A
land value tax is a levy on the unimproved value of
landIn economics, land comprises all naturally occurring resources whose supply is inherently fixed. Examples are any and all particular geographical locations, mineral deposits, and even geostationary orbit locations and portions of the electromagnetic spectrum. Natural resources are fundamental to...
. It is an
ad valorem taxTo tax is to impose a financial charge or other levy upon a taxpayer by a state or the functional equivalent of a state such that failure to pay is punishable by law. Taxes are also imposed by many subnational entities...
on land that disregards the value of buildings,
personal propertyPersonal property, roughly speaking, is private property that is moveable, as opposed to real property or real estate. In the common law systems personal property may also be called chattels or personalty. In the civil law systems personal property is often called movable property or movables - any...
and other
improvementsLand improvement or land amelioration refers to investments making land more usable by humans. In terms of accounting, land improvements refer to any variety of projects that increase the value of the property...
. A land value tax (
LVT) is different from other
property taxA property tax is an ad valorem levy on the value of property that the owner is required to pay. The tax is levied by the governing authority of the jurisdiction in which the property is located; it may be paid to a national government, a federated state or a municipality...
es, because these are taxes on the whole value of
real estateIn general use, esp. North American, 'real estate' is taken to mean "Property consisting of land and the buildings on it, along with its natural resources such as crops, minerals, or water; immovable property of this nature; an interest vested in this; an item of real property; buildings or...
: the combination of land, buildings, and improvements to the site.
Although the efficiency of a land value tax has been established knowledge since
Adam SmithAdam Smith was a Scottish social philosopher and a pioneer of political economy. One of the key figures of the Scottish Enlightenment, Smith is the author of The Theory of Moral Sentiments and An Inquiry into the Nature and Causes of the Wealth of Nations...
, it was perhaps most famously promoted by
Henry GeorgeHenry George was an American writer, politician and political economist, who was the most influential proponent of the land value tax, also known as the "single tax" on land...
. In his best selling work ‘’
Progress and PovertyProgress and Poverty: An Inquiry into the Cause of Industrial Depressions and of Increase of Want with Increase of Wealth: The Remedy was written by Henry George in 1879...
’’ (1879), George argued that the value of land was created by the community, and therefore its rent belonged to the community.
Land value taxes have been implemented in Taiwan (
Republic of ChinaThe Republic of China , commonly known as Taiwan , is a unitary sovereign state located in East Asia. Originally based in mainland China, the Republic of China currently governs the island of Taiwan , which forms over 99% of its current territory, as well as Penghu, Kinmen, Matsu and other minor...
),
Hong KongHong Kong is one of two Special Administrative Regions of the People's Republic of China , the other being Macau. A city-state situated on China's south coast and enclosed by the Pearl River Delta and South China Sea, it is renowned for its expansive skyline and deep natural harbour...
,
SingaporeSingapore , officially the Republic of Singapore, is a Southeast Asian city-state off the southern tip of the Malay Peninsula, north of the equator. An island country made up of 63 islands, it is separated from Malaysia by the Straits of Johor to its north and from Indonesia's Riau Islands by the...
,
RussiaRussia or , officially known as both Russia and the Russian Federation , is a country in northern Eurasia. It is a federal semi-presidential republic, comprising 83 federal subjects...
and
EstoniaEstonia , officially the Republic of Estonia , is a state in the Baltic region of Northern Europe. It is bordered to the north by the Gulf of Finland, to the west by the Baltic Sea, to the south by Latvia , and to the east by Lake Peipsi and the Russian Federation . Across the Baltic Sea lies...
, as well as in some localities in the American state of
PennsylvaniaThe Commonwealth of Pennsylvania is a U.S. state that is located in the Northeastern and Mid-Atlantic regions of the United States. The state borders Delaware and Maryland to the south, West Virginia to the southwest, Ohio to the west, New York and Ontario, Canada, to the north, and New Jersey to...
, the Australian state of
New South WalesNew South Wales is a state of :Australia, located in the east of the country. It is bordered by Queensland, Victoria and South Australia to the north, south and west respectively. To the east, the state is bordered by the Tasman Sea, which forms part of the Pacific Ocean. New South Wales...
and
MexicaliMexicali is the capital of the State of Baja California, seat of the Municipality of Mexicali, and 2nd largest city in Baja California. The City of Mexicali has a population of 689,775, according to the 2010 census, while the population of the entire metropolitan area reaches 936,826.The city...
, in
MexicoThe United Mexican States , commonly known as Mexico , is a federal constitutional republic in North America. It is bordered on the north by the United States; on the south and west by the Pacific Ocean; on the southeast by Guatemala, Belize, and the Caribbean Sea; and on the east by the Gulf of...
. The government of the
Republic of IrelandIreland , described as the Republic of Ireland , is a sovereign state in Europe occupying approximately five-sixths of the island of the same name. Its capital is Dublin. Ireland, which had a population of 4.58 million in 2011, is a constitutional republic governed as a parliamentary democracy,...
will implement a site value tax in 2012.
Economic effects
The value of the land (and many other macro-economic quantities too) can be expressed using two independent concepts:
- The value, or, strictly speaking, the price, of a particular site of land is what a fair exchange brings in terms of money during an agreed trade or transaction between two parties, one of whom is the landowner. (This definition is conditional on no LVT being applied, because when it does apply, the exchange value is affected.)
- The land value of the site is also directly related to its demandable ground-rent, which is its potential for use in either production or residential capacities. The capitalization
Capitalization is writing a word with its first letter as a majuscule and the remaining letters in minuscules . This of course only applies to those writing systems which have a case distinction...
of this rent gives the land value too. Land which is not useful has no value and is called marginal landEconomic rent is typically defined by economists as payment for goods and services beyond the amount needed to bring the required factors of production into a production process and sustain supply. A recipient of economic rent is a rentier....
, as explained by British economist David RicardoDavid Ricardo was an English political economist, often credited with systematising economics, and was one of the most influential of the classical economists, along with Thomas Malthus, Adam Smith, and John Stuart Mill. He was also a member of Parliament, businessman, financier and speculator,...
in 1816.
Efficiency
Most taxes distort economic decisions. If labor, buildings or machinery and plants are taxed, people are dissuaded from constructive and beneficial activities, and enterprise and efficiency are penalized due to the
excess burden of taxationIn economics, the excess burden of taxation, also known as the distortionary cost or deadweight loss of taxation, is one of the economic losses that society suffers as the result of a tax. Economic theory posits that distortions changes the amount and type of economic behavior from that which...
. This does not apply to LVT, which is payable regardless of whether or how well the land is actually used. Because the supply of land is
inelasticIn economics, elasticity is the measurement of how changing one economic variable affects others. For example:* "If I lower the price of my product, how much more will I sell?"* "If I raise the price, how much less will I sell?"...
, market land rents depend on what tenants are prepared to pay, rather than on the expenses of landlords, and so LVT cannot be directly
passed onIn economics, tax incidence is the analysis of the effect of a particular tax on the distribution of economic welfare. Tax incidence is said to "fall" upon the group that, at the end of the day, bears the burden of the tax...
to tenants. The direct beneficiaries of incremental improvements to the surrounding neighborhood by others would be the land's occupants, and absentee landlords would benefit only by virtue of price competition amongst present and prospective tenants for those incremental benefits; the only direct effect of LVT on prices in this case is to lower the
unearned incrementUnearned increment is an increase in the value of land or any property without expenditure of any kind on the part of the proprietor; it is a early statement of the notion of unearned income. It was coined by John Stuart Mill, who proposed taxing it. Mill's concept was refined and developed by...
(reduce the amount of the socially generated benefit that is privately captured as an increase in the market price of the land). Put another way, LVT is often said to be justified for economic reasons because if it is implemented properly, it will not deter production, distort market mechanisms or otherwise create
deadweight lossIn economics, a deadweight loss is a loss of economic efficiency that can occur when equilibrium for a good or service is not Pareto optimal...
es the way other taxes do.
Nobel PrizeThe Nobel Prizes are annual international awards bestowed by Scandinavian committees in recognition of cultural and scientific advances. The will of the Swedish chemist Alfred Nobel, the inventor of dynamite, established the prizes in 1895...
winner
William VickreyWilliam Spencer Vickrey was a Canadian professor of economics and Nobel Laureate. Vickrey was awarded the Nobel Memorial Prize in Economics with James Mirrlees for their research into the economic theory of incentives under asymmetric information...
believed that "removing almost all business taxes, including property taxes on improvements, excepting only taxes reflecting the marginal social cost of public services rendered to specific activities, and replacing them with taxes on site values, would substantially improve the economic efficiency of the jurisdiction." A correlation between the use of LVT at the expense of traditional property taxes and greater market efficiency is predicted by economic theory, and has been observed in practice.
Proponents, such as Fred Foldvary, state that the necessity to pay the tax encourages landowners to develop vacant and underused land properly or to make way for others who will. They state that because LVT deters speculative land holding, dilapidated
inner cityThe inner city is the central area of a major city or metropolis. In the United States, Canada, United Kingdom and Ireland, the term is often applied to the lower-income residential districts in the city centre and nearby areas...
areas are returned to productive use, reducing the pressure to build on undeveloped sites and so reducing
urban sprawlUrban sprawl, also known as suburban sprawl, is a multifaceted concept, which includes the spreading outwards of a city and its suburbs to its outskirts to low-density and auto-dependent development on rural land, high segregation of uses Urban sprawl, also known as suburban sprawl, is a...
. For example
Harrisburg, PennsylvaniaHarrisburg is the capital of Pennsylvania. As of the 2010 census, the city had a population of 49,528, making it the ninth largest city in Pennsylvania...
in the
United StatesThe United States of America is a federal constitutional republic comprising fifty states and a federal district...
has taxed land at a rate six times that on improvements since 1975, and this policy has been credited by its long time mayor,
Stephen R. ReedStephen Russell Reed is the former and longest-serving mayor of Harrisburg, Pennsylvania. He moved to Harrisburg with his parents as a boy.- Biography :...
with reducing the number of vacant structures in downtown Harrisburg from around 4,200 in 1982 to fewer than 500. LVT is an
ecotaxEcotax refers to taxes intended to promote ecologically sustainable activities via economic incentives. Such a policy can complement or avert the need for regulatory approaches. Often, an ecotax policy proposal may attempt to maintain overall tax revenue by proportionately reducing other taxes...
because it ostensibly discourages the waste of locations, which are a finite natural resource.
Real estate values
Real estate bubbleA real estate bubble or property bubble is a type of economic bubble that occurs periodically in local or global real estate markets...
s direct savings towards
rent seekingIn economics, rent-seeking is an attempt to derive economic rent by manipulating the social or political environment in which economic activities occur, rather than by adding value...
activities rather than other investments, and can contribute to
recessionIn economics, a recession is a business cycle contraction, a general slowdown in economic activity. During recessions, many macroeconomic indicators vary in a similar way...
s which damage the entire economy. Advocates of the land tax claim that it reduces the speculative element in land pricing, thereby leaving more money for productive capital investment and making the economy more stable.
If the value to landowners were reduced to zero or near zero by recovering effectively all its rent, total privately held asset values could decline as the land value element was stripped out, representing a shift in apparent private sector wealth. Since landowners often possess significant political influence, this has significantly deterred the adoption of land value taxes.
Practical issues
There are several practical issues involved in the implementation of a land value tax. Most notably, it needs to be:
- Calculated fairly and accurately,
- High enough to raise sufficient revenue without causing land abandonment, and
- Billed to the correct person or business entity.
Assessments/Appraisals
In theory, levying a land value tax is straightforward, requiring only a valuation of the land and a register of the identities of the landholders. There is no need for the tax payers to deal with complicated forms or to give up personal information as with an
income taxAn income tax is a tax levied on the income of individuals or businesses . Various income tax systems exist, with varying degrees of tax incidence. Income taxation can be progressive, proportional, or regressive. When the tax is levied on the income of companies, it is often called a corporate...
. Because land cannot be hidden, removed to a
tax havenA tax haven is a state or a country or territory where certain taxes are levied at a low rate or not at all while offering due process, good governance and a low corruption rate....
or concealed in an electronic data system, the tax cannot be
evadedTax evasion is the general term for efforts by individuals, corporations, trusts and other entities to evade taxes by illegal means. Tax evasion usually entails taxpayers deliberately misrepresenting or concealing the true state of their affairs to the tax authorities to reduce their tax liability,...
.
However, critics point out that determining the value of land can be difficult in practice. In a 1796
United States Supreme CourtThe Supreme Court of the United States is the highest court in the United States. It has ultimate appellate jurisdiction over all state and federal courts, and original jurisdiction over a small range of cases...
opinion, Justice William Paterson noted that leaving the valuation process up to
assessorsAn assessor is a specialist who calculates the value of property. The value calculated by the assessor is then used as the basis for determining the amounts to be paid or assessed for tax or insurance purposes....
would cause numerous bureaucratic complexities, as well as non-uniform assessments due to imperfect policies and their interpretations.
Austrian SchoolThe Austrian School of economics is a heterodox school of economic thought. It advocates methodological individualism in interpreting economic developments , the theory that money is non-neutral, the theory that the capital structure of economies consists of heterogeneous goods that have...
economist
Murray RothbardMurray Newton Rothbard was an American author and economist of the Austrian School who helped define capitalist libertarianism and popularized a form of free-market anarchism he termed "anarcho-capitalism." Rothbard wrote over twenty books and is considered a centrally important figure in the...
later raised similar concerns, stating that no government can fairly assess value, which can only be determined by a
free marketA free market is a competitive market where prices are determined by supply and demand. However, the term is also commonly used for markets in which economic intervention and regulation by the state is limited to tax collection, and enforcement of private ownership and contracts...
.
However, as Steven Spadijer has pointed out, the free market is
already determining the taxable value of the land. For example, valuators in the home and contents insurance industry are
already performing such a function on a daily basis when, in order to calculate an insurance premium, the valuator must separate the value of the home from the indestructible value of the land beneath the home itself. Secondly, when compared to modern day property tax evaluations, valuations of land involve fewer variables and have smoother
gradientIn vector calculus, the gradient of a scalar field is a vector field that points in the direction of the greatest rate of increase of the scalar field, and whose magnitude is the greatest rate of change....
s than valuations that include improvements. This is due to variation of building style, quality and size between
lotIn real estate, a lot or plot is a tract or parcel of land owned or meant to be owned by some owner. A lot is essentially considered a parcel of real property in some countries or immovable property in other countries...
s. Modern computerization and statistical techniques have eased the process; in the 1960s and 1970s,
multivariate analysisMultivariate analysis is based on the statistical principle of multivariate statistics, which involves observation and analysis of more than one statistical variable at a time...
was introduced as a method of assessing land. Finally, land value for LVT purposes is assessed using market evidence. Such evidence may comprise both selling prices and rentals. Where development already exists on a site, the value of the site can be discovered by various means, of which the most easily understood is the residual method: the value of the site is the total value of the property minus the depreciated value of buildings and other structures. This may explain why the system involves little fuss and relative ease in the places where it has been implemented.
Usually, the valuation process commences with a measurement of the most and least valuable land within the taxation area. A few sites of intermediate value are then identified and used as "landmark" values. Other values are filled in between the landmark values. The data is then collated on a database and linked to a unique property reference number, "smoothed" and mapped using a geographical information system (GIS). Thus, even if the initial valuation is difficult, once the system is in use, successive valuations become easier.
Limited revenue
In the context of land value taxation as a single tax (replacing all other taxes), some have argued that LVT alone cannot raise large enough
revenuesTax revenue is the income that is gained by governments through taxation.Just as there are different types of tax, the form in which tax revenue is collected also differs; furthermore, the agency that collects the tax may not be part of central government, but may be an alternative third-party...
. However, this is to ignore the fact that other taxes have the effect of reducing land values and hence the amount of revenue that can be raised from them. The
PhysiocratsPhysiocracy is an economic theory developed by the Physiocrats, a group of economists who believed that the wealth of nations was derived solely from the value of "land agriculture" or "land development." Their theories originated in France and were most popular during the second half of the 18th...
argued that all taxes are ultimately at the expense of land rental values. Most modern LVT systems are alongside other taxes, and thus only reduce their impact without removing them completely. In a case or event where a jurisdiction attempted to levy a land tax that was higher than the entire landowner
surplusIn mainstream economics, economic surplus refers to two related quantities. Consumer surplus or consumers' surplus is the monetary gain obtained by consumers because they are able to purchase a product for a price that is less than the highest price that they would be willing to pay...
, it would result in landowner
abandonmentThe term abandonment has a multitude of uses, legal and extra-legal. This "signpost article" provides a guide to the various legal and quasi-legal uses of the word and includes links to articles that deal with each of the distinct concepts at greater length...
and a sharp decline in tax revenue.
Requires clear ownership
In some countries, LVT is nearly impossible to implement because of lack of certainty regarding land titles and clearly established land ownership and tenure. For instance a parcel of grazing land may be communally owned by the inhabitants of a nearby village and administered by the village elders. In these situations, the land in question would need to be vested in a trust or similar body for taxation purposes. If the government can not accurately define ownership boundaries and ascertain the proper owners, it cannot know from whom to collect the tax. The phenomenon of lack of clear titles is found worldwide in developing countries and is in part the subject of the work of the
PeruPeru , officially the Republic of Peru , is a country in western South America. It is bordered on the north by Ecuador and Colombia, on the east by Brazil, on the southeast by Bolivia, on the south by Chile, and on the west by the Pacific Ocean....
vian economist
Hernando de SotoHernando de Soto is a Peruvian economist known for his work on the informal economy and on the importance of business and property rights. He is the president of the Institute for Liberty and Democracy , located in Lima, Peru.-Childhood and education:Hernando de Soto was born in 1941 in Arequipa,...
. In African countries with imperfect land registration, boundaries may be poorly surveyed, the landlord can be elusive and would have to be identified, or made to identify himself, otherwise it would be significantly more difficult to tax than occupants. Most governments require that tax collectors track owners down nonetheless so that the burden of the tax does not fall on the poor.
Ethics
In religious terms, it has been claimed that land is a common gift to all of mankind. For example, the Catholic Church as part of its "Universal Destination" principle asserts:
Land acquires a
scarcityScarcity is the fundamental economic problem of having humans who have unlimited wants and needs in a world of limited resources. It states that society has insufficient productive resources to fulfill all human wants and needs. Alternatively, scarcity implies that not all of society's goals can be...
value owing to the competing needs of the community for living, working and leisure space. According to proponents, the unimproved value of land owes nothing to the individual efforts of the landowner and everything to the community at large. These supporters suggest that the value of land belongs justly and uniquely to the community.
A land value tax does take into account the effect on land value of location, or of improvements made to neighbouring land, such as proximity to roads, public works or a shopping complex. LVT is said to act as
value captureValue capture refers to a type of public financing where increases in private land values generated by public investments are all or in part “captured” or recouped by the public sector...
tax. A new
public worksPublic works are a broad category of projects, financed and constructed by the government, for recreational, employment, and health and safety uses in the greater community...
project may make adjacent land go up considerably in value, and thus, with a tax on land values, the tax on adjacent land goes up. Thus, the new public improvements would be paid for by those most benefited by the new public improvements — those whose land value went up most.
Pre-modern
Land value taxation has ancient roots, tracing back to after the introduction of
agricultureAgriculture is the cultivation of animals, plants, fungi and other life forms for food, fiber, and other products used to sustain life. Agriculture was the key implement in the rise of sedentary human civilization, whereby farming of domesticated species created food surpluses that nurtured the...
. One of the oldest forms of taxation, it was originally based on
crop yieldIn agriculture, crop yield is not only a measure of the yield of cereal per unit area of land under cultivation, yield is also the seed generation of the plant itself...
. This early version of the tax required simply sharing the yield at the time of the
harvestHarvest is the process of gathering mature crops from the fields. Reaping is the cutting of grain or pulse for harvest, typically using a scythe, sickle, or reaper...
, akin to paying a yearly rent.
Ancient China
MenciusMencius was a Chinese philosopher who was arguably the most famous Confucian after Confucius himself.-Life:Mencius, also known by his birth name Meng Ke or Ko, was born in the State of Zou, now forming the territory of the county-level city of Zoucheng , Shandong province, only thirty kilometres ...
was a chinese philosopher who advocated for land tax around 300 BCE.
Physiocrats
The
physiocratsPhysiocracy is an economic theory developed by the Physiocrats, a group of economists who believed that the wealth of nations was derived solely from the value of "land agriculture" or "land development." Their theories originated in France and were most popular during the second half of the 18th...
were a group of economists who believed that the wealth of nations was derived solely from the value of land
agricultureAgriculture is the cultivation of animals, plants, fungi and other life forms for food, fiber, and other products used to sustain life. Agriculture was the key implement in the rise of sedentary human civilization, whereby farming of domesticated species created food surpluses that nurtured the...
or
land developmentLand development refers to altering the landscape in any number of ways such as:* changing landforms from a natural or semi-natural state for a purpose such as agriculture or housing...
. Physiocracy is considered one of the "early modern"
schools of economicsSchools of economic thought describes the variety of approaches in the history of economic theory noteworthy enough to be described as a 'school of thought'. While economists do not always fit into particular schools, particularly in modern times, classifying economists into schools of thought is...
. Physiocrats called for the abolition of all existing taxes, completely
free tradeUnder a free trade policy, prices emerge from supply and demand, and are the sole determinant of resource allocation. 'Free' trade differs from other forms of trade policy where the allocation of goods and services among trading countries are determined by price strategies that may differ from...
, and a single tax on land; they did not distinguish, however, between intrinsic value of land and ground rent. Their theories originated in
FranceThe French Republic , The French Republic , The French Republic , (commonly known as France , is a unitary semi-presidential republic in Western Europe with several overseas territories and islands located on other continents and in the Indian, Pacific, and Atlantic oceans. Metropolitan France...
and were most popular during the second half of the 18th century. The movement was particularly dominated by Anne Robert Jacques Turgot (1727–1781) and
François QuesnayFrançois Quesnay was a French economist of the Physiocratic school. He is known for publishing the "Tableau économique" in 1758, which provided the foundations of the ideas of the Physiocrats...
(1694–1774). It immediately preceded the first modern school,
classical economicsClassical economics is widely regarded as the first modern school of economic thought. Its major developers include Adam Smith, Jean-Baptiste Say, David Ricardo, Thomas Malthus and John Stuart Mill....
, which began with the publication of
Adam SmithAdam Smith was a Scottish social philosopher and a pioneer of political economy. One of the key figures of the Scottish Enlightenment, Smith is the author of The Theory of Moral Sentiments and An Inquiry into the Nature and Causes of the Wealth of Nations...
's
The Wealth of NationsAn Inquiry into the Nature and Causes of the Wealth of Nations, generally referred to by its shortened title The Wealth of Nations, is the magnum opus of the Scottish economist and moral philosopher Adam Smith...
in 1776. The Physiocrats were also highly influential in the early history of land value taxation in the United States.
Thomas PaineThomas "Tom" Paine was an English author, pamphleteer, radical, inventor, intellectual, revolutionary, and one of the Founding Fathers of the United States...
contended in his
Agrarian JusticeAgrarian Justice is the title of a pamphlet written by Thomas Paine, published in 1797, which advocated the use of an estate tax and a tax on land values to fund a universal old-age and disability pension, as well as a fixed sum to be paid to all citizens on reaching maturity...
pamphlet that all citizens should be paid 15
poundsThe pound sterling , commonly called the pound, is the official currency of the United Kingdom, its Crown Dependencies and the British Overseas Territories of South Georgia and the South Sandwich Islands, British Antarctic Territory and Tristan da Cunha. It is subdivided into 100 pence...
at age 21 "as a compensation in part for the loss of his or her natural inheritance by the introduction of the system of landed property." This proposal was the origin of the
citizen's dividendCitizen's dividend or citizen's income is a proposed state policy based upon the principle that the natural world is the common property of all persons . It is proposed that all citizens receive regular payments from revenue raised by the state through leasing or selling natural resources for...
advocated by
GeolibertarianismGeolibertarianism is a political movement that strives to reconcile libertarianism and Georgism .Geolibertarians are advocates of geoism, which is the position that all natural resources – most importantly land – are common assets to which all individuals have an equal right to access; therefore if...
.
Classical economists
It was
Adam SmithAdam Smith was a Scottish social philosopher and a pioneer of political economy. One of the key figures of the Scottish Enlightenment, Smith is the author of The Theory of Moral Sentiments and An Inquiry into the Nature and Causes of the Wealth of Nations...
, in his book
The Wealth of NationsAn Inquiry into the Nature and Causes of the Wealth of Nations, generally referred to by its shortened title The Wealth of Nations, is the magnum opus of the Scottish economist and moral philosopher Adam Smith...
, who first rigorously analyzed the effects of a land value tax, pointing out how it would not hurt economic activity, and how it would not raise land rents.
Georgism
Henry GeorgeHenry George was an American writer, politician and political economist, who was the most influential proponent of the land value tax, also known as the "single tax" on land...
(September 2, 1839 – October 29, 1897) was perhaps the most famous advocate of recovering land rents for public purposes. An
AmericanThe United States of America is a federal constitutional republic comprising fifty states and a federal district...
journalistA journalist collects and distributes news and other information. A journalist's work is referred to as journalism.A reporter is a type of journalist who researchs, writes, and reports on information to be presented in mass media, including print media , electronic media , and digital media A...
,
politicianA politician, political leader, or political figure is an individual who is involved in influencing public policy and decision making...
and political economist, he advocated a "Single Tax" on
landIn economics, land comprises all naturally occurring resources whose supply is inherently fixed. Examples are any and all particular geographical locations, mineral deposits, and even geostationary orbit locations and portions of the electromagnetic spectrum. Natural resources are fundamental to...
that would eliminate the need for all other taxes. In 1879 he authored
Progress and PovertyProgress and Poverty: An Inquiry into the Cause of Industrial Depressions and of Increase of Want with Increase of Wealth: The Remedy was written by Henry George in 1879...
, which significantly influenced land taxation in the United States.
Meiji Restoration in Japan
After the 1868
Meiji RestorationThe , also known as the Meiji Ishin, Revolution, Reform or Renewal, was a chain of events that restored imperial rule to Japan in 1868...
in Japan,
Land Tax ReformThe Japanese Land Tax Reform of 1873, or was started by the Meiji Government in 1873, or the 6th year of the Meiji era. It was a major restructuring of the previous land taxation system, and established the right of private land ownership in Japan for the first time.-Previous land taxation...
was undertaken. A land value tax was implemented beginning in 1873. By 1880 initial problems with valuation and rural opposition had been overcome and rapid industrialisation was underway.
Liberal and Labour Parties in the United Kingdom
In the
United KingdomThe United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...
, LVT was an important part of the platform of the
Liberal PartyThe Liberal Party was one of the two major political parties of the United Kingdom during the 19th and early 20th centuries. It was a third party of negligible importance throughout the latter half of the 20th Century, before merging with the Social Democratic Party in 1988 to form the present day...
during the early part of the twentieth century:
David Lloyd GeorgeDavid Lloyd George, 1st Earl Lloyd-George of Dwyfor OM, PC was a British Liberal politician and statesman...
and
H. H. AsquithHerbert Henry Asquith, 1st Earl of Oxford and Asquith, KG, PC, KC served as the Liberal Prime Minister of the United Kingdom from 1908 to 1916...
proposed "to free the land that from this very hour is shackled with the chains of feudalism." It was also advocated by
Winston ChurchillSir Winston Leonard Spencer-Churchill, was a predominantly Conservative British politician and statesman known for his leadership of the United Kingdom during the Second World War. He is widely regarded as one of the greatest wartime leaders of the century and served as Prime Minister twice...
early in his career. The
modern Liberal PartyThe Liberal Party is a United Kingdom political party. It was formed in 1989 by a group of individuals within the original Liberal Party who felt that the merger of the party with the Social Democratic Party, to form the Liberal Democrats, had ended the spirit of the Liberal Party, claiming that...
(not to be confused with the
Liberal DemocratsThe Liberal Democrats are a social liberal political party in the United Kingdom which supports constitutional and electoral reform, progressive taxation, wealth taxation, human rights laws, cultural liberalism, banking reform and civil liberties .The party was formed in 1988 by a merger of the...
, which are the larger heir to the earlier Liberal Party but whom also have some support for the idea) remains committed to a local form of land value taxation, as do the
Green Party of England and WalesThe Green Party of England and Wales is a political party in England and Wales which follows the traditions of Green politics and maintains a strong commitment to social progressivism. It is the largest Green party in the United Kingdom, containing within it various regional divisions including...
and the
Scottish Green PartyThe Scottish Green Party is a green party in Scotland. It has two MSPs in the devolved Scottish Parliament, Alison Johnstone, representing Lothian, and Patrick Harvie, for Glasgow.-Organisation:...
.
From its early years, and until just after the Second World War, there was strong support for land value taxation within the
Labour PartyThe Labour Party is a centre-left democratic socialist party in the United Kingdom. It surpassed the Liberal Party in general elections during the early 1920s, forming minority governments under Ramsay MacDonald in 1924 and 1929-1931. The party was in a wartime coalition from 1940 to 1945, after...
. The Member of Parliament
Andrew MacLarenAndrew MacLaren was an Independent Labour Party politician. His passions were economic justice and art; he persistently campaigned for Land Value Taxation, and he was a painter. He represented Burslem for three separate terms during the 20th century.-History:Andrew MacLaren was born in a poor...
was a consistent and vocal advocate. The 1931 Labour budget included a land value tax, but before it came into force it was repealed by the Conservative-dominated National Government that followed shortly after.
An attempt at introducing site value taxation in the administrative
County of LondonThe County of London was a county of England from 1889 to 1965, corresponding to the area known today as Inner London. It was created as part of the general introduction of elected county government in England, by way of the Local Government Act 1888. The Act created an administrative County of...
was made by the local authority under the leadership of
Herbert MorrisonHerbert Stanley Morrison, Baron Morrison of Lambeth, CH, PC was a British Labour politician; he held a various number of senior positions in the Cabinet, including Home Secretary, Foreign Secretary and Deputy Prime Minister.-Early life:Morrison was the son of a police constable and was born in...
in the 1938–9 Parliament, called the London Rating (Site Values) Bill. Although it failed, it sets out detailed legislation for the implementation of a system of land value taxation using annual value assessment.
After 1945, the Labour Party adopted the policy, against the opposition of a substantial body of MPs, of attempting to collect "development value": the increase in land price arising from planning consent. This was one of the provisions of the
Town and Country Planning Act 1947Town and Country Planning is the land use planning system governments use to balance economic development and environmental quality. Each country of the United Kingdom has its own planning system that is responsible for town and country planning devolved to the Northern Ireland Assembly, the...
and it was repealed when the Labour government lost power in 1951.
Canada
Land value taxes were common in Western Canada at the turn of the twentieth century. In Vancouver LVT became the sole form of municipal taxation in 1910 under the leadership of mayor, Louis D. Taylor. Gary B. Nixon (2000) states that the rate never exceeded 2% of land value, too low to prevent the speculation which led directly to the massive 1913 real estate crash. All Canadian provinces now have moved back to taxing improvements.
Existing tax systems
A comprehensive and detailed survey of land value taxation around the world was published in 2001.
Australia
The state of New South Wales levies a state land value tax. However unlike council rates, farmland and a person's principal place of residence are generally exempt and the state tax is only levied on value over a certain threshold. In New South Wales determination of land value, for tax purposes at a state and local level, is the responsibility of the Valuer-General. The cities of
SydneySydney is the most populous city in Australia and the state capital of New South Wales. Sydney is located on Australia's south-east coast of the Tasman Sea. As of June 2010, the greater metropolitan area had an approximate population of 4.6 million people...
,
CanberraCanberra is the capital city of Australia. With a population of over 345,000, it is Australia's largest inland city and the eighth-largest city overall. The city is located at the northern end of the Australian Capital Territory , south-west of Sydney, and north-east of Melbourne...
, and others in Australia use LVT. An in-depth study under the Chairmanship of Sir
Gordon ChalkSir Gordon William Wesley Chalk, KBE was Premier of Queensland for a week, from 1 to 8 August 1968. He was the first, and only, Queensland Premier from the modern Liberal Party of Australia....
issued a report in 1986 on the subject of local taxation for the city of Brisbane, Queensland. The report, which examined many alternative means of local finance, sets out comprehensive and concise arguments for LVT.
By revenue, property taxes represent 4.5% of total taxation in Australia.
United States
Land value taxes are used in various jurisdictions of the
United StatesThe United States of America is a federal constitutional republic comprising fifty states and a federal district...
, particularly in the state of
PennsylvaniaThe Commonwealth of Pennsylvania is a U.S. state that is located in the Northeastern and Mid-Atlantic regions of the United States. The state borders Delaware and Maryland to the south, West Virginia to the southwest, Ohio to the west, New York and Ontario, Canada, to the north, and New Jersey to...
.
In the late 19th century followers of Henry George founded a single tax colony at Fairhope, AL. Although the colony, now a nonprofit corporation, still holds land in the area and collects a relatively small ground rent, the land is still subject to all other state and local taxes.
Hong Kong
In Hong Kong, a government rent, formerly the crown rent, is levied in addition to Rates (tax). For properties which are located in the New Territories (including New Kowloon), or located in the rest of the territory and of which the land grant take place after 27th May 1985, the government rent is levied at 3% of the rateable rental value.
Other countries
Pure LVT, apart from real estate or generic property taxation, is used in Taiwan (
Republic of ChinaThe Republic of China , commonly known as Taiwan , is a unitary sovereign state located in East Asia. Originally based in mainland China, the Republic of China currently governs the island of Taiwan , which forms over 99% of its current territory, as well as Penghu, Kinmen, Matsu and other minor...
),
SingaporeSingapore , officially the Republic of Singapore, is a Southeast Asian city-state off the southern tip of the Malay Peninsula, north of the equator. An island country made up of 63 islands, it is separated from Malaysia by the Straits of Johor to its north and from Indonesia's Riau Islands by the...
, and
EstoniaEstonia , officially the Republic of Estonia , is a state in the Baltic region of Northern Europe. It is bordered to the north by the Gulf of Finland, to the west by the Baltic Sea, to the south by Latvia , and to the east by Lake Peipsi and the Russian Federation . Across the Baltic Sea lies...
.
Several cities around the world also use LVT (e.g. see Australia, above). It has also been used in Mexicali, Mexico.
Ireland
In 2010 the then government of the
Republic of IrelandIreland , described as the Republic of Ireland , is a sovereign state in Europe occupying approximately five-sixths of the island of the same name. Its capital is Dublin. Ireland, which had a population of 4.58 million in 2011, is a constitutional republic governed as a parliamentary democracy,...
announced that it would introduce an LVT, beginning in 2013. However following a change in government in 2011 this commitment has been weakened. The current, 2011 Programme for Government states only that the government will "consider ...various options for a site valuation tax". It continues "Any site valuation tax must take into account the significant number of households in mortgage distress and provide local government with a reliable stream of revenue".
Scotland
Since the turn of the new century, with devolution and the re-establishment of the
Scottish ParliamentThe Scottish Parliament is the devolved national, unicameral legislature of Scotland, located in the Holyrood area of the capital, Edinburgh. The Parliament, informally referred to as "Holyrood", is a democratically elected body comprising 129 members known as Members of the Scottish Parliament...
, there has been interest and political pressure in Scotland to introduce land value taxation.
In February 1998 the pre-devolution UK government in Scotland (the
Scottish OfficeThe Scottish Office was a department of the United Kingdom Government from 1885 until 1999, exercising a wide range of government functions in relation to Scotland under the control of the Secretary of State for Scotland...
) launched a far-reaching public consultation process on the broad question of land reform. A survey of the record of the public response found that: “excluding the responses of the lairds and their agents, reckoned as likely prejudiced against the measure, 20% of all responses favoured the land tax” (12% in grand total, without the exclusions). The government responded by announcing “a comprehensive economic evaluation of the possible impact of moving to a land value taxation basis”. However, in a welter of published Land Reform Action Plans, concrete, positive public outcomes failed to materialise.
In 2000 the Parliament’s Local Government Committee held an inquiry into local government finance. Its terms of reference explicitly included land value taxation but the Committee’s final report did not comment on the system.
In 2003 the Scottish Parliament passed a resolution: “That the Parliament notes recent studies by the
Scottish ExecutiveThe Scottish Government is the executive arm of the devolved government of Scotland. It was established in 1999 as the Scottish Executive, from the extant Scottish Office, and the term Scottish Executive remains its legal name under the Scotland Act 1998...
and is interested in building on them by considering and investigating the contribution that land value taxation could make to the cultural, economic, environmental and democratic renaissance of Scotland.”
In 2004 a letter of support was sent from a group of members of the Scottish Parliament to the organisers and delegates of
the IUThe IUThe IU is the popular name of the International Union for Land Value Taxation and Free Trade, officially also known as the International Union for Land Value Taxation, and the International Georgist Union; and colloquially as The International Union. is an international umbrella organisation...
’s 24th international conference being held in Madrid—signed by members of the
Scottish GreenThe Scottish Green Party is a green party in Scotland. It has two MSPs in the devolved Scottish Parliament, Alison Johnstone, representing Lothian, and Patrick Harvie, for Glasgow.-Organisation:...
,
SocialistThe Scottish Socialist Party is a left-wing Scottish political party. Positioning itself significantly to the left of Scotland's centre-left parties, the SSP campaigns on a socialist economic platform and for Scottish independence....
and
NationalistThe Scottish National Party is a social-democratic political party in Scotland which campaigns for Scottish independence from the United Kingdom....
parties.
The policy was considered in 2006 by banker
Sir Peter Burt-Early life:Peter Alexander Burt was educated in Scotland. He graduated from the University of St Andrews and the University of Pennsylvania's Wharton School and later worked in the computer industry in California and Scotland....
’s government-appointed Scottish Local Government Finance Review. The Review’s 2007 Report
concludes that “although land value taxation meets a number of our criteria, we question whether the public would accept the upheaval involved in radical reform of this nature, unless they could clearly understand the nature of the change and the benefits involved…. We considered at length the many positive features of a land value tax which are consistent with our recommended local property tax [LPT], particularly its progressive nature.” However, “[h]aving considered both rateable value and land value as the basis for taxation, we concur with Layfield [UK Committee of Inquiry, 1976)] who recommended that any local property tax should be based on capital values.”
In 2009, Glasgow City Council resolved that it wished to introduce a tax based on land values: “the idea could become the blueprint for Scotland’s future local taxation” The Council has agreed a “long term move to a local property tax / land value tax hybrid tax”: its Local Taxation Working Group also states that simple [non-hybrid] land value taxation should itself “not be discounted as an option for local taxation reform: it potentially holds many benefits and addresses many existing concerns”.
United Kingdom
The Labour Land Campaign campaigns within the Labour party and the broader Labour movement for "a more equitable distribution of the Land Values that are created by the whole community" through an annual tax on land values. Its membership includes members of the British Labour Party, Trade Unions and Cooperatives as well as individuals. The Liberal Democrats' ALTER (Action for Land Taxation and Economic Reform) aims
Courses in "Economics with Justice" with a strong foundation in LVT are offered at the
School of Economic ScienceThe School of Economic Science , a registered charity based in Mandeville Place, near Oxford Street in London, provides courses in what it calls "Practical Philosophy" and "Economics with Justice". The courses are based on the Hindu philosophy of Advaita Vedanta, which sees an underlying unity in...
, which has historical links with the Henry George Foundation.
Other countries
Land value taxation is currently at some stage of being introduced in
KenyaKenya , officially known as the Republic of Kenya, is a country in East Africa that lies on the equator, with the Indian Ocean to its south-east...
,
NamibiaNamibia, officially the Republic of Namibia , is a country in southern Africa whose western border is the Atlantic Ocean. It shares land borders with Angola and Zambia to the north, Botswana to the east and South Africa to the south and east. It gained independence from South Africa on 21 March...
and other countries.
ChinaChinese civilization may refer to:* China for more general discussion of the country.* Chinese culture* Greater China, the transnational community of ethnic Chinese.* History of China* Sinosphere, the area historically affected by Chinese culture...
's Real Rights Law contains fundamental provisions founded on a land value taxation analysis.
Policy interest elsewhere
In
ZimbabweZimbabwe is a landlocked country located in the southern part of the African continent, between the Zambezi and Limpopo rivers. It is bordered by South Africa to the south, Botswana to the southwest, Zambia and a tip of Namibia to the northwest and Mozambique to the east. Zimbabwe has three...
, government coalition partners the Movement for Democratic Change has land value taxation as its policy. Since 2000, there have been political expressions of interest in the policy and analysis in Belgium, Ethiopia, Republic of South Africa and other countries. The governments of Thailand and Hungary have shown some sympathy with the policy.
There are local campaigns to introduce it in many other countries, including
South KoreaThe Republic of Korea , , is a sovereign state in East Asia, located on the southern portion of the Korean Peninsula. It is neighbored by the People's Republic of China to the west, Japan to the east, North Korea to the north, and the East China Sea and Republic of China to the south...
and the
United KingdomThe United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...
(where a broad assembly of independent and politically-aligned groups advocate and advance the case for land value taxation).
The IUThe IUThe IU is the popular name of the International Union for Land Value Taxation and Free Trade, officially also known as the International Union for Land Value Taxation, and the International Georgist Union; and colloquially as The International Union. is an international umbrella organisation...
works internationally and at the United Nations in support of the policy. In 1990, several economists wrote to then
PresidentThe President of the Soviet Union , officially called President of the USSR was the Head of State of the USSR from 15 March 1990 to 25 December 1991. Mikhail Gorbachev was the only person to occupy the office. Gorbachev was also General Secretary of the Communist Party of the Soviet Union between...
Mikhail GorbachevMikhail Sergeyevich Gorbachev is a former Soviet statesman, having served as General Secretary of the Communist Party of the Soviet Union from 1985 until 1991, and as the last head of state of the USSR, having served from 1988 until its dissolution in 1991...
suggesting that
RussiaRussia or , officially known as both Russia and the Russian Federation , is a country in northern Eurasia. It is a federal semi-presidential republic, comprising 83 federal subjects...
use Land Value Taxation in its transition towards a
free marketA free market is a competitive market where prices are determined by supply and demand. However, the term is also commonly used for markets in which economic intervention and regulation by the state is limited to tax collection, and enforcement of private ownership and contracts...
economy: its failure to do so has been argued as causal in the rise of the
OligarchsBusiness oligarch is a near-synonym of the term "business magnate", borrowed by the English speaking and western media from post-Soviet parlance to describe the huge, fast-acquired wealth of some businessmen of the former Soviet republics during the privatization in Russia and other post-Soviet...
.