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The LVTC blog, by Henry Law

The comments in the LVTC Blog are a personal view of our Hon. Secretary Henry Law and do not necessarily reflect the official policy of the Campaign.

This is a place for personal observations and comments on politics, economics, current affairs, on-going discussions on the potential for LVT to remedy some of the current ills, and the impact on Society of any of the above. 

Please read and enjoy, and feel free to respond to Henry if you have any thing you would like to add.


Somebody doesn't like us

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Polly Toynbee wrote an article in the Guardian today, criticising David Cameron's proposals for tax cuts. My comments were deleted by the moderator as being off-topic. Somebody must have complained. I asked for an explanation and the comment was reinstated, but they must obviously have got under someone's skin. Whose, I wonder? Here is the allegedly off-topic comment:

All mainstream economics is disconnected from reality. The role of land is ignored. But land and labour are the two factors of production. How can this have happened? The result of working to rotten theory is that none of the parties have sound policies. Conservatives will aggravate recession. Labour will give us hyperinflation before this wretched business is through.

There is a case for Keynesian policies if these are restricted to bringing forwards projects the will increase productivity. Schemes like Crossrail. But this will put several times construction costs into landowners' pockets. The taxpayer will never see most of it back. And this plan for getting out of recession will set the country straight on track for the next, around 2025, probably.

http://www.landvaluetax.org/theory/new-model-of-the-economy.html

 

LVT wouldn't work - people say

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This is an extract from a discussion on the Guardian's "Comment is Free"

I'm not convinced by the argument.

To start with, you are describing a method of taxation. It's not clear why "poverty and unemployment; widening divisions between rich and poor; boom-slump cycles; housing shortages; inadequate infrastructure; and damage to the environment" will be alleviated by replacing income tax with a land valuation tax. It sounds like a magic pill to cure all ailments. Clarify this point and we can talk further.

Another troubling aspect is that "it would operate as an annual charge on the rental value of land, assuming that each site was in its optimum permitted use." So If I own land on the site of the proposed 3rd (or is it 4th?) runway at Heathrow, the tax will be prohibitively expensive should I wish to continue running a corner shop. And who would determine the optimum permitted use? It suggests a dictatorship of land values decided by bureaucrats.

Individual income and corporate profit are reliable indicators of current economic success, and a fair way to assess what we owe for the maintenance of a civilized society

Income tax is a system for soaking the poor. It has to be, otherwise it would only yield trivial amounts of money. Only it is worse than that. People will work for the least that they will accept. In countries with some kind of unemployment benefit, the minimum wage is set by benefit levels or minimum wage legislation, such that take home pay is equal to benefits. But for every £ that a worker receives in take-home, the employer must pay an extra and large amount to the government, made up of PAYE income tax, and "Employer's" and "Employees' " NI. This creates a situation of low pay and high labour costs. If the employer is in the public sector, the money is just churning. But the result it to price low-skill workers out of employment altogether. The tax you and I pay is then wasted in keeping people idle. Is that how you want your money spent.

The next evil with the tax system is that the same amount of taxation is payable per unit of added value regardless of whether a firm is operating in a marginal location say in the Hebrides or in the City of London. The effect here is to drive marginal sites out of use. Businesses that would be viable in the absence of the tax become non-viable if tax has to be paid, because all other costs are higher in the distant location. This is why the drift towards London and the south east is aggravated. This article explains the principle.

The combined effects of present taxes is a deadweight loss to the UK economy of over 12% of GNP. (Harrison, Institute of Economic Affairs). Under a land value taxation system this would not happen because labour is not taxed and there is no tax levied at marginal locations.

Land value taxation is, strictly speaking, not a tax at all. It is the collection of land rent for public revenue, instead of present taxes. This is a value created by the presence and activities of the community. As long as this income stream is privatised, landowners are free-riders on the backs of the rest of society. Land owners do not produce land - it is a gift of nature (or God). So why should they keep what they have not worked for?

The effect of privatising land rent is that land titles become valuable tradeable commodities. This corrupts the banking system when people purchase land titles using borrowed money, which they normally do. The dynamics of this leads to periodic speculative bubbles, followed by disastrous crashes such as the one we are just going through. That is another part of the price of allowing land rental value to stay in private hands.

Finally, to come to your question about the corner shop at the end of the runway - it is significant that you have had to postulate an absurd situation to make your point. Objectors to land value taxation normally do. If you look at the area around a major airport, you will immediately notice that it is occupied by warehouses, hotels, car parks and industrial buildings used by firms providing ancillary aviation services. There are no corner shops, any more than there are allotments next to the Stock Exchange in the City of London. And what an abuse of a valuable site it would be if there were. Interestingly, this kind of inefficient land use was a feature of the Soviet system.

But there is a more general point this raises. Infrastructure creates land value. The £3 billion Jubilee Line Extension added about £10 billion in land value to the areas served. That is public investment that ended up in private pockets on the basis of a public policy decision to build the line. Is is any wonder that the Treasury is not keen on these projects when there is nothing received in return? So we in the UK struggle under an inadequate and poorly maintained infrastructure which costs the country billions.

 

Can the state protect human rights?

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Prompted by the economic crisis and the sixtieth anniversary of the UN declaration, human rights have been the subject of several pieces arguing that states should have a stronger role to ensure that people's rights are protected. But human rights are not guaranteed by defining them as such, rather they arise by defining the corresponding duties which confer those rights. Once the duties of the state and of the individual are defined, both positively and negatively, the rights emerge naturally.
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Campaigning for LVT - some thoughts

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There is a more interest in promoting LVT in the present state of the economy, and quite right too. But campaigners need to be very clear what they are promoting and why, and to be able to defend their position. I could not argue against some of the attacks that can be made against LVT on capital values and on no account should we be advocating Capital Value assessment.
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Is Libertarianism dead?

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Advocates of our policy often find themselves in conflict with both "left" and "right". The discussion below, which arose out of an article on Libertarianism, is an example of the latter. I wrote...

There is just one flaw in the libertarian argument but it is fatal. It fails on the question of land rights. Nozick, one of the prophets of modern libertarianism, skirts over this key issue. There is a powerful critique of the position by Hillel Steiner, who wrote a piece called "The Libertarian Dilemma".
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Tales from a school classroom

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A few months ago a neighbour's son told me that he was thinking of studying Economics for A-level. I suggested that there were more useful subjects, like chemistry, or woodwork or cookery. If he studied economics he would learn things as they were not, in other words it was worse then useless, and that if he wanted to learn about economics, he should take a Saturday job in a street market, which would be more fun and he would make a bit of money. Or he could take up street busking, because then he would learn what he would never be taught in the classrom, This is explained in Sounds from the Deep which you can read elsewhere on this web site, and shows how the Law of Rent works. The famous economist David Ricardo formulated it in the early nineteenth century, using fields of corn as his example, but somehow it has been forgotten, because modern economists claim that nowadays economies are commercial and industrial, and so land is not important any more. To take such a view must require a well-developed capacity to ignore what is going on all around, when urban land can be worth a million times more than land used for growing crops, and where the world's financial system has just been thrown into chaos by a the collapse of a land price boom fuelled by reckless lending and reckless borrowing,
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Social mobility improves

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Polly Toynbee has been talking about the latest figures on social mobility in Britain, which suggest things are improving, but only slightly. She puts the problem down to educational and pay inequalities and points to the Nordic countries as exemplars.
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