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”
Dave
Last time I checked, “the poor” don’t own land
Newsbot9
And don’t need to pay rent for housing in your world either I’m sure.
Newsbot9
Ah yes, “nonsense”. Never mind it would actually encourage landlords to update the terrible quality of housing stock which we have.
It is NOT in Landlord’s interest to upgrade most houses while they can continue to press rent rises due to the critical housing shortage, or indeed to do much for tenants at all!
And I see, you want to harm, and that’s the correct term of course, the poor tenants – causing the DIRECT OPPOSITE of what I intend, when their energy bills are jacked up again (and of course the Landlord isn’t going to authorise works which MIGHT cause problems for him!)
Thanks for that display of nastiness! But no, I actually knew what I was talking about in terms of my own aim!
Macrocompassion
Land Value Taxation is hard to explain because it has about 14 different facits all of which deserve some careful consideration before the basic idea can be judged. The following list of them is an attempth to present a fair and comprehensive picture.
14 ASPECTS of LAND-VALUE TAXATION affecting Government, Land Owners, Community and Ethics
3 aspects for GOVERNMENT
1. LVT, adds to the national income. .
2. The cost of collecting the LVT is much smaller than for income tax and other production-related taxes.
3. With LVT, the national economy stabilizes and no longer experiences the 18 year housing boom and bust cycle.
6 aspects affecting LAND OWNERS
4. LVT is progressive, the owners of the most potentially productive sites pay the most tax.
5. The land owner pays his LVT regardless of how the land is used. When the land is leased to tenants most or all of the resulting ground-rent is the tax.
6. LVT stops the speculation in land prices because any withholding of land from proper use is too costly.
7. The introduction of LVT reduces the sales price of sites even though their value (or potential usefullness) may continue to grow.
8. With LVT, land owners are unable to pass the tax on to their tenant renters, due to the competition for land use.
9. With the introduction of LVT, land prices will drop. Speculators in land values will tend to foreclose on their mortgages and to withdraw their money for reinvestment. LVT should be introduced gradually. It allows investors sufficient time to transfer money to company-shares where their greater use will meet the increased demand for produce (see below)
.
3 aspects regarding our COMMUNITY
10. With LVT, there is an incentive to use land for production, rather than it laying idle or being partly used.
11. With LVT, greater working opportunities exist due to cheaper land and a greater number of available sites. Consumer goods become cheaper because entrepreneurs have less difficulty in starting-up and running their businesses. Demand grows, unemployment decreases
12. As LVT is introduced, investment money is withdrawn from land and placed in durable capital goods.
2 aspects about ETHICS
13. The collection of taxes directly from productive effort and commerce is socially unjust. LVT replaces this form of extortion by gathering the surplus rental income which comes without exertion. Consequently LVT is a natural system of money-gathering.
14. Bribery and corruption cease with LVT. Before, this was due to the leaking of news of municipal plans for housing development.
Roy Langston
Evan Price, your claim that there are no good or bad taxes, merely
taxes, is a bald falsehood. It has been known for over 200 years that
unlike taxes on income, sales, value added, etc., a tax on a factor in fixed supply, like land,
does not and cannot impair production. Indeed, land value taxation has
reliably produced economic miracles everywhere it has ever been tried,
to the exact extent that it has been tried. Why do its opponents
always refuse to know such facts? The answer is all too obvious: they
are landowners who are being given immense wealth in return for nothing,
and they intend to go on getting it, the nation be damned.
Your refusal to admit that some taxes are stupid and others are very good cannot alter the fact that some taxes are stupid and others are very
good. If you cared about effective taxation (you don’t), you would be
an enthusiastic supporter of land value taxation. Like all other
“criticisms” of land value taxation that have ever been advanced, or
ever will be advanced, yours are fallacious, absurd, and dishonest.