Taxation according to means is an essential characteristic of any fair tax system. Where this happens the tax is described as ‘progressive’. With LVT the tax burden is imposed according to relative prosperity as measured by land values. The word relative is important here for the practicability of LVT depends on land value differentials. The theory is that these differentials distinguish between areas of high and low prosperity, which are then taxed accordingly. If all land had the same uniform value there would be no basis for a land-value tax. In such a situation a land-value tax would be little better than a poll tax, where the measure is on the number of acres rather than the number of heads.
There is always an ongoing discussion amongst politicians and their advisors about where and how taxes should be imposed. The possibilities seem limitless: incomes, sales, transactions, capital gains, property, road use and so on. Rarely is there much agreement; the left say ’tax the rich’, the right say tax anything except the rich, who they claim are the ‘wealth creators’. Nevertheless, whatever the type of tax, there are, I suggest, two basic principles that apply to all taxes:
- That every able-bodied, able-minded adult who benefits from belonging to a society should make a contribution towards its upkeep
- Such contribution should be in accordance with the ability to pay
Most people would agree with these principles as being fair and reasonable. The first is probably beyond dispute–– one could reasonably argue that simply being a member of a community is a benefit in itself. It is with the second that disagreement usually arises, basically over the interpretation of the expression ‘ability to pay’. Most would agree with the old Marxist dictum ‘From each according to his abilities, to each according to his needs’, but much disagreement arises with the definitions of ‘abilities’ and ‘needs’. However no one has expressed it better, and it remains a guiding principle for all systems of fair taxation.
Taxation of any kind has always involved identification and measurement: identifying what might be taxed and ascertaining to what degree the tax might be imposed, taking into account the means of the payer; that is his ability to pay. This latter consideration has given rise to the principle of progressive taxation, where those most able to bear a tax should pay more in proportion to their wealth or apparent prosperity. Land values provide a measurement of such prosperity whereby the occupiers or owners of high-value sites are generally considered more prosperous, and therefore better able to bear a tax, than those on low-value sites. This may be seen as a blunt instrument of measurement, but it is nevertheless generally true.