Last week Vince Cable seems to have unilaterally added to Lib Dem tax plans in response to repeated more-heat-than-lght stories in the media about private equity bosses and their tax treatment, "non-domiciles" and their property in the UK going untaxed and the continued cris de coeur of middle England against Inheritance Taxes on their homes. Later in the week it seems George Osborne joined in, on what must be pretty unfamiliar Tory territory.

And then yesterday there was a story on the BBC about how buy-to-let property owners are able to avoid up to £2bn in taxes by offsetting their mortgage interest against their rental income before tax.

This seems to me to be something of an unhealthy return to the politics of envy, where the only question the taxman asks is "how much have you got?" As I wrote last week at the 1909 Group website, our Liberal forebears wanted to change that attitude. They realised that "equity" in the tax system was not solely a question of how much someone has, but just as importantly of how they got that wealth. Whether it was through healthy economic processes, creating new wealth, or by exploiting such things as protectionist policies, negative externalities or land and other natural monopolies.

Take supermarkets as an example. Private Equity firms have been circling Sainsbury's recently. Though they may have been seen off by other investors such as Robert Tchenguiz, he himself, a noted property tycoon, said he was investing in a "property company with a retain business". Indeed, with a Stock Market capitalization of £8.7bn, estimates value their property estate at more like £10bn - more than the whole business! If someone were to take over Sainsbury's they would not be creating new wealth but releasing the embodied profit of land ownership.

Many new entrepreneurs are basically leveraging land values to make a killing, hiding behind diverse operating businesses. INTO University Partnerships is an international English Language teaching business, but the partnership deals it forges with universities all seem to revolve around land acquisition and becoming a successful and profitable landlord to the students it brings from all corners of the planet. Last year, the HBOS banking group attempted to become a major player in the UK house building industry, pipped by Barratts in a contested bid for what had been the fifth largest house builder - this last is a double whammy - not only do they get to build your home, and capture the land value profit for themselves, but they get to charge you for borrowing the money to pay them for that land!

As to "non-doms" why should only they be penalised for owning property in the UK? Why not a land tax that would fall on everyone regardless of domicile status and instead of income and other capital taxes, including the hated Inheritance Tax? The non-doms would not be able to avoid it - and neither, incidentally, would the company involved in the outsourcing of the HM Revenue & Customs property estate, Mapeley, who subsequently off-shored the ownership of the property to avoid any taxes on it.

Anyway, the point is there are ways of making a tax system which is fair and equitable, that is not complicated, and doesn't seek to fleece people just because they have made money, but on the basis of how they make that money, and where that wealth is accumulated by processes like land ownership, where the value is created not by themselves but by others' need for their monopoly locations, they will be taxed the most, automatically, and according to market valuations not intrusive tax assessors. Land Value Tax.

Technorati Tags: vince cable, lib dems, tories, land value tax, Henry George, property tax, george osborne