars themselves. Given that the criminals obviously find it is worth the effort, the revenue should at least be sufficient to pay for a team of inspectors, and possibly a profit on top for the city’s coffers.

 

Tax Justice Network - a welcome shift?

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We have always been sceptical about Tax Justice Network, which at the most, has seen LVT as part of a "balance of taxes", which amongst other things ignores the fact that the other taxes are competing for the same revenue  stream as LVT itself. But this article is more positive than most that has come from that direction. If the prevention of tax avoidance and tax evasion are the aims, then anything other than LVT is inherently vulnerable. So this could be a welcome sign that those behind TJN are beginning to notice.

 

Land a bigger fish than the Mansion Tax minnow

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On 15th Sept. a colloquium on land value tax (LVT), held at the Westminster HQ of the Royal Institution of Chartered Surveyors (RICS), was presented with economic analysis suggesting that a single annual tax based on land values would be capable of producing potential revenue flows of £82 billion: sufficient to replace all existing property taxes.

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Scotland votes no

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The Campaign as such never had a view on whether Scotland should be independent. Scotland suffers from the disadvantage of being distant both from the main centres of population in Great Britain, and also from the ports in the South-East that provide easy connections to mainland Europe. Thus, since the decline of the heavy industry which was the mainstay of the Scottish economy, the country has been struggling. This must surely have been one of the driving forces behind the independence movement.

It is not, however, just Scotland that suffers from geographical disadvantages; the same can be said of most of England north of about Leeds, as well as Devon, Cornwall and most of Wales and Northern Ireland. Ricardo's Law of Rent can be seen here having its effect at a country-wide scale, with these peripheral locations being at the margin.

One of the many shortcomings of the tax system is that it takes no account of locational advantage and disadvantage, and consequently it attempts to levy taxes at the margin. This is by definition impossible. The result is that economic activity is unviable over large tracts of the country, which then become a commercial and industrial wasteland. In Newcastle city centre, for instance, it seems as if estate agents' boards are sprouting from every other building, whilst Devon and Cornwall - and indeed much of the south of England - only survive on their seasonal coastal tourist trade. Increasingly, the population, and most of Britain's economic activity, are concentrated into the bottom-right hand corner of the country, which in turn imposes costs as infrastructure is overloaded and the demand for housing becomes insatiable.

We hate to have to keep on repeating this, but a shift from existing taxes to a tax on the rental value of land is the only way to deal with this problem. That ensures that taxes are highest where there is the most ability to pay. This reform effectively creates tax havens precisely where they are most needed. No taxes are levied at the margin, and so economic opportunities would be opened up where, at present, commerce is stymied by the tax system. In this way, the people of not only Scotland but also all the other peripheral regions of the country would be better able to make a go of things.

 


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