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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.

Piketty still hasn't a clue

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Piketty still hasn't a clue. His comments in today's Observercalling for international action, demonstrate the point. The Observer itself is worse, with a call for United Nations action in a piece headed, "The Observer view on how to clean up a squalid world financial mess".

Both pieces appear in the Observer/Guardian's section laughably called "Comment is free", I say laughably because most of the articles in the section are not open for comment. Free comment closed down several weeks ago, presumably because the newspapers' pro-EU stance and advocacy of open-door immigration policies are met with a chorus of derisive and usually well-argued comments demolishing the authors' arguments.

As far as the tax avoidance issue is concerned, there is no excuse for missiing the point because the Guardian itself published a piece, referred to on this website earlier in the weeek, that catalogued prime London residential property owned by offshore funds. If there was any real desire to deal with the problem, the hand-wringers would be arguing for increased taxes on property which is not going to be taken off to any tax haven anywhere; a simple way to pick up a bit of the lost tax would  be through reform of Council Tax bands, including a national component which could be used to boost the revenue of local authorities in places where property values bump along the bottom and are untouched by any boom. I am not advocating this but it would be a move in the right direction and go a little way towards dealing with the problem. One might expect the hand-wringers to come up with some such suggestion. That they do not indicates either that they are incapable of joining-up their thinking or that the whole thing is humbug.

You might ask why bother to visit The Guardian's news website at all? Occasionally it comes up with a few nuggets, but the main thing in its favour is that most of the better British newspapers - the FT, Times and Daily Telegraph - have put themselves behind paywalls. That makes it pointless to link to any articles in them as visitors to this web site will not be able to read them unless they themselves are subscribers.





Humbug in perspective

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A correspondent sent me this yesterday, apropos the Panama "revelations"

"I paid £200k for my house in 99. Now its worth £600 big ones. How much work did I do? None. How much tax did I pay? None. How much benefit did I receive? Rather a lot - All the increase in price plus improved location value. Now, multiply that by 23 million home owners and you have a nation of benefit scrounging tax avoiders who make Amazon Google and all the wealthy and powerful together look like minnows in comparison. And this nation of regular folks elected every single government who make it all legal. I'm not saying its right or wrong. I'm merely pointing it out for the 'living' among us to observe and shed a blinding light on."


Proposed high speed rail alternative - and a funding model

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High Speed UK is the greener, well-connected alternative to HS2, write Colin Elliff, Andrew Coulson & Stephen Stretton - and it would save taxpayers billions. Financed by taxing property owners in connected cities on their windfall gains, HSUK would create a low fare, high capacity, interconnected railway network which would generate huge long-term profits for the nation.

Our interest in this is the proposed funding model - through enhancements in land value. Unfortunately, although it is not clear exactly what is suggested, it seems to be some system for capture of windfall gains in land value. What a pity the authors of the scheme have not heard of classic land value taxation.

 See full article in The Ecologist.


A dialogue of the deaf

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In response to an article on housing policy in the Observer, which needless to say did not mention LVT but came up with a list of tinkering measures

ME: There is no solution to the housing problem without land value taxation - that is a prerequisite.
Without LVT, all the measures listed in the article are just useless tinkering. With LVT, most of them would not be necessary

REPLY FROM Lune13: Zzzzzzz

ME: You do not conceal your towering intellect, do you?

Lune13: Not ever. You are a fanatic who believes an extremely minor single taxation change would have a huge impact. It won't. it is also comically out of line with how most new business generates wealth. Clue- it does not involve land.

ME Fanatic? What word describes someone who comments on something they obviously know absolutely nothing about? There is so much material around on the subject that I am not going to waste time explaining here.

Well, Mr Genius, perhaps you would care to explain why the price of it keeps on going up and up when nobody wants it or needs it any more?

Lune13: How much land do the following highly profitable companies use, and could you possibly tax them on it the same as CGT?

Shell; BP; All the banks; Vodafone; Google; Apple; Etc The answer is- you can't The only valuable thing that LVT can be applied to is peoples houses. The biggest vote losing proposition ever formulated.

  • ME: Shell; BP - Nearly all of their revenue consists of resource ie land rents. "Land" in economics means the entire natural world apart from man ie the surface of the earth, radio spectrum, minerals in the ground, fish in the sea, virgin forest.
  • All the banks - Banks own vast amounts of land through their secured mortgages. A mortgage is a device whereby the lender creates money at next to no cost for the purchase of real estate. The borrower is the bank's tenant for the duration of the loan. What is labelled "interest" is in reality "rent".
  • Vodafone - Redio spectrum is classified as "land" in economics
  • Google; Apple - Google and Apple cannot operate in locations where land values are low - although they do their best. They need well-serviced sites where labour with the right skills is available. In this case a lot of their revenue flow is from intellectual property rights ie like land, they are a monopoly granted by government, analogous to land titles. The first thing their highly-paid staff do is to purchase valuable real estate.
  • The only valuable thing that LVT can be applied to is peoples houses - In valuable central business districts like London and New York, more than 80% of the rent paid represents land value. The dukes who own most of central London are not living in penury by having to rely on the land value of their property.

Lune13: 80% of the land value of the UK is in residential property. You do know that, right? So, tell me again, how is LVT going to replace any other taxes.

ME: What is your source for this claim? Please show your calculations based on LAND RENTAL VALUE, not selling price, and allow for the fact that some land value is already collected through the UBR and Council Tax.

You have forgotten to take account of Ricardo's Law of Rent, from which it follows that all existing taxes are at the expense of land rental value ie a cut in tax of £1 billion will lead to an aggregate increase in land value of about the same amount. If you can disprove Ricardo then you will get a Nobel Prize in Economics. I will make the journey to Stockholm to congratulate you.


Incidence of property taxes

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I regularly get into arguments with people who think that property taxes are paid by tenants. Now it is true that tenants in the UK are nominally responsible for paying the property tax, be it Council Tax or business rate. But the tax cuts into the amount a landlord can charge in rent. In other words, the incidence of the tax is on the landlord. Yet so many people refuse to believe this and do not understand it. Thus we are constantly hearing about the need to "help business" by cutting the business rate. Now it may be that the business rate, on top of all other taxes, may mean that no business is viable in some locations, and this would help to explain why so many of the UK's high streets are lined with charity shops and boarded-up windows, but cutting the business rate will not help business.

If there are any doubts on this point, this "study of studies" should dispel them once and for all.


Economic effects of immigration

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Concern about immigration was one of the reasons why the Brexit camp won. In the post-referendum recriminations, it has led to the Brexiters being denounced as xenophobes. 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

Begging according to Georgist principles - update

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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. There is indeed evidence that some kind of mafia is in operation. Homeless people in Sweden who sell a magazine called Faktum (equivalent of The Big Issue), have been complaining that they have been forced off their regular pitches, sometimes at knifepoint, by heavies from Rumania and Bulgaria. There is certainly collaboration between the beggars - for example, in organising transport, and probably accommodation as well. There is talk about banning begging altogether in Sweden, but the fact that the best pitches - at the entrances to railway stations, shopping malls or next to busy bus stops, are now coming under control by protection rackets taking a cut of the taking points to a potential and constructive solution. The mafias are collecting a rental value which could be collected by the local authority instead, thereby applying Georgist principles 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.


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