the title itself.
Speculation in land value- frequently misrepresented and disguised as " property " or " asset " speculation – is the root cause of unsustainable booms which result periodically in damaging corrective slumps, such as those which effected the mid-1970s, the early 1990s and the present one that began around 2008. Land Value Taxation, fully and properly applied, knocks the speculative element out of land pricing.
Variants of Land Value Taxation, known as Site Value Rating, are accepted practice in, for example, Sweden, Denmark and Australia.
' Variants of Land Value Taxation are accepted practice in Sweden, Denmark and Australia '
Are there any disadvantages?
LVT has few snags provided that the system is properly set up from the outset. These must include provision for full registration of all land, an open valuation register and appeals system and regular revaluation. The assessments must be based on annual rental values and not on selling prices. There must be no exemptions or thresholds, as these create loopholes and open up possibilities for avoidance. And the liability to pay the tax must be attached to the land title, so that continued validity of that title is dependent on payment of the tax.
The objection to LVT that most often arises relates to people living on fixed pensions in properties that in a few cases have risen sky-high in value since they were purchased a few decades ago. But given that in the first instance the tax would logically be a replacement for Council Tax, the fear is largely ungrounded. Most people would end up paying around the same initially. Eventually they would pay less, as existing taxes were cut and the government’ s welfare bill was reduced with the fall in unemployment. Pensioner relief could be made available in the form of deferral of payment until the valuable property was sold, and there is also scope to mitigate the impact through a general increase in pensions.
Land( unlike goods and services) has no cost of production. If an ample supply of land of equal desirability were available everywhere, there would be nothing to pay for its use. In reality land acquires a scarcity value owing to the competing needs of the community for living, working and leisure space. Thus land value owes nothing to individual effort and everything to the community at large. It belongs justly and uniquely to the community. Conversely, the reward for individual effort can belong only to the one who earns it, to spend, save or give away as he or she may see fit.
Because of differences in locational advantages, fertility or natural resources, some locations are more desirable than others. Demand for access to these features gives land its rental value, which is created and sustained by the presence and activities of the community. Some have argued that LVT would put up the price of food, however this indicates a misunderstanding. Farm rents are set by what farmers can obtain for their produce. If the prices are high, rents go up.
Land titles and the security of occupation they provide are ultimately derived from, and defended by, government, through its legal system and responsibility for defence of the realm. It is indeed, a primary function of government to do so. Land Value Taxation, being assessed on these values, is fair in its incidence.
Properly applied, Land Value Tax would support a whole range of social and economic initiatives, including housing, transport and other infrastructural investments. It is an elementary fiscal measure that would go far towards correcting fundamental economic and social ills.
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