12 May 2010

The Church of St. George

A week before the election - and how long ago that seems now - I was happy to accept an invitation to make a presentation to the IU Conference on land issues. The International Union for Land Value Taxation is an interesting organisation with a long pedigree that campaigns under the slogan 'Why is so much wealth in the hands of so few'. Its primary motivation at present is to propagate the policy of land value taxation.

In spite of its obvious appeals in terms of justice and practicality - after all, land cannot be hidden or sent overseas as a means of evading tax, as most other assets can - the taxation of land has not received much attention in recent years. This is partly, I think, because those who argue for it often come from the opposite ends of the left-right spectrum.

On the left end we have people who, following Gerard Winstanley and the Diggers, argue that land is a common wealth and that value extracted from it in tax should be shared between all the citizens of that commonwealth, or nation. On the right end we have those who argue that the absence of a cost for land stifles its efficient exploitation, leading to over-strict planning laws and the like. If people had to pay to own land, they would be sure to get the maximum financial return from it.

Henry George, the radical journalist of some 150 years ago who created a global grassroots campaign for land taxation, seems to have had sympathies with both of these arguments, but that was before the planetary limit was an observable concern. Since the recognition of the limits to growth we would need to work a land tax in conjunction with the planning system to prevent over-exploitation.

I was not received with universal approval at the conference, largely because I had made a speedy attempt to calculate how much a land tax might actually yield in the UK today, and what proportion of the overall tax tax this appeared to be. My assumptions were clearly questionable, but I felt it pointless to discuss theory without having some handle of what the fiscal implications for the UK might be. Although I presented my figures with a lavish quantity of caveats, they were attacked (subsequently) for being treacherous.

However, explanations offered to me as to why I was wrong were theoretical. George argued that a land value tax could be a 'single tax' since all other sources of taxation would ultimately have to be derived from land as the source of all wealth. As a green economist this argument appeals, but it cannot be theoretically upheld today for a couple of reasons.

First, the value that is generated by companies today is not linked to any particular parcel of land and does not derive from it. Most is created from thin air by financial institutions. Second, our consumer lifestyle relies on renting - at extremely cheap prices - productive land in many other countries around the world, to produce our food and the raw products for our clothes and consumer goods. If we truly lived from the value of our own territory we could never sustain the levels of living we now consider our right.

While this undermines the theoretical argument for land value taxation, it also suggests that land value tax might be able to play a crucial role in recreating the link between the value that land can produce and the financially based size of a national economy. It is the breaking of this link that is driving environmental destruction. Limiting the money system and introducing a tax on land values could offer policies to restore it.

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