Winston Churchill as LVT mascot
tony at gaia.org
Wed Mar 10 10:34:52 GMT 2004
I didn't initially realise that chunks of the article Wolf wrote for the FT=
were relying on old Winston (a man badly in need of a mohican).
I know that this is a boring issue for many. I have sat and watched people =
nodding off or simply leaving the room while grim LVT campaigners try to eva=
ngelise their audience. Now you know why - Winston approves.
Dividing and tenanting out big estates at peppercorn rents. Then transferri=
ng the freehold makes much more sense than using LVT.
The Property Tax is Messy -- Simply Tax Land Value Instead
Why on earth not put a tax on land?
by Martin Wolf
"Roads are made, streets are made, services are improved, electric light tu=
rns night into day, water is brought from reservoirs a hundred miles off in =
the mountains - and all the while the landlord sits still . . . To not one o=
f those improvements does the land monopolist, as a land monopolist, contrib=
ute . . . He renders no service to the community, he contributes nothing to =
the general welfare, he contributes nothing to the process from which his ow=
n enrichment is derived."
Thus did Winston Churchill explain, in 1909, the morality and the efficienc=
y of taxing land (or pure location), rather than development. It is moral be=
cause owners, as owners (rather than managers or developers), contribute not=
hing to land's value. It is efficient, because taxing land distorts nobody's=
choices. On the contrary, a tax on site values encourages owners to use wha=
t they own more efficiently.
Always desirable, a land value tax is now an idea whose time has come. As J=
ohn Muellbauer of the University of Oxford notes, a tax on site values has t=
he following hugely desirable features in contemporary Britain: it offers a =
tax base that cannot run away, unlike capital or labour; it encourages desir=
ed development; it imposes the greatest cost of holding undeveloped land whe=
re prices, and so values in alternative uses, are highest; it captures for t=
he public purse a part of the benefits accruing to landowners from those inv=
estments in infrastructure and other amenities made by the public sector; an=
d it makes the cost of speculation higher, improving the country's allocatio=
n of resources.
Uniform site-value or land-value taxation is a "no-brainer". But what makes=
it particularly attractive today is its superiority to other taxes now impo=
sed on property.
The council tax and the uniform business rate are imposed on land that is b=
oth occupied and developed. These taxes encourage dereliction and discourage=
development. Council tax has the additional disadvantage of being imposed a=
t higher rates on the cheaper properties in poorer places, thereby reinforci=
ng the perverse regional effects of differential user costs of housing. Agai=
n, stamp duty, now at the steep level of 4 per cent on properties worth more=
than £500,000, is a tax on transactions. But why would anyone wish to lower=
mobility and reduce liquidity in this way?
What the UK needs, then, is a national tax on the value of land holdings. A=
s is pointed out in the interim report on housing supply by Kate Barker of t=
he Bank of England's monetary policy committee, discussed here a fortnight a=
go, Denmark does already imposes just such a tax.
If, as seems plausible, the country should move in this direction only caut=
iously, the obvious place to start is with the uniform business rate. Prof M=
uellbauer suggests we could reform the business rate by halving the rate and=
replacing the lost part with a land value element. A floor value might be s=
et at, say, £10,000 a hectare, which would exempt most farmland. He also sug=
gests that a tax below 1 per cent a year would be sufficient.
What are the objections to such a modest reform? One would be that it is ha=
rd to value the land component in property values. But insurance valuations =
might be used to place a value on structures, in which case land value is si=
mply total value less the value of the structures on it. Another objection i=
s that such a tax would impose cash costs on people with no incomes. A possi=
bility here, also applicable to current discussions of reform of council tax=
, is to roll up tax and recoup it when the asset is sold, developed or beque=
In the long run, a national land value tax, at a uniform rate, seems at lea=
st a partial substitute for council tax as well. For the moment, however, th=
e big point is that the taxation of property is a mess. This is one reason t=
he housing market and regional policy work so poorly. National land-value ta=
xation is a part of the solution. It is both fair and efficient. It should b=
Churchill's speech (double snore!)
Winston Churchill on Land Monopoly
Speech made to the House of Commons on May 4, 1909.
Land monopoly is not the only monopoly, but it is by far the greatest of mo=
nopolies -- it is a perpetual monopoly, and it is the mother of all other fo=
rms of monopoly.
Unearned increments in land are not the only form of unearned or undeserved=
profit, but they are the principal form of unearned increment, and they are=
derived from processes which are not merely not beneficial, but positively =
detrimental to the general public.
Land, which is a necessity of human existence, which is the original source=
of all wealth, which is strictly limited in extent, which is fixed in geogr=
aphical position -- land, I say, differs from all other forms of property, a=
nd the immemorial customs of nearly every modern state have placed the tenur=
e, transfer, and obligations of land in a wholly different category from oth=
er classes of property.
Nothing is more amusing than to watch the efforts of land monopolists =
to claim that other forms of property and increment are similar in all respe=
cts to land and the unearned increment on land.
They talk of the increased profits of a doctor or lawyer from the grow=
th of population in the town in which they live. They talk of the profits of=
a railway, from the growing wealth and activity in the districts through wh=
ich it runs. They talk of the profits from a rise in stocks and even the pro=
fits derived from the sale of works of art.
But see how misleading and false all those analogies are. The windfall=
s from the sale of a picture -- a Van Dyke or a Holbein -- may be very consi=
derable. But pictures do not get in anybody's way. They do not lay a toll on=
anybody's labor; they do not touch enterprise and production; they do not a=
ffect the creative processes on which the material well-being of millions de=
If a rise in stocks confers profits on the fortunate holders far beyon=
d what they expected or indeed deserved, nevertheless that profit was not re=
aped by withholding from the community the land which it needs; on the contr=
ary, it was reaped by supplying industry with the capital without which it c=
ould not be carried on.
If a railway makes greater profits it is usually because it carries mo=
re goods and more passengers.
If a doctor or a lawyer enjoys a better practice, it is because the do=
ctor attends more patients and more exacting patients, and because the lawye=
r pleads more suits in the courts and more important suits. At every stage t=
he doctor or the lawyer is giving service in return for his fees.
Fancy comparing these healthy processes with the enrichment which come=
s to the landlord who happens to own a plot of land on the outskirts of a gr=
eat city, who watches the busy population around him making the city larger,=
richer, more convenient, more famous every day, and all the while sits stil=
l and does nothing.
Roads are made, streets are made, services are improved, electric ligh=
t turns night into day, water is brought from reservoirs a hundred miles off=
in the mountains -- and all the while the landlord sits still. Every one of=
those improvements is effected by the labor and cost of other people and th=
e taxpayers. To not one of those improvements does the land monopolist, as a=
land monopolist, contribute, and yet by every one of them the value of his =
land is enhanced. He renders no service to the community, he contributes not=
hing to the general welfare, he contributes nothing to the process from whic=
h his own enrichment is derived.
While the land is what is called "ripening" for the unearned increment=
of its owner, the merchant going to his office and the artisan going to his=
work must detour or pay a fare to avoid it. The people lose their chance of=
using the land, the city and state lose the taxes which would have accrued =
if the natural development had taken place, and all the while the land monop=
olist only has to sit still and watch complacently his property multiplying =
in value, sometimes many fold, without either effort or contribution on his =
But let us follow this process a little further. The population of the=
city grows and grows, the congestion in the poorer quarters becomes acute, =
rents rise and thousands of families are crowded into tenements. At last the=
land becomes ripe for sale -- that means that the price is too tempting to =
be resisted any longer. And then, and not until then, it is sold by the yard=
or by the inch at 10 times, or 20 times, or even 50 times its agricultural =
The greater the population around the land, the greater the injury the=
public has sustained by its protracted denial. And, the more inconvenience =
caused to everybody; the more serious the loss in economic strength and acti=
vity -- the larger will be the profit of the landlord when the sale is final=
ly accomplished. In fact, you may say that the unearned increment on the lan=
d is reaped by the land monopolist in exact proportion, not to the service, =
but to the disservice done. It is monopoly which is the keynote, and where m=
onopoly prevails, the greater the injury to society the greater the reward t=
o the monopolist. This evil process strikes at every form of industrial acti=
vity. The municipality, wishing for broader streets, better houses, more hea=
lthy, decent, scientifically planned towns, is made to pay more to get them =
in proportion as is has exerted itself to make past improvements. The more i=
t has improved the town, the more it will have to pay for any land it may no=
w wish to acquire for further improvements.
The manufacturer proposing to start a new industry, proposing to erect=
a great factory offering employment to thousands of hands, is made to pay s=
uch a price for his land that the purchase price hangs around the neck of hi=
s whole business, hampering his competitive power in every market, clogging =
him far more than any foreign tariff in his export competition, and the land=
price strikes down through the profits of the manufacturer on to the wages =
of the worker.
No matter where you look or what examples you select, you will see eve=
ry form of enterprise, every step in material progress, is only undertaken a=
fter the land monopolist has skimmed the cream for himself, and everywhere t=
oday the man or the public body that wishes to put land to its highest use i=
s forced to pay a preliminary fine in land values to the man who is putting =
it to an inferior one, and in some cases to no use at all. All comes back to=
land value, and its owner is able to levy toll upon all other forms of weal=
th and every form of industry. A portion, in some cases the whole, of every =
benefit which is laboriously acquired by the community increases the land va=
lue and finds its way automatically into the landlord's pocket. If there is =
a rise in wages, rents are able to move forward, because the workers can aff=
ord to pay a little more. If the opening of a new railway or new tramway, or=
the institution of improved services of a lowering of fares, or of a new in=
vention, or any other public convenience affords a benefit to workers in any=
particular district, it becomes easier for them to live, and therefore the =
ground landlord is able to charge them more for the privilege of living ther=
Some years ago in London there was a toll bar on a bridge across the T=
hames, and all the working people who lived on the south side of the river h=
ad to pay a daily toll of one penny for going and returning from their work.=
The spectacle of these poor people thus mulcted of so large a proportion of=
their earnings offended the public conscience, and agitation was set on foo=
t, municipal authorities were roused, and at the cost of the taxpayers, the =
bridge was freed and the toll removed. All those people who used the bridge =
were saved sixpence a week, but within a very short time rents on the south =
side of the river were found to have risen about sixpence a week, or the amo=
unt of the toll which had been remitted!
And a friend of mine was telling me the other day that, in the parish =
of Southwark, about 350 pounds a year was given away in doles of bread by ch=
aritable people in connection with one of the churches. As a consequence of =
this charity, the competition for small houses and single-room tenements is =
so great that rents are considerably higher in the parish!
All goes back to the land, and the land owner is able to absorb to him=
self a share of almost every public and every private benefit, however impor=
tant or however pitiful those benefits may be.
I hope you will understand that, when I speak of the land monopolist, =
I am dealing more with the process than with the individual land owner who, =
in most cases, is a worthy person utterly unconscious of the character of th=
e methods by which he is enriched. I have no wish to hold any class up to pu=
blic disapprobation. I do not think that the man who makes money by unearned=
increment in land is morally worse than anyone else who gathers his profit =
where he finds it in this hard world under the law and according to common u=
sage. It is not the individual I attack; it is the system. It is not the man=
who is bad; it is the law which is bad. It is not the man who is blameworth=
y for doing what the law allows and what other men do; it is the State which=
would be blameworthy if it were not to endeavor to reform the law and corre=
ct the practice.
We do not want to punish the landlord.
We want to alter the law.
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