What was that all about?
Yes the film is fast, but so is life.
We all intrinsically understand that the earth is valuable.
Is it going to get more valuable?
Who should get a share of this naturally increasing value, this economic rent?
At present the 1% have this magic money all stitched up. We are adamant there is enough economic rent, primarily in land, to fund government. This can keep the right wing happy by reducing the inordinate number of taxes (we have 125 here in Australia with only 10 of them raising 90% of the revenue) and the greens happy by reducing sprawl, encouraging resource conservation and funding public transport.
Terminology. Please explain.
Land Tax (LT) and Land Value Tax (LVT) are interchangeable. Owning a piece of the earth is seen as a privilege. One should compensate the rest of the community for the right to put a fence around a location. The same principle should extend to those that pollute the air, the water – True Cost economics.
Economic rent relates to the magic money that owners of a monopoly can charge. It relates to any extra price that one can charge above what is required to bring that resource onto the market. ie land has no cost of production as it was a gift to all living beings. So any price charged for the land (not the buildings) is an economic rent and can be taxed without affecting the supply.
Land cannot run away to another jurisdiction (tax me if you can) nor move.
A 6% charge on land will hurt pensioners.
Remember this is on land value. At present we are suffering from high land prices. Land prices are what speculators can extort from the market, values are what can actually be earned from a location. Land Taxes will be charged on approximately a 30% lower land price than at present.
Land Tax cannot be hidden in a tax haven. Thus more people will be paying tax who can afford it.
Pensioners will have their pension increased by 50%.
Everyone, including pensioners, will be better off due to reduced or abolished taxes on labour and exchange. 30% of the price of goods purchased are made up with layer after layer of taxation. It is well accepted amongst economists that a Land Tax is the most efficient of all taxes. Replacing those 125 taxes and capturing some 70% of government revenue via Land Taxes will allow us to remove those taxes that cascade into the pricing system.
The worst off pensioners who do not own a home but board or rent will not pay LVT at all.
Those in large family homes should downsize and the proceeds invested to provide more income to more than offset transition effects.
Australian councils seem to have a scheme where some ratepayers in dire circumstances have their council rates party or fully paid by local charitable organizations. Failing this, the rates are paid out of the proceeds of the house sale when the occupier passes on. This is known as a reverse mortgage.
What about Capital v Labor?
- This is an old paradigm analysis. Today’s entrepreneurialism is all about enforcing monopolies.
- Remember the pie chart in the film – land, labour capital. All output comes from a combination of those three factors of production. Our wealth pie must be split between land (rent), labour (wages) and capital (interest). Neither capital nor labout can exist without land, something which our policy makers should recognise.
- Karl Marx said “Even the capitalist is subservient to the landlord”
- If the barriers to entry weren’t so high for small business re high land prices and high compliance costs (tax paperwork), more small business would start up → higher demand for labour → higher wages. How can they afford it? With lower rents, there is more room for higher wages.
- Bryan Kavanagh’s Classical Components of GDP graph sums up the crowding out of labour and capital by the poor taxation of economics rents. This has forced more and more ineffective taxes to be placed on productive business whilst the speculators get away with the free lunch, the privatised land rent.
How will land prices fall with a higher LT?
- There are 46,000 speculative vacancies here in Melbourne and up to 1 million in the UK. LVT will bring these onto the market, pushing prices downwards, ensuring the tax is not passed on.
- Additionally, a huge percentage of inner urban properties are underdeveloped. Melbourne City Council’s Rob Adams outlined in a State Govt Transport Plan that 500,000 additional homes could be built by giving automatic zoning to sites along inner city tram and railway lines. This added supply would also keep a lid on prices.
- This system also encourages people to build upwards, not outwards, an urgent issue now that we have more people living in cities for the first time. This trend will be reversed under this system, where land values will be lower in rural areas, thus attracting people.
- Remember price V value – price is what the speculator can extort from the market, value is what can actually be earnt from a location.
Land Taxes will simply be passed onto the tenant
- Are landlords already charging the maximum they can for a location? Yes in most cases. Thus the market cannot bear any LVT being passed on. Huh?!
- The hidden supply of speculative vacancies will ensure that housing returns to a human right, not a speculative imperative. As Land Taxes are based over time periods, not on transactions, the longer a property is held idle, the higher is the tax burden. Some rent must be earned to cover the return on capital (as capital gains are no longer so lucrative as Land Tax returns them rightfully back to the people). The Land Tax is paid out of this rent. The rent cannot be increased, or else the tenant will have that light-bulb moment and realise that they can move to a cheaper location nearby that may have been hidden/ rarely used in the past..
- The power shift between buyers and sellers becomes more balanced.
Why would anyone want to own land under this system?
Security of tenure is paramount. You have all the private property rights you receive under our current ‘fee simple’ system (of one off payments) if you pay your land rent to the government. Legally, this system is known as ‘fee annual’.
The returns you gain on your building, your improvements, will be untaxed.
In effect we are ensuring that we replace 70% of our mortgage payments (ie the bread and butter of banking profits) with a lower overall cost structure of lower mortgage payments, lower land prices and lower costs of goods. No income tax, no tax dodging and best of all – equality of opportunity for all once we properly fund health and education again.
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