An Easy Way to Save The World
Overview
We pay 40% tax
When you buy something, every stage in manufacture adds a slice of tax,
and all those taxes are passed on to the final price. Tax
is usually around 40 percent of everything we buy (even in the USA).
Taxing goods raises prices by 67%
In order to pay 40% tax, a
product that costs $100 in total (including all stages of manufacture)
must be sold for $167. There may be a big market for products that sell
for $101-$166 but they can never be made. (On average - see objections)
What if we taxed land instead?
What if you said, "this year,
I'll pay the same tax as last year, but call it land tax instead." Once you have made all your $167
products and
paid the tax you could then make extra products and sell them for $101
each.
The market simplifies the rate
If
your land tax is high you can buy lower tax land and spread your tax
across it. So land tax adjusts until it is based on land price, not what the person previously paid. Land owners will gain more than they lose.
Simpler tax: new democracy
A single land tax makes your relationship with government very
simple. So you can make deals to get the government you want. E.g.
"we will use less X if you lower our tax" or "we will pay more if you
let us do Y." As more groups make deals, their collective power increases.
Benefits
More jobs, lower prices
More products sold at lower
prices means more jobs.
More efficient use of land
If land is taxed, idle or underused land will be put to better use.
Cheaper government
More jobs means fewer welfare payments. And land is easy
to measure, so we have no tax avoidance and far less paperwork.
More inward investment
The first nation to adopt land tax will attract a massive wave of foreign businesses wanting tax free work.
Fewer recessions
By adding a cost to landownership, land will only be bought to be used,
not for idle speculation. No housing bubbles means fewer recessions.
Choose your ideal government
When groups negotiate particular rules, some will attract more people,
making them able to negotiate even better deals. In effect, this gives
everyone the chance to find or start their own ideal mini-government.
No taxes at all
Tax is "a sum of money demanded by a government."
Land tax allows you to set up your own government, so they can no
longer make demands. They must negotiate like any other business that
wants your trade. Since they can no longer demand, it is no
longer a tax.
Scientifically rational politics
The willingness to pay land tax
becomes a direct measure of the attractiveness of each
mini-government. By comparing many such governments,
statisticians can deduce the objective value of any action or policy.
No crime
If
people choose their ideal government then they trust it. They support
their police and welcome some surveillance, making crime uneconomic.
More efficient business
The same trust that removes
crime will also allow for an objective reputation database. This ensures that all business decisions are optimal.
A more beautiful world
Anything that makes a mini-government more attractive will result in
profit (more people willing to pay higher land tax), so beauty
increases.
Longer term thinking
At present, politicians can
make short term decisions knowing that future generations will always
pay the bills. Investors know this, so continue to lend. With land tax,
future investors could simply set up a different government. This
forces politicians to value the future as much as the present.
Utopia
All of these effects (economic
growth, more desirable government, scientific data) improve each year,
so land tax states soon out pace other states. This encourages other
nations to join the system, spreading the benefits around the globe.
No global poverty
The poorest people make a dollar a day. But in a well designed economy,
even an unskilled worker can make 20 dollars a day. When one nation
allows its people to create their own government, somebody will work
out how to create a self sufficient state in a desert, and invite all
the world's poor, and solve poverty overnight.
Less inequality
More jobs means employers have to treat workers well or lose them. Ending
global poverty reduces pressure from cheap immigrant labor.
Better government means fewer opportunities to skim unearned
wealth from the top. The result is less inequality.
Remove the causes of war
Land tax removes the major causes of war:
-
A desire for a different government: With land tax you can choose your own anyway.
-
Desire for profit: Trade is already the biggest disincentive to war. By making the economy more efficient, land tax greatly increases the benefits of peaceful trade.
Buy off tyrants
Land
tax can be sold to tyrants as a way to make a
nation wealthy. The tyrant can safely remain as a symbolic head of
state, like the British monarch, with more money, more support
and more security than before. Meanwhile the people gain wealth and
freedom.
Solve environmental problems
Land tax solves global poverty, ensures long term thinking, and creates
a more beautiful world. Between these three, all environmental problems
are solved.
The bottom line: government without theft
The beauty of land tax is
its moral elegance. Society creates land value through its laws, roads,
culture, etc. These values can be a million dollars for a few square
feet. That wealth belongs to society. Similarly, wealth created by an
individual belongs to the individual. Tax on work is theft. Tax on land
is not theft.
Objections
The math:
Land rent is not enough to cover tax?
Progressive taxes already solves the 67% problem?
Some things are naturally profitable, so are safe to tax?
Government needs the tax from businesses (who use very little land)?
Land tax is economically illiterate?
It's just another way to redistribute wealth?
Land owners' concerns:
Land owners will litigate over land valuation?
Land will lose value?
Land will be less profitable to owners?
Rental income will go to land tax and not the land owner?
Other:
Land tax did not work in case X?
A voluntary switch is too complicated?
People dislike change?
Politicians will resist change?
Land rent is not enough to cover tax?
We already pay this amount in
land tax: tax is a payment to live in a country, so all tax is rent.
The government is a landlord who may decide to charge rich people more
and poor people less, but the product is the same: we pay for the right
to freely occupy the country.
Government needs the tax from businesses (who use very little land)
Business
tax does not go down, they are simply free to do extra tax free work
(Or sell their land to foreign businesses who want a low tax
environment.) see how land can be valued and how it adjusts to market rates.
Land owners will litigate over land valuation?
There
is no need for the
government to value the land. In year one, the land can be valued
objectively at precisely what the owner paid in tax the previous
year. The owner is then free to buy other land, and average his land
tax over it all. This brings land tax to a rate decided by the market
without any government valuation or any loss of total tax revenue.
Land will lose value?
In the long term, land will gain value more quickly as the economy expands more quickly. So land tax makes land owners richer.
In the short term, governments can guarantee land prices by buying them with 30 year bonds. When the bonds are due for payment, government can sell the land for far more due to the expanded economy. This allows government to offer an attractive rate on the bonds (giving them a present value in the market).
Land will be less profitable to owners?
Over the long term, land grows
in value at roughly the same rate as other investments: if it was more,
this would drive its price up until the return was the same. In this
chart note that the recent 1% annual growth is less than the economy
grew in the same period. Land is no better than other investments, on
average.
Land tax will not change the return on investment, because if land becomes less desirable then its price falls, making land tax fall, until the land becomes attractive again.
Rental income will go to land tax and not the land owner?
The selling price of land reflects its total profit, not just its bare value. So rent is covered in the previous answer.
Land tax did not work in case X?
Apparent problems disappear on closer inspection. For example, in a recent Reddit discussion:
Objection (by 'GregorMendel'):
"Yeah, because ground rent has helped out Baltimore city a whole lot."
Response (by 'EmbraceUnity'):
"Harrisburg in the 70s was like the Detroit of today and they
implemented moderate land value taxation, though radical by comparison
to other US cities. Certainly far more in line with the ideals being
discussed here than Baltimore has ever approached.
The place completely turned around, as far as unemployment, crime, and
so on. Lots of money started flowing into the municipality, so of
course the bureaucrats decided to spend it on a huge incinerator
project that burned through all that money... but at least people now
have jobs and aren't being shot at or robbed!"
Land tax is economically illiterate?
Tell that to Adam Smith. He spent about one third of "The
Wealth of Nations" on the proper role of taxes. He concluded that taxes
should not be charged on work, but only on the value of bare land and
(if needed) on the consumption of luxury consumables.
"Ground-rents,
and the ordinary rent of land are, therefore, perhaps the species of
revenue which can best bear to have a peculiar tax imposed upon them." (The Wealth of Nations, book 5, p.356)
"In all cases, a direct tax upon the wages of labour must, in the long run, occasion both a greater reduction in the rent of land, and a greater rise in the price of manufactured goods, than would have followed from a proper assessment of a sum equal to the produce of the tax, partly upon the rent of land, and partly upon consumable commodities."( The Wealth of Nations, book 5, p.366)
It's nothing special, just another way to redistribute wealth?
Land
tax does not merely redistribute, it creates wealth. Land tax makes
more work profitable, so it creates jobs and goods that would not
otherwise exist. Also, in the long term, land tax is not even a tax.
Progressive taxes already solves the 67% problem?
If tax takes 40% of income as at present, then lower
taxes to one group must mean higher taxes to another. So progressive tax does not help the economy as a whole.
Some things are naturally profitable, so are safe to tax?
High profit industries are a sign of an inefficient economy. High profits attract more players until profits drop.
If profits appear to be high, then this masks either hidden risks (e.g.
the business is highly volatile and will make big losses some years) or bad regulations
that prevent new entrants. This hurts the economy just as much as high tax.
A voluntary switch is too complicated?
Each person who pays the fixed monthly land rent gets a swipe card.
They then have tax deducted from everything they buy. So the two
systems can
live side by side as people gradually choose to switch.
People dislike change?
The change is voluntary.
Politicians will resist change?
Land tax gives politicians a
platform to get elected. Then the increased number of mini-states, with
increased wealth, gives them more job opportunities. As the new mini
states join into unions, this creates new opportunities for global
power.
Examples
So far, all experiments with land tax have been very small. Nobody has had the courage to end all other taxes and only tax land values. But while they lasted, these timid baby steps had dramatic results. Source: "Where Tax Reform Has Worked" by Jeffery J. Smith (used by kind permission.)
Japan
escaped its medieval economy
The 19th century 'Japanese miracle' was achieved, at the outset, on a
foundation of land-value taxation. An efficient centralized bureaucracy
was set up. A modern army and navy were established. Compulsory
education was introduced. Manufacturing, mining, transportation, and
banking were promoted, frequently with advice from European and
American experts. And a bicameral Diet or Legislature was formed, with
an elected House of Representatives." -From Japan, American Journal of
Economics and Sociology, Dec, 2000 by Yoshisaburo Yamasaki, Robert V.
Andelson
California changed from dust
bowl to breadbasket
In 1887 the California state
government passed the Wright Act, which allowed communities to create
by popular vote irrigation districts to build dams and canals and pay
for them by taxing the resultant rise in land value. ... In ten years,
the Central Valley was transformed into over 7,000 independent farms.
Over the next few decades, those tree-less, semi-arid plains became the
"bread basket of America", one of the most productive areas on the
planet.
Why Sydney is so great, even for the poor
In the 1900s, the biggest city in Australia, Sydney, levied only one
tax - on land. Neither Sydney's tax nor Canberra's lease recovers all
the land's Rent, so these cities also get revenue from the federal
government. But the poorer sections of both cities bear no resemblance
to the degrading slums of nearly all American cities. ... Around
Melbourne, some towns tax land alone. Dr. Ken Lusht, visiting from Penn
State, found they have 50% more built value per acre than those that
tax both land and buildings.
Why some Canadian towns are bigger than others
In Western Canada, in the 1910s, as they came into being, many towns of
the prairie provinces decided to go with the collection of site Rent
exclusively. Generally they outgrew and out-served their neighboring
towns.
From ghost town to richest city in the country
Johannesburg, which began as a mining town, was rapidly becoming a
ghost town when the ore was being played out. To avoid such a fate, the
city councilors shifted their property tax from buildings to
land,rescuing their town. Johannesburg grew to become the financial
capital of the nation, eclipsing Cape Town, a port situated on one of
the most strategic points on the planet, which taxed land and buildings
equally, a victory similar to Albany, New York, outpacing New York
City. Jo-burg enjoyed the fastest site-recycling rate in the world, a
little over 20+ years, meaning urban sites were kept at best use, so
sprawl was precluded. Sadly, after apartheid ended, the new government
reverted to the conventional property tax, assuming (mistakenly) that
it would increase their take from wealthier neighborhoods.
Why New York is so great
A law had been passed allowing
New York City for the next ten years to tax land but not the buildings
on it. New construction more than tripled while in other big cities it
barely doubled. Not only was there more housing, and thus lower cost
apartments, there were more jobs and higher wages for construction
workers, and more business for merchants who sold goods to the employed
workers.
The miracle of Singapore and Hong Kong
Singapore and Hong Kong were both founded on a large element of land tax, and saw explosive economic growth.
The secret behind Japan's post war boom
Gen. Douglas MacArthur, an
admirer of Henry George, forced the Japanese provisional government to
write a diluted form of land tax into their new democratic
constitution (it limited rent paid by tenants to land owners, since
they did not create the land). South Korea and Taiwan (see below)
adopted a similar rent reform. All three saw massive economic growth.
The bubble only burst for Japan in the late 1980s due to massive land
speculation, which would be impossible if they had full land tax.
When people can do extra work tax free...
Until 1969, the Danish government calculated tax based on the previous
year's income. In 1970 they started to calculate tax based on the
current year's income. The Danes saw that in 1969 it didn't matter what
they did, it would not affect tax. So from 1968 to 1969, they doubled
the increase in production (4% to 8%), halved the inflation rate (8%
to3.5%), quadrupled investment increases (5% to 20.5%), raised savings
by a quarter (from 2.9 million kroner to 3.8), and employed nearly all
workers.
How Russia could have avoided economic crisis
In 1991, thirty economists, including three then Nobel-prize
winners(one signer, William Vickrey, won the prize later), signed a
letter to Soviet president Mikhail Gorbachev advising him that it is
important that the rent of land be retained as a source of government
revenue (Tideman, 1991, p. 226). Had this prescription been heeded
either by this last Soviet president or his Russian successor, the
massive capital flight and the financial crises in large part due to
tax evasion in Russia may well have been avoided. Subsequent Russian
history has been in large part a result of and a reaction to those
crises. - see Fred E. Foldvary, "Public Revenue from land tax."
land tax economists predicted the 2008 crash.
Jeffery
Smith's article,
written in 2004, contains this line: "Watching land prices inflate in
the 80's,followed by farm takeovers and slowed housing starts,
land-focused econometricians predicted land prices to hit bottom in
about 1990, then next around 2008." And sure enough, the crash was
triggered by sub prime loans: loans based on a property speculation
bubble, something that cannot happen with land tax.
If land tax was so good, why don't we still have it?
These experiments were all small. They boosted economic growth, but not
enough for land owners at the time to see an instant profit after
paying rent (it would have needed a few more years of compound growth),
so land owners voted these policies into oblivion. For land owners to
see instant benefits, land tax needs to be introduced on a much bigger
scale.
Did you know...?
Supporters of land tax include Winston Churchill, Mark Twain, Henry Ford, Leo Tolstoy, and numerous Nobel Prize winning economists. The game Monopoly (originally "The landlord's Game") was originally designed to illustrate the need for land tax: it demonstrates the folly of letting landlords charge rent without paying rent themselves. The first British welfare state, created by Churchill and Lloyd George in 1909, was supposed to be based on land tax, but wealthy land owners killed it. For more information, visit progress.org or Google "Henry George" or "Geonomics" or "The Single Tax."
$100,000 dollars extra, per family, per year
In 2002 Ronald Banks calculated the dead weight cost of taxing work at
GBP15,000 per year for every man, woman and child in Britain. Adjusting
for inflation and converting to US dollars that's $25,000 each. For a
typical three to five person family, that's $70,000-$120,000 extra, per
household, per year, that would be gained from switching to land
tax. Source: "Double-cross" (Center for Land Policy Studies, 2002)
and chapter 6 of "The Losses of Nations" (Othilia Press, 1998).
Website created by Chris Tolworthy. To support this site, please consider buying a game from EnterTheStory.com.
| Revised 30th April 2012 | Thanks for reading. |