A great deal of taxpayers money is currently spent on regional assistance schemes aimed at depressed areas, in order to encourage economic activity and a revival in fortunes for the populace in those areas. A National land value tax would automatically address this problem.
It would provide a re-distribution of wealth through the general easing of taxes on less prosperous areas, with low land values, the burden being transferred to the more prosperous areas. It would also eliminate the demeaning dependence certain areas have on government hand outs, which naturally keep them within the government’s power. Contrary to their claims about devolving power, all governments are inclined to retain the real power to themselves by maintaining control of the purse strings.
Devolution and Local Taxes
Few governments advocate the most important factor in devolution to the regions; the power to raise revenue, (1). LVT, if applied at the local level, would be an ideal means for giving local authorities real power. Raising revenue for local government has become an intractable problem over the years. The various methods tried, Local Rates, the Community Charge and Council Tax have all proved unsatisfactory. A local Income Tax has also been proposed as a solution. However there appears to be a general consensus that any local tax should relate in some way to property and be graduated according to the rentable value of the property. Previous systems have attempted this in different ways, but none has ever directly taken into account the most important factor; the value of the site upon which the property stands.
The value of a property has two parts; the value of the building, the bricks and mortar, and the value of the site. A tax on the site value only would resolve many problems. It would remove the current penalty against new building or making improvements. It would encourage the productive use of vacant and ‘brownfield’ sites and it would provide a natural system of gradation. It would also dampen down the escalation of property prices and speculation based on constantly increasing location values.
(1) This is now being re-considered in Wales: http://www.bbc.co.uk/news/uk-wales-politics-24763988
Tax evasion and avoidance
The government relies heavily on income tax to raise revenue, but one of its great weaknesses is that it is easily subject to evasion by unscrupulous operators. This costs the exchequer countless billions in lost revenue, which of course has to be made good by the honest taxpayer. There is also a thriving legal tax avoidance industry in which highly paid lawyers and accountants devote their time advising us how to be ‘tax efficient’; in other words how to avoid paying our taxes. All of this depends on the obscurity and ambiguity of the existing tax systems. LVT is a system that is clear and obvious to all and would eliminate this unproductive activity, which represents an enormous waste of a human resource that could otherwise be employed to some useful purpose.
Tax in whatever form, has never been popular. It is usually seen as an evil; an unwelcome burden to be borne with resentment and avoided wherever possible. But in an enlightened society the payment of tax would be seen not only as a good, but also as a privilege; in being able to contribute to the well-being of society. It isn’t tax that is the problem; it is the type of tax and the means by which it is applied.
Economists generally agree that a land value tax would be efficient in that there would be no ‘deadweight loss’ A deadweight loss is where the imposition of a tax has a deleterious effect on the taxable source itself or the effectiveness of collection. Most taxes suffer from this defect; income tax is a discouragement to work, VAT is a discouragement to trade, and so on. LVT would have no negative effect for land supply is fixed and cannot be evaded.