Thursday, February 09, 2006

Proposal: For the Introduction of the Taxation of Land Values

Editor's note: This "Proposal For the Introduction of the Taxation of Land Values" has been submitted for comment and improvement by David Chester, in responses to Dan Sullivan's call for" a very short, compelling brochure showing why land value tax is a better alternative than the planning gain supplement". Please go to the Cooperative Blog via to place your comments there. This will greatly facilitate all our reviews and any eventual rewrites.(Eric Britton)



Although land is generally treated as if it were capital, it was not created by Man. In particular, our Land is a gift of nature (if not of a Higher Authority) and we have it on trust. Before very many people lived here, the Land was almost worthless. Its value grew with the population increase, due to amount of public money necessarily invested in the surroundings and their benefit on our national economy.

As towns grow, the areas of land that they occupy become more valuable. This is anticipated by speculators, who purchase sites on the peripheries. This opens the door to corruption, due to the land- speculator's need to know where the next development will take place. He gladly will bribe the town planners for this useful information, or to "persuade" the new neighborhood to be build on his site. The resulting land trading is encouraged by the banks, who find that lending money for this purpose is profitable. Land speculation also occurs in the center of town, where certain sites are held unused or partly used whilst their value increases. Then the outskirts of the towns will need more public money to be spent in their development, whilst the previous public investments in the town centers are not properly used.

The value of the land is expressed by its ground-rent. It depends on the relative utility of the site in question compared to one on which it is scarcely worthwhile to work. For a marginal site of this kind, no rent is created and the site has no value. However on better land, the same expenditure of labor and capital can result in a greater amount of produce. When expressed in terms of money, this advantage is the ground-rent. The same argument applies to land that is used for residence, except that the utility criterion becomes the comfort, beauty and ease of living in the better neighborhoods. Particularly in town-centers, a very high degree of organization and specialization in work are possible. There the greater productivity generates huge ground-rents and astronomical land-values, no wonder that's where the tall buildings are to be found!


Thus the basic advantage, due to land gaining and having greater value, justly belongs to the people. These benefits should not be treated as bounty for exclusive use by the monopolistic owners of our land. However, this is what our current system of land tenure allows. Our land should not be used as an item of durable capital for hire, trade and speculation. It is a national asset not a bargaining medium.

Where there is land speculation, the land is often held out of use and the price of the available surrounding land becomes raised due to the scarcity and competition for it. These effects are of benefit the land-owner who does not sell. Subsequently the ground-rents are raised, but this adds to production costs. The outlaying sites also become more expensive due to this kind of speculation. Today our system of land ownership and tenure seriously limits the opportunities for entrepreneurs, resulting in the diminished demand for consumer goods, unemployment and poverty.

In order to stop the land speculation, part of its ground-rent should be collected as revenue by the government. Then it no longer becomes worth-while for the speculator's to hold land unused. The money collected from the ground-rent (which in any case justly belongs to the people, see above), will allow the burden of other kinds of taxation to be eased. Many of these present forms of taxation adversely affect the process of the production and distribution of goods. Consequently it is proposed to tax land- values.


There are many advantage and few disadvantage in the gradual adoption of this kind of tax reform. The ground-rent revenue is easy to determine after the land-value has been estimated fairly and professionally and is frequently updated. With proper legislation the land tax is difficult to avoid, unlike the legal loop-holes used by business-men at present. Fewer tax collectors will be needed and their salaries will be less of a drain on the national budget.

Due to the incentive effect of the land-value tax, proper use will be made of the land, and its speculation will cease. Land prices will fall and there will be greater opportunities for entrepreneurs, due to the lower production costs as well as less money being taxed from the consumers. These trends will reduce degree of unemployment and poverty. The ethics of the change (noted above) will raise our moral standards, resulting in less cynicism and frustration and this will lead to a better life-style.

Greater efficiency in the use of land will result and our cities being less spread-out, easing the journeying and communicating needs of their commuters and businesses respectively. There will be less public expenditure on the fringe-developments. Since most of the nation's land will be owned, access to it will be more restricted and there will be less pollution from the dumping of waste products on "empty" sites. Land prices will stabilize and the "business- cycle" (which comes from land speculation and its price collapse) will disappear.


There will be more new investment from private savings, the earners of which will be less burdened by income tax etc. More of them will be able to operate their own businesses. Thus the general public will have more control of industry, whilst the capitalists and land monopolists will have smaller incomes and less power. This will modify the structure of the macro-economy by the wider spreading of the investment in industry and by the encouragement of competition without slowing national growth. In fact economic progress will increase due to the smaller amount of restraint on the use of our Land and by the better use of what has already been invested in our national infrastructure etc.