Land Value Taxation Campaign

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Scottish Local Income Tax announced

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Alex Salmond, leader of the Scottish National Party has long advocated a Local Income Tax instead of the Council Tax and has now announced that it will be included in the next legislative programme. The belief is that it is based on "ability to pay". That notion is a delusion (see below). It has been widely condemned, for example in this article which appeared in The Scotsman in September 2007 and shows how it would have a particularly adverse effect on the Scottish economy.

What should the government do about the economy?

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What is the public's level of understanding about economics? Following the Chancellor's comments and predictions about the state of the British economy, a BBC discussion forum invited members of the public for their suggestions. There are over 100 pages to be viewed, but it is only necessary to scan through a few in order to get the flavours. They are worth looking at since they provide a snapshot view of people's ideas. It is a measure of the task confronting anyone wishing to sell the idea of land value taxation in Britain, and probably anywhere else too.The main themes, are in no particular order, are...

Royal Institute of Chartered Surveyors housing proposals

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The Royal Institute of Chartered Surveyors says

"Dealing with the current housing market downturn requires significant and decisive action from the Government whose attempts to address the problems facing the market up to now have been limited and have had little real impact.

"To encourage the Government to take action, RICS has put together a package of measures that will help address the downturn in the property market, help people who want to own a home and improve the home buying, selling and renting experience for consumers. These issues will not be resolved by a series of small individual measures but must instead be dealt with by looking at the system as a whole..."

But what is proposed is nothing more than a series of small individual measures which do not address the underlying problem. Needless to say, there is no suggestion of replacing the existing rats' nest of land taxes with LVT. The proposals include...

To be or not to be?

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Kronborg Slott, Helsingör
As a matter of policy, the Campaign confines itself to its specific area of concern but recent events illustrate more general points relating to land and the exploitation of positional advantage.

Kronborg Slott (illustrated) is otherwise known as Elsinore Castle, though it is actually a seventeenth century palace in the style known in England as "Jacobean". It overlooks the Öresund which is just a few kilometres wide at this point. All traffic into and out of the Baltic Sea must pass through this strait. In the middle ages, both sides of the Öresund were part of the Danish kingdom and the kings took the opportunity to levy "Öresund dues" on every vessel passing through. In other words, using the look-out tower to keep a personal eye on all the comings and goings, the Danish monarchs exploited a locational advantage to behave like common highwaymen. The income was used to pay for the palace, but, in a bizarre blend of criminality and piety, until the Reformation the kings used some of the spoils from this robbery to support a community of nuns.

Naturally, those who had to pay the dues did not like the imposition and this lead to continuous and costly wars. Eventually, the land on the north side of the Sound ended up as part of Sweden. As soon as there was free passage of shipping through the Sound, Copenhagen became an important trading centre and prospered. The king abandoned his castle-palace.

The extraction of the ransom was a classic example of rent-seeking, and the moral of the story is that it is not worth the trouble - the Danish kings would have done better to have allowed free passage in the first place, made friends instead of enemies, and charged a land value tax on the cities that would have grown up much sooner had they done so, thereby saving the cost of the wars and avoiding the ultimate loss of a chunk of their territory to Sweden.

Territorial disputes are usually about seeking some kind of positional advantage of this kind, for example, to gain access to natural resources or key routes, so it is always a good idea to see if something of the sort lies behind such disputes.

Factories demolished to avoid empty property rates

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An article in The Independent reports that buildings are already been knocked down to avoid having to pay rates after the government abolished rates relief on vacant property.

Anyone familiar with the theory behind LVT could have warned the government that this would happen, but in any case, have they forgotten how the Window Tax led to bricked-up windows? However, given that this is being done for no other reason than for tax avoidance, I would have thought that it is contravention of recent tax avoidance legislation. Isn't the Inland Revenue going to mount a challenge?

UK joblessness set to rise for sixth month

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An article in The Times today reports that "the deteriorating employment outlook is emphasised by a survey today from the Royal Bank of Scotland, which suggests that numbers in work fell in every region of the UK last month, and at the fastest rate since late 2001, as most parts of the country suffered a fall in economic activity. The steepest falls in employment levels were in Wales, the North East and the South West, with the jobs market holding up best in the South East, according to the monthly RBS regional purchasing managers' survey."

Much of the theory behind land value taxation is blindingly obvious


Labour returns to Keynesian roots

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An article in the Sunday Telegraph accuses Prime Minister Gordon Brown and Chancellor Darling of reverting to a default Keynesian option.

One of the commentators says that he does not recall an economist who forecast the bust. Regular visitors to this site will know, of course, that as long ago as 2005, Fred Harrison, wrote a book called "Boom Bust: House Prices, Banking and the Depression of 2010". He also accurately forecast the 1991 recession long before it happened. Harrison has identified 18 year cycles going back to about 1800, and their cause and frequency is due to the interaction of the banking system with the land market.

Banks losing money right, left and centre

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The loss of money by the banks is a wonder to behold. How many boardroom members have lost their jobs as a result of this monumental blundering? Nobody in charge can really say they did not know they were taking a huge risk.

At the root of the trouble is that the banks have been lending money for people to buy land. LAND IS NOT WEALTH. The primary value of land is its rental, which is a residual value after all the other claims on production have been made, for example wages, the suppliers of actual physical capital, and tax. What is left over is rent. Land price is the capitalised rent; think of land purchase as the purchase of an income stream. Then there is a chunk added on, the expectations of future growth. That is the hope value, which is the bit that bubbles up every so often. No prudent banker would lend money on the strength of hope value, even if that value had been rising for years and years. But they do, and now we can see the result. Worse still, those who run the banks seem not to have investigated too closely whether the people they were lending to would be able to pay back the money they owed. Evidently they could not. It is all very interesting but one wonders how this level of stupidity could have spread into the highest levels of the business community?

Then there is the special case of Northern Rock, which has just been fed another £3 billion to keep going. It is strange how this money suddenly becomes available. It is about the same amount as the government made such a fuss about when the 20% tax rate was abolished. It would also pay, for instance, for a good length of high speed railway, or half a dozen city tramway schemes, of the kind that the government refused to support on grounds of cost. To put this in perspective, the cost of reopening the Uckfield to Lewes line has escalated from £6 million to about £100 million in the past ten years, but it is still negligible compared to the money that is now having to be shovelled into a pit because people who have been running the banks have ignored the most fundamental principles of banking.

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