TP20. Land Value Taxation and the Home-owner
How a different basis of taxation would affect the ordinary householder,
Very briefly, Land Value Taxation (LVT) means that the value of all privately-owner land in the country would first be assessed, and then a tax would be levied, based on that valuation. By “land” we mean the site alone; we do not include any buildings, crops or other “improvements” which have been put on the “land” by human activity. As the revenue from LVT increased, other taxes, such as Income Tax and VAT, would be reduced.
How does this affect the homeowner? What we call a house, or a flat, consists of two entirely different things. There is the building, which was made by somebody from whom the homeowner acquired it, or by one of that person’s predecessors. There is also the site – the “land” – on which the building rests, and which often includes a garden. The “land” and the building both have a value. But while the value of the building derives from the effort of the owner or his predecessors, the value of the “land” does not. It may derive from some feature of nature – a good view, for example. Or it may derive from activities of the surrounding community. There are, for example, good communications to local schools, parks and shops, or to the place of the owner’s employment,
On the face of it, the homeowner will get some direct advantages from LVT – his other taxes will be reduced – while he also incurs the disadvantage of being required to pay the new tax, which is counterbalanced by reductions in other kinds of taxation. How will the advantages and disadvantages work out? Here are a few questions often asked.
1. Will homeowners be robbed of the land beneath their houses with LVT?
No. The homeowner will still have the same rights as before over both the site and the building on it.
2. Will poor householders be forced out of their homes by LVT?
Far from it. Poor people usually live in areas with few amenities, and often in run-down areas. In those places land values are low, and LVT will be low – while, of course, they will save by a reduction in other taxes.
3. Will people living on moderate incomes in places where the land has risen in value since they acquired their houses, find themselves unable to afford the LVT?
There is no simple “yes” or “no” answer. Changes in land values occur whatever the tax system, and from this some people will gain and others lose. Under LVT, people will weigh up advantages like a convenient transport system, or good schools and a nearby park against high LVT, in exactly the same way as at present they weigh up such advantages against high rents or house sale prices and high Council Tax when deciding where to live. In current economic conditions, only landowners selling or letting at higher prices benefit from the raised land values, enjoying wealth which they have done nothing to create. The difference that LVT will make is that the whole community will benefit from the increased amount which will be collected when land values rise.
4. Will people receive adequate warning of the arrival of LVT?
Yes. Introduction of LVT will require a change in the law. Before this can happen, the principle of LVT will have to be explained and discussed, until a lot of people are convinced that it is right. This will take time. Even after the legislation has gone through Parliament, it will take time to value all the nation’s land. Then LVT will be gradually introduced, and increased in stages as people recognise the benefits that it is bringing them. Meanwhile, of course, other taxes will be reduced. The whole process will take a long time, which will give everybody plenty of opportunity to make necessary adjustments in their lives and finances.
5. How will pensioners’ housing be affected?
Today, many people seek to obtain the means to live comfortably in old age by selling their houses at a profit, and moving into cheaper places on retirement. But the profit has come, not from a rise in value of the building (which deteriorates over time, in real terms), but from a rise in the value of the underlying land. Land prices, however, are not a reliable investment. In times of recession, house prices slump. Long before LVT is fully implemented, people will realize that they cannot expect future rises in house prices to fund their support in old age, and they will have switched to other ways of prearing for retirement. As LVT takes effect, salaries and pensions will be given increased purchasing power by increased production and the lowering of taxes on goods and services. People will therefore find themselves in a better position to save for old age.
6. What will be done for “hard cases”?
With LVT, as with any kind of change in taxation, it is possible that some people will be unintentionally disadvantaged, particularly in the transition period. Parliament must recognise this by setting up temporary systems of exemption, relief or deferment, to deal with hard cases. But it should be recognised that the large majority of people will benefit greatly from LVT.
7. What will happen to Council Tax?
Council Tax is a prime example of a tax which nobody ever thought was “right”, but with which we have been stuck for years because nobody has had the courage to change it. Council Tax came into existence because the previous “Community Charge” – generally known as the Poll Tax – not only proved itself a bad and unfair tax, but was in many places uncollectable. Something had to be done in a hurry to replace it, and Council Tax was the result of an uneasy compromise. The original idea was that revaluation for Council Tax would be carried out at fairly frequent intervals, but we are still stuck with an obsolete valuation made nearly twenty years ago. LVT can be applied for local government purposes (where it is called Site Value Rating, or SVR), and would be a much better local tax.
8. Why is Land Value Taxation necessary?
This is discussed more fully in several other Topic Papers in this series. To sum up the main points, LVT is needed to ensure best use of natural resourcves, in the interests of everybody. People currently out of work need the employment opportunities which will naturally arise when productive land is brought into use. Run-down areas need the tax advantage which LVT will give them, in order to stimulate economic regeneration. More prosperous areas, which suffer from increasing population pressure on limited space, will be relieved by regeneration elsewhere. The environment will benefit when “brownfield” land which is at present held out of use for speculative reasons is brought into use, thus reducing the pressure for encroaching on “green” areas. Would-be homebuyers, including the “key” workers who are at present priced out of the housing market, will have a better chance of acquiring good homes of their own.
In other Topic Papers of this series, we explain what is meant by “Land Value Taxation” (LVT), and various advantages which would flow from its introduction. In the present Topic Paper we consider how LVT would affect homeowners.
FOR FURTHER INFORMATION PLEASE CONTACT:
Land Value Taxation Campaign, at http://www.landvaluetax.org
Articles
Land Value Tax Links
The Tax Burden
Article List
- Welcome
- SA 88. Is there another way? by Tommas Graves
- SA 87. Time for a look at Rent by Tommas Graves
- SA 86. It’s rather Odd………….. By Tommas Graves
- SA85. Born to become a Georgist by Ole Lefmann
- SA84. Happy Nation by Lasse Anderson
- SA83. Ulm is buying up land, sent by Dirk Lohr
- SA82. Radical Tax Reform by Duncan Pickard
- SA 81. All taxes come out of Rents, by Rumplestatskin.
- SA 80. The Housing Crisis and the Common Good, by Joseph Milne
- SA 79. The “housing crisis” is no such thing, by Mark Wadsworth
- SA78. The Inquisitive Boy by “Spokeshave”
- SA 75. A Note on Swedish Taxes, by Tony Vickers MScIS MRICS
- SA 74. Homes Vic by Emily Sims
- SA73 Public Revenue Without Taxation by Peter Bowman
- SA71. Two presentations by Ed Dodson
- Short Sighted Benevolence
- SA 72. CAN YOU SEE THE CAT?
- SA70. Dissertation on Land Rental by Marion Ray
- Verses on the theme
- SA69. Argentina by Fernando Scornic Gerstein
- SA68. The Right to Work, by Leslie Blake
- SA66. The Most Wonderful Manuscript by Ivy Akeroyd 1932
- SA65. Housing Crisis? What Housing Crisis? by Mark Wadsworth
- SA64. Making Use of History by Roy Douglas
- SA63. The Fairhope Single Tax Colony – from their website
- TP35. What to do about “The just about managing” by Tommas Graves
- SA62. A Huge Extra Resource, by Ed Dodson
- SA61. Foundations of Earth Sharing Why It Matters: By Lawrence Bosek
- SA60. How to Restore Economic Growth, by Fred Foldvary, Ph.D.
- Two cartoons by Andrew MacLaren MP
- SA59. The Meaning of Work, by Joseph Milne
- SA 58. THE FUNCTION OF ECONOMICS, by Leon Maclaren
- SA 57. CONFUSIONS CONCERNING MONEY AND LAND by Shirley-Anne Hardy
- SA 56. AN INTRODUCTION TO CRAZY TAXATION – by Tommas Graves
- SA 55. LAND REFORM IN TAIWAN by Chen Cheng (preface) 1961
- SA54. Saving the Commons in an age of Plunder – by Bill Batt
- SA53.- Eurofail – VAT, by Henry Law
- SA52. Low Hanging Fruit – by Henry Law
- SA51. Location Theory and the European Union, – by Peter Holland
- SA50. Finland’s Basic Income – why it matters by Fred Foldvary, Ph.D.
- SA 29. A New Model of the Economy, by Brian Hodgkinson, as reviewed by Martin Adams of Progress.org
- Economics Explained (In 1 Simple Cartoon)
- SA 48. LANDED (Freeman’s Wood) by John Angus-StoreyG2
- SA 47. Justice and the Common Good by Joseph Milne
- SA 49.Prosper Australia – Vacancies Report
- SA39. A lesson from Alaska: further thoughts? By Alanna Hartzog
- SA23. Taxation: a brief history by Roy Douglas
- SA45. Of course, it wouldn’t solve all problems………by Tommas Graves
- SA43. TIME TO CALL THE LANDOWNERS’ BLUFF by Duncan Pickard
- SA44. Answering questions to UN Habitat 3 Financing Urban Development by Alanna Hartzog
- SA15. Why we don’t have a Housing Shortage, by Ben Weenen
- SA27. Money and Natural Law, By Tommas Graves
- SA42. NO DEBT, HIGH GROWTH, LOW TAX By Andrew Purves
- SA40. High Land Prices and Rural Unemployment, by Duncan Pickard
- SA28. Economics is a Natural Science by Duncan Pickard
- SA34. Economic Answers to Ecological Problems by Seymour Rauch
- SA22. Public Revenue without Taxation by David Triggs
- SA41. WHAT FAMOUS PEOPLE SAID ABOUT LAND contributed by Frank de Jong
- SA36. TAX THE RICH? Pikety and all that……..by Tommas Graves
- SA46. LAND VALUE TAX: A VIABLE ALTERNATIVE By Henry Law
- SA35. HOW CAN THE ECONOMY WORK FOR THE BENEFIT OF ALL? By Peter Bowman, lecture given at the School of Economic Science.
- SA38. WHO CARES ABOUT THE FAMILY by Ann Fennell.
- SA30. The Turning Tide: The Beginning of Monetary Trade in Anglo-Saxon England by Raymond Makewell
- SA31. FAULTS IN THE UK TAX SYSTEM
- SA33. HISTORY OF PUBLIC REVENUE WITHOUT TAXATION by John de Val
- SA32. Denmark By Ole Lefman
- SA25. Anglo-Saxon Land Tenure by Raymond Makewell
- SA21. China – Four Thousand Years of Taxing the Land by Peter Bowman
- SA26. The Economic Philosophy of Georgism, by Emma Crosby