26 February 2009

Credit Where it's Due

I usually have very few positive comments to make about Polly Toynbee's work, even going back as far as my GCSE English coursework, when I had to review one of her articles and was told by the teacher I was "doing the author a disservice" by describing it as party political propaganda.

However, in her piece in Tuesday's Guardian, I'm in almost total agreement with her comments on the housing market and the serious under-taxing of land. I doubt she'd agree with me that, on the flip side, income is seriously over-taxed, but it's still a positive read.

5 comments:

Mark Wadsworth said...

Agreed.

With her generally and with your final point especially. She got a favourable mention at mine and elsewhere.

Blad_Rnr said...

I'm curious. In your manifesto you claim that, "...traditional taxes on income, sales and man-made wealth create economic distortions and effectively confiscate the legitimate wealth of individuals. As such, they should be avoided."

How does any taxation (you believe land should be taxed) benefit society? Taxation is theft. Pure and simple. There are other means of building bridges, roads, schools, infrastructure and services in a market economy besides forcing people to part with their money. Besides, who decides what the rate should be? Politicians waste our money.

I overall agree with your manifesto, being a Libertarian myself (although I disagree with abortion, as it ignores the child's rights), but I am completely opposed to any and all government taxation. It's theft. Period.

Paul Lockett said...

Blad_Rnr, I'm of the opinion that it is government spending rather than taxation which could be considered theft. My ideal would be for the revenue from land taxes to be paid out in equal shares to the electorate with the state spending none of it, but realistically, I accept that there will inevitably be some government expenditure.

Land titles are a state granted privilege and I believe that anybody who gains from that sort of monopoly should compensate those they exclude. The same goes for broadcasting licences, etc.

Blad_Rnr said...

Okay, but at what rate? That's the "devil in the details." I have a problem with taxation because the tax rates always rise. Always. We can't trust any politicians to stick to what they say. Here in the U.S. we didn't have any federal taxes until 1913, and the government claimed it would be held to 1%. Of course, once you open the door for the fox, the hens are all at risk. We now have a tax rate of up to 33% here in the U.S.

The second problem is that, why tax land at all if you're just going to give it back to the people? What's the point of that? And taxing someone for owning land just adds to the cost (such as farming) of all the products produced. The electorate may see an annual check but that will just be absorbed by the rise in produce prices.

Interesting discussion. I'm on the same page as you, but have just never heard of these ideas before. Cheers!

Paul Lockett said...

Okay, but at what rate?In principle, it should be close to, but not greater than, the rental value of the land. The ideal would be to use the same system that is used for other natural resources, such as oil drilling rights and broadcasting licences, by holding periodic auctions, but that isn't really practical with land tenure as it is today.

The second problem is that, why tax land at all if you're just going to give it back to the people? What's the point of that?In effect, it's a payment by people who want exclusive use of a natural resource to those they are excluding. In some cases people will get more than they pay and in other people will get back less than they pay.

The closest example I can think of in practice is the Alaska Permanent Fund, where the state's oil reserves are sold and a proportion of the revenue is paid as a dividend to the population.

And taxing someone for owning land just adds to the cost (such as farming) of all the products produced. The electorate may see an annual check but that will just be absorbed by the rise in produce prices.Intuitively, that is what you'd expect to happen, but, so long as the charge is below the rental value of the land, it can't increase prices in that way; the charge has to be covered by the profits of the producer or the landlord, it can't be passed on to the consumer. It's a difficult effect to describe briefly. It is a consequence of Ricardo's Law of Rent and the effect of supply and demand. The key factor is that land is a fixed quantity, so placing a tax on its value can't reduce the supply and hence it can't increase the market price.

As an example, imagine if new deposits of oil were found in the sea-bed of a country. The right to drill for it could be auctioned off to the highest bidder, or it could be given to someone for free, but in either case, the oil company will sell the oil at the highest price they can get, which will be the prevailing market rate. Giving the oil drilling rights away for free wouldn't benefit the consumer, it would just allow the extractor to make extra profit.