A note on land value tax

I’ll start this post with a quick shout out to the good folks of Just Stop Oil putting themselves on the line for a habitable future, and seemingly getting noticed less than other recent climate actions of more generalized protest. Indeed, there’s been more coverage in the press of the allegations against my local MP than of Just Stop Oil. If these turn out to be true, it might explain the difficulties of trying to get a meaningful response from his office. What was it XR have been saying about the need to go ‘beyond politics’…?

Anyway, on to the main business of this post: after various digressions, diversions and interruptions, I’m almost at the end of this part of my blog cycle within a blog cycle about property and tenure in a small farm future. My argument, in a nutshell, is that there will be private property in a well-functioning small farm future (but not in the form characteristically advocated by right-wing and pro-capitalist analysis) and there will be collective and common property in a well-functioning small farm future (but not in the form characteristically advocated by left-wing and anti-capitalist analysis).

One remaining item left standing from discussions here about these matters is the question of land value tax (LVT). The case for this was famously made by Henry George in his 1879 book Progress and Poverty. The basic idea is that the monopoly rent that accrues to the landowner from the fact of their ownership is taxed away. So if you were playing a game of Monopoly (which in fact was originally invented by a Georgist to illustrate the point), you would have to pay back to the bank all the money accrued from the rental income of your properties at the end of each round. Obviously, this would stop anyone from winning or losing the game through the exercise of monopoly rent, and people would have to find other ways to move around the gameboard of life. Which was precisely George’s point.

As I recently said in my analysis of death taxes, I can’t claim any special expertise as a tax analyst, but – far less than death taxes – I’m not a great fan of LVT, and here I’ll try to explain why.

Of all the redistributive schemes that people have dreamed up for levelling inequalities in capitalist societies, LVT is one of the few that often gets the blessing of mainstream capitalist/neoclassical economists. But it hasn’t been widely implemented by capitalist governments. In that apparent paradox lies a truth that really needs to be better known. While the theory of capitalist economics is all about private enterprise and the rewards to innovation, the practice is largely about monopoly rent, without which the system hits the buffers. As cheerleaders for the non-monopolistic profit-seeking that’s supposed to be how capitalism works in theory, mainstream economists like LVT because it’s consistent with this convenient fiction. As managers of how capitalism actually works in practice, governments are less keen because it puts obstacles in the way of normal capital accumulation via monopoly rent.

But arguably not very big obstacles. Nowadays, and much more than in George’s time, monopoly rent is only partly about land and property and is more about intellectual property rights, financial instruments and government contracts. So as a way of redistributing the spoils of capital, LVT is a partial measure at best. But I think we must go further. As Michael Hudson suggests in this interesting article, George himself had no objections to the general workings of the capitalist political economy. He simply opposed one of its most obviously brutal consequences. Karl Marx wrote that George’s programme was “a last attempt to save the capitalist regime”. He was wrong. There have been many subsequent and partially successful efforts to save it. But he was right that it was such an attempt (George never really addressed what happened to the tax revenues once the Monopoly players had paid them back to the bank). And also right, I think, that ultimately the regime will prove beyond saving.

So while the logic of LVT, rightly in my opinion, mitigates against the sheer ownership of land or property allowing the owner to make money, this in itself does nothing to stop the owner from using land as an input to generate and accumulate as much money as possible. No wonder mainstream economists prefer it to, say, income tax, which they see as ‘distorting’ of the full-bore capitalism they tend to regard as the natural order of things. Their enthusiasm should surely raise suspicions among those who don’t regard it this way. LVT is not in itself an especially good way to decommodify or redistribute economic goods.

In agricultural settings, LVT fits readily within the mould of an agricultural improver ideology – the kind I criticized in A Small Farm Future (pp.48-9). Think, for example, of John Locke’s argument that colonial expropriation of indigenous lands in North America was justifiable because Europeans could make them more productive and remunerative. Contemporary applications of LVT are rarely so unjust, but once a land tax has been set at some average level of return in the wider economy, decommodification towards smaller and more localized farm scale would be quite impossible. Within the present framing of the capitalist political economy, LVT sets the capitalist snare that forces ever greater returns on investment, and happily watches it tighten.

In theory, perhaps this could be avoided through tax exemptions on small properties. But I can’t really see how a low input ecological small farm sector could survive long term in a world where the accumulation of liquid capital is otherwise incentivized, and where large-scale owners would be gunning hard to extract returns in excess of their tax bills. Maybe the point of the policy would be to make it impossible for large-scale owners to turn any profit at all. But in that case, levying a profit-incentivizing tax probably isn’t the best policy intervention.

Maybe there’s a stronger case for LVT in urban settings, where property owners can cash out heavily from high property values resulting from local concentration of economic activity, and not from anything connected with their own enterprise. Cleverer people than me could probably determine the implications for tax bases, planning and zoning laws and the gaming of urban/rural boundaries in that scenario. But again, my feeling is that even in this instance LVT is a rather indirect way to try to achieve something that needs to be addressed more directly.

That was certainly the view taken by the aforementioned Karl Marx, another popular writer-activist of the 19th century. While George was agitating for the state to levy a tax to somewhat improve the lot of the working class, Marx was agitating for a more direct approach. This involved the working class taking over state functions and using the leverage thereby gained to radically transform the lot of everyday people. But Marx was pretty vague about exactly how it would do that once the state was in its hands, and in my opinion the words and deeds of later Marxist thinkers and governments haven’t been overly impressive in tackling that question.

So while an LVT might be a slight improvement on the present situation, I can’t get hugely excited about proposals to end human misery either through an LVT charged by the central state or through overthrowing the centralized state to create … another centralized state. To me, the political futurologies of both George and Marx seem rooted in a past era that barely speaks to our present one, with its endogenous state failure and ecological collapse. Which raises the question of what alternative futurology might just see us through these hard times. Since that’s roughly what I address in the later parts of my book I’ll end at this point, poised to get into those issues (though I have a little ground clearing to do in the next couple of posts first).

46 thoughts on “A note on land value tax

  1. One thing to remember with either Marx or George is that we are 150 years farther down the road of Capitalism.

    Here in the US we call LVT property taxes, basically a wealth tax on the majority of our assets.. Every land owner here gets a bill from the county every year that demands a little over 1/2 a percent (0.00525) of the value of the land and buildings.

    In total we pay about 1/3 of our income as taxes.

    I think that things would be remarkable different if everyone paid taxes at similar rates but not just limited to land values but all wealth and income (like stock options, etc.)

    • it’s unnecessary to apply such a taper; lower value land has a lower tax just because the tax is proportional to the value. Hence the name. Agricultural land has far lower land value than development land; this consideration alone would appear to undermine much if not all of the above article. Resistance to LVT is common in the landowning community, for the visceral reason that it seems aimed at them. I am disappointed that the article does not take a more enligtened view.

  2. Who decides what the value of the land is ? Do you go by productivity of the land ( compared to ? ) Do you go by the auction value ,( wealthy refugees from northern cities driving price ) . The scenic wonders or lack of such , water avalability .
    Getting a base under the value of land that everyone can identify with is fraught .

    • If having everyone on board with a valuation is the goal – then yes, it is fraught. If having the community of concern on board then there are straight forward methods.

      To define a community of concern for this comment:
      A seller, class of potential buyers, local government, state and federal government (where taxes, legal rights/responsibilities, and zoning are concerned). Local populations (township neighbors for instance) and lenders in the case of buyers bidding beyond cash holdings.

      Identifying a potential buyer can be through auction or a sale by private treaty. I’ve been a seller through private treaty, and a buyer through both auction and private treaty. All of my private treaty purchases required financing, and thus a lender was added to the community of concern. We recently discusses the interest of lenders in vetting potential borrowers. For land in the US Midwest this is a very defined process and not one prone to guessing and dart throwing. It is possible for a cash flush oligarch to purchase land at far above market value (and this does occur) – but for someone like this poor peasant to qualify for a loan there will be an appraisal of the property. If the land does not appraise for the bid price the potential borrower has only two options… walk away, or provide sufficient fungible asset(s) to cover the difference between the appraisal and the bid. Appraisals can be gamed, it is not a perfect system. But it is a system that tends to work far more often than it doesn’t. [in the case of gaming appraisals for nefarious reasons – Trump comes to mind… but that’s a story for another day]

      For more information about land appraisals and appraising check out:
      https://www.asfmra.org/about-us/about-us-page

      Market appraisals and government appraisals for tax purposes are often not linked very tightly. But in my experience the government appraisals will lag the market, but still tend to be correlated over time.

      Valuing land might be difficult, but it is not impossible.

      For situations where cash flush bidders out bid the present local valuation there is currently little recourse. Market forces should in theory correct this in time – but the time horizon may exceed the patience of locals who feel immiserated.

      • Hmmm . Tax appraisle .
        Well round here taxes are appraised by the county claiming 3 cows on 10 acres , USDA one cow and calf on 18 acres , USDA states any more than that overgrazing and dustbowl conditions will occur , county says it don’t care if the land blows away, maximising income is all that matters , we want our money !

  3. Chris wrote, “George was agitating for the state to levy a tax to somewhat improve the lot of the working class… I can’t get hugely excited about proposals to end human misery either through an LVT charged by the central state or through overthrowing the centralized state to create … another centralized state.”

    Instead of improving the lot of the working class, or ending human misery, current tax schemes seem geared toward propping up empires and maintaining the status quo (especially for the well-connected).

    Tax reform is needed, and not just a slow-paced incremental approach.

  4. So LVT is (or would be) a tax on rental income, not on the prospective resale value of land?

    Isn’t rental income, like other income, already taxed? Or are the landlords on even more of a gravy train than I thought? I’m not sure I would object too much to it being taxed at, say, double the rate of other income, but the more complicated that kind of system gets, the more loopholes arise. I don’t remember who it was that said taxes should be simple, universal, and low, but maybe they had a point.

    • (Thankfully nobody is trying to forcefully extract the value of the potatoes or peas or whatever that I grow. But that wasn’t always the case, as the existence of tithe barns shows.)

  5. IMHO There should be no taxes on land , only on built properties in the land , charged in the square footage of the property .

    • Wouldn’t this encourage people to buy land, leave it undeveloped for a number of years, and then sell it for a profit once its value has risen?

  6. These are all good observations, including that I think the limited utility of the LVT is in urban settings (shops and rental units especially), which derive exponentially more value from their location than rural agrarian property.

    An added critique is this: George thinks that the added value of the land shouldn’t accrue to the individual owner, but to the state (and he tends to assume at least the level of the big city governments, if not the nation-state). By that logic, why not point out the divergent value of land from international geopolitical arrangements, and then demand that there be one world government which enacts a LVT? It’s an absurd proposition of course for many reasons (among them, the fact that the bureaucrats at the ‘core’ will always be the ones to determine the LVT valuation for the ‘peripheries’), but it’s another example of how the centralized “one size fits all” miracle solutions of modernity culminate in the impossible and/or the tyrannical.

    One question, however: what difference do you see between universal death taxes and universal LVT? To me, both of them are rooted in the socialist error of positing that all property rights flow from the polis, and that any granted to the family are instrumental and revokable.

    (funnily enough, Henry George had a close relationship with many Catholics, though never really grasped the natural law tradition. He wrote a long open letter in good-mannered rebuttal of Pope Leo XIII’s “Rerum Novarum”, sadly never responded to!)

    • Two notes in favor of George, 1) he has some brilliant analysis, but his writing is also beautifully eloquent, much more so than Marx! and 2) he has a strong grasp of one natural law principle, namely, that Creation is a gift of the Creator and is meant to serve the needs of all mankind. One powerful passage from the conclusion of /Progress and Poverty/:

      “Though it may take the language of prayer, it is blasphemy that attributes to the inscrutable decrees of Providence the suffering and brutishness that come of poverty; that turns with folded hands to the All-Father and lays on Him the responsibility for the want and crime of our great cities. We degrade the Everlasting. We slander the Just One. A merciful man would have better ordered the world; a just man would crush with his foot such an ulcerous ant-hill! It is not the Almighty, but we who are responsible for the vice and misery that fester amid our civilization. The Creator showers upon us His gifts—more than enough for all. But like swine scrambling for food, we tread them in the mire—tread them in the mire, while we tear and rend each other!” (Book X, Chapter V)

    • “An added critique is this: George thinks that the added value of the land shouldn’t accrue to the individual owner, but to the state”
      Then why bother to increase the value of the land ? Why bother with ecology the environment or anything else just burn out the land to make as much profit as possible then walk away .

    • My reading is that he’s happy with the value added by the individual owner to accrue to the owner, but not for the initial or unadded value to do so by virtue of ownership

      • Yes, sorry, the above is imprecise. “Added value” in what I said means the “social value” which accrues into the land itself, not the infrastructure/capital which is “added” on top of the land. George thinks that former is the great evil, whereas the latter is commendable.

  7. Thanks for the comments. I agree with Steve that current tax regimes buttress privilege and that LVT would be an improvement in that respect – something I probably should have clarified. All the same, I don’t think LVT as the main plank of an alternative tax policy would deliver the kind of small farm societies that are required. Greg’s points about taxing other assets, and the passage of history since the time of George and Marx are pertinent. More on the latter in particular in forthcoming posts

    I daresay the tapered LVTs John suggests would go some way to mitigating the difficulties I’ve raised, but my (perhaps naïve) view is that since LVT doesn’t mitigate capital accumulation as such, it’s inherently incapable of remedying our fundamental economic problems.

    As per Diogenes, who determines taxation and how, along with how it can be gamed and whether it creates perverse incentives are always questions worth asking, though they’re a bit too detailed for me to address here. As Clem shows, land is more visible than many things that are taxed, which is an advantage of LVT. But, as I’ve said, the tax has its disadvantages too.

    To Kathryn’s points, my Monopoly example was perhaps a bit misleading. LVT isn’t a tax on rental income, it’s a tax on land value – regardless of whether the land is rented out or not – set at a level that taxes away the possible gains from rental. But the issue of the value of your potatoes and peas is somewhat to the point, since LVT incentivizes more remunerative ‘improvements’ to the land than this. The mitigations that John suggests would certainly help safeguard your potatoes, but ultimately the LVT route seems to me to beat about the bush a bit too much if the goal is to incentivize local, decommodified agrarian production. As a way of cooling the monetization and concentration of landownership it does, however, have its pluses.

    To Sean’s questions, I’d say the most important difference between a death tax and LVT is that the former is inherently decommodifying in a way that the latter simply isn’t. Whether they’re both rooted in a socialist error whereby property rights are invested only in the polis and not within families depends quite a bit on how one chooses to construe all of those key terms: socialism, property, rights, polis, family. This is a conversation I’d like to develop, with Sean in particular, in relation to an Aristotelian or natural law position, but I’m not quite ready to do so yet! Patience is a virtue … or is it?

    What I would say in the meantime is that death taxes seem to me more compatible with an idea of the polis as a kind of extension of the family, whereas LVT does seem to require a – perhaps ‘socialist’? – conception of the state as an autonomous agent. I’d have thought that people wouldn’t support either tax unless they felt it was broadly beneficial to themselves and their families. Then again, I thought that people wouldn’t support Boris Johnson at the 2019 election for the same reason, and I was wrong.

    • There is another problem with taxation , there is a large corporate farm in this county , it is run as a tax loss to get tax rebates on their other companies , it’s a household name in the US well known by anyone who lives in the USA their new crop of green tractors has not turned up this year as the green tractor company can’t supply so they have invested in several hundred miles of barbed wire . Another subsidised tax fiddle .
      And by the way a truck driver friend was supposed to deliver 8 loads of feed to the daries today , he delivered one , nothing to load at the rail yard .

    • Hmm… I think I see what you mean: death taxes pins land ownership and taxation to a natural, physical reality (the cycle of life and death), whereas LVT involves a fluid, symbolic money valuation. That’s a fair distinction, though I think that the natural, physical reality of the family society also has to be fleshed out—but for that discussion, I am happy to restrain my ‘irascible passion’ with the virtue of patience!

    • Ah. So if I were to “own” a parcel of land, and I’m not planning on renting it out, but the bank or the state thinks I *could* rent it out at a certain rate, I’d be liable for the tax?

      This is not favourable to growing spuds on it for my own use. If I wanted to, say, set up a mixed polyculture orchard, I would need to make enough profit in the first year to be able to afford the tax. That seems unlikely. Alternately I would need to own two parcels of land and rent one out in order to pay the tax on both, at which point why not own three and keep one empty to raise prices? And woe betide me if the land is so poor (from a series of short-term tenants, perhaps) that the actual rental income is below assessed market rates.

      If I understand this correctly, it’s a great wheeze for whoever receives the tax, but mostly rewards financialisation and extraction. Perhaps in some ways it’s similar to housing benefit, which turned out to be a transfer of social funds to, er, private landlords (and banks, through the interest on buy-to-let mortgages). It’s almost as if many MPs are also landlords, or something.

      As an aside to the potatoes thing — I am not a historian, but how much did the ability to store grains for longer periods and therefore demand taxes or tithes encourage a move toward monoculture grain crops and away from mixed horticulture? Obviously the storage potential is useful to individual households or families, too, and obviously grain was gathered in mediaeval tithe barns; but I know almost nothing of how this worked in North America with maize before European colonisation, for example, or in the Fertile Crescent for that matter (beyond Biblical accounts of storing up grain before years of famine).

      • Ah. So if I were to “own” a parcel of land, and I’m not planning on renting it out, but the bank or the state thinks I *could* rent it out at a certain rate, I’d be liable for the tax?

        Yes, at least here in the US Midwest – agricultural land will be taxed whether you raise a crop or not (likewise, rent it or not). If you do rent it or raise a crop, you will also be subject to income tax on top of the property tax.

        …at which point why not own three and keep one empty to raise prices? And woe betide me if the land is so poor (from a series of short-term tenants, perhaps) that the actual rental income is below assessed market rates.

        I can’t imagine leaving one property empty would have sufficient market impact on prices – at least not enough to offset the loss in potential income.

        Here in the US cash rental income is often tied to productivity estimates (not actual production); but not all Ag land rents are cash rents. Some rents are production related. Income tax liability will also change depending upon how rent is managed. A crop share lease obligates owner and tenant to share in the input costs (seed, fertilizer, pesticides, etc) and later each will share in the produced crop. Exposure to risk is different in these two scenarios – as is a tenant’s motivations. Market rates, productivity, weather, pest biology, international affairs… a complex milieu to wade through.

        • Oh, introducing artificial scarcity into the property market by leaving some properties empty or even derelict is an absolute classic of the genre. It only requires that you and other like-minded landlords own enough property to pull it off; and how much is “enough” depends on exactly what costs you’re trying to cover. A LVT set fairly low should allow it. If LVT is too low you get property empty or derelict; if it is too high, only the most extractive producers can stay afloat and the total available useful land goes down.

          What is “enough” to pull off that kind of market manipulation will, of course, be different in rural areas than in urban ones, and different types of rent are of course going to have different effects too.

          And, of course, the market manipulation can come about as a side effect of speculation, rather than anything anyone intends.

      • An additional wrinkle is that we get taxed at a lower rate because we are farming the land. Letting the neighbor cut hay once a year on the worst soil keeps it in ag preserve. Renting it for continuous corn will wear it out in just a few years but also counts as ag use. I have had several discussions with the assessor about long crop rotations and soil building cover crops.

      • Using numbers from the latest Census of Agriculture (2017), the estimated average property tax on farm land in the USA is less than $11/acre per year. I say “less than” because $11/acre results from using the average *total* farm property taxes (on not only farm land, but also farm buildings, machinery, and livestock), and dividing by the average acres per farm.

        In Nebraska, it’s less than $17/acre per year.
        In California, it’s less than $49/acre per year.
        In Texas, it’s less than $6/acre per year.

        It’s a different story where the land is zoned Residential. My wife and I own a quarter-acre vacant lot, with garden beds on it. The property tax bill for that undeveloped lot exceeds US$1,000 per year, equivalent to $4,000/acre per year. Considering the additional expenditures of my labor, the vegetables grown there are quite expensive!

        “On average, Nebraska farmers pay $16,200 in property taxes per year, among the highest figures of any state.  And the state relies heavily on that money: More than a quarter of its total property tax revenue, much of which pays for public education, comes from farmland.”

        “The latest Census of Agriculture from the U.S. Department of Agriculture showed that in 2017, 43,000 Nebraska farmers paid $686.5 million in property taxes…”

        “The census figures reflect property taxes paid by producers for the farm share of land, machinery, buildings and livestock…”

        “Only two states collected more property tax from farmers than Nebraska. In California, 65,000 farmers paid $1.1 billion, or roughly $17,300 each. In Texas, which has no state income tax, 236,000 farmers and ranchers paid $698 million, or roughly $3,000 each…”

        “Nationally, 1.9 million farms paid $9.4 billion in property taxes, for an average of roughly $4,900 per farm.”

        https://www.pewtrusts.org/en/research-and-analysis/blogs/stateline/2020/01/16/property-taxes-sink-farmland-owners

        Average farm size, acres (2017 census):
        USA  441
        Nebraska  971
        California  348
        Texas  511

        Average farm size (acres) from www.
        nass.usda.gov/Publications/Highlights/2019/2017Census_Farms_Farmland.pdf
        www.
        nass.usda.gov/Publications/AgCensus/2017/Online_Resources/County_Profiles/Nebraska/cp99031.pdf
        www.
        nass.usda.gov/Publications/AgCensus/2017/Online_Resources/County_Profiles/California/cp99006.pdf
        www.
        nass.usda.gov/Publications/AgCensus/2017/Online_Resources/County_Profiles/Texas/cp99048.pdf

      • ‘This is not favourable to growing spuds on it for my own use’ – You could use the money you saved from not having to buy spuds to pay the tax.

        ‘If I wanted to, say, set up a mixed polyculture orchard, I would need to make enough profit in the first year to be able to afford the tax’ – Possibly, but the tax levying authority might allow you to defer the tax in this sort of case. It’s also worth thinking about how you were able to ‘own’ the land: if you had to buy it from someone else, then the tax would reduce the amount you had to pay for it, so it wouldn’t cost you any more. If you inherited it from someone, then lucky you!

        ‘If I understand this correctly, it’s a great wheeze for whoever receives the tax, but mostly rewards financialisation and extraction’ – Those who receive the tax are the public. It does not reward financialisation and extraction, it does precisely the opposite. LVT reduces the selling price of land, so it reduces the rewards to the financialisation of land and housing, and it reduces the value that can be extracted from owning these assets. The absence of LVT is the ‘great wheeze’, as it inflates the value of real estate, thereby rewarding financialisation and extraction, and depriving the public of the value that it would otherwise receive.

  8. The central aim of the World Bank is to prevent other countries from growing their own food. That is the prime directive. It will only make loans for countries to earn foreign currency and it has insisted ever since about 1950 that countries that borrow from it must shift their agriculture to plantation export crops to grow tropical crops that cannot be grown in the United States for environmental and weather reasons. And the countries must not grow their own food and must not undertake Land Reform or small family-based farming.
    https://www.unz.com

  9. Comment to Kathryn regarding “As an aside to the potatoes thing — I am not a historian, but how much did the ability to store grains for longer periods and therefore demand taxes or tithes encourage a move toward monoculture grain crops and away from mixed horticulture?”

    I am a great fan of chestnut trees and chestnut food crops. However, taxation was a main driver in France from 1700-1950 to dis-incentivize people to grow chestnuts. It was much easier to tax wheat and barley, so the government encouraged farmers to cut down their chestnut trees and grow grains instead.
    Therefore, the cultivation area for chestnut steadily decreased.

    I think James Scott’s “Seeing like a state” provides a framework for seeing how mixed orchards are threatening to the authority of your average taxman.

    Back to the main topic, I think that LVT as a kind of wealth tax makes sense, but with a reasonable tax-free bracket at the bottom for subsistence. Maybe 1 acre per person tax free?

    Peace,
    Goran

    • We have yet to come down to the crux of the matter , who decides how much the government spends and on what ? Yes I know this is a snake pit !!!

    • The other option is Drill Baby Drill. Looking to the current system to save itself (no matter which flavor of Business As Usual you like) is probably hopeless. Consuming less is never an option. It is bad for the economy.

      • Consuming less is never an option. It is bad for the economy.

        Yes, unfortunately – for the overall economy. But for an individual’s economy consuming less is not just an option, it is pretty good policy. Thus it seems the trick is to get from an individual policy to the overall.

        • https://problemspredicamentsandtechnology.blogspot.com/2022/04/what-is-oil-and-why-is-it-so-special.html
          Fast or slow crash it’s crash all the same , Europe seems to be leading the pack of western countries going for a fast crash , banning Russian oil and gas banning cars in cities private jets , internal air travel and thermostats turned to 18deg C leaves them at the tender mercies of opec , Saudi won’t pick up the phone to answer Biden’s calls , Russia will send its energy East to countries that do not give a crap about global warming , opec limits energy to the West to limit western pollution aided by euro politicos turning Europe into Somalia .

          • As I have said before, I love fossil fuels. Gasoline is a screaming deal compared to turning over a few acres with a shovel.

            A fast crash seems better than a slow one. At least there will still be some fuel to be had.

            Care or not, nobody is immune to climate change. Since the frost isn’t out of the ground and the high today made it just about to freezing with a hard (30 mph) wind out of the west, it does not look like I am going to get peas planted tomorrow. Average low temperature is 32F for this time of year.

            If the US and European economies crash, China is going to sorta s.o.l. No customers = no sales.

            We will know that there is a problem when the banks are in trouble (2008 ?).

  10. Apologies for my recent silence here. I’ve been offline for reasons I’m about to relate in my next post. But I appreciate the input during my absence!

  11. ‘As managers of how capitalism actually works in practice, governments are less keen because it puts obstacles in the way of normal capital accumulation via monopoly rent……..But arguably not very big obstacles. Nowadays, and much more than in George’s time, monopoly rent is only partly about land and property and is more about intellectual property rights, financial instruments and government contracts. So as a way of redistributing the spoils of capital, LVT is a partial measure at best.’

    I would agree that rent is now more about IP rights, financial instruments and government contracts than it was in George’s time. But it is still more about land and property than it is about any of these other things. This is because people always need somewhere to live and work, and the supply of the locations in which they like to live and work is fixed. This means that the value of these locations constantly increases. If this value is not taxed, then the locations become highly valuable assets, ripe for financialisation. The value of the ‘financial instruments’ you mention is mostly land value. Take this away and what’s left is negligible, or at least far less valuable. LVT is indeed a partial measure, but by far the most important one. Take away IP rights and lucrative government contracts, and location rents would just rise even further. Churchill was right when he said it was the mother of all monopolies. It’s not just the rents received by landlords and the capital gains received by land-banking property developers, but also bankers’ bonuses, salaries, and proftis and the profits of large landowning corporations (eg supermarkets, fast food restaurants) that constitute land rent. Note also that ‘land’ include all natural resources, so profits deriving from untaxed or undertaxed oil, gas, minerals, electromagnetic sprectrum, roads, airport landing slots, and so on, all constitute land rent.

  12. ‘In theory, perhaps this could be avoided through tax exemptions on small properties. But I can’t really see how a low input ecological small farm sector could survive long term in a world where the accumulation of liquid capital is otherwise incentivized, and where large-scale owners would be gunning hard to extract returns in excess of their tax bills.’

    Would they be gunning any harder than they already are?

  13. Briefly in response to Gavin, your take on LVT as a taxation on the value of all resources raises a few questions for me. First, if the tax is set at some average level for a local use class, it incentivizes resource owners to innovate new ways to generate extra income before the tax is adjusted upwards (it’s a land value tax, not an income tax, right?). It is inherently not a decommodifying and ecological-limit oriented tax. Second, and for this reason, there is no way that such a regimen would create a financial window for Kathryn to grow her vegetables and eat them without generating any income from her land. Under your LVT regimen, yes large-scale resource owners would have to gun harder than they already are for income, and there would be no space in this world for a self-reliant smallholder any more than there is in the present one. Your proposals sound like a kind of endless ratchet, with brief money-making opportunities presenting themselves in between the clicks – which is not so different from the present situation, except that most of the money ends up in the hands of governments rather than private corporations. Which may or may not be better. But saying that the government receives the tax is not the same as saying that the public receives the tax.

    It’s for these reasons that I think death taxes are a better way of preventing the speculative increase of agricultural land values. I’m not suggesting there’s never a place for LVT – but I don’t think there’s a place for it as a tax on agricultural land if the aim is to create a sustainable/regenerative agrarian localist future.

    • Thanks for replying to my comment, and I won’t clog up your comments feed by posting any more comments after this one. I would just make a few points in response to your reply:
      1. A simple LVT on extractable resources would indeed not be an ecological-limit oriented tax – but a different kind of resource tax (perhaps just a simple auction) would be better than simply giving away the resources for free, thereby privatising their value.
      2. Kathryn would definitely have a financial window to grow her own veg without generating income from her land if her land is marginal or near-marginal. If it’s marginal then there is no tax burden; if it’s near marginal then her citizen’s income would cover the minimal tax bill (the citizen’s income is a natural counterpart to the LVT); if it’s better quality land then she can reasonably be expected to compensate those who are excluded from this land (ie, everyone but her).
      3. The point about marginal land also answers your claim that LVT means an endless ratchet – it does, but only for those who want to make money, and for this reason choose to live on inframarginal land. It’s a mistake to assume that only a small proportion of land by area would be marginal or near marginal – most would be, and would for this reason be subject to minimal or no taxation. So there would be plenty of space for slef-reliant smallholders.
      4. I still don’t see why large scale resource owners would have to gun harder than they already do to earn income – now they have to pay interest and taxation in addition to the capital they have to raise to buy the asset; with LVT they would just have to pay the LVT;
      5. This leads to my final substantive point: in the absence of LVT, with private property in land, LVT still has to be paid – not to the government, but to private landlords, banks, and anyone fortunate enough to be in a position to sell their land. And existing taxes have to be paid. And there is less land available, because owners are incentivised to withhold it from those who need it. It seems highly unlikely to me that this would ever be in the interests of would-be self-reliant smallholders.
      6. I recognise that all of the above is highly speculative, so you might be right after all (and I haven’t read your piece on death taxes yet). Thanks again for taking time to reply to my comment.

      • Thanks Gavin, I appreciate you probing these issues, though I’m short of time to respond. I think we basically agree on what’s needed, but with different approaches to the means. One point of disagreement is in your take on marginal land, which IMO does too much heavy lifting in your proposals. In a climate challenged small farm future I think there will be very little marginal land. And in Kathryn’s specific case she lives in London, where I surmise a simple LVT would not generate much homegrown veg. But the issues go wider.

        • Value is in the eye of the beholder… what is marginal to an agrarian is not the same as marginal to an apartment builder.

          Location means so much in the present conversation. A very productive silt loam soil far from a city street will sell at a price per acre (or hectare) while a few square meters of abandoned concrete within a stones throw of skyscrapers will sell at a price per square meter. An agrarian has no hope of regenerating the concrete island for carrots and spuds; the builder wanting to construct apartments on the silt loam too far from town is likewise fooling himself.

          In a small rural community where local decisions can be cussed and discussed by all those with skin in the game values will be different than those found on the 22nd floor of an apartment complex within walking distance of the Tube.

          When George proposed an LVT I’m guessing a 22nd floor flat was yet a distant aspiration. Likewise – a collateralized debt obligation with trenches divided among many investors who then become remote landlords or lenders – was something the tax authorities hadn’t anticipated.

  14. ‘While George was agitating for the state to levy a tax to somewhat improve the lot of the working class, Marx was agitating for a more direct approach.’

    George was not agitating for a tax to ‘somewhat improve’ the lot of the working classes – he was calling for a tax that would ensure that all citizens had somewhere to live and work, while at the same time funding all kinds of public services that didn’t at the time exist. He thought that this would dramatically improve the lot of the working class, but would not require the liquidation of the capitalist class.

  15. I think this article contains several misunderstandings about the working of a land value tax, but the main one for me is this. It talks about setting the land value tax at an average return in the economy. LVT is in proportion to the value of the land. So it’s a category mistake to compare this to a return on investment. An LVT of x% means for example x% of the rental income of the land if it were put out to rent, payable annually. It doesn’t mean that the owner has to make x% on what they paid for it or anything of that nature. Since agricultural land has a low land value, farmers would not be paying much per acre compared to holders of land with development planning permission. Another poster has made the excellent point that with privatised land holding LVT is paid anyway, just not to the government.

    • It’s possible I’ve misunderstood LVT but the pushbacks I’ve had about it in the comments above haven’t yet convinced me – and, Nick, I don’t believe that I do make the category mistake you allege, since I address rental value, not return on investment.

      It seems to me that the defences of LVT from Gavin and Nick rest heavily on the notion that agricultural land is of low value, which is not the case – and certainly won’t be the case in a climate and water challenged, low energy agrarian localist future. They also rest on the notion that it’s a good idea for governments rather than private individuals/corporations to accumulate the income from monopoly rent. That may be so – although there are reasons for scepticism, not least due to the tight relationships between wealthy individuals/corporations and governments. However, I think it’s an even better idea for there to be no income from monopoly rent at all.

      Let me frame it like this. I think we need to move to and sustain a world in which much or most land outside towns, and some land within them, is used to produce food and fibre to meet immediate local and personal needs directly in sustainable/regenerative ways. Take the place I grew up, about 30 miles outside London, where the average house price is now just shy of £900,000. Suppose I want to buy or build a house there on a couple of acres of land to be used primarily for meeting my household’s subsistence needs, and I want to spend most of my time meeting those needs with as little time and other resource as possible devoted to earning cash income. Obviously this would be quite impossible at the moment unless I’m already independently rich.

      My question then is what single tax would best deliver that option for me and other local residents? I daresay LVT might figure somewhere in the mix, if it was framed carefully enough so as not to disincentivize non-cash producerism, but I’m not convinced it would be high on the list. I’d suggest death and estate taxes, carbon taxes, income taxes, corporation taxes and maybe finance taxes would place higher. Along with a bunch of other non-tax policies. So I remain unpersuaded by Georgist single LVT thinking. However, I may not have made the wider context apparent in the OP, in which case apologies.

Leave a Reply

Your email address will not be published. Required fields are marked *