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TOWARDS LAND VALUE TAXATION FOR LOCAL
GOVERNMENT CONFERENCE, OXFORD
"Land Value Taxation as part of a Tax Shift"
This is a copy of the notes circulated to the conference summarising James Robertson's talk - 16 September 2004.
(1) A “tax shift” is needed - a new approach to taxation, based on collecting the value of “common resources” as public revenue for the benefit of all citizens. The case for LVT can be seen in that wider context. The same principle applies to the development of national and international, as well as local, taxation.
(2) Political and public debate on taxation today is mainly about how high the total tax take should be. It largely ignores what should be taxed and what untaxed.
About 80% of UK taxation now is from taxes on outcomes of work and enterprise, and about 10% from taxes on resources. (The remaining 10% is from other taxes, such as “sin taxes” on tobacco, alcohol, and gambling). This existing approach to taxation imposes hugely damaging costs on the economy, going beyond the high administrative costs of collecting the taxes – for the government, for those who are taxed (people and businesses), and in the employment of professionals to help taxpayers to cope.
(3) So the effects of the present tax system are perverse. (The worldwide significance of this)
1. It encourages over-use of natural resources and under-use of human resources.
2. It penalises adding value, and rewards subtracting value (free lunches - below).
3. It makes it easier for rich people and businesses to avoid taxes.
Milton Friedman asserted that “there ain’t
no such thing as a free lunch” (TANSTAAFL). But
in fact - following from the historic enclosure of
common land - wealthy individuals, organisations, and
nations are still allowed privileged enjoyment of the
value of “common resources” on a massive
(5) A “common resource” is a resource which owes its monetary value mainly to the demands and activities of society (including public investment) and also to its natural features. It does not owe its value to the activities of individuals or corporate groups, and they should pay – into public revenue - for their right to profit from it.
(6) One example is the value of a land-site , excluding the value of buildings on it. Other common resources include: the unextracted value of energy; the value of the environment’s capacity to absorb pollution and wastes; the value of space for road and air traffic; of water, for extraction and transport; of the electro-magnetic spectrum for mobile phones; and the value arising from issuing new money.
(7) A “tax shift”, replacing many of today’s taxes on positives (like useful work and enterprise) with taxes on negatives (like use of common resources) will contribute to economic efficiency, social justice and environmental sustainability.
(8) It will shift the emphasis from REdistribution to PREdistribution. Whereas redistribution aims to correct the outcomes of economic activity, predistribution will share the value of essential inputs to economic activity. This will correct an underlying cause of economic inefficiency, injustice, inequality, exclusion and poverty, and allowthe market economy to operate more freely within a more effective framework of monetary incentives.
(9) Predistribution will ideally include the introduction of a citizen’s income in addition to the tax shift. But that takes us beyond what we are discussing here today.
James Robertson - 16.9.2004
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