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”
JohnLVT
I advise you look at the Fed Harrison videos on Youtube: They are short and easy to grasp. Look at the first in the list first.
http://www.youtube.com/watch?v=6ZkfmY1PMng
http://www.youtube.com/watch?v=HTSKiyDWXys
http://www.youtube.com/watch?v=wgTt4wqwbPw
http://www.youtube.com/watch?v=t0rjAfzoHeI
http://www.youtube.com/watch?v=TTiVS2lhMuY
http://www.youtube.com/watch?v=iQrt9eN4pYM
http://www.youtube.com/watch?v=ACHXyv3QyLI
http://www.youtube.com/watch?v=Vx2STNZ07Mc
http://www.youtube.com/watch?v=uG3MyE16WBQ
http://www.youtube.com/watch?v=VCEhkJd0zB8
http://www.youtube.com/watch?v=haKgDkXKU24
Great supporters of Geonomics/LVT are:
Martin Wolf – Associate editor at the Financial Times.
Sir Samuel Brittan – Columnist for the Financial Times.
Vince Cable – UK Secretary of State for Business, Innovation and Skills,
Winston Churchill
Nick Clegg – Deputy Prime Minister of the United Kingdom, leader of the Liberal Democrats
Mark Drakeford – Labour Welsh AM.
Albert Einstein
Fred Foldvary, PhD – Lecturer in Economics, Santa Clara University
Henry Ford
Mason Gaffney, PhD – Economics professor at theUniversity of California at Riverside
David Lloyd George
Fred Harrison – Research Director of the London-based Land Research Trust
Ralph Nader
Joseph Stiglitz – Winner of theNobel Memorial Prize in Economics (2001)
Leo Tolstoy – Russian writer.
William Vickrey – Winner of theNobel Memorial Prize in Economics (1996)
Frank Lloyd Wright
Sun Yat-sen
Mark Wadsworth
1. How do you plan on handling the equivalent of council tax benefits, when landlords are paying it and hence passing it on to tenants, rather than paying it direct to the council?
2. How will you handle flats above shops?
3. How will you handle agricultural land so as not to inflate food prices?
All easily solved if you apply commonsense.
1. What sort of welfare system we have is usually agreed among Georgists as being a flat rate, universal Citizen’s Dividend, which will be netted off with everybody’s rent or LVT bill such that the median household in a median value home pays plus-minus nothing. And they keep all their earned income to spend on stuff, the price of which is not inflated by taxes on production.
2. Land is land and optimum use is optimum use, it makes no difference whether a three storey building is shop-flat-flat, or shop-office-storage or shop-flat-vacant, the tax is the same. There is no need for different rates on commercial and residential as the dividing line is blurred.
3. The rent of farmland, and hence the LVT is dictated by food prices and not vice versa. In any event, teh rental value of farmland is so low that the tax would be less than the income tax etc which farmers currently pay. This all stands to reason, or else tenant farmers would not be able to make a living.
JohnLVT
Stephen Reed, former Mayor of Harrisburg, discusses the effect that Land Value Tax had upon the city’s economy. Harrisburg was transformed from the 2nd most deprived city in the USA to one the best.
http://vimeo.com/16326800
Reed said:
1. LVT serves to induce the highest and best use of land
2. LVT rewards rather than penalizes the highest uses of land, which a single tax rate system does not do.
3. LVT discourages land speculation, which is a particular issue involving “slumlords”.
4. LVT encourages vertical development rather than horizontal development (sprawl).
5. LVT has made it easier to keep open space, parks and, historic and other open public spaces.
6. Since the inception of LVT Harrisburg reversed 3.5 decades of decline.
7. LVT has induced $3.4 billion of private investment.
8.Businesses increased from 1,100 to over 9,100.
9. LVT encouraged economic development lowering the crime rate by 46%.
10. LVT dropped the fire rate by 78%.
11.
JohnLVT
A landlord will pay LVT and no one else. The landlord will pay no Income, Sales and other bad taxes. If the landlord can’t make the land profitable then he sells up and leaves it to proper business professionals.
What are the Social Benefits of LVT?
1. LVT will encourage economic activity and will discourage the under-use and dereliction of properties.
2. It will also provide a revenue stream for local and national government investment in public services.
2. The tax will include temporary exemptions for homeowners in the transition to LVT who purchased their land at the height of the boom.
3. Senior citizens will be able to defer payments until their home changes hands.
4. LVT also helps infrastructure investment by allowing the government to capture the rise in land values caused by infrastructure creation.
5. LVT prevents public expenditure serving to enrich private landowners at the expense of taxpayers.
You are very confused. Read the responses here and the links given. Understand Geonomics, do not incorrectly guess it.
Evan Price
LVT is a tax on what is perceived as land value. It’s purpose is to raise money for central expenditure.
The problem with assessing any tax on the basis of the value of a home, for example, is that your home is a cost. It has value only in the sense that it will realise a sum of money when it is sold. If you wish to remain where you are, you cannot realise that money save through some very expensive (at present) equity release schemes or through a loan that has to be paid off.
You can ‘downsize’ and realise value then, but that comes at the expense of the space that you currently enjoy. If your needs increase (you have more children for example), then the costs of ‘upsizing’ are related to the increase in value locally.
The problem with taking into short term changes in value is a nightmare potentially for both taxpayer and for the VOA or other authority assessing the value – that is why there is such resistence to revaluations for Council Tax and also it creates the political headache that results in further resistance to such a revaluation.