This was the headline of an email that came into my inbox today. And it dawned on me that it is a fine angle from which to view the benefits of land value taxation.
As a society, we have a lot of problems, and our tendency is to come up with programs, of one kind or another, to try to ameliorate those problems. Those programs are expensive, they employ people, they often treat the victims of our problems as if they were somehow the source of the problems. The programs may gather a major constituency. But the programs really end up becoming part of the problem, rather than solutions to the problem -- bandaids which, layered one upon another, end up forming a heavy cast.
But what is the alternative? Don't just stand there! Do something! Anything is better than nothing! Doing something shows we care.
The alternative is to fully understand the problem, and then to seek its solution. Pretty radical, huh? Eradicate the problem. Get to the root of the problem, and tear it out by the root. Don't trim the branchlets. Don't cut off one limb or two. Don't pollard it. Don't trim it so that it can be carved into a totem pole. Don't cut it off at the ground level. Dig it out at the root.
Land value taxation is a simple, elegant, just, logical, efficient reform of the property tax which transforms a confused* local tax into the primary tax on which our common revenues should be collected. There was a time when the revenue needs of government were not as high as they are today, when it alone would have been sufficient to meet all the revenue needs. That probably isn't true today.** But using the tax on land value as our underlying revenue source, and then supplementing it with sales taxes and wage taxes, at lower rates and, likely, on less of the population, would be far superior to the lower property taxes and higher sales and wage taxes we have today. Our economy would be healthier, and a number of other good things would occur.
* The traditional property tax is placed on both land and buildings, and is like a train with engines pulling at both ends. Raising the millage rate on land requires raising the millage rate on buildings. Reform the PT by untaxing buildings, or at least reducing the millage rate on them.
** But a fair case could be made that, with the enactment of land value taxation, many of the needs for expensive programs would melt away, and thus government's needs for revenue might shrink significantly. I can't begin to guess whether that would be enough to permit this to be our only tax, but it is a possibility worth contemplating.
Many well-intentioned people are passionate about protecting the environment, ending sprawl, reducing poverty, improving wages, invigorating the economy, making sure that all have access to the airwaves, reducing inequality, etc. But many of them would, knee-jerk, reject tax reform which would accomplish those things, either because they don't see the connection, or are so attached to the one asset they've got which tends to appreciate. They don't understand the mechanism, exactly, but, like the blue pain reliever pill, it works for them, and they don't want to kill the goose that lays their golden egg. (Have I mixed enough metaphors? Sorry!)
Land value taxation can solve many of those problems, or at the very least, put us well down the road to solutions. It gently removes the barriers to their solution. Here are a few:
Sprawl: the checkerboard development one sees outside many cities, with subdivisions in the middle of what should be agricultural land, many miles out beyond the city's fringe, would stop. Land near the fringe would be developed first, and ag land would remain ag land. Commutes would be shorter.
Urban blight: the locations in the city where we already have schools, water, electricity, sanitary and storm sewers, paved roads, bridges, emergency services, public health systems, courts, etc., are valuable, and they are often underused. Land value taxation -- raising the taxes on the land value and lowering or eliminating the taxes on the improvements -- would cause the owners of those properties to put them to better use, or sell them at an affordable price to someone else who would. Think what this would do for the local economy. Think too of what this would do for the wider economy.
Public transportation: in order to make public transportation really work, we need population density. LVT creates the density where the infrastructure already exists. Hourly bus service gets upgraded to more frequent, and thus becomes a dependable and realistic alternative to relying on a car for each adult. Getting people out of cars is a necessary step if we are going to reduce greenhouse gas emissions, reduce reliance on petroleum products, reduce the demand for corn-based ethanol, allow our farmers to grow to feed people instead of machines.
Wages: With the economy invigorated, employers will be chasing workers, instead of workers chasing jobs. Wages will tend to rise, and with that, people will be seeking the education which will make them more employable. A virtuous circle replaces a vicious circle.
Poverty: When we create an economy that needs workers -- right here, not overseas -- people will be employed, and their employment will reduce, even eliminate the widespread poverty we see around us. Our children will grow up in families who have sufficient income to meet their needs, and our teachers will be teaching children who are growing up with a degree of financial security that simply doesn't exist in a wide part of our income spectrum today.
Opportunity: When we create downtowns that replace vacant lots and 1940s low-rises with mid-rises and highrises, those buildings will need tenants and owner-occupants. Venues for all sorts of business plans will be available, at reasonable rents or selling prices. Affordable housing, for all parts of the income spectrum -- working poor, middle class, retired, just starting out, teachers, policemen, nurses, janitors, firefighters -- will be available in reasonable proximity to jobs. Will some people still pine for the house in the 'burbs with the white picket fence for some portion of their lives? Yup. Some will. And many will be utterly content with an affordable, comfortable, technologically modern home closer to the center of things, as long as their children can get a good education.
Boom-Bust Cycles: Most boom-bust cycles are, at their core, land price cycles. Land value taxation will tend to even these out -- reducing the opportunities for windfalls on the way up and the widespread human pain on the way down.
A virtuous circle.
It seems to me that any one of these virtues is sufficient reason to enact Land Value Taxation. Any two of them should be enough to convince most people. So why are we stuck?
Perhaps the right question is, cui bono -- who benefits?
Will LVT solve our health care problems? No, probably not. But it might play a small role in at least two ways:
- more people in walkable cities will probably reduce obesity
- more people feeling economically secure and having enough money to feed themselves better may reduce obesity. (I've wondered whether some of the obesity we see among poorer people is an unconscious form of insurance against "lean times." And certainly the long term trend on the price of food has been downward, making it an inexpensive form of gratification, even when other costs were rising.)
There has to be a loser in all this, doesn't there? Well, if there is a loser, it would be the land speculator. The fellow (individual, corporation, trust, pension fund, foreign entity, etc.) that owns a well-located piece of land, and either is not using it or is underusing it. In my small city (120,000), for the 33 years I've lived here, there has been a 4.3 acre "hole in the ground" not far from the center. Chain link fence, and a sign with a phone number. Nearby are a few other properties with chain link fences and grass. The recent revaluation by the assessor has begun to recognize how valuable these properties are, and so their carrying costs will rise somewhat. (But they're still going to be paying much lower property taxes than the well-used properties around them that employ people and/or house people.) LVT would motivate those property owners to do something or sell to someone who will. And yes, the price that the speculator would receive would be less with the higher tax than it would be with the lower tax attached to the property. But he hasn't done anything to earn the dollars. Nothing. Nada. So I have no sympathy for his "loss." And if, instead of selling, he puts the property to work, he will be contributing something to the community and earning an honest living for himself. Talk about incentive taxation! This is aligning our incentives with where we want to go.
The people who can afford to keep a vacant 4.3 acre site worth many (~$48) millions of dollars can usually afford to sit and wait for "their price." Let's raise the cost of sitting and waiting.
Under LVT, the focus will shift from "landlord" to "buildinglord." And the "buildinglord" will not be making most of his money from owning property in a good location, but from providing on that good site the kind of building and services that tenants demand. He'll have to! He'll be competing with other buildinglords for business.
What's the difference between the vicious circle we've got now and the virtuous circle? Who gets the land rent.
- Today, it stops in the pockets of the landlord (and then we must fund government spending from other less desirable revenue sources which burden workers and transactions).
- Under LVT, it gets recycled -- continuously -- for our common purposes.
Are you willing to be part of the solution?
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