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Sir Josiah Stamp, reckoned at the time to be the second wealthiest person in Britain, sometime Bank of England director, Chairman of the LMS railway and Liberal economist, winning a 1912 prize for an essay about taxing the "unearned increment" instead of incomes, is quoted as saying:

"Banking was conceived in iniquity and was born in sin. The bankers own the earth. Take it away from them, but leave them the power to create money, and with the flick of the pen they will create enough deposits to buy it back again. However, take it away from them, and all the great fortunes like mine will disappear and they ought to disappear, for this would be a happier and better world to live in. But, if you wish to remain the slaves of bankers and pay the cost of your own slavery, let them continue to create money ."

Particularly apt this week I should say. You see, what's been happening this week should make most of us take to the streets in demonstration and revolt; if only we understood our unwitting role in the gargantuan pyramid selling fraud that's been playing out in global financial markets this last few weeks and who, ultimately, is going to pay in the fall out.

Follow the money trail...

The economy needs money to function just as we need air to breathe. The more we produce, the more money we need circulating to consume that production. That production is our collective creditworthiness - the measure of how much wealth we are all creating and swapping with each other. We trust the money that facilitates those swaps because we are told to. The green/blue/purple crinkly stuff, of which there exists less than £50 billions' worth, says on it "I promise to pay the bearer on demand the sum of..." as that most potent national icon, the monarch, smiles benignly up at us in reassurance.

So, do we have a benign national institution that keeps watch on economic activity and creates the currency to match our national creditworthiness? Do we hell. We have an Old Lady that the monarch once gave a monopoly to to create money and sell it back to him who can no longer be bothered to do the job and has subcontracted it to private banks. She keeps an eye on all the economic activity and so on, she has all the figures and tools needed to do as good a job as anyone else, but instead of actually creating money into productive circulation she lets that cartel of private bankers know how much she thinks should exist by telling them the rates of interest they should be charging for actually lending the money into circulation. They create nothing except numbers. Pixels on a computer screen that we all trust we will be able to turn into those "promises to pay" whenever we need it.

These bankers, being a conservative breed at heart, not wishing to lose their investment, look to lend to those most likely to pay them back with interest. But even making such a risk calculation based on the prospective borrower's ability to repay, they look also to take some security, something they can sell to get as much of their money back as they can if the borrower finds he can no longer repay. And what's the safest security? Safe as houses? Well, houses of course, or more particularly the land value it sits on (a house, like any other capital good depreciates and needs constant maintenance to hold its value).

There's very little, in the ordinary course of things, less likely to go south in value than land, except perhaps very small specialized bits of land like gold and other rare natural resources. Keeping those rates low makes the money borrowed more affordable. More people think they can afford it. The banks lower the interest cover they're prepared to take by increasing the multiples of income people can borrow. Still the insatiable economy needs more money circulating, so the banks, usually not the front liners with big reputations to keep, go chasing more and more marginal borrowers. The house price/land value increases make people who don't own nervous that they never will if they wait as prices rise, so the age old human natural inclination to want to "own" the place you live in takes over and you stake more than you could comfortably afford in less benign economic conditions on getting your foot on that housing ladder.

The more front liner banks are however prepared to back up this borrowing with "managed risk" packages of these loans. But when the Old Lady gets a bit nervous about inflation at the centre of this web and decides money should be more expensive and the cartel operators duly follow suit, whilst those of us with enough simply cut down on spending now to afford the higher interest payments, those of us who were only just able to afford to get on the ladder at the lower rate now find it impossible and stop paying. The image from "Life in the Freezer" comes to mind of chin-strap penguins trying to get ashore on a south Atlantic rocky crag where the unfortunates that only slightly mistime the wave scrabble about and fall back into the thrashing ocean.

The security, the house and its land value, takes a while to turn into liquid cash, the buyers of the "managed risk" packages that back up those loans see the prospect of getting the yield they expected diminishing and tighten their belts. This whole house of cards rests on every card in it honouring their obligations every night and so suddenly the Old Lady awakes, reaches over to the button that is all it takes to create credit into the system and rather than the private bankers see their stockholders losing their investment the retail debts of dubious morality they marketed and created are magically covered.

Excuses, excuses...

Of course the banks and monetary authorities give out all sorts of excuses that, because of the mystery they have created of smoke and mirrors and the awe with which we will believe the sort of people who are obviously so brilliant they merit multi-million pound a year bonuses and management fees, us mere mortals swallow out of fear of recession, slump, unemployment, meltdown...

The "sub-prime" market is made up of feckless folk who really should have known better that they really couldn't afford to borrow. They fail to explain that it is being relentlessly sold to them through aggressive marketing and in the hype that they might miss the bandwagon if they don't sacrifice now to get on the rapidly rising housing ladder, rising of course because of the amounts of money they've created over the past few years chasing the monopoly of desirable locations. Not only are these sub-prime chin-straps cast back into the tumultuous briny, but they are pulled down by the under-tow. Not only have they lost their home, and whatever credit rating they had achieved, but now they probably also owe money on something they no longer own. They are not just back at square one, but off the game board for a good long while.

The liquidity injection protects the creditworthiness of the pound in your pocket. They fail to tell you that its creditworthiness has only been compromised because the subcontractors that actually create the vast majority of it took bad investment decisions in the pursuit of ever more profit for their shareholders.

That we're all protected because we are all, or nearly all, shareholders in banks through our pension funds. They fail to tell us that the vast majority of non-housing financial assets are held by a tiny minority of the wealthiest people on the planet and that the bottom third or so of folk, including, most likely, the hapless sub-prime mortgage market, do not own any financial assets. Besides, the propensity in the UK for pension funds to hold bank shares comes at least in part because through all the special privileges involved in creating our money stock out of nothing and the protectionism in having a sugar daddy in the form of a lender of last resort that will ensure the whole thing doesn't go down the tubes they are usually a pretty dependable investment.

That we need to prevent a run on equity markets becoming a rout. Of course they tend not to point out that the underlying business prospects of the companies facing huge write-downs in their values because of the "dash to cash" to shore up the credit markets have usually not changed. That these values are being slashed by large volume gamblers for whom the shares in those companies are little more than poker chips to buy and sell, swap into other assets and so on in technical trading, game theory scenarios and arbitraging between all but unrelated markets.

And that, dear reader, is why the collective noun for bankers is "wunch".

A call to arms...

This kind of money system, based on debt and causing the very asset price bubble that brings about its own collapse is first and foremost unsustainable. Every time there's an expansion it's the big players, those on the inside of that smoke and mirror fraternity, that gain by skimming off the cream from their ever increasingly precarious plate spinning, and those on the outside, with everything to lose, who get dumped on. And our governments collude in this iniquity.

If it weren't for this last fact, that it's always the little man that loses in this, I'd be hoping and praying this weekend that the whole house of cards does collapse this time and we are forced to find a different way to monetize our national creditworthiness for the future without creating these artificial asset bubbles and mountains of debt.

Yet there are a couple of ways to use the current turbulence to effect far-reaching changes so that our money system becomes more stable. Depending largely on whether you view the world from the market or the state point of view:

We could on the one hand break the link between the state and the real creators of credit, the commercial banks, by refusing to be the lender of last resort, by completely privatising currency so that what and whose money we use and trust most will be down to which of the commercial banks are best managed. Instead of Dollars and Yen, Pounds and Euro we might use Barcs or Honkers, BOSses, AirMiles or CitiCash right around the globe. Those with a favour for market solutions would point out that this removes the state protectionism, removes trade tariffs (by abolishing national currencies in favour of competing, global, commercial currencies) and crucially does not involve anything that could be connected to government.

On the other hand, for those of a more statist constitution, or perhaps just too timid to sever the ties between crown and the "coin of the realm", there's another possibility - the C H Douglas style national credit authority. Controlled by statute rather than by government, such a body would do as the Bank of England does now in monitoring economic indicators and deciding whether there should be more or less money in the system to cope with the economic climate. But instead of subcontracting the power of new money creation to a cartel of commercial interests, they would create all new money and be the lender of first resort to a banking system reduced to brokering loans between people who have cash to invest and people who need that investment. The national credit authority makes a profit as it does so on the lending of newly created money that costs it little or nothing to produce that can then go to its shareholders - the people of Britain, as a dividend, or our representative, the government, as money to spend.

And we could begin to make this latter change right now, with no legislation needed and no expenditure required. Instead of buying back all the liquidity central bankers have put into the system these past few days when markets stabilize, they could just increase the reserve requirements by the same amount, forcing the commercial banks to keep the debt-free money and restricting the new debt-money they can create on the back of it. Over time this reserve requirement could be increased until the majority of money is created by the national credit authority in response to economic growth needs.

But in order for there to be a will for such a thing to happen, people need to understand how skewed towards those who already wield wealth and power the current protectionist system is, and who loses...us. Nearly all of us. So why aren't we marching? We aren't even daring to discuss it. We're accepting that the situation financial markets are in today is because of feckless borrowers wanting to better themselves beyond their means. And that we all have to take a bit of pain for the irresponsibilities of our fellow borrowers.

And THAT, dear reader, is also why the collective noun for bankers is "wunch".

Technorati Tags: credit crunch, debt money, fiat money, monetary reform

ConservativeHome on Sunday included this little piece of hubris. Now, it is true that, somewhat inexplicably to me, Gideon's announcement about raising the Inheritance Tax threshold, something that everyone seems to acknowledge affects just 6% of estates (about 30,000 families each year) currently, seems to have done them a lot of favours, positioning them in the public perception at least as a tax cutting party.

But it would be quite wrong on a number of levels to say that they are lowering taxes:

• First, they are simply shifting the burden. Sure, it is shifting from a few relatively wealthy households (with average house prices once again below £200k having a housing asset over £350k is still in the top quintile nationwide) who can and generally do vote to a very tiny number of households who generally can't and don't vote. But shifting, rather than cutting, it undeniably is.
• Second, even if it were not the "revenue neutral" shift (after all they have also promised to stick to Labour's spending plans so need the money from somewhere) it would amount to a tax cut of just 0.88% of the government tax take (that's central government by the way - i.e. excluding local taxes). If a party that has regularly claimed to be managerially superior and capable of saving government wastage cannot "lose" less than a measly one per cent of its revenue in efficiency savings, they're clearly not the competent financial managers they would have us believe!

It astonishes me that a measure that would be felt my fewer than 30,000 families per year can be spun as some major step forward in tax shifting, let alone tax cutting. Compared to the Lib Dem proposals - abolishing the Council Tax (the tax most respondents found unfair in recent polling by the Tax Payers' Alliance) would be immediately felt by virtually all households; reducing national Income Tax by four pence in the pound would be felt by every individual earning anything more than the personal allowance, the Tory changes to IHT and Stamp Duty on homes, are small fry - mere plankton in fact.

But both parties of course propose changes that are "revenue neutral". Nobody seems to be advocating real tax cuts. And maybe when the population wakes up to this fact they will see through the spin and reject those attempting to hood-wink them into believing they will somehow be much better off. On balance of course, the Lib Dem proposals would leave far more people better off, if they tread lightly on the resources of the planet, for most of our tax cuts are to be funded by increases in taxation for environmentally damaging behaviour and life-styles.

Vince Cable - the best prospective Chancellor by far?

So why is it not us that have made eleven percentage point gains in the polls? For I have to say, compared with either Gideon, Gordon, Balls or Darling I find Vince Cable the most palpably honest and certainly best briefed potential Chancellor of the Exchequer in mainstream politics right now. Might I suggest that it is a lack of clarity, especially about who gains and who loses under our proposals. This was most obviously apparent when Charles Kennedy famously fluffed his interview on Local Income Tax during the 2005 General Election campaign.

Our Green Taxes and local tax reform ideas have been criticized by others:

• as affecting the annual family holiday (wrong - they do however aim to penalize those very lucky tiny few who have the time, lack of domestic commitments and financial wherewithal to take weekend breaks abroad every month or two - where their flight costs pale into insignificance compared with hotel and entertainment costs)
• to hit the poorest households' motorists (wrong again - the 33% poorest households by and large still do not even have access to a private car and would in fact be likely to benefit from the resultant investment and better efficiency in public transport)
• or to greatly increase the income tax of those two young nurses of CK's fluffed interview (still wrong - the four pence in the pound reduction in national income tax is intended to more than cover the Local Income Tax and they won't be paying Council Tax on top).

So why can't we get that across to people? It's a far more compelling package than the Tories and their tax cuts for the rich - which is jam tomorrow for even those who might benefit and jam never for most of us.

Now, you would not expect me to comment on tax policy without mentioning my pet pair of elephants - Land Value Tax and Citizens' Income . I maintain that by adopting the "Single Tax" of Henry George - that is taxing the unimproved value of all land as a replacement for (most*) Income Tax, Capital Gains Tax, Inheritance Tax, Corporation Tax, and, if Europe were to agree, Value Added Taxes and returning most of even that Land Value Tax to the people to spend in the form of "an unconditional, non-withdrawable income payable to each individual as a right of citizenship" (the description used by the Citizens' Income Trust) would so transform our economy and environment that government expenditure could be reduced to just a fraction of the proportion of the national income it is today.

Couple this with monetary reform that would see a national credit authority, free of government and politicians' interference, creating just the right amount of new currency needed by the economy to account for each year's growth in the economy instead of privatised debt creation doing the same job with a lot less stability as recent weeks in the financial markets have shown, we would have virtually no need for taxation at all (except perhaps as a behaviour modifying mechanism)

Pie in the sky? Well, it may be. But surely that sort of promise is worth investigating at the highest level. We assume the way we currently operate - coercive taxation and state capitalism - is the only one possible. It is true that, as the joke goes, in order to get to that fiscal nirvana one would not start from where we are, but the potential attractions are so enormous that we ignore them at our peril. Land Value Tax has some heavy-weight supporters historically - Adam Smith, J S Mill, Winston Churchill, Lloyd George, Albert Einstein, George Bernard Shaw, Milton Friedman and others cannot all have been wrong, surely?

I stumbled across this group of bloggers the other day called the "Low Tax Coalition" .  I considered applying to join their number, but so far as I can see not one of them even dares to imagine the sort of low/no tax economy I set out above.

*I say "most" Income Taxes (and possibly CGT too) because I am becoming more convinced that some of these taxes on (some of) the highest earners may be necessary in the short to medium term to recoup the "embodied advantage" they have gained under the current less fair system. For an example of what I mean, look at the current Sainsbury take-over where the shareholders are about to crystalize property values worth up to around £10bn effectively valuing the grocery business at nothing despite its obvious earnings history and potential.

...on the other hand, the one good thing about the smoking ban is that it brings starkly into the open the fact that the "state" acting in the "best interests" of its citizens can decide and enforce with legislation and criminal penalties what you can and cannot do with your own property. Of course it always has in all sorts of different ways, but at least it's out in the open now.

So we can proceed to Land Value Tax unopposed by those who think it is not right for the state to take some of "your" property wealth yet okay to tell a landlord what he can and cannot allow in his own property...:)

Technorati Tags: land value tax, smoking ban

Over at Lib Dem Voice they've printed a biographical piece from the Directory of Liberal Thought about Henry George, the leading proponent of the "single tax" in the nineteenth century that many of us know nowadays as "Land Value Tax" or "Site Value Rating". Several of the correspondents in the discussion following the article felt that they had never really understood, or had explained clearly and convincingly, what LVT is and why it is such a good thing. So I'll give it a go, though many have tried before me, and no doubt many of them more intelligibly.

Land.

Forget what you might think you know about land. In economic terms land refers to the third factor of production. If "labour" is the work that goes into something, "capital" the wealth invested or expended in producing more wealth then "land", in economic terms, is everything else - "the entire material universe not produced by the application of capital and labour." So yes, it includes the land underneath our feet, but it also includes the air, the electromagnetic spectrum, the cosmos, the mineral wealth of the planet, all in their natural states, natural fertility, self-seeded trees and plants, water and fish and non-domestic animals and so on.

Now, billions that we humans number, for most purposes most of these types of land are either unlimited or of indefinite supply. Some types we don't absolutely need to survive. Others we do need to survive. Others are fixed or limited in supply. As far as I am aware, we are pretty well attached to this planet. Every single human born so far has only had the resources of this one planet to sustain them. And since we need it to survive, then we must all, every one of us, have an equal claim on its natural bounties.

In early human society, hunter gatherer family units or tribes would simply range over as big a territory as necessary to meet their nutritional needs. For some, in fertile temperate parts of the world, this may have been a small area.  For others, in less fertile territory, it might be a large area of rough foraging. But of course this sort of isolation, subsistence living, is not very conducive to human development. Through trade we grow, both as individuals and as communities. And as soon as we come together to trade certain locations become more important as places where people meet and we can no longer justly grab as much space as we want without excluding others. It is at this point that land begins to have...

Value.

The value of "land" is its "rent". Just as the cost of "labour" is "wages" and the cost of "capital" is "interest". When natural resources (land) are in infinite supply, so that anyone who wants to use some of it can just take it and there will still be plenty for everyone else, it has no rental value. But as soon as humans get together in clusters, the further we move away from being a agricultural based economy and as our survival is based more on our ability to sell our specialist labour for enough to sustain us those locations where we form our clusters begin to attract rent, because many people are in the scramble to be in the best location for their market.

A landowner might be able to make more efficient use of his location and fit more people onto a particular piece of land, or they might invest in creating a work of art for the discerning occupier who will pay a premium for quality. But the landowner, as a landowner, does not have to lift a finger to contribute to any change in the rental value of that location.

And when we buy our homes, what we are doing is rolling up all the location rent for a number of years and handing it over, together with the capital value of the buildings at that location, to the previous landowner, and usually borrowing to do so. This is a key concept in LVT - we are already paying this rent either monthly when we actually rent, or up front when we buy (but inflated often by the cost of borrowing to afford it). It is this "rent" value that Land Value Tax seeks to...

Tax.

To me, this is a big misnomer, and causes a deal of confusion about LVT even amongst "Land Value Taxers". The Georgist purist like me intends really for the community to share the rent for the locations that are made valuable by that whole community equally with everyone in that community. Shared equally because, remember, we have that equal right of access to the land as our birthright as creatures tied to it for the very stuff of life, and because we all help to create that overall rent value. We more commonly think of a "tax" as an imposition used to fund government spending. The community sharing of rent is really a way of each and every one of us paying everyone else who has just as much right to make as good use of our location as we do for the inconvenience of having to avoid it because we have exclusive rights to it.

The community in question is the area within which land has rental value - technically speaking "within the margin of production". In some cases that may still be just a single town or city - the desert outside Phoenix, Arizona, for example might well tail off to zero in rental value at the end of the irrigation system pipes. In others, it could be an entire country - for example it could be argued that we are such a small country that London creates some rental value almost everywhere in the country.

The effect of this rent sharing is that those in that geographical community, however big it is, whose productivity - ability to earn - means they can only afford to live in the cheapest locations with the lowest rents will get more, perhaps much more, than they pay out in location rent. Those whose ability to earn enables them to commandeer the best locations will be paying into the community rent fund much more than they get out. And the net effect of all that is that we create an automatic, self-adjusting safety net which, if you have nothing else coming in, should enable you to eke out a basic living on the most marginal, cheapest locations.

Of course many of you reading this actually do believe that government is sometimes the best body to deliver "essential" "public" "services" and will recoil from the idea of giving people a basic income for fear it becomes an invitation to idleness. That's fine. For you, the Land Value Tax would be a way of financing those public services. I will tend to try to persuade you to take that one further step and believe that giving people their money to spend for themselves will lead to better and more efficient services in most circumstances.

The single tax.

Now this is the other side of the equation. Nobody who is serious about LVT's benefits wants to add to the current tax bill. LVT must replace other taxes if it is to achieve its most important benefits - of freeing up labour and capital to invest and work in productive wealth creation. And so Henry George called it the "Single Tax" and his adherents were called "Single Taxers". Henry George reasoned that virtually all other forms of taxation constituted tariffs, and therefore barriers to wealth creating free trade. All except tax on land in the generic economic sense affect the resources that can be applied to productive enterprise - labour, capital and, in the end, consumer spending.

And remember, the best thing about all this is that most of us, that is everyone who is still paying a mortgage or anyone who rents anyway from a landlord, are already paying this "single tax" in the form of location rent to our landlord or previous landowner, who have done nothing as landowners to earn that bit of the rent. So reductions in any of these other taxes, such as employers National Insurance, Income Taxes, VAT and capital taxes, feed straight through into more money in our pockets. And not only that, but all the disincentives to work and creating employment created by our complex income tax system and the problems associated with benefits withdrawal rates and tax credits and so on, will be removed.

Nor must you believe that the "Single Tax" only refers to a tax on the rental value of one type of land. There are other finite natural resources that we can rightly claim belong equally to all of us but which attract an economic rental value because they are scarce amongst a given community of users. One can argue for a "Land Value Tax" on the exclusive right to transmit on particular frequencies in the electromagnetic spectrum. Or to fly through our airspace at a particular time and place. You could even describe some mechanisms for taxing polluters as a specialized "Land Value Tax" - though it may not be the best way to deal with such issues.

Common Objections:

"We've already been taxed on the money we bought our home with"

Actually, you've been taxed on what you have paid your rent with - whether you actually rented, or bought from the previous owner by paying over several years' rent up front. Any rise(or fall) in your property's rental value by the time you come to sell it on is mostly accounted for by changes in the location rent, to which you have not actually contributed, as a landowner anyway.

But think of it in a post-LVT world - you'll have paid substantially less for your home, you'll have borrowed substantially less to do so, and you will not be paying all those unproductive taxes on income and capital anyway.

We have plenty of "double taxation" in our current system anyway. I pay tax on my income, but then when I go out and spend my post-tax income on most most goods and services I will pay VAT at another 17.5% and possibly duties. And this is an ongoing double taxation - at least with LVT we're only talking about this effect being felt once - at the implementation date and then not again because all the other taxes will have been ended.

"Land rich, income poor - the "poor widow bogey""

As long ago as 1909 Winston Churchill used to be taunted by the Tories with what he called the "poor widow bogey" - the supposedly unbeatable argument that LVT would be wrong because people who happen to have seen the rental value of their location rise will have to pay more in location rent without necessarily having more income with which to do so.

First, again, think of it in a post-LVT world - you will have borrowed substantially less to acquire the various places you will have lived in your life and you will be paying, if you are efficient in your use of land at least, less in tax in the form of location rent. You will have more to save and invest in productive assets other than housing. If you choose to save for your retirement an amount that allows you to continue paying your location rent till you drop, fair play to you. But the evidence is in fact that there is a huge unmet demand for people downsizing nearing retirement (indeed it is mostly the best off pensioners who are able to do this at present). LVT, because it makes the market in land and locations much more reactive to community change, will more than likely encourage this need to be met.

But in the implementation there is some evidence that a very small proportion of pensioners would indeed face larger bills than they have at the moment. For those Land Value Taxers who would prefer to implement LVT slowly, increasing the rate of the tax over a long period of time, their answer would be to allow such people to roll up their tax bill until they do eventually sell up and move or for their estate to pay. I, preferring the big bang approach, would simply compensate people for the lost land value in bonds which they can use to pay their tax into the future.

"Confiscating the value of our biggest asset"

It is true that implementing the full rent sharing I outline above will wipe out the capitalized rent values that one is accustomed to seeing as part of the "sale price". And it is also true that this will hurt those most recently on the ladder and having just borrowed to pay for that up-front location rent.

But the home you live in is not really "wealth" in the conventional sense. Until you are at the stage of downsizing or selling up completely, the value of your home really only matters in respect of its relationship to the price of your next one. For most of us, for most of our lives, our shelter is a cost of living - either in rent or mortgage payments. And if we have slashed the cost of buying by removing the land value, then we have also slashed the cost of your next home in similar proportion.

Again though, in transition from one system to another, with my big bang approach, those who lose out can be compensated with bonds with which, for example, they could pay off any outstanding mortgage over the new land-free market value. If you take the slower incremental implementation mechanism, again, the loss will be less all at once; indeed you could structure implementation such that it effectively only capture future rises in rental values.

"Impossible to value"

This is the "experts' objection" that it will be too cumbersome to invent a system that values the rent for each plot of land every year. And more than that, that it will be arbitrary. But we know from evidence in on the ground pilot studies that we only actually have to value about one in ten plots that share common characteristics in the form of access to services and infrastructure say. It's also not really too different from the current system of self-assessed income taxes. A game is played out every year with taxpayers trying to minimize their liability and the HMRC trying to catch people out hiding some of their income. And here there is no market to help.

The average mortgage lasts eight years. That means that somewhere around 12.5% of our owner occupied housing is valued every year just to get a mortgage valuation. More in recent years where people have been encouraged to chop and change their mortgage even though they are not moving home.

And then there's the rental market. There will always remain benefits to renting for some in the population - short term workers and so on. So there will remain a rental market. This presents yet more, and really very accurate, evidence on which to base valuations- more accurate once you take away the capital gains aspect of land ownership as landlords will only be investing in a rental stream.

And ultimately the market will still highlight areas where the assessed location rents are higher or lower than investors think they should be. If buyers think the current rents are too high, they are going to offer a discount on the capital value of the buildings themselves and if assessed rents are adjudged too low by the market, buyers will offer a premium over the building values in order to get the more desirable location at a lower location rent until the location rent is adjusted the next year.

And finally, let's not pretend that this is new - we had Schedule A imputed rent on our homes on our tax returns until 1963.

"Concreting over surburbia"

There is often concern that when Land Value Taxers talk about our system leading to more efficient land use we mean that every available inch of land will be developed. There is no reason to think this in reality. It will first bring into use completely unused land - that mouldering old factory that's been sitting empty and becoming more and more of an eyesore for a decade for example.

But there's no reason why Land Value Tax would not be subject to a similar planning regime as now. It would change - because a community decision that they would prefer housing to a factory on a particular site for example will lead to that factory being redeveloped a deal sooner than it might today, because its owners are going to be seeing their location rents rise to the point that running a factory there would be inefficient compared with developing it for housing, say.

Personally I would also like to see many planning controls repealed anyway and have most (ie small scale) developments make their peace privately with its neighbours through mediation rather than state control.

Overall though, there is little evidence that people would suddenly settle for a squashed apartment instead of a suburban semi with garden and garage just because of LVT. It will encourage people to consider whether their continuing use of a particular location is cost effective for them and it will make the market more efficient and so there is likely to be more rebuilding, but that doesn't need to be at the expense of amenity.

In conclusion

So, there then was my now not so concise explanation of Land Value Tax and some brief responses to some of its most common objections. It is quite important to get across just how land gains its value though. That helps to explain why some of us see LVT as such a just and equitable way of doing things. If we had Star Trek style free instant transportation systems, land would again be worthless but while it take time (which is money opportunity lost) and money itself to get from A to B the land in between A and B is absorbing some of your hard earned income (and that of everyone else who has to pass it by every day) for doing precisely nothing.

Land values are effectively a tax on all production and one we already pay anyway. Getting rid of all those other taxes on production and capturing for the community the rental values of land will create such a different more equitable economic playing field on which we all continue to ply our various trades.

...but strangely intensely exciting at the same time?

I'm just watching the news on Channel 4 and they've got all this coverage of the squirming going on in Washington and Wall Street.

Is it just me or am I right in the impression that Privilege and Power is absolutely terrified at the moment? That "they" really believe things are on the edge of a precipice which threatens systemic melt-down or revolution?

And also that there is a real massive popular movement going on to get the message across to "the Hill" that "they" will not be forgiven for allowing "our" money to pay Goldman Sachs bonuses.