Tax Policy

Hat tip to US Georgist tax researcher "Taxpayer" who highlights that Fred Harrison has made a seven or so minute introduction/video advert for his book "Ricardo's Law: House Prices and the Great Tax Clawback Scam"

If you want to understand a bit about just how unfair a tax system based on incomes is, have a watch, and hopefully buy the book - it goes into a lot more detail and will leave you I am sure convinced of the place of LVT.

Anyone who knows about the controversy surrounding Lloyd George's 1909 budget will know that the House of Lords fought tooth and nail to prevent the most important fiscal measures in that budget - Georgist Land Value Taxes - from being implemented. They fought so hard, and were prepared to give up so much, that they emasculated their own power by accepting the first Parliament Act, rescinding their historic rights to overturn anything the elected chamber sent to them - most especially finance bills, in return for their aristocratic land wealth remaining immune as far as possible to the tax collector's predations.

For those of us who still harbour ambitions to complete Lloyd George's work in this area, the past few weeks, and in particular the furore about Inheritance Tax have been very depressing. For we have been witnessing the fight to repeal one of the few measures of land taxation L-G was able to get passed.

The landed interests of his day, represented by the Lords and the Tories, did not want land taxed on disposal, they refused to participate in registering all land to make annual land tax feasible, but they could not resist, ultimately, the calls for a more general taxation on passing an estate down the generations. Though it aimed at all accumulated wealth passed down, it was aimed at land wealth, and the landowners felt that they might get away with it by selling more liquid wealth on death to pay the taxes and keeping their privileged position as landowners.

Now the landed wealth of the country is spread more widely, and the calls to abolish even this small remaining part of the People's Budget are being made in the name of the much wider community of landowners, owner-occupiers. And so they are much more popular calls - many want to hope that they will one day be "accidental property millionaires". And even a Labour government is prepared, as they have shown today, to accept those calls and try to take the family home out of Inheritance Tax for good.

But the arguments made by Lloyd George and Winston Churchill and others around 1909 explaining why land was a good asset to tax - better, say, than incomes or shareholdings - are just as relevant today, notwithstanding that far more of us today, indeed a substantial majority of the population, have some interest in land holdings. The nature of land value and where it arises from has not changed just because more of us own some of it. It is still, as Churchill pointed out a wealth born out of monopoly and restriction of others needs and desires.

We must rework those great speeches to fit with an economy in which land ownership is more widespread and in which, as the past few weeks have shown, those millions of new landowners go through life utterly unaware and uneducated about where the value of their home comes from, who creates that value and how, and, as a result, sincerely believe that it's theirs to keep, merely the result of their good fortune in buying a home when prices were lower than they are today.

We will never produce a just and equitable society without recognizing "land" in its more general economic sense as a factor of production that is the birthright of us all and is the sink in which excess unearned profit collects - depressing the returns to both labour and capital. All the attempts today of Chancellor Darling to close loopholes and attack income abroad and so on are merely making the system more complicated, and his attempts to exclude the family home from Inheritance Tax the complete opposite of the philosophy of his Labour forebears.

We would, of course, prefer not to wait till someone dies to tax their land value, preferring instead to replace taxes on healthy economic activities such as work and investment in productive industry with annual land taxes, but we should also not be effectively repealing the few opportunities we have of capturing land value without replacing them with better ones. 

Spot what is wrong with this...

Adam Smith Institute Blog:

Taxing times

By Dr Madsen Pirie in: Tax & Economy •

I had a piece in the Telegraph business section on Wednesday, comparing Gordon Brown's tax policy with the maxims set down by his illustrious fellow-countryman, Adam Smith. Smith had said that people should pay taxes in proportion to income, that they should be certain rather than arbitrary, that they should fall due when they could conveniently be paid, and that they shouldn't cost too much to administer. I suggested that few would give the Chancellor four marks out of four, given his stealth taxes and his steady tax increases.

Much of my article was of steps which could be taken to simplify taxes in Britain, starting with the harmonization of income tax and national insurance. I also suggested that capital taxes could be harmonized, and put in line with income tax as well as with each other, absorbing the much-disliked death tax. The complex system of tax credits put in place by the Chancellor could and perhaps should be replaced by a simpler negative income tax. Out could go all the tax exemptions, allowances and tax credits accumulated over the years like junk in a store-room.  read more »

The Office of Fair Trading today announced that it was to conduct a review of the UK's house-building sector. One of the aspects of the market it will be looking at is:

how land that is suitable for development is brought through the
planning process...and...how land with planning approval is
converted into new homes.  read more »

I've been doing some research on the details of the 1909 budget and how it was promoted and received. And one of the most fantastic resources I've found, which anyone interested in the debate between "economic liberalism" and "social liberalism" ought to have a look at is the Project Gutenburg online edition of Winston Churchill's "Liberalism and the Social Problem".  read more »

Tony Vickers and Andrew Duffield's Liberator has caused a little consternation on the internet. Make up your own mind; we reproduce it in full here...

Seasoned Lib Dem Conference-goers agree that the tax debate at Brighton in 2006 was one of the best since the Party was formed. The motion was passed by a clear majority, rejecting a 50% top rate of income tax and embracing a “Green Tax Switch” from productivity to pollution, with a call for “further policies on land taxation to be developed, including consideration of the Lyons Review when it is published”. Note that it did not merely ask for existing policy to be further developed.

You didn't have me down as some happy clappy evangelical did you? No, you'd be quite right. So this is just a little celebration of "Tax Freedom Day".

A new book aimed at 'grassroots politicians' who want to quickly understand why Tax Shifting is today not only more vital than ever but also more achievable is due to be published in time for the Party conference season. An on-line draft called Tax Shift Now! - Regaining Our Common Wealth has been available for 18 months but now the author has found a publisher for the printed version.

In which Mr Churchill, in a speech at Edinburgh on July 17th 1909, explains Lloyd-George's tax switch - from income taxes to land taxes. Courtesy of Project Gutenberg's rendeing of "Liberalism and the Social Problem"

Copiously researched and crisply but elegantly written, Braund has put together a series of arguments addressing the modern conundrum of growing poverty alongside growing 'progress' - Tony Vickers reviews Mark Braund's "The Possibility of Progress"