Hi Jim. It's JOck by the way - as in generic nickname for a Scotsman
this side of the pond, or perhaps less flattering on your side...:)
Anyway, no, it's not really how you describe. Though I can see where
you get it from.
It's a tax on the economic rental value of the land/site/location in
question. At the moment we all pay this anyway. If we buy a property
we pay it in capitalised form to the previous owner. If we rent we pay
it to the landlord.
An example might help explain...
Say you currently are going to pay $200,000 for a home, "freehold".
Financing that may cost you what, $12,000 per annum for 25 years - so
you take out that loan and give the money to the previous owner, pay
off the bank and 25 years later you have the building, the land and all
paid for. You may have small localised property taxes - such as here
in the UK the council tax. But to all intents and purposes you have
your home paid for and now have no great incentive to ensure that
you're not using more than you need to supply your needs, especially in
an era, in the UK, of scarcity, where your underoccupancy means there's
less available in the market for someone else. So let's say you pay
$12,000 financing and $2,000 local property tax for twenty five years
and then you're left with just the $2,000 after that, and a whopping
great capital asset plus growth in land values in the meantime.
Under an LVT regime, we recognise that the value of that land is not
something the current, or the previous, or any "owner" has really had
much to do with. They may have a beautiful house and keep it in good
repair and that is a valuable, if technically depreciating asset. But
it's the rest of the community that has largely contributed to the
value of the land itself. An area becomes more popular - that's
usually got nothing to do with you, the community spends money on
infrastructure - recent research in London shows that people will pay
up to £60,000 more for housing in a catchment area of a good school
over one of a bad school. That's the school and whoever paid for that
that adds the value, not the owner you're buying the property from.
So, back to our $200,000 home. Let's say the land value is $100,000
and the present value of the building in its current state is $100,000.
If the tax were "100%" of the economic rent, you would be buying just
the capital value of the building - so you'd be financing just $100,000
- say costing you $6,000 for 25 years - then it's all yours (the right
to the building that is). And the land value tax, well that would cost
you the other $8,000 a year (the financing of the land portion of the
home plus the existing, now done away with, inefficient council tax -
the "Rating system" that Douglas was complaining about in that quote
you posted.
Now sure, that land tax would rise or fall depending on the premium or
discount land in the area was attracting - so eventually, as a place
develops and the area becomes more valuable you have a decision to make
- do I stay here in my two bedroomed house on half an acre of land when
it's actually now in an important commercial area of town where that
land could be better used and do I continue to pay this rising tax
reflecting the added value the community now puts on that land. If you
were ostentatiously wealthy you might like to continue paying it to
live in the centre of things. The community would still get the tax
from you. Or a developer could give you a premium for your land, and
develop it to a more sustainable use. Say your tax was by now $32,000
a year and a developer could get four families in a nice new condo they
would each pay your original $8,000 in tax.
The idea for most LVTers is that it is a "single" tax - it would
replace the tax stream from peoples' incomes and capital wealth which
is, certainly where honestly earned, economically productive, whereas
your underuse of that land would by now be economically underproductive
to the community. Of course nowadays things other than land are scarce
and so in addition to this single tax, people often suggest taxes on
the use of scarce resources like oil, and punitive taxes on things we
don't want people to do, like tobacco or alcohol say.
Yes, there are transitional issues. If you pay $200,000 for that home
today and tomorrow we impose a land value tax, the value someone will
give you for your site will decrease and you'll be a bit
miffed/pissed/whatever the correct slang is your side of the pond. So
usually people suggest imposing the tax in small increments, replacing
part of or a whole of other less economically beneficial taxation
streams at each increment.
Now here's where the social credit comes in for me. As the capitalised
values of land that people are prepared to pay fall, so the amount of
debt taken out to finance those falls and the debt money created by the
usurers to fund that falls. Something needs to replace that. I would
suggest this would be a good place to start for a National Dividend -
distributing debt free money into the economy by way of a Citizens
Income or similar to maintain the purchasing power removed by the
reduction in property based debt.
So, what purpose does it serve...
It replaces bad taxes on healthy economic activity, with a tax on the
bad monopoly value of something to which the owner does not contribute
value and which, in many places is a zero sum market - "they ain't
making land anymore".
It reduces land values, so making the basics of life more affordable
for most people.
It reduces the amount of debt money in the system (you'd need to plan
the National Dividend distribution to go alongside before the money men
worked out some new asset to ramp up the price of so they could
continue to make the same profit from debt on something else to replace
the business lost from their loan books on land).
It helps with economic rebalancing between regions. One mark of an
overheated area is property values. If they were taxed, a new business
opening up there would be paying a high rate of tax in a high land
value area. But if they were able to relocate to a low value area they
would bring investment and regeneration without massive government
subsidies to make such a thing attractive.
It recycles the value of infrastructure and other projects the
community puts into an area - remember the school and house values.
Well, it's even bigger when you build things like transport
infrastructure. Nobody likes a freeway/motorway/railway built at the
bottom of their garden, but you just know that eventually that
transport link will make the land within easy reach of it more valuable
- the tax "after the fact" of the infrastructure development will pay
off the costs of that development. So, incidentally - you can create
debt free government money to pay for infrastructure in the sure
knowledge that it will be recouped out of the areas that benefit as
their land values rise and without it becoming inflationary.
It ensures the optimal use of land especially where land is scarce. If
the wealthy want to be ostentatious and continue to occupy their Fifth
Avenue/Mayfair mansion they will pay through the nose for it. In fact,
as per that "Geo-Libertarian" FAQ they would propose that the collected
land value tax would be all redistributed as National Dividend (small
government folks). Here many would suggest it is used to pay for
public works. Either way, it is a revenue stream that "pays for
itself" much moreso than punitive taxation on healthy economic
activity. It does not tax the improvement of the land - hence the
example of fitting four families onto your $32,000 taxable plot will
leave them paying $8,000 each.
Sorry that's so long - you can see why i was hesitant to get into it
during the week!
Jock
On 10 Sep 2005, at 10:27, Jim wrote:
> Hi Jack:
>
> I looked that the FAQ url, and I also browsed a Georgist website. I
> didn't have time to read them fully, but from what I gather the
> problem still remains, and Martin picked up on the problem by
> suggesting a dividend would have to be issued to pay the tax.
>
> I assume the tax is a property tax based on the assessed value of the
> land? If it is, then the tax is upon an asset, not income. Because
> something is valued in $ does not mean that the person who has the
> property has the $ to pay the tax. There is a difference between an
> asset valued at $100,000 and actually having the $100,000.
>
> I would also like to ask what purpose does the LVT serve?
>
> Sincerely,
>
> Jim
>> ----- Original Message -----
>> From: Jock Coats
>> To: socialcredit@elistas.com
>> Sent: Friday, September 09, 2005 12:54 PM
>> Subject: Re: [socialcredit] Land Value tax
>>
>> Sorry - I've seen people discussing this a little but held off
>> replying to this one in particular because of time (I always find
>> that if I get into a discussion about LVT it takes a while to get
>> people to understand it - but it's Friday night so what the hey!).
>>
>> I realise you didn't get the attachment, so I'm happy to assume you
>> know nothing other than the name about LVT. From what you quote of
>> Douglas he is not talking about Henry George's Land Value Tax, but a
>> variety of land based taxes that used to and often continue to apply
>> in the UK and which are all economically and property destructive as
>> he points out - LVT is not, in my opinion.
>>
>> And as one who thinks that he is an LVT and a Social Credit advocate
>> (though not up to the standard of people on this list in intimate
>> knowledge of A+B and so on), I see no conflict between the two.
>>
>> If it makes it easier to understand, the principle of Land Value Tax
>> could perhaps be better conveyed by the phrase "Community Collection
>> of Rent" and the mechanism, perhaps especially in the modern,
>> urbanised, developed world, as "Location Benefit Levy".
>>
>> In fact - let's not bother to try to duplicate what's already out
>> there on the web - the "Geo-Libertarian FAQ" I think explains most of
>> the points far better than I can - and then I can maybe help answer
>> questions...
>>
>> http://members.aol.com/_ht_a/tma68/geo-faq.htm
>>
>> I think that is better than most anything I could write. But if it
>> doesn't make sense anywhere, holler.
>>
>> Jock
>>
>>
>>
>> On 8 Sep 2005, at 17:34, Jim wrote:
>>
>>> Hi Dave:
>>>
>>> I'm not exactly sure what is the exact nature of a "land value tax",
>>> because I did not get the attachment either, but I'm pretty sure
>>> Douglas would have opposed it.
>>>
>>> From "The Land for the Chosen People Racket":
>>>
>>> "Now there is no room for discussion as to what has caused the
>>> disastrous state of British land and everyone connected with it.
>>> That cause is grinding and punitive taxation.
>>>
>>> And this taxation has for the most part been concocted either
>>> directly or indirectly by the London School of Economics—a good deal
>>> of it by Sir William Beveridge who we are to entrust with the
>>> building of our New World, “half way to Moscow,” as he puts it so
>>> engagingly. An understanding of the main principles of current
>>> taxation is indispensable to anyone who claims to hold views on the
>>> future of the soil. In the first place, it is necessary to
>>> recognise three classifications of the surface—agricultural,
>>> industrial, and residential.
>>>
>>> The question of minerals underground is closely interwoven with the
>>> surface classification, but may be left for subsequent
>>> consideration. It is a question which, if possible, is less
>>> understood by the average land agitator than that of the surface.
>>>
>>> Now, land taxes begin with a series of recurrent capital levies at
>>> each inheritance, thinly disguised under the names of Legacy Duty,
>>> Estate Duty, and so forth. It must be borne in mind that (in spite
>>> of nearly unworkable alternatives of recent date) these have to be
>>> paid in money, and land does not grow money. Generally, this money
>>> is borrowed on mortgage or otherwise. These “Duties” may range from
>>> 10 per cent. in the case of very small properties, to sixty or
>>> seventy per cent. in the case of very large ones.
>>>
>>> In effect, these taxes are confiscatory, consequently whatever is
>>> the state of the land at the present time, that state is the result
>>> of a change of effective “ownership.”
>>>
>>> Subsequently to the Capital levies paid by the legatee, but not by
>>> anyone purchasing the land, Income tax at the current rate (now 10/-
>>> in the £) is paid on the ownership of the land, not on the return it
>>> makes, but on an arbitrary assessment which goes up if the land is
>>> improved. This assessment is generally made by the local rating
>>> authority who levy their own distinct taxes, called Rates, on it ;
>>> and these go up if the land is improved. But if the owner also
>>> occupies “his own” property, he pays Schedule B as well as Schedule
>>> A and Rates, also at the current rate. (The foregoing statements
>>> are subject to certain modifications in respect of Scotland, and to
>>> the vagaries of Derating Acts.) In effect, the owner-occupier of
>>> his “own” property pays, at the present time, more in rates and
>>> taxes than he would have paid in rates, taxes and rent, sixty years
>>> ago, as a tenant.
>>>
>>> It is a sound legal, as well as common-sense axiom, that a man must
>>> be presumed to have intended the logical consequences of his
>>> actions. The logical consequences of the taxation just roughly
>>> summarised can be seen to be what they have in fact been. They have
>>> made the use of land for agriculture only precariously possible by
>>> treating as soil income what is in fact soil capital ; thus
>>> fostering overseas imports of easily grown food.
>>>
>>> They have made the “ownership” of land, as an administrative
>>> profession, impossible by imposing what is in fact an intolerable
>>> nationalised rent. And they have made the improvement of real
>>> property an expensive form of altruistic philanthropy (many
>>> landowners have accelerated their ruin by persistence in it) by
>>> penalising every improvement either to site or buildings by an
>>> increased assessment, so that whoever doesn't get the rent, the tax
>>> or rate-collector does."
>>>
>>> http://yamaguchy.netfirms.com/douglas/land2.html
>>>
>>> Further Douglas says:
>>>
>>> "So far as the produce of the land is concerned, that is available
>>> to anyone who has the money. Has anyone suggested that “the People”
>>> should have the produce of the money-making machine ?
>>>
>>> Conversely, do the agitators for common ownership yearn to pay the
>>> taxes now borne by land ? Ask most of the farmers who bought their
>>> farms during and immediately after the 1914-1918 war period how they
>>> like their bargain, from the business point of view. If the older
>>> conditions of estate management were so unfair to the tenant, how
>>> was it that farmers' sons had to wait years before they could get a
>>> vacant farm, and had to be well known to be thoroughly competent
>>> farmers, or they would never get one ; while nowadays there are
>>> hundreds of once-famous farms going begging, and every day good
>>> farmers are throwing in their farms in disgust at the ever rising
>>> tide of interference without responsibility ?"
>>>
>>> http://yamaguchy.netfirms.com/douglas/land2.html
>>>
>>>
>>>
>>> Take care,
>>>
>>> Jim
>>>
>>>
>>> ----- Original Message -----
>>> From: "Martin Hattersley" <hattersleyjm@interbaun.com>
>>> To: <socialcredit@elistas.com>
>>> Sent: Wednesday, September 07, 2005 8:44 PM
>>> Subject: Re: [socialcredit] Land Value tax
>>>
>>> > Didn't get your attachment, but the idea to me has merit.
>>> >
>>> > Martin Hattersley
>>> > 1970-10123-99 St.,
>>> > EDMONTON AB CANADA
>>> > e-mail: hattersleyjm@interbaun.com
>>> > ----- Original Message -----
>>> > From: "Wetzel Dave" <Davewetzel@tfl.gov.uk>
>>> > To: <socialcredit@elistas.com>
>>> > Sent: Wednesday, September 07, 2005 11:19 AM
>>> > Subject: [socialcredit] Land Value tax
>>> >
>>> >
>>> > >
>>> > >
>>> > > Hi
>>> > > Have you considered Land Value Tax together with monetary
>>> reform, as a
>>> > > contributor to a half decent society?
>>> > >
>>> > > Article from the FT attached, which may interest you.
>>> > >
>>> > > Dave
>>> > > Dave Wetzel; Vice-Chair; Transport for London.
>>> > >
>>> > >
>>> > >
>>> > >
>>> > >
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>>>
>> --
>> Jock Coats
>> At:
>> Corporate Information Systems, Computer Services,
>> AG17, Gipsy Lane Campus, Oxford Brookes University,
>> OX3 0BP
>> Work: +44 1865 483353
>> and at:
>> Wardens' Lodgings, Flat 1e, Block J Morrell Hall,
>> John Garne Way, OXFORD, OX3 0FF.
>> Home: +44 1865 485019 Mobile: +44 7769 695767
> ---------------------------------------------------------------------
> Some introductory materials to the discussion topic of this list are at
> http://www.geocities.com/socredus/compendium
> You're subscribed to this list with the email
> jock.coats@oxfordshirecommunitylandtrusts.org.uk
> For more information, visit http://www.eListas.com/list/socialcredit
>
>
>
--
Jock Coats
At:
Corporate Information Systems, Computer Services,
AG17, Gipsy Lane Campus, Oxford Brookes University,
OX3 0BP
Work: +44 1865 483353
and at:
Wardens' Lodgings, Flat 1e, Block J Morrell Hall,
John Garne Way, OXFORD, OX3 0FF.
Home: +44 1865 485019 Mobile: +44 7769 695767
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