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As Secretary of Lib Dems ALTER (Action for Land Value Tax and Economic Reform) I have been trying to follow from the sidelines the progress of the Tax Commission. Recent discussions within ALTER suggest that for a variety of reasons the Commission may be shying away from the idea of a land based tax in the final recommendations, or that, at best, they see a possibility of a minimal form of LVT as if to oblige one lobby.

So I wanted to make a plea for people, particularly Tax Commission members to which this document will go in a slightly modified form, to take one more look at the claims we proponents of LVT make. To ask Tax Commission members and others whether they think they have had enough information to enable them to evaluate these claims and prove or disprove them.

Most of all it appears to this LVT proponent that they have either not grasped the so called “narrative” behind Tax Shifting from a predominantly income, capital and transaction tax base to a land and natural resource use tax base. Perhaps they have and have dismissed it and if so, I would be interested in the grounds on which they have done so.

The Tax Shifting “narrative”

Fairer taxing - working, making money, trading, providing the investment for someone else to work and make money in which you share, are all economically beneficial behaviours. Yet our system predominantly taxes these particular (and quite arbitrary) measures of “wealth”. Income taxes, corporation taxes, capital gains taxes, VAT and other taxes on transactions discourage these economically beneficial behaviours.

Because land value is created not by the owner pro tempore of a particular site but from the unique set of social, commercial and economic activities around it and the investment in them the speculative change in the value of land is not down to its owner’s work or investment in that land itself. It is taxing a monopoly (that location’s unique set of circumstances) of a scarce and finite resource that creates an unearned wealth increase (or indeed decrease) on the part of the owner.

Smarter taxing – we don’t offer a tax that merely “raises” money for government to spend. All tax mechanisms tend to modify behaviour. LVT however discourages behaviour we want to discourage – inefficient use of land and other scarce finite natural resources.

Since the landowner pays the tax whether or not they use the land for its optimal planning use, underuse is relatively penalised. Underused land is brought into use so it can make a return that justifies the tax burden. It encourages people to consider whether they use all the services and benefits their site gives them.

Liberal taxing – LVT is ultimately an obligaiton that can be controlled by the payer, so making it one of the most liberal tax mechanisms. If you want to save on tax, you can move to an area of lower land values and therefore lower taxes. Just as you can plot isobars on a map and watch high pressure move around to fill depressions, so you could plot land value scape and watch as the “smart money” seeks to minimise its tax liability by moving to areas of lower land values.

A tax for the globalized world we now inhabit – in a world where distances have shrunk with technology, where we can trade directly with individuals on other continents, where we can more easily hide our incomes (one open source software developer I know can effectively live on “donations” through his Amazon wish-list, never receiving a cash income from anyone), the state will have to become ever more intrusive to keep a track on incomes and transactions if it wishes to rely on these for a tax base. The land is pretty fixed however; once registered it’s difficult to deny or hide ownership completely. Its value pretty accurately reflects the value of supply side inputs around that location. It’s a non-intrusive, objective base for taxation.

An essential “eco-tax” – it encourages regeneration of our built environment (because it doesn’t tax improvements) – speeding up the redevelopment to modern environmentally essential technologies. By reducing capital values of house prices a household is better able to compare, for example, the relative merits of living far from work in a home they can afford but wth big fuel taxes to commute, or having a home they can afford close to work with a larger annual land tax bill but no fuel costs.

To recap, what we are promoting, in “manifesto speak”, is a shift in the tax base that will:

• make your tax bill controllable
• reduce the overall tax burden and the size of the state versus the individual and the market
• make housing more affordable and better match empty homes to households in need
• reduce the overall burden of debt in society
• ensure efficient use of land and prevent sprawl
• encourage our built environment to move with technological advance
• promote investment in areas of low economic prosperity
• recoup public investment in infrastructure directly from those who benefit from it in unearned wealth increases

…through a system that:
• taxes monopolistic windfall gains rather than hard work and enterprise
• is simpler to administer
• is more difficult to avoid/evade

Has the Tax Commission investigated such claims, understood them, and dismissed or disproved them? Or is it simply skeptical about something that makes so many wide ranging claims? Will they have done their jobs properly if they do not investigate such claims? Can we not steel ourselves to say “we have an idea even better than LIT” rather than worry about negative press for ditching it?

Most of the claimed effects are, after all, sound Lib Dem policy “desirables”. For example many housing professionals think that LVT is the best or even only longer term solution to current housing availability and affordability. We were not permitted to discuss LVT in our Housing Policy Paper discussions, as we had no fiscal remit, but were assured it would be considered when the party did look at taxation policy.

Let’s not forget in this year when we’ve been celebrating the 1906 Liberal Government, this is the tax that so enraged the vested interests in our society a hundred years ago that they gave up most of their “born to rule” birthright (Parliament Act 1911) to see it withdrawn.

Technorati Tags: land value tax, lib dems, tax shifting, taxation

Charles Kennedy was presenting a Channel 4 "Thirty Minutes" tonight on "Politics and Power". I can't find it online, so if you missed it (as I missed the first five minutes being suckered in by those other great Liberals trying to rearrange the county in the Madness of King George) all I can find to give you a flavour is the Radio Times write-up:

Charles Kennedy, former leader of the Liberal Democrats, examines the problem he sees as being at the heart of British politics: the way politicians too often sacrifice their principles in the pursuit of power. Speaking about his experiences fighting six general elections, Kennedy compares notes with parliamentary colleagues including Michael Howard, Ian Duncan Smith, Baroness Jay, Norman Tebbit, Baroness Morris and Jonathan Cruddas.

If it wasn't actually intended as a reminder to party members heading off to conference in four weeks or so of what we (were forced to) gave up only eight short months ago, it certainly succeeded in being so for me! Charles came across as we fondly remember - frank, honest and genuine. A real "home boy" still representing the constituency he grew up in. The man who, for all his faults and fumblings at times, managed to woo the electorate with his fireside chattiness.

I missed him setting out the hypothesis, but he diagnosed many of the problems lots of us feel about politics today - disengagement, lack of trust, unwillingness to debate with the public some of the biggest issues - especially at elections times - the concentration on what a tiny number of floating voters in a small number of marginal constituencies think and want to the exclusion of the majority of communities in the country, even the whips system keeping MPs on the party line regardless of what they honestly feel and whether their constituents agree.

He said that reform was necessary. IDS, I think it was, argued that there was no such thing as a General Election nowadays because of targetting marginal seats. Everyone seemed to agree. One problem was that parties did not want to appear to be divided on these hot issues (they chose Europe, nuclear power and Trident, but it could have been any of a whole load of other big issues - environment, drugs and so on), again especially at election times. And it made me wonder - how would it affect my commitment to an election campaign, say, if these big debates were aired and I did stand divided from my party on something that I thought very important.

And as I thought about it, I found that Charles was making the perfect argument for electoral reform, and in particular STV voting. It's a little ironic as I know some Labour electoral reformers felt that Charles was pretty much responsible for us letting the long grass grow around PR as an issue at a time when they could have built a lot of support for reform in their own party if there was pressure from us and the issue kept at the fore.

Under STV you have larger constituencies with several MPs and you get to rank the candidates individually in order of preference on the ballot paper. Say Oxfordshire could be one instead of six constituencies, returning six MPs altogether. In order to get yourself a better chance of being elected than your party colleagues you've got to make a name for yourself, differentiate yourself a little from them. So you might be generally a Tory voter, but are strongly pro-Europe, so you can get to choose the Tory candidates who are least anti-Eruope and maybe throw in a vote for a more free-market Lib Dem as better than the more Eurosceptic Tory candidates.

So it would give the candidates a reason to highlight their individual issues where they differ from the predominant party line, an excuse for when the whips try to berate them for voting honestly on those issues when the pressures are on to vote with the lobby fodder. In short, more open, honest and public debate, a closer approximation to the overall political preferences in the nation as a whole and no safe seats to abandon to concentrate on targeted marginal constituency.

A great pity then that Charles did not take the opportunity to prescribe that remedy. But I do hope to see more of him, soon. Not just the party, but the British political scene is the poorer for his not being as big a part of it as he was. And I say that as someone who put him sixth (if at all even possibly) in my preferences when he was first elected.