Jenny Jones AM, leader of the Green Party on the London Assembly, argues the case for a land value tax to be at the heart of London’s economic recovery.
By Jenny Jones AM, leader of the Green Party on the London Assembly
Fairer, smarter taxes are needed for London to recover from the double-dip recession. Therefore I fully support the Mayor of London’s move to have another look at them with his London Finance Commission.
Earlier this week I asked its chair, Professor Tony Travers, whether he will look at putting a tax on rising land values as one way to promote useful economic activity in a more fair way.
You can watch our exchange below:
Land value taxation can get complicated to explain, but could potentially keep down house prices, finance major transport infrastructure projects and switch more of the burden of taxation onto unearned wealth.
The basic idea is very easily explained with an example.
The £15 billion Crossrail project is expected to benefit many businesses in London, so they were required to contribute to the cost. A Business Rate Supplement has been levied on businesses with a rateable value greater than £50,000, raising £4.1bn towards the cost.
But building this new railway line will also benefit land owners along its route, estimated at a minimum to be a £5.5bn windfall gain by property consultants GVA. Their land becomes more valuable when the line is built without their lifting a finger but, unlike businesses paying rates, these landowners get their windfall gain tax-free.
The Jubilee line extension to Stratford is an even more stark example. The £3.5bn cost to the public purse was dwarfed by the estimated £10bn plus in windfall gains to land owners in the area.
A land value tax would enable the Mayor and government to reinvest a proportion of these windfall gains into new infrastructure, ensuring everyone who benefits pays their fair share.
The Metropolitan Line was built in the 1930s using a similar principle. The company who built the line bought up land along its length for housing, and used the uplift in land values to pay for the line.
London desperately needs investment in its transport, energy and waste infrastructure. Fairness also demands we do something about these huge, unearned private gains to already-wealthy individuals and companies resulting from public investment.
There are many other strong economic arguments for land value taxation – putting a dampener on the housing market by making it a less attractive option for investors; giving developers with land banks and other owners of brownfield sites a strong incentive to develop; and possibly using the revenue to reduce business rates are just three that were raised in the debate with Professor Travers by myself and other London Assembly Members.
Land value taxation could reshape London’s economy to promote useful economic activity, generate revenue for investment and fairly distribute the benefits. It’s popular with economists of all colours and stripes, and was endorsed by the Institute for Fiscal Studies’ Mirlees Review.
So it’s a shame Travers thinks the proposal is unlikely to make it into the London Finance Commission’s final recommendations. While he “definitely won’t not look at it”, he suggested it wouldn’t get buy-in from all political parties and so would be a non-starter. I hope this week’s debate will have helped convince more Assembly Members it’s a viable option and I urge them to raise it with their parties.
86 Responses to “A land value tax should be at the heart of London’s economic recovery”
LB
More tax. Solves every known ill.
Does that include Scrofula? Still a problem. What about HIV? Does the property tax solve that?
Does it make people richer and better off? I presume you think it does. Give us all your money and you will be rich – rich – rich … [Well I might be rich depending on what you earn, but you will be buggered by not having any money]
Snake oil. Pure snake oil. So desperate for cash because of your spending addiction. So you want a something for nothing tax.
LB
But building this new railway line will also benefit land owners along its route
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Really? It only benefits people who use the railway. They are the ones getting from A to B 2 minutues quicker.
So lets have a sensible solution. A magical financial instrument is available where the people who get the benefit pay for it. It’s called a ticket.
Ah, I can spot the problem. They won’t pay 500 quid for the ticket, to cover the interest and repayment on the loans to build the railway, plus the running costs, pension costs. So you want to screw someone else who doesn’t benefit so you can get around fast on the cheap.
In most walks of life, that’s called fraud.
LB
Land value taxation can get complicated to explain, but could potentially keep down house prices, finance major transport infrastructure projects and switch more of the burden of taxation onto unearned wealth.
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There’s a problem with high food costs.
How about keeping food prices down by putting on a 100% VAT rate on food? If it works for property it’s got to work for food.
You’re idea is so deluded and the above example shows why. Did your teachers at school ban you from using safety scissors? You should be allowed any where near taxation.
Evan Price
I am sorry, but Jenny Jones does not present the whole picture. She claims that the increase in the value of land is ‘tax-free; but she ignores the effect of Capital Gains Tax, Inheritance tax and other taxes on the transfer of land when it is sold or inherited.
If my land increases in value as a result of external factors, then when I sell that land, I am liable to CGT on the sale – subject to any exemptions or allowances that I receive. In her example, if I get £1 million of gain in the value of my land, when I sell the land, I am currently liable to pay up to £280,000 in Capital Gains Tax (less the personal allowance of £10,600 – which is free of tax) if I am a top rate tax payer. If the land is held by a trust, then the allowance is £5,300. And if I am a lower rate taxpayer, the tax is charged as top slice of income and at 18% up to £34,370 and then at 28% thereafter. Assuming that I have no income, this would mean that I would pay more than £241,200 odd in tax on this gain.
I I don’t sell the land, but merely allow it to be transferred to those I nominate in my will, the whole value of the land (say, £2 million) is taxed with Inheritance tax at 40% after the allowance of £325,000. So my estate would pay £670,000 in tax. If I was married (I am) and my wife jointly owned the property, the survivor of us would be able to inherit the land free of tax, but on their death, the estate would be taxed at 40% on the total value of the land less the joint allowance of £650,000 (2 x £325,000) which amounts to £540,000. This only works if in my will I give the land to my wife and to the extent that my estate’s allowance of £325,000 has not already been used after my death and by my will.
As anyone reading this will appreciate, the tax liability on land pregnant with capital gains is potentially very large indeed. I can mitigate this tax to some extent and there are some aggressive tax avoidance schemes that some are prepared to enter into in order to reduce the tax paid by estates, but to say that there is a gain that is ‘tax-free’ is simply mistaken.
Newsbot9
Yes, you’re a fraud. Unfortunate for you, public policy allows you to suggest ideas.
Thanks for also showing that you have no idea what “externalities” are. There are problems with this idea, but you’ve complete missed them!