The History and Principles of Land Value Tax<br />Presentation by Mark Wadsworth to UKIP Bromley Branch<br />1<br />
Premiership footballers’ pay<br />2<br />
Anderson/Ricardo’s Law of Rent<br />3<br />
Commercial rents<br />4<br />
House prices and rents vs. wages<br />5<br />
House prices vs. wages(2)<br />6<br />
Closeness to London<br />7<br />
Footballers – inelastic supply<br />8<br />
Footballers – increased demand<br />9<br />
Land – fixed supply<br />10<br />
Land – increased demand<br />11<br />
House prices, wages, rents<br />12<br />
House prices increase faster than wages<br />13<br />
House prices since 1953<br />14<br />
Land – reduced supply<br />15<br />
New housing since 1953<br />16<br />
Land use in the UK<br />Farmland and grassland – 63%<br />Mountains, heaths and bogs – 16%<br />Woods and forests – 12%<br...
Land – reduced interest rates<br />18<br />
Do rising house prices make us richer? <br />The parents have made a £100,000 paper gain<br />The adult children are looki...
Do rising house prices make us richer?<br />20<br />
Do rising house prices make us richer?<br />Rising prices are based on supply restrictions and a credit bubble<br />Credit...
UK tax revenues (forecast 2011-12)<br />Taxes on wages and profits  - £419 billion<br />Taxes on land values and wealth - ...
Not at all taxes are created equal!<br />Some are intended to discourage certain activities (smoking, drinking, gambling)<...
Supply and demand in a free market<br />24<br />
Dead weight costs (1)<br />25<br />
Dead weight costs (2)<br />Higher prices for consumers<br />Lower income for businesses<br />Less employment, more unemplo...
Dead weight costs (3)<br />Worst is VAT (a tax on ‘value added’ or ‘gross profits’)<br />Next worst is National Insurance ...
The Laffer Curve (1)<br />28<br />
The Laffer Curve (2)<br />29<br />
Dead weight costs (4)<br />Nobody really knows what the dead weight costs of VAT, PAYE, income tax and corporation tax are...
Who said that Land Value Tax was the best kind of tax?<br />Adam Smith<br />David Ricardo<br />Tom Paine<br />John Stuart ...
The Poor Law Act 1572<br />Introduced a tax on land owners in each Parish, called the ‘Poor Rate’<br />Agricultural Rates ...
The People’s Budget 1909<br />The ‘Terrible Twins’ David Lloyd George and Winston Churchill pressed hard for a Land Value ...
Land – without Land Value Tax<br />34<br />
Land – with Land Value Tax<br />35<br />
Land – with a subsidy<br />36<br />
Land – phasing out a subsidy<br />37<br />
Commercial land - Business Rates<br />38<br />
Commercial land – Land Value Tax<br />39<br />
Housing – Council Tax<br />40<br />
Housing – Land Value Tax<br />41<br />
Advantages of Land Value Tax<br />Has no dead weight costs<br />Is easy and cheap to collect, easy to avoid and impossible...
A modest proposal… (1)<br />Council Tax  - £26.1 billion<br />Council Tax Benefit -  £(4.8) billion<br />Stamp Duty Land T...
A modest proposal… (2)<br />The total value of UK housing is about £4,000 billion<br />Why not replace Council Tax, Inheri...
Who’s opposed to this? (1)<br />Large landowners<br />Bankers<br />MPs with second and third homes<br />Politicians who kn...
Excuses they use...<br />“What about a widowed pensioner with a small income, still living in the family home?”<br />Winst...
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History & Principles of Land Value Tax

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History & Principles of Land Value Tax

  1. 1. The History and Principles of Land Value Tax<br />Presentation by Mark Wadsworth to UKIP Bromley Branch<br />1<br />
  2. 2. Premiership footballers’ pay<br />2<br />
  3. 3. Anderson/Ricardo’s Law of Rent<br />3<br />
  4. 4. Commercial rents<br />4<br />
  5. 5. House prices and rents vs. wages<br />5<br />
  6. 6. House prices vs. wages(2)<br />6<br />
  7. 7. Closeness to London<br />7<br />
  8. 8. Footballers – inelastic supply<br />8<br />
  9. 9. Footballers – increased demand<br />9<br />
  10. 10. Land – fixed supply<br />10<br />
  11. 11. Land – increased demand<br />11<br />
  12. 12. House prices, wages, rents<br />12<br />
  13. 13. House prices increase faster than wages<br />13<br />
  14. 14. House prices since 1953<br />14<br />
  15. 15. Land – reduced supply<br />15<br />
  16. 16. New housing since 1953<br />16<br />
  17. 17. Land use in the UK<br />Farmland and grassland – 63%<br />Mountains, heaths and bogs – 16%<br />Woods and forests – 12%<br />Coastal and freshwater – 3%<br />(of which 13% is classed as green belt)<br />Urban - 6%<br />17<br />
  18. 18. Land – reduced interest rates<br />18<br />
  19. 19. Do rising house prices make us richer? <br />The parents have made a £100,000 paper gain<br />The adult children are looking at an extra £100,000 mortgage each!<br />The paper gain is no good to the parents – unless they remortgage and run up further debts<br />The extra mortgage is a real cost to the adult children – they’ll pay an extra £200,000 in mortgage repayments.<br />Who benefits from all this? The banks!<br />19<br />
  20. 20. Do rising house prices make us richer?<br />20<br />
  21. 21. Do rising house prices make us richer?<br />Rising prices are based on supply restrictions and a credit bubble<br />Credit bubbles always burst in the end<br />That’s no good for the economy<br />Taxpayers and savers end up bailing out the banks<br />We’ve been having these 18-year boom-bust cycles since the early 19th century, possibly longer<br />21<br />
  22. 22. UK tax revenues (forecast 2011-12)<br />Taxes on wages and profits - £419 billion<br />Taxes on land values and wealth - £73 billion<br />Fuel, alcohol and tobacco duty - £59 billion<br />Other receipts - £37 billion<br />Total revenues - £588<br />Total spending – £710 billion<br />Deficit spending - £122 billion<br />22<br />
  23. 23. Not at all taxes are created equal!<br />Some are intended to discourage certain activities (smoking, drinking, gambling)<br />Some are rationing measures (fuel duty)<br />Some are user-charges. Land Value Tax is a kind of user-charge.<br />Some are jealousy surcharges<br />Most of them have huge dead weight costs<br />23<br />
  24. 24. Supply and demand in a free market<br />24<br />
  25. 25. Dead weight costs (1)<br />25<br />
  26. 26. Dead weight costs (2)<br />Higher prices for consumers<br />Lower income for businesses<br />Less employment, more unemployment<br />Tax evasion – so honest people end up paying even more<br />Off shoring, outsourcing<br />Deficit on balance of trade<br />26<br />
  27. 27. Dead weight costs (3)<br />Worst is VAT (a tax on ‘value added’ or ‘gross profits’)<br />Next worst is National Insurance (a super-tax on wages)<br />A flat tax on all incomes would be preferable to these<br />A flat tax on land values has no dead weight costs<br />27<br />
  28. 28. The Laffer Curve (1)<br />28<br />
  29. 29. The Laffer Curve (2)<br />29<br />
  30. 30. Dead weight costs (4)<br />Nobody really knows what the dead weight costs of VAT, PAYE, income tax and corporation tax are<br />At a minimum, they are about £200 billion<br />That’s over ten per cent of GDP!<br />This is on top of the dead weight costs of all the rules and regulations (another ten per cent of GDP).<br />30<br />
  31. 31. Who said that Land Value Tax was the best kind of tax?<br />Adam Smith<br />David Ricardo<br />Tom Paine<br />John Stuart Mill<br />Karl Marx<br />Henry George<br />David Lloyd George<br />Winston Churchill<br />Milton Friedman<br />31<br />
  32. 32. The Poor Law Act 1572<br />Introduced a tax on land owners in each Parish, called the ‘Poor Rate’<br />Agricultural Rates were scrapped in 1929<br />Domestic Rates was directly descended from this, scrapped in 1990<br />They still have Domestic Rates in Northern Ireland instead of Council Tax.<br />Business Rates are still going strong – the closest thing we still have to Land Value Tax<br />32<br />
  33. 33. The People’s Budget 1909<br />The ‘Terrible Twins’ David Lloyd George and Winston Churchill pressed hard for a Land Value Tax in the 1909 Budget<br />The landed aristocracy in the House of Lords blocked this<br />There were two General Elections in 1910<br />The Parliament Act 1911 prevented the House of Lords from voting on taxation<br />Conveniently for the aristocracy, the 1914-18 war intervened<br />33<br />
  34. 34. Land – without Land Value Tax<br />34<br />
  35. 35. Land – with Land Value Tax<br />35<br />
  36. 36. Land – with a subsidy<br />36<br />
  37. 37. Land – phasing out a subsidy<br />37<br />
  38. 38. Commercial land - Business Rates<br />38<br />
  39. 39. Commercial land – Land Value Tax<br />39<br />
  40. 40. Housing – Council Tax<br />40<br />
  41. 41. Housing – Land Value Tax<br />41<br />
  42. 42. Advantages of Land Value Tax<br />Has no dead weight costs<br />Is easy and cheap to collect, easy to avoid and impossible to evade<br />It encourages efficient use of land and buildings<br />Leads to low and stable house prices<br />Dampens credit bubbles and the boom-bust cycle<br />Discourages NIMBYism, makes being a landlord less lucrative and so increases the number of owner-occupiers or home-owners<br />Could replace most other taxes<br />42<br />
  43. 43. A modest proposal… (1)<br />Council Tax - £26.1 billion<br />Council Tax Benefit - £(4.8) billion<br />Stamp Duty Land Tax - £5.8 billion<br />Stamp taxes on shares - £3.3 billion<br />Capital gains tax - £3.4 billion<br />Inheritance tax - £2.7 billion <br />Insurance premium tax - £2.9 billion<br />TV Licence fee - £3.1 billion<br />Total £42.5 billion<br />43<br />
  44. 44. A modest proposal… (2)<br />The total value of UK housing is about £4,000 billion<br />Why not replace Council Tax, Inheritance Tax etc with a Land Value Tax of about 1% on the value of all housing (at today’s prices)?<br />There’d be no need for an extra ‘Mansion Tax’<br />According to Eric Pickles, it would only cost £5 per home to do the valuations<br />This would be similar to Domestic Rates in Northern Ireland (0.7% of 2005 values), where they also have a roll-up option for pensioners <br />44<br />
  45. 45. Who’s opposed to this? (1)<br />Large landowners<br />Bankers<br />MPs with second and third homes<br />Politicians who know that rising house prices creates an illusion of wealth and keeps them in government until the next bust<br />Newspapers get a lot of advertising revenue from banks and estate agents<br />45<br />
  46. 46. Excuses they use...<br />“What about a widowed pensioner with a small income, still living in the family home?”<br />Winston Churchill had tired of hearing this one over a century ago<br />Of course we will have exemptions or discounts or a deferment option for pensioners! <br />Or even better, increase the state pension.<br />46<br />

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