Response to some comments on "Unconditional Benefits"
24.07.08
at 20:52
at 20:52
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In my last post I set out what I considered to be the three necessary reforms to create a more equitable society - Land Value Tax (or "The Single Tax"), Citizen's Income and Ownership for All.
In the comments, Tim Carpenter, Head of Policy at the Libertarian Party UK had several objections that I would like to address:
Tim: "LVT can seem fine and dandy at the first off, but over time who decides the future value of your land?"
Why does anyone need to decide the future value of your land? In any case, even if that were necessary the market does that anyway even at present - what people pay for a property reflects their view of what it's worth into the future - they are, literally paying up front, to the previous owner, the rent for a number of years into the future. I agree there are issues with a "100% Land Tax" where the community attempts to collect 100% of the rent (as I and other geo-libertarians would advocate). This would make the capital land value tend toward zero and how would you know whether it's moving up or down over time? Well, the answer I believe is that it would trade at a discount or premium reflecting the buyer's and seller's view of whether the "passing rent" (ie the LVT bill) was set too high or too low.
Tim: "It is fraught with risks, opportunities for corruption and chaos. If you think compulsory purchase was bad..."
As I understand it several of the big RICS member firms have discussed this and have proposed a valuation regime that they would be comfortable bidding for and would expect to be able to handle things like appeals. The Oxfordshire pilot study showed that on average there was only a need to value about one site in ten - ie that that many nearby sites would share the same land value. And there are developing ever more sophisticated data and models for modelling things like "landvaluescape" and how it changes in reaction to things like new infrastructure.
I only don't believe it is as daunting a task as taxing incomes in the multitude of ways we currently do.
Tim: "If CBI is only half what is needed to live on, then surely we will still need welfare."
The Joseph Rowntree report I mentioned included a lot of things that go much further than the "basics needed to survive" (and the headline figure of £13,400 was "pre-tax". Not that I claim that would halve the bill. However the removal of the deadweight loss created by the other taxes that would be repealed, and the ending of subsidies, particularly on agricultural land and other tariffs on the necessities of life would make them cheaper. Two ways to be wealthier - have more money or make everything you need cheaper. As Frank Gallagher in "Shameless" says "Make poverty history; cheaper drugs now!"
Tim: "Removing the minimum wage is fine but be under no illusion, the CBI will be factored into that wage (or lack of)."
But, first, they would also be factoring in the lack of payroll taxes and income taxes - they'd have nearly 40% more in their "wage bill" to play with in many cases. Second, the CBI has two purposes in my mind - one of them is to give people enough to survive, just, day to day, but the intentional beneficial effect of that is that people have a cushion that empowers them to say "no" to a coercive deal from an employer. If the marginal benefit from working x hours for y pay is not worth it and you know you can survive until you get another, hopefully better, offer, this changes the balance of power between employer and employee. And, because it is the same for all workers, and not just the ones currently stuck in the benefits trap, the employers are more likely to have to listen and produce decent remuneration. Though I do concede that there would be hundreds of thousands of currently civil servants in the job market to depress wages...:)
Tim: "It will be no solution to poverty AFAICT and your assertion that it would eradicate x y or x is not explained. I think parish provision is an interesting one, but frankly, look at places like S Wales and you will find that parishes will have little or no wealth creation so no money to spend on their army of dependants - central funding will be needed in precisely the places where people say it causes problems of unconditionality - for once the parish is spending other peoples' money the problems are right back with you again."
However, the LVT is more likely to move economic activity to areas where companies, and employees, and therefore also companies as employers, will pay less tax, which is turn will raise the economic activity in poorer areas and tend to level out regional disparities of economic activity. It cannot be any worse than the current situation where some regional economies make up more than half of their regional GDP from state handouts and subsidies to individuals and businesses.
Tim: "As another person has mentioned, the mutualist company can occur NOW. What is to change here? The fact that it does not happen now should either make you ask what stops it legally/financially or regulatory OR that it is actually a factor of how humans are socially, in that it takes certain individuals the gumption to kick start a company (and that is NEVER to be underetimated) and once they do so, why would they then let a whole load of strangers take just as much out of it as he/she does?"
I certainly don't underestimate the setting up of a company. I have been an employer for precisely one month in my life and it was a bloody nightmare. But it would certainly be less troublesome if I was not burdened with all those damn tax calculations! But again, I refer the honorable gentleman to the answer I gave a moment ago - the "cushion" that empowers the employee to say "no" a bit more; to hold out for a better share of the total returns to a business. This of course goes to the core of mutualism as I see it, as opposed to the anarcho-capitalist type of libertarianism. Mutualists believe that the current capitalist system is lop-sided, "toxic" and that it is itself a coercive and damagingly hierarchical system. Empowering labour to hold out for a better deal, making use of new corporate forms like limited liability partnerships and so on, will accelerate this change.
...and finally...
Tim: "Monetary reform and changes to fiat issuance will not happen by itself. The problem is coming up with something to replace it that actually works. I have seen many attempts and none appear to work or are just a cover operation for hatstand ideas like "social credit"."
As I think I said in response to another comment, I'm actually quite agnostic about how monetary reform should happen and what direction it should take. Personally I like the Hayek idea of fully privatised commercially competing currencies. I am told that the legislation actually already exists to allow commercial "complementary" currencies run by corporations. Air miles, Nectar and Kit-Kash are but early examples.
But consider this - if you collect 100% land rent and the capital value of land falls towards zero, the structure of the money system is bound to change - a large proportion of our broad money is lent into existence to pay for land in the form of mortgages. At the very least banks are going to need to have to adjust to that.
Actually I believe the real question is what lengths states will go to to prevent what I see as inevitable change if we allowed it. I haven't played there for a long time, and the hype about it seems to have died down a lot, but "Second Life" and "Kiva" are but a glimpse of what might be to come.
Incidentally, I presume I've been linked to in a discussion on the Libertarian Party forums (link will only work if you are a member and registered on their forums). And that, now they have closed the public forums that were accessible to non-members, I am unable to see what people are saying. I believe that none of these three policy areas step outside the bounds of libertarianism. In fact that they address more inequities that create coercive human relationships than, say, anarcho-capitalist flavours of libertarianism do. It would be nice to get the jist of what you are saying, if anything, over there!
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Well, at least the Libertarian Party give you the time of day. I signed up to their alleged mailing list when their website was about a week old, with a chirpy message saying how interested I was in the Libertarian/Lib Dem overlaps, and have heard bugger all since. [/grumble]
Thanks, Jock, for your full reply, but I do need to clarify things here.
I am not against LVT as a concept to tax and in the policy we at the Libertarian Party do say we would want to do it IF IT CAN WORK. That proviso has not yet been met by a long way, and btw, it is inaccurate of Paul Lockett (in the comments) to suggest there is any inconsistency here - we want a practical plan, and I criticise what I see as IMpractical plans.
1. When I say who defines the value of your land, you say "why does anyone need to decide", yet immediately go on to talk about collecting the tax! Someone DOES decide the taxable value and that affects the actual value. Can you not see that?
2. As you should know, we aim to eradicate income tax., so the comparison does not hold. The problem comes when some local area under the influence of whomsoever, adjusts taxation on land they wish to gain access to because a new development is coming. So, building a road, whack up the value of land next to it. Farmer has no CAPITAL to develop it, so has to sell it for a knock-down price because he HAS to sell to meet the tax bill. If this does not concentrate land into a few hands, I do no know what would. This is just one example of the potential risks.
3. Living costs - if you have CBI as described you would still keep the most expensive parts of the Welfare bureaucracy - the entire means-testing apparatus. Housing benefit would probably remain in all but name.
4. Income. You need to clarify here - are you saying that COMPANIES have 40% more or that wage earners do? Be under no illusions, if you have CBI, income tax will be enormous. I worked out once that if we went for CBI with no other tax changes but a cull of QANGOs, income tax would need to be about 64% flat from the very first penny (IT is currently £140bln, 7k x 50m = £350bln pa). A HUGE disincentive to working especially at the lower end. Result: black economy, unproductive citizens, more companies shutting down and a growth in imports (and do not say "cheap imports make us richer" because that only holds if we are simultaneously exporting a greater amount of higher value exports).
5. Movement to low tax areas: A company will consider workforce supply as a prime consideration, not just rental costs. If that were not the case, expensive London would be empty. People pay top dollar for London rents because of a massive pool of labour - they can gain access to many cheap or more chance of snaring the best. To think LVT would make a company move out to a depressed area? Those places are already cheap. Why doesn't it happen now? Limited skilled labour pool. As you say the Government does it now and did it in the past (remember the Hillman Imp?) and it creates quasi-soviets. If LVT has an influence, it might IMHO move a few companies, deter some from even setting up where they need to and the rest of the companies will be bled paying higher rates just to keep near the labour pool they require. In the case of London, the move will be to New York or Hong Kong and we all lose out.
6. Mutualism: your previous reply was not an answer and neither does this answer, m'fraid. It is not a case of being employee or mutual but mutual or owner here. CBI, I agree, will allow people to consider taking the risk in a new venture, but I cannot see where changes are put forward that would encourage more mutualism, or should I say remove the discouragement to mutualism (that is very important distinction - no favouritism!). BTW, if only the Co-op did not fund the Labour Party, I'd seriously consider changing my bank account to them. I use Nationwide, though.
7. I think you need to rewind a little here and explain why the State thinks it has the right to charge 100% land tax! That to me is "tax is theft" in its pure form. It is Nationalisation or even Communism. The State as landlord? Go to China and see the misery and abuse the lack of freehold creates. I can see that you have no idea what will happen with 100% land tax in terms of ownership or even the banking industry - this is a core part of my concern with LVT schemes.
Funny you mention Second life. Do you remember the recent banking crisis therein? This is a problem if you are not careful about banking, though the mistake SL had was allowing Lindens to be used. What I want is for all those Social Creditors to go on to SL and try and make their ideas work.
Private competing currencies might well be a good thing, but eventually the State would collect taxes measured in one currency or basket thereof (which in effect becomes a currency!), regardless of how the other currencies floated around it purely from a perspective of budgetary planning. I would not be surprised if VISA and MASTERCARD were quick to create their own - they have the operational systems to create a currency without even printing a single note or minting a single coin and to match the exchange rate transaction by transaction.
btw I am no "anarcho-captialist". I am not a "geo-libertarian" either.
p.s. your page has a script that my browser asks me to kill due to risk of resource hogging.
As someone who considers himself a Geo-libertarian, my response to Tim's request for an explanation of why the state thinks it has the right to charge 100% land tax would be that the state doesn't have an automatic right to do anything, but each person has an equal right to use land and other natural resources, so, if somebody wants to make exclusive use of a plot of land, they should be required to pay the market rent for the land to everybody else, in the form of a citizens' dividend, to represent the opportunity that they are monopolising.
Likewise for other natural resources, like oil drilling rights, or the electromagnetic spectrum. If somebody wants to broadcast reliably on a certain frequency, they need the equivalent of secure tenure, which means the state preventing anybody else using the same frequency. The individual or company that obtains that right to exclusive use is being given a benefit by the state and it is right that they pay the market rate for that broadcasting licence.
To address the freehold issue, it is perfectly possible for somebody to have freehold, but be required to pay land rent. Both Council Tax and NNDR incorporate some element of land taxation, but neither are a direct threat to secure tenure.
Paul,
Firstly, do you now see that there is no conflict between what I said and our policy?
Secondly, giving a tax to the State set by the State is a million miles away from "paying a market rent to everyone else". It is very disingenuous to convey the idea in those terms.
Further, the idea does not take into account the conversion of the land from unused forest and at a time that little or no people were using the land or even ON the land. If you arrive first, clear land, you can understand that it would be rather annoying to find that others arrive later and say "hey, that land is now valuable. we want a piece so pay up".
Tim, "Firstly, do you now see that there is no conflict between what I said and our policy?"
I’m still not clear on that one. You say that you are happy with the concept of LVT and your objection is purely that you can’t see a way of practically implementing it and that “we at the Libertarian Party do say we would want to do it IF IT CAN WORK.” On the other hand, on the concept of 100% LVT, you’ve also said “That to me is "tax is theft" in its pure form. It is Nationalisation or even Communism.” Is that due to the percentage involved or the nature of LVT itself?
"giving a tax to the State set by the State is a million miles away from "paying a market rent to everyone else". It is very disingenuous to convey the idea in those terms."
I don't believe it is. With the citizens' dividend approach, the state would merely be acting as an agent, collecting land rent and paying it straight back out. The value would be determined by the market and the job of the state in that respect would be purely to collect the data from the market and process it.
If you accept that we each have an equal right to use the land, the sea, the air, the broadcast spectrum, etc., the only other libertarian method which would allow people to gain exclusive use of those resources would be the anarcho-capitalist approach to broadcasting rights I outlined in another thread. Each landholder would have to get everybody else to sign a contract waiving their rights to access the land. The other signatory would clearly make their own demands in return, be it a cash payment, a reciprocal arrangement regarding their own land, or a combination of the two. The issue there is one of practicality; requiring each landholder to negotiate bi-lateral agreements with everybody else in the country would clearly be a huge burden. LVT would achieve the same end in a much less convoluted way.
"Further, the idea does not take into account the conversion of the land from unused forest"
All suggestions for LVT that I have encountered are based on unimproved land value; any work done to the land, be it building or clearing, would not be reflected in the land rent. I believe the use of the word "land" in LVT is in some respects confusing. Location Value Tax would possibly be a better description.
“If you arrive first, clear land, you can understand that it would be rather annoying to find that others arrive later and say "hey, that land is now valuable. we want a piece so pay up"”
But, on the other hand, I would find it annoying to find that I was being denied access to a piece of land. I don’t believe that somebody saying “this is mine” is enough to entitle them to a perpetual monopoly over a location. If it was already there before man came along, it is something we all have an equal claim over, so it should either remain in common, with equal access for all, or, if it is necessary for somebody to have exclusive use, it should require the payment of compensation to those excluded.
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Libertarian Party Policy
Obviously, a member of a political party doesn't have to agree with every policy of that party, but I find it a bit odd that the Head of Policy at the Libertarian Party would go out of his way to criticise LVT when the Housing and Planning policy statement in their manifesto tacitly supports it with the statement:
"Until a practical Land Value Taxation system can be devised, forms of zoning (such as Green Belts) will still be needed."