Socially Just Taxation and Its Effects (17 listed)

Socially Just Taxation and Its Effects (17 listed)

Our present complicated system
for taxation is unfair and has many faults. The biggest problem is to arrange
it on a socially just basis. Many companies employ their workers in various
ways and pay them diversely. Since these companies are registered in different countries
for a number of categories, the determination the criterion for a just tax system
becomes impossible, particularly if based on a fair measure of human work-activity.
So why try when there is a better means available, which is really a true and
socially just method?

Adam Smith (“Wealth of Nations”, 1776) says that land is one of the 3 factors
of production (the other 2 being labor and durable capital goods). The
usefulness of land is in the price that tenants pay as rent, for access rights to
the particular site in question. Land is often considered as being a form of
capital, since it is traded similarly to other durable capital goods items. However
it is not actually man-made, so rightly it does not fall within this category.
The land was originally a gift of nature (if not of God) for which all people
should be free to share in its use. But its site-value greatly depends on
location and is related to the community density in that region, as well as the
natural resources such as rivers, minerals, animals or plants of specific use
or beauty, when or after it is possible to reach them. Consequently, most of
the land value is created by man within his society and therefore its advantage
should logically and ethically be returned to the community for its general use,
as explained by Martin Adams (in “LAND”, 2015).

However, due to our existing laws, land is owned and formally registered and its
value is traded, even though it can't be moved to another place, like other
kinds of capital goods. This right of ownership gives the landlord a big
advantage over the rest of the community because he determines how it may be
used, or if it is to be held out of use, until the city grows and the site
becomes more valuable. Thus speculation in land values is encouraged by the law,
in treating a site of land as personal or private property—as if it were an
item of capital goods, although it is not (see Mason Gaffney and Fred Harrison:
“The Corruption of Economics”, 2005).

Regarding taxation and local community spending, the municipal taxes we pay are
partly used for improving the infrastructure. This means that the land becomes
more useful and valuable without the landlord doing anything—he/she will always
benefit from our present tax regime. This also applies when the status of unused
land is upgraded and it becomes fit for community development. Then when this
news is leaked, after landlords and banks corruptly pay for this information,
speculation in land values is rife. There are many advantages if the land
values were taxed instead of the many different kinds of production-based
activities such as earnings, purchases, capital gains, home and foreign company
investments, etc., (with all their regulations, complications and loop-holes).
The only people due to lose from this are those who exploit the growing values
of the land over the past years, when “mere” land ownership confers a financial
benefit, without the owner doing a scrap of work. Consequently, for a truly
socially just kind of taxation to apply there can only be one
method--Land-Value Taxation.

Consider how land becomes
valuable. New settlers in a region begin to specialize and this improves their
efficiency in producing specific goods. The central land is the most valuable
due to easy availability and least transport needed. This distribution in land
values is created by the community, after an initial difficult start and not by
the natural resources. As the village and city expand, speculators in land
values will deliberately hold potentially useful sites out of use, until
planning and development have permitted their site-values to grow. Meanwhile there
is fierce competition for access to the most suitable sites for housing,
agriculture and manufacturing industries. The limited availability of useful
land means that the high rents paid being by tenants make their residences more
costly and the provision of goods and services more expensive. It also creates unemployment
when entrepreneurs find the rents too high for them to operate and employ
workers. This speculation causes wages to be lowered by the monopolists, who
control the big producing organizations and whose land was previously obtained
when it was cheap. Consequently this basic structure of our current macroeconomics
system, works to limit opportunity and to create poverty, see above reference.

The most basic cause of our continuing poverty is the lack of properly paid work
and the reason for this is the lack of opportunity of access rights to the land
on which the work must be done. The useful land is monopolized by a landlord
who either holds it out of use (for speculation in its rising value), or
charges the tenant heavily in rent for its right to access. In the case when
the landlord is also the producer, he/she has a monopolistic control of the land
and of the produce. The product becomes more costly--this monopolist can effectively
charge more for it, than what an entrepreneur normally would, were he/she able
to compete on an equal basis, because of the excessive rent demanded by the
landlord.

A wise and sensible government would recognize that this problem derives from
lack of opportunity to work and earn. It can be solved by the use of a tax
system which encourages the proper use of land and which stops penalizing
everything and everybody else. Such a tax system was proposed almost 140 years
ago by Henry George, a (North) American economist, but somehow most macro-economists
seem never to have heard of him, in common with a whole lot of other experts.
(I would guess that they don't want to know, which is worse!) In “Progress and
Poverty” 1879, Henry George proposed a single tax on land values without other
kinds of tax on produce, services, capital gains, etc. This regime of land
value tax (LVT) has 17 features which benefit almost everyone in the economy,
except for landlords and banks, who/which do nothing productive and wrongly find
that land dominance has its own reward.

 17 Aspects of LVT Affecting Government, Land Owners, Communities and
Ethics

Four Aspects for Government:

1. LVT, adds to the national income as do all other taxation
systems, but it can and should replace them.

2. The cost of collecting the LVT is less than for all of the production-related
taxes—then tax avoidance   

     becomes
impossible because the sites being taxed are visible to all.

3. Consumers pay less for their purchases due to lower
production costs (see below). This creates

     greater
satisfaction with the government’s management of national affairs.

4. The national economy stabilizes—it no longer experiences
the 18 year business boom/bust cycle, due

    to periodic speculation
in land values (see below).

 

Six Aspects Affecting Land Owners:

5. LVT is progressive--owners of the most potentially
productive sites pay the most tax.

6. The land owner pays his LVT regardless of how his site is used. When fully
developed, a large   

    proportion of the
ground-rent from tenants becomes the LVT, with the result that land has less
sales-

    value but a
significant "rental"-value (even when it is not being used).

 7. LVT stops the speculation
in land prices and any withholding of land from proper use is not

    worthwhile.

8. The introduction of LVT initially reduces the sales price of sites, (even
though their rental value can

    still grow over long-term
use). As more sites become available, the competition for them becomes
less

    fierce so
entrepreneurs are more active.

9. With LVT, land owners are unable to pass the tax on to their tenants as rent
hikes, due to the reduced

    competition for
access to the additional sites that come into use.

10. With LVT, land prices will initially drop. Speculators
in land values will want to foreclose on their

      mortgages and
withdraw their money for reinvestment. Therefore LVT should be introduced

      gradually, to
allow these speculators sufficient time to transfer their money to
company-shares etc.,

      and
simultaneously to meet the increased demand for produce (see below). 

 Three Aspects Regarding Communities:

11. With LVT, there is an incentive to use land for
production or residence, rather than it being unused.

12. With LVT, greater working opportunities exist due to cheaper land and a
greater number of available

      sites. Consumer
goods become cheaper too, because entrepreneurs have less difficulty in
starting-up

      their businesses
and because they pay less ground-rent--demand grows, unemployment
decreases.

13. Investment money is withdrawn from land and placed in durable capital
goods. This means more

      advances in
technology and cheaper goods too.

 

Four Aspects About Ethics:

14. The collection of taxes from productive effort and
commerce is socially unjust. LVT replaces this

      extortion by
gathering the surplus rental income, which comes without any exertion from the
land

      owner or by the banks--LVT is a natural
system of national income-gathering.

 15. Bribery and
corruption on information about land cease.  Before, this was due to the leaking of

       news of
municipal plans for housing and industrial development, causing shock-waves in
local land

       prices (and
municipal workers' and lawyers’ bank balances). 

16. The improved and proper use of the more central land
reduces the environmental damage due to a)

      unused sites
being dumping-grounds, and b) the smaller amount of fossil-fuel use, when
traveling

      between home and
workplace.

17. Because the LVT eliminates the advantage that landlords
currently hold over our society, LVT

      provides a
greater equality of opportunity to earn a living. Entrepreneurs can operate in
a natural

      way-- to provide
more jobs. Then earnings will correspond to the value that the labor puts into
the

      product or
service. Consequently, after LVT has been properly introduced it will eliminate
poverty

      and improve business
ethics.