Why We Need a Land Value Tax

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We didn’t create the land beneath our feet. No individual should be able to claim a piece of land as theirs definitively, what’s theirs are the developments they establish; the land itself  should be recognised as something they are merely renting. Land is part of the commons. This is why Landowners should pay society a rent, as society has allowed them to take a bit of the land and utilise it how they see fit.

The tax upon land values is, therefore, the most just and equal of all taxes. It is the taking by the community, for the use of the community, of that value which is the creation of the community – Henry George, Progress and Poverty (1879)   

This rent is in the form of the the Land Value Tax (LVT) which is levied annually on land. Each and every plot is assessed and then a tax is levelled on the landowner which amounts to a certain share of the assessed value. Property taxes (which are what we currently have), on the other hand, are levied based on the size or values of the properties on the land, not the value of the unimproved land they are situated on. Daran Sarma of the IEA believes LVT is pretty much an ideal tax. He explains that LVT “Is efficient (does not alter economic activity), equitable (the richer tend to have more land than the poor) and has revenue raising potential”.  This is a form of taxation that is harder to evade; you can’t hide your land off shore or have a crafty account ‘cook’ it.

How does LVT make society fairer? Say you live in a bog standard country village. Imagine one day you notice that a nearby vacant lot has been bought up by some fat cat on the cheap. Despite purchasing this land the fact cat is just going to sit on it. The years roll by and your community becomes more attractive; locals are opening more businesses, infrastructure is being invested in and the streets are kept cleaner. Suddenly the fat cat reemerges and has got a massive grin plastered over their mug. Because of the grafting of you, local authorities and your neighbours, the value of the fat cat’s empty plot has soared, and now the fat cat is set to make a plump profit. The fat cat then siphons off his unearned profit and buggers off out of your community, back on the hunt for other cheap plots of land in under developed areas – rinse and repeat. Does this sound equitable to you? LVT would allow society to recoup this profit, a profit it created. Furthermore, LVT would create a symbiotic cycle of windfall taxation and spending that would allow aforementioned local infrastructure to be financed and refinanced through the LVT. Said windfall nature of LVT would also make gentrification a more positive force.

An LVT would discourage this hoarding of land, hoarding that is partly to blame for our housing crisis. The Guardian called this hoarding phenomenon “Land Banking” and in a 2015 investigation revealed that the UK’s biggest house builders were sitting on 600,000 plots of land! Our dysfunctional system allows these big land banks to pull the plots off the market and into a sphere of speculation, preventing others who might actually want to acquire the land for immediate building of affordable homes from doing such. They don’t even have to build on the site themselves to make profit off the land; land promoters such as the ‘Strategic Land Group’ do big business just by maximising the value of land and then helping landowners sell it off for substantial short-term gains. A plot of land can go through this process multiple times before being built on, hence it’s no surprise that when finally built on luxury accommodation is often what arises, since the land has become so expensive that this is the only profitable outcome. Unsurprisingly this process also prices out housing associations and community groups from acquiring the land themselves. While this self-serving speculation is happening, we have over a quarter of a million people living homeless in this country!

Much has been said of the potential of brownfield sites. LVT would encourage the owners of these sites to invest their capital into redevelopment of the sites, as under LVT the owners are taxed regardless of what they do with their site, meaning they might as well get investing if they want to make a profit. Residential rejuvenation in inner cities would thus follow. LVT would lead to a land being used in a more efficient manner, which would kerb problems such as Urban Sprawl.  Development would sustainably spread all across our nation.

Sajid Javid, the communities minister, intends to up-heave the planning permission system. Javid hopes this will lead to an increased supply of decent housing. LVT would couple perfectly with this new system. LVT could replace unpopular and overly complex forms of taxation like council tax, stamp duty and business rates. This shifts the tax burden away from households and local business, and onto unproductive land hoarders. Said asset rich folks are having a right lark at the moment: capital gains tax has been lowered, quantitate easing stuffs their pockets, housing prices continue to rise and they are getting away with extortionate levels of rent. It’s about time they pay their fair share.

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Second year English and History student. Other spots: http://abotaabot.blogspot.co.uk/ & https://www.theedgesusu.co.uk/author/tom-townend/

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