Asking ‘what’ instead of ‘who’ for raising public revenue

It would appear to me the vast majority of people – whether you’re talking about economic schools of thought, political parties or disgruntled citizens – are giving their attention to ‘who’ to tax.  Of course once the question is asked there is only one answer that will not have a politician kicked into oblivion or an individual branded as uncaring.  Yes you’ll even hear Cameron and the Tories on BBC’s Question Time agree that the ‘who’ to tax are ‘the wealthy’ and ‘big business’ – and before you run away I’m not saying that’s wrong.  What I’m suggesting is that by asking the wrong question we’re never going to get to an answer that has the potential to fix things.

Senior advisers to Chancellor Angela Merkel are suggesting taxing property rather than ‘levying’ bank accounts* if and when Spain (or whichever is next to fall) seek another bailout.  They seem to be coming round to the idea that raiding peoples’ bank accounts is stupid not least because the smart will simply take their money elsewhere.  So with ‘the wealthy’ as the ‘who’  to be targeted they’re flailing around trying to find ways of getting money from them and have for the time being landed on property.

Proponents of Land Value Taxation (LVT) – what I’m going to call the Location Charge** – like this because it is a big step towards a solution that could work.  But even if it works in terms of raising revenue whilst simultaneously stimulating the economy (which is what a Location Charge does) it will fail for as long as its intended purpose is the taxing of wealthy people and multinationals  because many of these intended targets do not hold a high proportion of their wealth in property – and are even less likely to if such a policy is on the cards.

But what if instead we gave our attention to ‘what’ to tax?  What if we recognised that introducing a charge on the value of land would bring vast swathes of redundant (development) land into use, would allow for an immense reduction if not abolition of all (other) forms of taxation creating an enormous economic stimulus and would lower land values thus enabling those starting their working lives today to have a chance at buying their own home?***

Then the ‘who’ doesn’t matter.  Of course there is a ‘who’ who will catch the brunt of it and it is land owners in the highest-demand areas.  These are the estimated 20% of tax payers who would, even if all other forms of taxation were abolished, be worse off under a Location Charge system.  Labour supporters of LVT like that because generally speaking those land owners are very wealthy so it ticks the right box.  But it’s not the point.  The land has its high value in those locations because of the economic activity in the vicinity.  It is because of the activities of employers, workers, shops and service providers – and of course public services such as hospitals and the police (how long would Mayfair properties retain their value if there were no disincentives to burglary and kidnapping?) that there is such a high demand on that land and subsequent high value.  The current incentive to get a piece of land and sit on it on the almost guaranteed long-term assumption its value will increase will with a Location Charge no longer be attractive.  The owner will no longer receive the ‘free gift’ of increased value provided by those I just listed and instead landowners will be incentivised to make most efficient use of the land, releasing development land for building on etc.

As difficult as it may be for many, could it be time to let go of the idea that the reason to tax someone heavily is because they earn a lot or have got a lot of money?  Could you live with the idea that it’s OK that a very rich person who doesn’t want to pay simply sells their property if in the act of selling the property they are making it available to someone who will pay?  Could you live with Starbucks not paying huge amounts on their profits if instead they had to pay ‘only’ on the value of the land of their premises****?

A Location Charge is as good an idea now as it was when Henry George proposed it and when Lloyd George first tried to implement it.  But as persuasive as the economic arguments are the focus is too often on ‘who’ (for Lloyd George it was a means of getting at his enemy, the landed gentry).  If we can let go of this fixation with seeing economic justice as ‘getting more out of the rich’ then we can finally get beyond the politics of envy and start working constructively, dare I say ‘together’ towards solutions.  It’s not a matter of ‘us’ v. ‘them’, it’s simply a matter of what makes sense 🙂

* I’m really not trying to put off readers but I’m finding it funny that the first link in my blog is to the Telegraph with a picture of Merkel and Cameron on it!

** because in my book it doesn’t qualify as a tax – but that’s another story for another time.

*** Again, I won’t here go into the nitty gritty of how and why LVT works.  My point in this piece is on asking a helpful interrogative (what) rather than one which will never work (who).

**** It is not coincidental I chose Starbucks as an example because we all know the kind of location they go for for their premises.  What the Location Charge ensures is when they do take a prime spot thus depriving everybody else of the same spot they contribute accordingly.  And from a practical perspective it has to be easier than trying to get the world’s tax jurisdictions to work together to try and ‘corner’ them into paying on the basis of the profits someone deems to have originated from their UK operations?

Edit:  I got a load of questions about this from a Redditor over on which I’ve had a go at replying to.  If any Geosits with a deeper understanding fancy popping over to give some better answers you’d be most welcome 🙂


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