GEORGISM: You have 2 cows. They are both yours, all yours. The land they are standing on isn’t.
(Inspired by “A Tale of Two Cows“)
GEORGISM: You have 2 cows. They are both yours, all yours. The land they are standing on isn’t.
(Inspired by “A Tale of Two Cows“)
Posted by petersmithconsulting on March 1, 2014
In a series of articles appearing on Salon last year Michael Lind argued that left and right alike are confused by a failure to distinguish productive businesses that sell innovative goods and services from “rentier” interests — landlords, lenders, copyright holders and others — which use their natural or artificial monopoly power to extract excessive tolls, fees and other recurrent payments from the rest of society, including productive businesses. Lind made the case that the fees or rents extracted by these interests constitute a kind of “private taxation” and that this is the greatest threat facing the productive economy.
This line of thinking is essentially a Georgist one and it doesn’t sit easily on the tired old left-right spectrum that dominates mainstream political discourse today. Many who identify with the left, worried that growing wealth inequality is leading to complete domination of society by big moneyed interests, denounce “capitalism” and reach for socialist answers. Take for example the following policy statement from the newly formed LeftUnity Party in the UK:
“We are socialist because our aim is to end capitalism. We will pursue a society where the meeting of human needs is paramount, not one which is driven by the quest for private profit and the enrichment of a few. The natural wealth, and the means of production, distribution and exchange will be owned in common and democratically run by and for the people as a whole, rather than being owned and controlled by a small minority to enrich themselves.”
This approach is born out of a flawed understanding of fundamental economic principles, namely the conflation of land with capital and the mistaken belief that privilege stems from ownership of the latter rather than the former. There is nothing wrong with wealth per se – after all we all want it! A top footballer or movie star who earns astronomical amounts by virtue of their unique talent isn’t preventing anyone else from prospering, so good luck to them I say! Similarly, creative go-getting entrepreneurs who make their money satisfying others needs in the market place should be free to enjoy the wealth they have created. Stealing their income and redistributing it to others smacks of envy.
The problem with wealth arises when it is possible to use it to buy monopoly privilege including control of natural resources, thus depriving others of access to the opportunities they need to get ahead unless they meet the payment terms of the owner. So in the aforementioned examples, the movie star and the entrepreneur who go on to invest their wealth in speculative real estate or shares in an exploitative oil company have crossed the line from wealth creator to parasite. In essence the Georgist solution is to cut off this possibility in a very simple and efficient way, leaving the economy to function as a true free market that benefits all.
I believe the best way to undermine the powerful elite vested interests that exploit the wealth of society and the planet is to drive a wedge between them and genuine wealth creators i.e. the industrious hardworking people that actually provide the goods and services in the economy. This includes lowly wage workers as well as high flying individuals who should actually be allies in this struggle. It certainly won’t be achieved with socialist rhetoric which unhelpfully perpetuates the sterile socialist-capitalist dichotomy and precludes the possibility of a broader anti-rentier agenda from taking shape. This plays into the hands of establishment interests that want to maintain the status quo, leaving them free to laugh all the way to the bank. Clearly much needs to be done to reshape the political debate in order to form a genuine coalition for change that works for everyone. Georgist education of economic principles has an absolutely vital role to play in this process of realignment.
Posted by petersmithconsulting on February 2, 2014
Everybody nowadays is anxious to help do something for the poor, especially they who are on the backs of the poor; they will do anything that is not fundamental. Nobody ever dreams of giving the poor a chance to help themselves. The reformers in this state have passed a law prohibiting women from working more than eight hours in one day in certain industries — so much do women love to work that they must be stopped by law. If any benevolent heathen see fit to come here and do work, we send them to gaol or send them back where they came from.
All these prohibitory laws are froth. You can only cure effects by curing the cause. Every sin and every wrong that exists in the world is the product of law, and you cannot cure it without curing the cause. Lawyers, as a class, are very stupid. What would you think of a doctor, who, finding a case of malaria, instead of draining the swamp, would send the patient to gaol, and leave the swamp where it is? We are seeking to improve conditions of life by improving symptoms
No man created the earth, but to a large extent all take from the earth a portion of it and mould it into useful things for the use of man. Without land man cannot live; without access to it man cannot labour. First of all, he must have the earth, and this he cannot have access to until the single tax [on land value] is applied. It has been proven by the history of the human race that the single tax does work, and that it will work as its advocates claim. For instance, man turned from Europe, filled with a population of the poor, and discovered the great continent of America. Here, when he could not get profitable employment, he went on the free land and worked for himself, and in those early days there were no problems of poverty, no wonderfully rich and no extremely poor — because there was cheap land. Men could go to work for themselves, and thus take the surplus off the labour market. There were no beggars in the early days. It was only when the landlord got in his work — when the earth monopoly was complete — that the great mass of men had to look to a boss for a job.
All the remedial laws on earth can scarcely help the poor when the earth is monopolized. Men must live from the earth, they must till the soil, dig the coal and iron and cut down the forest. Wise men know it, and cunning men know it, and so a few have reached out their hands and grasped the earth; and they say, “These mines of coal and iron, which it took nature ages and ages to store, belong to me; and no man can touch them until he sees fit to pay the tribute I demand.”
Nature prepared the earth for ages to make a mine of iron ore, which is so useful in civilized life. It was here before man came, and will be here after he is gone, and yet a plundering, soulless, conscienceless band of pirates, called the steel trust, have taken possession of all the iron in America, and they say to every man who will use it: “You must pay us tribute.” And every time two dollars is paid for their product one dollar goes to labour, and one dollar is taken as plunder pure and simple, because of the foolish laws of man. They can take from the farmer and labourer all that they earn except enough to keep them alive still to toil for the monopolist.
You may make eight-hour laws, you may make laws regulating sweat shops and factories, but so long as a few rich men own the earth, there will be a few rich and many millions of helpless poor. As population becomes more dense, the proportion of poor will increase.
The labouring man takes no account of fundamentals. Millions of working men have organized themselves into great unions to protect themselves, to force up their side to counteract the forcing up by the other side. These millions have organized for a most impossible purpose. They seek to change the social life in an impossible way. Their higher wages will be handed back to monopoly in higher prices. If a small fraction of the energy and money that has been given by the working men to support labour unions had been spent to change fundamental conditions, there would be no need of a labour union in the world today. Everywhere about us we can see that the conditions cannot change while land monopoly continues.
Most of our laws were made by the dead, and the dead have no right to legislate for the living. The present generation has no right to bind its legislation upon the generation still unborn. When one generation is dead, it ought to stay dead and not reach out its dead hand to bind the living. We have no right to fix terms and conditions for those yet unborn; it is for each generation to fix the rules and regulations for itself. The earth should be owned by all men, the coal mines should belong to the people who live here, so they can take what they want while they live, as when they are dead they won’t need coal — they will be warm enough without it — and they should not have the power to say who shall have it when they are gone. Carnegie and Morgan cannot use or withhold it much longer, as they will soon be gone — that is one consolation.
Fundamentally, all law recognizes the right to eminent domain, to take the portion of any human being for the welfare of the public — that no man’s claim to any portion of the earth shall stand in the way of the common good. This is a common law, but in practice it only applies where a rich railroad wants to get the land of some poor widow.
Everybody who works is poor; nobody would work if they were not poor, and nobody can get rich working. I never tried it, but I have seen others try it. The land boomer comes along and gets good car service to this poor man’s home, and then charges him ten dollars per month instead of five. A lot of reformers are trying to get parks laid out in the slums, which only make the poor move, for they cannot pay the increased rent. The greater the population, the less the worker gets. As the land becomes valuable, more and more goes to rent. The bigger the city, the deeper the poverty; the bigger the city the more degradation, there are the almshouses and gaols filled to overflowing. It is better for the men who own the earth to have big cities — but for no one else. Every man, woman, and child adds to the wealth of the land owner; the others must secure land upon which to live, and they must bid with each other for the right to live.
Beyond a living all surplus goes to the monopolist, and it does go to him. You talk about a city of a million in 1915 — who would be benefited? Not the workingman; he would be far worse off than at present, for the greater the city the greater the poverty.
Taxes on goods are added to the price of goods and passed on to the consumer. There is only one kind of tax that is not a curse, and that is the land tax. If you tax a pair of shoes a dollar, the manufacturer will add that to the price of the shoes, and thus diminish the number of shoes the people can buy. The higher you tax the land the more land is thrown on the market and the easier it is to secure, and it is the only thing that increases by taxation.
The higher the tax on land the more it comes into use, and so “single tax” is a positive blessing. It is the only tax that does not come out of labour, it comes out of the monopolist; it stays right there, and that fact compels them to put the land to some use, and that employs labour.
The single tax theory is that the public should take all the value of land, as it was made by the public. Land value goes up because of population, and not because of the owner of the title deed, and the value should be taken by the community, and thus create a natural fund from which to make improvements for the comfort of all, and thus make life easier. It would abolish poverty, that crime of the century, which has always come with civilization; inequality of wealth, which comes as the world grows older, and which we have never been able to cure, because man wants to hold what he cannot use, and pass on to future generations what they will not use.
The personal property tax always was a delusion, a humbug, and a snare; it never could be administered justly. The conscientious man, the widow and the orphans (whose fund is in trust) pay in full while the rich get off. It is unscientific, it is bad as a fiscal measure. What we are after is the earth, and it can be had in an easy, simple, direct way.
Every right-of-way of every railroad should be owned by the people; all public franchises, every mine and every forest, all should belong to the community itself. Then we would not need the repressive laws we have today.
The “single tax” is so simple, so fundamental, and so easy to carry into effect that I have no doubt it will be about the last reform the world will ever get. People in this world are not often logical; in fact, there is never any considerable number of them that are logical. I am pretty sure the people will never get started in the right direction; they will go a long way around.
Posted by petersmithconsulting on January 14, 2014
Economics has been called “The Dismal Science.” But it’s also been called “the science of how people get a living.” Our daily lives are beset with economic questions! Why is it so hard to buy a home? Why does the cost of going to university rise so fast? Why are willing, able workers unable to find jobs?
What about us the citizens — is basic economic literacy out of our reach? We are told, we need to ask the experts. But the experts tell us, “It’s more complicated than that!” Referring to obscure formulas and charts, they pitch their arguments at each other.
The Henry George Institute offers online courses that cast a light on today’s baffling economic problems and whats more the first course is absolutely free! No longer must you PAY US$25 and WAIT for a teacher to be assigned. But, you do still have to read stuff – that can’t be helped. It’s great stuff, though.
People in the group share a basic insight. The course explores this insight from all relevant vantage points, from its roots in classical economics to its capacity to resolve the crippling contradictions of modern “autistic” economics. But be warned, this course will change the way you think and feel about society!
There’s not a darn thing to lose. Do sign up! Click here to find out more.
Posted by petersmithconsulting on December 30, 2013
The leading tax experts who conducted the Mirrlees Review came to the conclusion that Land Value Taxation is such a powerful idea, and one that has been so comprehensively ignored by governments, that the case for a thorough official effort to design a workable solution seems to be overwhelming. In particular, the report noted, significant adjustment costs would be merited if the inefficient and iniquitous system of business rates could be swept away and replaced by an LVT (James Mirrlees et al 2011, p. 377).
Taking his cue from this Henry George Society of Devon member Julian Pratt has written a paper for the consideration of Treasury which sets out a compelling case for the replacement of Business Rates with revenue raising based on Land Value. The paper notes that the current regime of National Non-Domestic (Business) Rates (NNDR) encourages the under-use and under-development of non-domestic land and penalizes businesses that invest in buildings and other improvements, reducing their profitability and competitiveness. Replacing NNDR with Land Value Taxation (LVT) would provide more than £3 billion a year in economic stimulus as the dead weight loss of taxation under the current system was lifted. Moreover it would benefit businesses that invest in their property, reduce under-use and dereliction of land, increase business profitability and international competitiveness, regenerate deprived areas, have a counter-cyclical impact on the economy, permit infrastructure to become self-funding and reduce tax avoidance and evasion.
The paper advocates a two-stage switch over and calls on Treasury to carry out a feasibility study to further explore mechanisms for valuation, revaluation, transition and piloting.
The paper can be accessed here: Business rates reform proposal
Posted by petersmithconsulting on December 19, 2013
A number of months ago I blogged about the Land of Africa as a response to a BBC piece about the path to prosperity for African nations. Just to be clear, land in the broad economic sense means all of the natural world, those things not made by people i.e. natural resources. I recently came across the following interview with Paul Collier in which he eloquently identifies the key issue at the heart of combating poverty, be it in developing nations or those already developed for that matter. It’s a must share!
Paul Collier is Professor of Economics and Public Policy at the Blavatnik School of Government and Director for the Centre for the Study of African Economies at the University of Oxford.
Posted by petersmithconsulting on December 6, 2013
In responding to the financial crisis of 2008 and the failings of our so-called capitalist system the good folk over at Positive Money have done excellent work highlighting how banks have the ability “to create money out of thin air as debt”, giving those institutions an economic privilege i.e. an advantage over others down stream that don’t have that ability. There is a lot of truth in what they say however to claim that reforming the money system alone will solve the problems of inequality and poverty goes too far. Economic analysis exclusively fixated on money has something akin to a cargo cult – that is to say an attempt to recreate successful outcomes by replicating circumstances associated with those outcomes, although those circumstances are either unrelated to the causes of outcomes or insufficient to produce them by themselves.
When trying to explain the economic thesis of Henry George to some people this fixation with money tends to get in the way. Therefore to understand Georgism it helps to switch off the “money button” in the brain and adopt the assumption (temporarily at least) that money is a benign factor in the economy which simply facilitates the exchange of goods, services, wages, capital and access to land . It makes all of these things fungible so that the market – the invisible hand of supply and demand – can do its work.
By temporarily abandoning monetary explanations one can then try then to understand how wealth (goods and services) produced in our economy ends up being unequally distributed. Why is it that some can compel others to work for them on their terms and appropriate a big chunk of the fruits of their labour? What gives some the whip hand to repress others? The Georgist answer to these questions is that private ownership of the resources of the Earth (LAND in its broadest economic sense) enables owners to claim larger and larger shares of increasing economic productivity. This private ownership is a monopoly privilege. It allows those who own the most valuable land to extract and pocket huge amounts of rent. In short, no economic production can take place without access to the natural opportunities of the Earth but those who must live from labour alone are forced to pay a toll charge for this access.
The film RealEstate4Ransom opens with the quote “if you had all the money in the world and I had all the land, what would I charge you for your first night’s rent?” The point being that when it boils down to it ownership of land will trump ownership of money every time. Land asset bubbles are commonly identified as a symptom of financial excess, but could it be that they are actually the cause? Ultimately rent is the fuel supply the financial system runs on.
In the end reform of our current flawed economy and the building of a fair and crony-free system is likely to require both monetary measures on the one hand and measures that facilitate the sharing of natural opportunities on the other. On the third hand lets throw a universal citizens income into the mix too. Give and take among heterodox economists is needed to move this agenda forward. From time to time this requires the suspension of ones long held assumptions. We need to start with an open mind in order to be receptive of new ideas.
Posted by petersmithconsulting on December 2, 2013
Since the onset of the Great Recession middle class earnings in the UK have shrunk significantly. Professional jobs across many sectors have become insecure and are paying less in real terms. Experienced, well educated and well qualified workers are struggling to make ends meet with many turning to self employment or living off scraps of part-time work for meagre returns in a desperate effort to avoid the dole queue.
Is this a temporary blip which will soon be corrected as the economy “returns to growth” or is the slide of the middle class something more permanent? Is the middle layer of society currently experiencing a decline of fortune just like that suffered by the working class when the industrial sector collapsed some 4 decades ago?
This is the question pondered by Rohan Silva in a segment on BBC Newsnight (11/9/13, posted here on Youtube). Silva, a former senior policy advisor to David Cameron, notes that the economy has recently started to grow again however the new wealth being created is not being enjoyed by the majority but is flowing exclusively to those at the top. Job creation has stalled, incomes have stagnated and some believe the middle class is dying off. Silva believes the adoption of labour saving technology is behind this trend, stating “if the last century was about technology replacing brawn, this century could be about technology replacing brains.”
Silva’s thesis is heavily influenced by the thinking of Tyler Cowan, Professor of Economics at George Mason University. Cowan notes that computer programmes are getting better and better at carrying out tasks traditionally performed by white collar workers, including within schools and universities, law firms, media outlets and hospitals. He concludes that this trend is set to continue with automation ultimately leading to the destruction of countless previously secure jobs throughout the economy.
With the number of well paid positions in decline a greater proportion of the workforce is being employed in low paid menial jobs that remain beyond the reach of automation. As Rohan Silva notes 4 out of 5 new jobs pay less that £8 per hour and zero hour contracts are becoming increasingly common. The result is growing inequality as many struggle to afford life’s necessities while the already rich pocket the additional wealth created by the application of new technologies.
This is a somber prognosis and Rohan Silva is right to identify it as the dominant economic challenge of his generation. However the remedy tendered by himself and Professor Cowan offers precious little in the way of solace. Cowan’s advice is to seek retraining in programming, machine learning and artificial intelligence to develop the high tech skills need to ensure one stays on the right side of the dividing line between benefactors and victims of technological progress. Silva holds up the example of Singapore’s prosperous innovative economy built on a foundation of high quality education in mathematics, science and technology.
Realistically though, how many of us will be able to retrain in the way advocated and earn a decent living in this new economy? Surely we won’t all be able to be employed building robots for each other. At best this remedy only offers safety to a relatively small proportion of the workforce and is therefore no solution at all for the rest who seem destined to continue to struggle to keep their heads above water.
Large numbers of well educated, capable and motivated individuals are in effect deemed “surplus to requirement” and are being thrown on the proverbial scrap heap. This realisation leads one to take a big step back and look critically at our economic system as a whole, to question its very purpose. Are people supposed to serve the economy, or is the economy supposed to serve the people? What does it mean to be human when the economy prescribes that, despite our talents, we must flip burgers in order to scrape by? These are existentialist questions.
I’m minded of Lindy Davies’ musings on the subject of Jobs in which he asks “what is a job, really? What does it mean to have one, or to not have one?” In a similar vein Buckminster Fuller once quipped “We should do away with the absolutely specious notion that everybody has to earn a living. It is a fact today that one in ten thousand of us can make a technological breakthrough capable of supporting all the rest. The youth of today are absolutely right in recognizing this nonsense of earning a living. We keep inventing jobs because of this false idea that everybody has to be employed at some kind of drudgery because, according to Malthusian Darwinian theory he must justify his right to exist. So we have inspectors of inspectors and people making instruments for inspectors to inspect inspectors. The true business of people should be to go back to school and think about whatever it was they were thinking about before somebody came along and told them they had to earn a living.“
Lindy Davies concluded that “the obsessive focus, in our political discourse, on “jobs” is a clever way of diverting our attention from our true economic problems: unused land, wasted capital, huge fat gobs of monopoly privilege, and tax burdens that hinder enterprise. When the resources that workers need to make a living are kept from them by monopolists, then “a job” becomes the best they can hope for. The extent to which we focus on “jobs” is a good barometer of how unjust and wasteful our economy truly is.” He is alluding here to Georgist economic principles including the relationship between rent and wages and the effect of monopoly privilege on the distribution of wealth. Henry George clearly explained the mechanism whereby increased riches from the adoption of new technologies will inevitably flow as unearned income to the owners of land and natural resource monopolies. Rising rents will swallow up any rise in wages thus leaving those who have to live from wages alone bereft of any lasting benefit. Understanding these principles and taking them on board is essential if we are to find a true solution to the dilemma we are facing.
The middle class is often considered the glue in society and it is this segment that is now in the firing line. Could this be the trigger for a long overdue reappraisal of the assumptions that underpin our economic system? As university academics start to feel the squeeze might they be shaken from a seemingly blinkered acceptance of the current failing paradigm and finally start to grapple with the true root cause of the problem? One can only hope this will usher in the adoption of an economic model that values all people and ensures everyone benefits from the wealth we have all had a hand in delivering – an economy centred on the principle of Earth Sharing.
Posted by petersmithconsulting on September 13, 2013
Yoni Higgsmith’s new film “The Taxing Question of Land” has now been released. The 30 minute film sets out a compelling case for the introduction of Land Value Tax in the UK and urges those who agree to take concrete steps push this vital reform up the political agenda.
Posted by petersmithconsulting on September 4, 2013
Why is something as basic as land still important in our technologically advanced world? After all, developed nations even have thriving Internet economies, where wealth is created virtually yet leads to tangible benefits in the material world. Companies such as Google don’t even use significant amounts of land in the vast majority of their business transactions.
So why, then, does land still matter? The answer is simpler than you think: look down.
Yes, you’re standing on it right now. Land matters. It’s like the air you breath — you can’t live without it and you probably don’t really pay much attention to it either.
It also matters because people buy and sell it. Imagine if people bought and sold the air! But unlike the air, land is more limiting: there’s only so much of it in each location — which is why land has a price tag. In fact, land enables you to have access to locations: if you own land in an urban environment, you’ll have access to a lot more goods and services in the surrounding environment than if you owned land in a rural area.
Because land is inherently limited for each location, it acts like a cool pane of glass that coalesces invisible water vapor into droplets — by coalescing demand for a particular location into increases in its value. As I extensively document in my forthcoming book (stay tuned here), the value of land needs to be shared or else we’ll continue to have a host of negative side-effects such as involuntary unemployment, ecological destruction, and even economic boom and bust cycles.
Part 2 of the importance of land in a modern economy
I was discussing Land Value Tax with someone recently and he made the point that land is not such an important factor in the economy as it once was. Stalwart blogger Mark Wadsworth answers this one well on his “Killer Arguments Against Land Value Tax … Not!” website, which I have pasted here, with a little redaction:
People claim “We are no longer a land-based economy”
They sometimes phrase this as: “We do not understand your obsession with land, land isn’t important in a modern economy, therefore what’s the point in taxing rental values?”. Back in the 19th century Karl Marx made the same false assumption.
Why are they wrong about this?
It’s true we are not an agricultural economy (even though the UK is or could be more or less self-sufficient in food), less than one per cent of the population earn a living in farming; farm gate prices only amount to less than one per cent of GDP and the total rental value of all UK farmland/buildings is less than one per cent of the total rental value of urban/developed land and buildings.
Nevertheless everything is land-based, we use land for houses, roads, offices, shops, radio transmitter masts etc. Some people live in house boats, but these still have to be moored somewhere, they still need land/location, and all that separates them from the land is a few feet of water. We are just as much a land-based economy as we ever were and always will be (until we all live in hot air balloons or spaceships or something).
Furthermore Ricardo’s law of rent is still easily observable today. There are differentials between average incomes (before housing costs) in different parts of the UK (or any other country for that matter) but most or all of the differential goes into higher rents, even The Daily Mail reports this regularly. A typical private sector worker (hairdresser, receptionist, bus driver, shop worker) can increase his or her income before rent by (say) £5,000 moving from a low wage area to London, but will end up paying £5,000 more in rent. So after housing costs (actual or notional), net household incomes are pretty much the same everywhere in the country, I refer to another article in The Daily Mail which reports exactly this effect.
So the analogy with farming is this: if the “yield” from a job in a low-yield area is £11, then the rent is £1, and if the yield is £15 in a high-yield area, then the rent is £5, and true net wages after housing costs are more or less the same everywhere. In a roundabout sort of way, Ricardo’s Law of Rent is exactly the same as the estate agent’s mantra: “Location, location, location”. What is plainly observable is that as an economy grows and becomes more productive – due to population increase, the adoption of new technology, increasing complexity and greater division of labour etc – the difference in value between the least and most desirable land grows too.
The countervailing force which prevents 100% of any growth in the economy going into higher rents is that over time, people also have a higher expectation of what the basic minimum is; if they get less than that they will not exactly starve, but they will revolt, strike, emigrate or turn to crime. So with the farming example, if some new technique is invented which increases the yield of all fields by ten percent, then wages (or the net profit of a self-employed worker) will creep up a bit, from £10 to £11, but mathematically, rents will still take a slightly larger slice of the whole cake.
But “With the internet, locations are no longer so important” I hear you say
People sometimes show how little they understand by throwing this into the mix. The internet is merely a great way of communicating, but you could have said the same thing when they invented writing and the messenger boy or the carrier pigeon, or the telegraph, radio, telephone or fax. The differentials in rental values between the city centre, the suburbs and farm land; between nice and grotty areas; between high wage and low wage areas; between plots with restrictive and with less restrictive planning permission will always be there.
And where do you find fledgling cutting edge tech start-up enterprises? Chiefly where its buzzing – places like London, Berlin, Stockholm and San Francisco . The clustering of these energetic and exciting new ventures in certain districts contributes to gentrification processes which are characterized by rising rents.
Furthermore whatever you do over the internet, it still requires land to hold the cables (or the WiFi transmitters), goods sold over eBay and Amazon still have to be manufactured somewhere and delivered from warehouses somewhere to shops or homes somewhere else. We can safely assume that the Internet increases our productive capacity and therefore the total rental value of UK land. Houses with broadband sell or rent for more than houses with only sporadic 3G reception; and those sell or rent for more than ones without either, or without even a telephone line. Conversely, rents on the High Street might have fallen a bit because a lot of people shop online. But the rents for factories and warehouses are unaffected.
At this stage, some will throw in a diagonal comparison and say: “But with LVT, a best-selling author would be able to live in a remote croft, email his books to his publisher, and not pay any tax; he’ll pay less tax than the printer with a printing shop in an urban area who prints his books.” Well yes of course, but that’s his good fortune and a stupid comparison. Surely it is more relevant to compare a best-selling author in a remote croft with one in a swanky mansion? Or compare a printer with a good site on the high street (with lots of passing trade and extra customers) with one in a back street or out of town industrial estate who has to spend more money on advertising and marketing?
Also please note…
The traditional system of taxing profits and transactions doesn’t really work with internet based businesses. They can circumvent many of the old rules and concepts dictating what will be taxed in which country, which gives them an unfair advantage over their competitors. So to level that particular playing field, taxes on output and profits and so on have to be reduced for all businesses.
But internet businesses need land the same as anybody else. Amazon and other internet retailers have their warehouses and delivery depots. Google, Facebook and Microsoft have massive offices, usually in expensive central locations (Google will soon be relocating to the massive new development behind Kings Cross Station). All their employees, directors and shareholders have to live somewhere. So the more that business takes place over the internet, the more important is is to collect revenue from the rental value of land instead of trying to collect taxes from turnover and profits in a most haphazard and damaging fashion.
Posted by petersmithconsulting on July 3, 2013