Land Value Taxation Campaign

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Land rent for public revenue

Picketty has got it wrong

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“Capital in the Twenty-First Century” by the French economist Thomas Piketty, is now coming to wider public attention following its publication last year. According to Wikipedia, “The central thesis of the book is that inequality is not an accident, but rather a feature of capitalism and that these excesses of capitalism can only be reversed through state intervention.

The book thus warns that unless capitalism is reformed, the very democratic order will be threatened. The trend towards higher inequality was reversed between 1930 and 1975 due to the two world wars, the Great Depression and a debt-fueled recession, which destroyed much wealth, particularly that owned by the elite. These events prompted the governments to undertake steps towards redistributing income and the fast economic growth meant that inherited wealth had its importance reduced.

Picketty suggests that the world is returning towards ‘patrimonial capitalism’, in which much of the economy is dominated by inherited wealth and that their power is increasing, creating an oligarchy.” To reverse the trend, Piketty proposes a global wealth tax and a top rate of income tax of 80%. From our own perspective, rooted in the ideas of Henry George, we recognise the trend but do not accept either the analysis nor the proposed remedy.

The deficiencies with Piketty’s analysis begin with definitions. What exactly are Capital and Capitalism? Which features of Capitalism are causing the problems that he is concerned about? And if wealth is to be the subject of a tax, how is it even to be defined?

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Mansion Tax misnomer

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GWR No.5900 Hinderton Hall, 1976

"Mansion Tax" is a misnomer, as it is just a tax on quite ordinary houses in London and the South East. A real mansion would be a seat like Hinderton Hal in Cheshire. Hinderton Hall in the photograph is a Great Western Railway locomotive, 5900 built in 1931. What is the connection? The Great Western's Hall Class locomotives were named after posh country mansions. There were over 250 of them. If the tax were a genuine mansion tax it would have started by going for the places on the list of Hall class locomotives

The mansion tax, as floated by the LibDems and now espoused by Labour, is a bad idea which doesn't go away. It is ill-conceived, arbitrary at the margin, an unnecessary complication and will require an expensive revaluation of properties within about £200,000 of whatever threshold is set. That will lead to a rash of appeals. It is everything a tax should not be.

If proper LVT is off-limits, the Council Tax needs to work with a new list based on current valuations instead of the 1991 valuations used at present, the ratio of payments between the bottom and top band properties should be increased from the present 1: 3 to something that more closely reflected the ratio of the property values, and a couple of extra bands should be added.

 

Main line to Cornwall reopens - and free riders

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The main railway line to Devon and Cornwall reopened on 4 April after a two month closure due to the sea wall being washed away at Dawlish. Between Dawlish and Teignmouth, the line runs on the sea wall, built by Brunel in the 1840s. It is an exposed stretch of coast and the route is vulnerable to damage by heavy seas. The speed of the repair was due to heroic efforts by Network Rail's engineers, who worked day and night in all weathers to get the work finished as quickly as possible.

Now consider this. Supposing that it had been decided there was no money for the work? Land values in Devon and Cornwall would have taken a big hit. People who had bought property, for example, for tourist activities, would have suffered a slump in the number of visitors as overloading of the already-congested main roads deterred people from travelling to the area.

This incident, and the fact that it was dealt with, and promptly, demonstrates that there is no such thing as a historic land value. ALL land value is continually sustained by the presence and activities of the community, above all, through the willingness of the taxpayer to maintain the supporting infrastructure in good order. But without land value taxation, landowners are not paying for the benefits they receive. They - which means all of us who own land - are the ultimate free-riders.

   

Practical Politics back

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We are pleased to announce that Practical Politics is back in production and the latest issue, number 205, will be available on the website shortly. If you want your copy as soon as it is published, you can subscribe or become a member of the Campaign - use the "contact us" link.
 


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