Progress without Poverty
Advantages of a Land Value Tax
(Compared with current taxes on Income, Employment, Value Added, Trade and Profits etc.)
A summary list might include the following:
1. The landowner must pay the tax himself – it cannot be passed on. The ‘owner’ (landlord) cannot pass the tax on to any tenant since the tenant will already be paying the full commercial rent value to the landlord. If the landlord is working the site himself and producing goods or services for sale he cannot pass the tax on to his customers in increased prices since, (assuming a competitive market) he is a price taker and cannot charge more than the market price. Others (at the margin) will already be producing similar goods profitably at the market price and they will have no LVT to pay. It may be noted in this connection that whilst rent does not influence the price of goods or services available in a particular area the value that people place upon given goods and services in a particular area may affect the rent or land value in that area. The causal link is that way round!
2. The subject matter of the tax (the land) cannot be hidden. Tax avoidance and evasion become impossible. ‘Confiscation’ by the community is a readily available remedy to evasion attempts.
3. LVT is a progressive system, falling most heavily where the benefit from the community is greatest and most lightly where the benefit is least.
4. LVT will tend to increase the amount of land (already designated for use by the community) available for such use since it will provide a major disincentive to holding this land derelict and out of use. The tax is due on the land value itself as permitted by the community – not on current use (or non use) value.
5. LVT would reduce speculation in land since there is little point in hoping to gain from an increase in capital land values where any gain is accompanied by an increase in the land value tax that is payable. If the tax were to be 100% of the annual rental value, the site would have no capital value! This is because the capital value only expresses the capitalised value of an anticipated indefinite stream of rental incomes.
6. In replacing other ‘malign’ taxes it would reduce the burden of taxation at the margin of production.
7. LVT would stimulate economic activity at the margins of production where land has already been approved for economic activity they would be brought into productive use by a new breed of entrepreneurs.
8. LVT would encourage optimum economic use of sites and employment of people since there is a major incentive for the most productive people to employ themselves on the sites with most productive potential. For a given rental value they will add most value.
9. The tax has no distorting effect on economic choices or valuations. Those enterprises that were viable before the tax remain viable after the tax. This may be contrasted with, for example income tax or VAT which render unviable certain forms of economic activity which would be viable without the tax. The negative effects on employment, unemployment, and the general level of wages of income tax and VAT are very important.
10. Investment in land (‘sterile’ since it generates no new land) is rendered less attractive whilst investment in productive enterprise including buildings becomes more attractive.
11. Collateral based credit is rendered less available whilst genuine ‘producer credit’ is encouraged.
12. LVT represents a vital ingredient of any system of charging for the use of common resources. The underlying philosophy is the basis for all environmental protection measures.
13. LVT reflects the natural laws pertaining to wealth creation and wealth distribution in that it enables individual producers to better enjoy the products of their efforts whilst returning to the community that value which it makes available to the individual producer. There is no theft!
