Progressive consensus growing for a Land-Tax

[MarkiB]

Andrew Sparrow of The Guardian says on his Guardian.co.uk blog:

There was a passage in Vince Cable's speech to the Lib Dem conference
earlier this week that did not get as much attention as it should have
done. I certainly missed it when I first skimmed the speech. It was the bit
where he came out in favour of a land tax.

Cable:  "It will be said that in a world of internationally mobile capital
and people it is counterproductive to tax personal income and corporate
profit to uncompetitive levels. That is right. But a progressive
alternative is to shift the tax base to property and land which cannot run
away and represent, in Britain, an extreme concentration of wealth. I
personally regret that mansion tax did not make it into the Coalition
Agreement but in a coalition we have to compromise."

Cable may not have much luck persuading David Cameron to increase taxes on
property and land, but Labour figures are coming around to the idea. Andy
Burnham proposed a land value tax as part of his leadership campaign. At a
fringe meeting today David Lammy spoke up for a land tax. Will Straw also
argued in favour, saying that 70% of land is owned by 0.3% of the
population.

Source:
http://www.guardian.co.uk/politics/blog/2010/sep/26/labour-labourconference

-------- Original Message --------
Subject: Martin Wolf LVT Great Sum Up
Date: Sat, 25 Sep 2010 13:28:34 +0100
From: Mark Barrett <marknbarrett at googlemail.com>


http://www.ft.com/cms/s/0/8f06df9e-8ac1-11df-8e17-00144feab49a.html
 Why we must halt the land cycle

By Martin Wolf

Published: July 8 2010 22:28 | Last updated: July 8 2010 22:28

Those who do not learn from history are condemned to repeat it. This
applies
not least to the immense financial and economic crisis into which the
world
has fallen. So what lay behind it? The answer is the credit-fuelled
property
cycle. The people of the US, UK, Spain and Ireland became feverish
speculators in land. Today, the toxic waste poisons the entire world
economy.

In 1984, I bought my London house. I estimate that the land on which it
sits
was worth £100,000 in today’s prices. Today, the value is perhaps ten
times
as great. All of that vast increment is the fruit of no effort of mine. It
is the reward of owning a location that the efforts of others made
valuable,
reinforced by a restrictive planning regime and generous tax treatment
– *property
taxes*
<http://www.ft.com/cms/s/0/bd439f06-7dff-11df-b357-00144feabdc0.html>are
low and gains tax-free.
  So I am a land speculator – a mini-aristocrat in a land where private
appropriation of the fruits of others’ efforts has long been a prime route
to wealth. This appropriation of the rise in the value of land is not just
unfair: what have I done to deserve this increase in my wealth? It has
obviously dire consequences.

First, it makes it necessary for the state to fund itself by taxing
effort,
ingenuity and foresight. Taxation of labour and capital must lower their
supply. Taxation of resources will not have the same result, because
supply
is given. Such taxes reduce the unearned rewards to owners.

Second, this system creates calamitous political incentives. In a world in
which people have borrowed heavily to own a location, they are desperate
to
enjoy *land price
rises*<http://www.ft.com/cms/s/0/2c7461b4-8a74-11df-bd2e-00144feab49a.html>and,
still more, to prevent price falls. Thus we see a bizarre spectacle:
newspapers hail upward moves in the price of a place to live – the most
basic of all amenities. The beneficiaries are more than land speculators.
They are also enthusiastic supporters of efforts to rig the market.
Particularly in the UK, they welcome the creation of artificial scarcity
of
land, via a ludicrously restrictive regime of planning controls. This is
the
most important way in which wealth is transferred from the unpropertied
young to the propertied old. In his new book, David Willetts, the
universities minister, emphasises the unfairness of the distribution of
wealth across generations.* The rigged land market is the biggest single
cause of this calamity.

Third and most important, the opportunity for speculation in land both
fuels
– and is fuelled by – the credit cycle, which has, yet again destabilised
the economy. In a superb new jeremiad, the journalist Fred Harrison argues
that this cycle – with a duration of 18 years – was predictable and, by
him
at least, predicted.** In essence, he notes, buyers rent property from
bankers, in return for a gamble on the upside. A host of agents gains fees
from arranging, packaging and distributing the fruits of such highly
speculative transactions. In the long upswing (the most recent one lasted
11
years in the UK), they all become rich together, as credit and debt
explode
upwards. Then, when the collapse comes, recent borrowers, the financial
institutions and taxpayers suffer huge losses. This is no more than a
giant
pyramid selling scheme and one whose dire consequences we have seen again
and again. It is ultimately, as Mr Harrison argues, a ruinous way of
running
our affairs.

I have long been persuaded that resource rents should be socialised, not
accrue to individual owners. Yet, as Mr Harrison tellingly remarks, “as a
community we socialise our privately earned incomes (wages and salaries),
while our social income (from land) is privatised.” Yet, whatever one
thinks
of the justice of this arrangement, the practical consequences have become
calamitous. Do we want to start yet another credit-fuelled property cycle
as
soon as the debris of the present one is cleared away, some years of
misery
hence?

If “a crisis is a terrible thing to waste”, here is an urgent case for
action. Socialising the full rental value of land would destroy the
financial system and the wealth of a large part of the public. That is
obviously impossible. But socialising any gain from here on would be far
less so. This would eliminate the fever of land speculation. It would also
allow a shift in the burden of taxation. Perhaps as important, with the
prospects of effortless increases in wealth removed, the UK might
re-examine
its *planning
laws*<http://www.ft.com/cms/s/0/d46d8daa-73e0-11df-87f5-00144feabdc0.html>.
There is panic about the dire consequences of such a liberalisation of
restrictions for the countryside. It is worth noting, however, how little
is
needed: an increase of just three miles in the radius of London would
raise
the capital’s surface area by 50 per cent. Would this really be the end of
England’s green and pleasant land?

I do not expect any government to dare to wean the English from their
ruinous trust in land speculation as the route to wealth. But I can hope.
It
is bad enough that the result has been expensive houses and inefficient
taxes. But it is surely far worse that such insane speculative fevers have
ended up destabilising the entire global economy. Even if few know it, it
is
time for a change.

** The Pinch, Atlantic Books*

*** The Inquest, Discovered Authors*

*martin.wolf at ft.com* <martin.wolf at ft.com>

*More columns at
**www.ft.com/martinwolf*<http://www.ft.com/comment/columnists/martinwolf>

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