Technology and the cost of access to land

A letter to the editor of the London Review of Books by Julian Pratt 18/05/17

Adrian Bowyer is to be congratulated on his invention of the self-replicating 3D printer RepRap, and also for the generosity of its open-source licensing, which tackles one of the chief blocks to universal access to production: the monopoly over intellectual property rights.RepRap

He is, though, too sanguine about the capacity of this technology to bring about a situation in which all a producer will have to pay is ‘the cost of access to an allotment’. As the current housing crisis shows, if all the land is owned by just some of the people, they will be in a position to charge as much rent as its users can pay. Ownership of land in perpetuity, without concomitant responsibilities and duties, is a state-created right. If inequality is to be reduced, this property-right must be transformed into a use-right, for which the steward of the land would pay rent to the community. Unless landowners were suddenly to start behaving with the same generosity as the open source movement, this would require political action not technological change.

Rethinking the Economics of Land and Housing

Why are house prices in many adRethinkingvanced economies rising faster than incomes? Why isn’t land and location taught or seen as important in modern economics? What is the relationship between the financial system and land? These are the questions addressed in an excellent and highly accessible new book by Josh Ryan-Collins, Toby Lloyd and Laurie Macfarlane. Rethinking the Economics of Land and Housing explains clearly that the key challenges facing modern economies – including housing crises, financial instability and growing inequalities – are intimately tied to the land economy.

These ideas are at the heart of the Georgist paradigm. Watch an excellent discussion about the book between Ross Ashcroft, Josh Ryan-Collins and Laurie Macfarlane on RT here:

https://www.rt.com/shows/renegade-inc/384176-land-economy-human-existence/video/

Why Robots Will Never Take Our Jobs (unless we want them to)

A guest post by Edward Miller: 

Many people are understandably concerned about the future role for labor in our increasingly automated economy. Considering the precarious position of laborers, these concerns should not be taken lightly. Nevertheless, this fear is rooted in simplistic reasoning. The deductive truths of classical political economy and the empirical truths of our world both reveal that capital will not permanently replace labor through any sort of unintentional economic process. It could only happen through conscious public policy.

robots

Could robots one day become sentient, and kill all humans? Maybe. That might even count as technological unemployment, by an expansive definition, but that is not the type of scenario I’m talking about. Automation can and will replace all sorts of jobs, and cause temporary displacement. Yet, in a market economy, there’s a number of strong reasons to doubt that automation will ever unintentionally replace labor in general. I’ve numbered them for convenience:

 1) There is a trend that is documented in the literature for Supply Chain Management (SCM) known as “de-automation.”

De-automation is the process of shutting down capital-intensive factories staffed by highly skilled laborers, and replacing them with unskilled Third World labor. Any look at the statistics of how manufacturing has actually occurred over the past century would validate this fact. It is amusing to note the cognitive dissonance that as people are worrying about robots, the obvious reality is that manufacturing has been constantly moving away from technologically sophisticated regions, and towards unskilled emerging markets. This is a predictable thing, when we note that capital and labor are “fungible” and can replace one another as necessary.

2) Nobody is questioning whether robots can be more efficient at producing any particular product. Indeed, there’s all kinds of jobs that we’ve figured out how to automrobots2ate decades ago that still aren’t automated. The question is whether these jobs *will* be automated, not whether they can be.

There is a finite supply of inventors, engineers, and so on. Each of them is generally going to apply their skills only to the areas in which they can achieve the highest return. Doing anything else would incur an opportunity cost. So why don’t we have robot arms like in the Jetsons that wipe our faces for us, and so on? Well, if you are a roboticist, are you going to work on a robot that wipes your face, or a robot that builds cars? Which is more likely to make you rich?

 3) The Law of Comparative Advantage shows that if there are two parties, and one is more efficient at every type of production than another, it is still in each party’s best interest to trade with one another as long as they each focus on their comparative advantage.

This is a simple deductive truth that can be figured out with basic arithmetic. Thus, even if we make the ridiculous assumption that humans can’t beat robots in any respect, in terms of quality or efficiency, in any industry at all, then it would still be in the best interests of everyone for robots to focus on their comparative advantage, and for humans to focus on ours.

4) The Law of Rent shows that rents are set based on the differential between the productivity available at that location compared to the productivity achievable on the best available rent-free land.
Thus, as productivity per laborer increases, nominal wages may go up, but real wages will stay the same because rents will rise. Wages are set primarily by the standard of living that can be achieved without paying rent. Even the wages of high-skilled labor, because everyone’s wages are set based on their next best alternative. When people can live well off the land, and by their own wits, then for employers to get unskilled workers they need to entice them with a better offer. And for them to get highly skilled workers, they can’t simply pay them the same wage… they need to offer something even better. And real wages are what matter, not some number on your check. Real wages are the standard of living that you can acquire after you’ve paid off all your rent, taxes, and other mandatory payments.

Basically, landlords are given a government license to sell access to the location, not just the improvements that they are responsible for. Even vacant land has a price, and clearly that can’t be attributable to the efforts of the landlord. Most of the rental price in urban locations is merely locational value. They don’t ask what their costs were when determining what to charge, they ask what their tenants can afford. Thus, as productivity rises, so do rents. But the reverse is also true. If workers aren’t in as much demand, then rents will begin to decline. This will assist workers in their race to the bottom. This process of land rents taking a larger and larger share of production, as economic progress occurs, is a key cause of wealth inequality.

5) If we suppose that there’s an inevitable race to the bottom in wages, we must remember that neither side is static in this race. Both capital and labor can become more expensive or less. The changes within the race are not unidirectional.

robots3

Sure, robots can make amazing gains in efficiency. What is the result of that? The price of goods decreases. If the prices of goods decrease, that means humans can achieve the same standard of living, while accepting a lower nominal wage, and underbid robots. And as artificial intelligence grows, this can enhance the productivity of human beings. Computers make humans more efficient, not just robots. We can become more like cyborgs ourselves, and some would say we already are. If efficiency rises, demand can shoot up to such a degree that resource usage rises higher than before. This is counter-intuitive because one generally associates efficiency with reduced resource consumption, but it is a well-documented fact, and high resource usage in turn raises prices. Right now there’s a scramble to mine enough lithium for all the batteries being produced for phones, electric cars, solar, etc. Rare earth elements, helium, and all sorts of scarce resources are in high demand for similar reasons. Shortages in any of these can quickly cause prices to spike, and for capital to be replaced with labor. Feeding humans with renewable resources can be cheaper than feeding robots with non-renewable resources.

6) The assumption that this race to the bottom is inevitable in a market economy is incorrect. Even though living standards are still rising, I don’t dispute that we are currently in a race to the bottom in much of the world.

However, certain insights from political economy show us how to make reforms that get us out of this race to the bottom. Most notably, a land value tax. …want a vision of the future? Imagine a child working in a sweatshop, forever. Unless we consciously choose another path. Automation is good. It is more or less synonymous with economic progress. Trying to halt automation would be like shooting ourselves in the foot, and would solve nothing. We just need to figure out how to achieve a fairer distribution of wealth, by understanding the fundamental power relationships that were revealed by classical political economists, such as Adam Smith and David Ricardo. Prime locations are one thing robots can never create more of.

We all need land, and to live where jobs are. If we share the rents that accrue from access rights to that which everyone needs, but nobody creates, then real wages can finally rise. At that point it could be financially viable for robots to actually start replacing labor. Using our higher wages and Citizen’s Dividend, laborers could stop working so hard, but only if we want to.

How would Land Value Based Fiscal Reform contribute towards good, secure, affordable housing?

In the face of a deep and ever worsening housing crisis there is widespread frustration at the failure to increase the rate of house building to address the imbalance of supply and demand. A large part of the problem is that the profits of the development industry are intrinsically linked to inflated land values which are boosted by artificial scarcity. It is not in the interests of developers to flood the market with new builds as this would have a price supressing effect and hit their bottom line.plymouth-houses

At present it is all too common for land owners to sit on development sites and demand an unrealistically high price from others who want to bring them forward, or otherwise demand that local authorities lift the obligation to build sub-market affordable homes in order to make schemes more profitable. The viability discussion, a circular argument over the relationship between site value and planning obligations, can be typified as a stand-off between the developer and the planning authority with the latter commonly lowering its affordable housing requirement in the hope that this will result in stalled sites being taken forward.

Land value based fiscal reform would strike at the root of the problem by fundamentally shifting the balance in favour of productive land use, rewarding the industrious and penalising the speculator. It would do this by introducing a modest annual cost on the land owner regardless of whether land is used productively or not. In return, one-off costs that developers currently face such as Community Infrastructure Levy and Stamp Duty Land Tax on development land could be eliminated in a revenue neutral way. These existing taxes are not paid by those holding land idle but are only levied once the decision is made to sell or develop the site. The revenue neutral fiscal shift could be extended further to the elimination of other taxes on house building companies and construction workers including VAT, corporation tax, income tax and national insurance. Reducing these harmful taxes would lower the cost of development.

The net result would be a saving for those who proceed quickly with development and mounting costs for those that do not. The reform would prove to be an effective antidote to unproductive land banking and speculative behaviour which drives up the cost of land. Stalled sites, previously developed, underused and derelict land in both the public and private sectors would be unlocked and the build-out of development schemes would be accelerated. The surge of available land would have the effect of lowering its price, enabling new developers, including smaller house builders, self-builders and housing associations to join established volume house builders in providing a plentiful supply of affordable housing as well as creating additional jobs in the construction industry.

The fiscal shift would also result in a more efficient use of the existing housing stock. Bringing empty homes back into use would be rewarded and an incentive would be created for existing households to downsize where possible. Not only would this mean a greater number of larger homes coming onto the market but it would also reduce the requirement for greenfield land to facilitate urban expansion.

huge-tracts-of-landThousands of hectares of land would be freed up and millions of new homes would be delivered across the country. Housing supply would increase to meet demand causing a fall in house prices as well as lower rents. At the same time the fiscal shift would mean higher after tax incomes and greater spending power for the majority of people which would make homes more affordable to the population at large. Furthermore, the end to scarcity that increased supply would bring would result in better quality housing and a more equal relationship between landlords and tenants, reducing the insecurity of tenure and poor conditions currently experienced by many in the private rented sector. In essence, a land value based fiscal reform would tackle the monopolisation of land which lies at the heart of our current housing crisis.

Google’s tax avoidance – the wrong culprit

By Julian Pratt

After a six year inquiry, Google has agreed with HMRC that it will pay £130 million in tax to cover the 10 years from 2005 – an amount that critics have rightly described as derisory. HMRC’s says that it has collected ‘the full tax due in law’. Both the critics and HMRC are completely right, as there is a problem but it does not lie with tax avoidance measures. These are entirely within the law and, for example, used by anybody with an ISA. Rather the problem is a badly designed tax system.

Lord Lawson has responded by attacking Corporation Tax, which invites large businesses to shift profits between tax jurisdictions to avoid paying tax in the UK – a privilege that, as he points out, is not available to small business. Lord Lawson proposes replacing this tax on profits, in whole or in part, with a tax on sales. This might be a bit more difficult to avoid, but it would surely not take long for the accountants to find ways of doing so – particularly as the location where a sale takes place is increasingly difficult to identify as more and more sales move to the internet. And like any conventional tax it would discourage whatever is being taxed – why would we want to discourage sales (or indeed profits)?

The solution to tax avoidance is to move towards a tax system in which whatever is being taxed is impossible to hide or to move abroad. After two hundred years of dysfunctional tax policy the answer is clear. Orthodox economists now agree that the source of revenue for a government should be the rent of the land that it defends, protects and services – which they describe as a Land Value Tax (Economist 29/6/13 Levying the land). A Land Value Tax even has the advantage that not only does it not discourage profit-making or sales but it does discourage holding land out of productive use – derelict or underused. If this land were brought back into productive use it would provide space for business and for decent housing that people can afford.

Bedroom Tax – David Cameron’s poor grasp of the facts

By Julian Pratt

The government has lost its Court of Appeal cases relating to two families that have a clear need for a spare bedroom and whose Housing Benefit has been cut, though the cases will now go to the Supreme Court. This ‘bedroom tax’ attacks those who are most in need of decent housing and is rightly described as ‘vile’ by Danny Dorling (2014:147) in his excellent book All that is solid: the great housing disaster.

David Cameron’s response is seductive but outrageous – that it is ‘unfair to subsidise spare rooms in the social sector if we don’t subsidise them in the private sector’. Housing Benefit is of course a subsidy to private landlords as well as to social landlords, but the substantial point is that we do subsidise – on a massive scale – spare rooms in the private sector. The most obvious way is by exempting owner-occupiers from Capital Gains Tax on their home. It’s not unusual to hear people say that they have ‘earned’ more by watching the value of their home rise over the years than they have by working full-time. This means that buying the most expensive home you can afford is one of the best investment decisions any family can make. Location is of course a major factor in this expense, but so is the size of the house. The exemption to Capital Gains Tax is therefore encouraging people to buy larger homes than they might without such an exemption – contributing to the large number of unoccupied bedrooms in the private sector. Housing in the private sector is used far less efficiently than in the social sector.

That’s just the capital gain. We also now fail to tax as income the ‘imputed rent’ that an owner-occupier can be considered to receive as income from themselves in rent (as the result of the exclusion of owner-occupied properties from Schedule A in 1963). This has provided a further subsidy to owner-occupiers that distorts housing tenure by incentivising investment in unnecessarily large homes in the private sector.

There are plenty of other subsidies for private housing that may subsidise overprovision of bedrooms, like Help to Buy and other schemes for first-time buyers and Right to Buy for residents in council and housing association properties. And the inequity of subsidies to owner-occupiers goes far wider than this. The government has shown that it will do whatever it takes to prop up house prices, whether this be by demolishing housing in northern cities or by increasing the money supply.

David Cameron is right though – we need a society that treats renters and owner-occupiers fairly and even-handedly. Subsidies to owner-occupiers currently make it inevitable that their wealth will grow in the long term, principally as the result of rising house prices and rent-free accommodation once the mortgage is paid off. How can we ensure that renters are fairly treated?

A large part of the cost of any house, and almost all of any increase in its value, is attributable to the value of the land rather than the building. What we need is a cap on ever increasing land values. The value of land is fundamentally determined by the discounted stream of expected future rents, though expectations of future price rises add a speculative element. The most effective way to cap land prices is to collect the full market rent, or even just any future increase in the market rent, as a location fee or Land Value Tax.

Land Value Taxation

Here is a comprehensive presentation on the merits of Land Value Taxation pitched at the Labour Party  by the Labour Land Campaign:

Why Keynes was wrong

Guest post by Akhil Patel of Ascendant Strategy

In 1930, as the world toiled through the Great Depression, John Maynard Keynes wrote an essay, Economic Possibilities for our Grandchildren, to allay people’s fears about their economic future and, as he so eloquently put it:

Keynes… to take wings into the future” in order to ask: “What can we reasonably expect the level of our economic life to be a hundred years hence?”

In other words, he was peering into a crystal ball to imagine what things would be like in 2030. As an aside, reading this essay is a little like going back and watching Back to the Future II, in which Marty McFly is transported to the future….to our very own 2015. It’s interesting to see all of the technological progress they envisaged for October 2015. Some of it was way off (hydrating pizza?) but in other ways it was quite accurate (3D movies at the cinema; video chatting with several people via computer).BackToTheFuture

In his essay, Keynes made two famous predictions:

  • that the world in economic terms would be eight times better off (projecting into the future the growth rates from the early part of the 20th century).
  • And that this would mean that his grandchildren would only have to work 15 hours per week.

I mention this now because a famous UK economist, Tim Harford, author of The Undercover Economist, revisited Keynes’ famous speculations in the Financial Times. Here is what he had to say:

Keynes was half right. Barring some catastrophe in the next 15 years, his rosy-seeming forecasts of global growth will be an underestimate. The three-hour workday, however, remains elusive.

Harford then goes on to explain why this might be the case. He puts it down to two main reasons:

  1. We like to work hard.
  2. We like to earn more than our neighbours so we can spend more than them.

There may be something in this. But please note – he misses the main point. (As an aside, I’ve given up expecting such figures to “get it”).

The main point is this: The fruits of economic development always increases the price of land, which far outstrips the growth in wages. This is called The Law of Economic Rent.

This is an invariable, immutable and permanent law of economics. Write it down. Commit it to memory. This is what drives the cycle. Increased rents attract capital; and then invite speculation as people chase something for nothing. In economies (such as ours) where the rent is privately captured, those who own the rent can work less and less – because as the economy grows the value of the rent increases. But those who earn wages will see much less growth – while the rent (or mortgage payments) they will have to pay for a place to live or work will go up by much more.

It used to be possible for a family on a single income to own a proper house in London and not to be mortgaged more than a decade. Now, it’s unlikely to happen for a two-income professional couple both working 40 plus hours a week and repaying the loan over three decades. A small flat is probably all they will be able to afford – after several years saving up for a deposit. This is because there is an abundant supply of people wanting jobs which puts pressure on wages and what people are prepared to do to earn them.

And note another thing: Tim Harford is a very widely-read economist, especially here in the UK. But he doesn’t talk about or understand the land dimension. This is one of the reasons why there will never be any widespread understanding of the 18 year cycle. Find out more about it here.

Akhil Patel

Director, Ascendant Strategy

www.theascendantstrategy.com

tw: @AkhilGPatel @AscendantStrat

The Georgist playbook adopted in Saudi Arabia

This week the Saudi government approved a proposal to tax undeveloped land in urban areas. It is a policy that will radically shake up investment incentives and help resolve the housing shortage in that country. It is an exciting opportunity to see the Georgist playbook put into action.

Saudi homesThe background to the new policy is a lack of affordable housing which, just like in the UK, has become a major social problem in the kingdom. After social discontent prompted uprisings elsewhere in the Arab world in 2011, the government announced a plan to build 500,000 homes over several years, earmarking some $67 billion of state funds for the plan. But progress was slow, partly because of the difficulty of obtaining land. Again just like in the UK much urban land in Saudi Arabia is owned by wealthy individuals or companies who prefer holding it as a store of value, or trading it for speculative profits, to the process of developing it. Some analysts have estimated 40 or even 50 percent of space inside big cities such as Riyadh, Jeddah and Dammam is undeveloped.

The Saudi cabinet’s new tax proposal aims to change that pattern by pushing more land out into the market, where it can be developed for housing. No details were given concerning the size of the tax, how it will be implemented, or its implementation timetable. An economic council will make proposals to the Shura Council, a top advisory body.

But the tax is politically sensitive because it may hurt the interests of influential people. Some investors fear a greater supply of land will force down its price, hurting the balance sheets of real estate development companies which own large land banks. Shares in major property developer Dar Al Arkan sank 6.5 percent the day after the announcement, while Emaar Economic City dropped 6.60 percent.

RiyadhHowever at the same time shares in the construction and building supplies sector climbed on expectations that the land tax would stimulate more activity. Major builder Abdullah Abdul Mohsin al-Khodari and Sons gained 1.9 percent, Saudi Cement Co added 3.3 percent, and Red Sea Housing Services, a maker of modular buildings, rose 2.1 percent. The overall Saudi stock market index climbed 0.4 percent. Mazen al-Sudairi, head of research at al-Istithmar Capital in Riyadh, said rising prices and limited availability of land had dampened many areas of Saudi business activity, so the tax could have a broad, positive effect on the economy. This is in line with the expectations of those versed in Georgist economic theory – actual wealth creators including construction companies will benefit while rent seekers parasitic on the wealth created by others will loose out.

Sudairi said the stock market was also pleased by the signal that King Salman was moving quickly to address economic problems and push through long-delayed reforms. “The decision opens growth opportunities even to other sectors. Retailers, which mainly depend on leases, can now buy land and expand. Cement firms will grow with rising demand, and even banks will prosper as they will lend to those firms. Despite the drop in the real estate stocks, the market itself is up – people are optimistic about the economic reforms and the seriousness of current management in executing reforms,” he said.

However a tax on undeveloped land does not have all the benefits of a universal land tax applied uniformly in terms of land value. This is because there is bound to be ongoing wrangling between the revenue collecting authorities and land owners as to what exactly constitutes undeveloped land. If a down-town vacant lot is turned into a parking lot simply by erecting a fence, paving it over and installing a pay booth then it could be argued that the land is no longer undeveloped and therefore no tax is payable. However such a low intensity use would be far from optimal therefore the site would continue to be a drag on the economy and have much the same negative consequences as before. Perhaps parking lots will be declared non-exempt. But then what about old and deteriorating poorly maintained low density buildings occupying prime sites? Where will the threshold be placed? This would not be an issue under a universal land tax that would encourage the appropriate intensity of development across all locations in keeping with the value of each location. Hence it would result in benefits of a far higher order of magnitude than the charge on undeveloped land proposed by the Saudi government.

Nevertheless taxing land as proposed by the Saudis will have significant economic effects. These effects are the same whether the country is an absolute monarchy with woeful human rights record or a modern democratic state. So this unfolding experiment in Saudi Arabia is of great interest to Georgists the world over.

This post was based on a Reuters report written by Andrew Torchia and posted at CNBC

Update Nov. 2015: The tax plans have moved a step closer according to this  Bloomberg article.

The dangers of a Basic Income without Land Value Taxation

By Charles Bazlinton, blogger, surveyor and author of The Free Lunch.This paper was presented at the 10th Congress of the Basic Income Earth Network at Barcelona in 2004.

One reason why many people are in poverty and why heavy taxation is needed to help them  is the cost of housing. From  time  to time, because of fluctuations in real estate markets, poverty touches more people than usual. For example in the United Kingdom  in the early 1990’s about 250,000 families had their homes taken from  them  following a housing price crash and the associated unemployment. That was 1 in every 90 families.

There are few investments as good in the long term  as land-based property, that is real estate, but  the accompanying speculation exacerbates poverty. In Japan from  1955 to 1990 residential land prices  multiplied by 200 times whilst wages rose only 21 times making it impossible for most young families to buy a home.  These things need to be taken into account by  all advocates of Basic Income if the poorest among us are to be permanently helped.

It surely is obvious that land holds  a vital place for human life. There  is pressure to use land that is readily accessible to existing population centres and that is where it  fetches particularly good prices. As we say in England the three most important  factors when assessing the value of a house are: ‘location, location, location’. So what  gives land in a particular place  its value?  It is partly what a government will permit to be done there, but this itself has always been driven historically by one factor – the success of the society in which the land is situated.  Let us look first at an extreme case of an unsuccessful society – one where law and order have broken down, say in a war zone. There is no  incentive to settle there, either  generally or for business reasons. In such a place you will have great difficulty selling land – there are few buyers around and you will get little money for it, the low land values being an  outcome  of the disorder and failure of that society at that time.  But look at a successful city or  town or region, where basic utilities are present: water and electricity flows, rubbish is collected, streets are safe, banks are open, businesses can be run profitably, there are schools for children, good laws are enforced, the media is  free, and so on. People want to live in such places. There is a high demand for houses since there are jobs, and for offices, shops and factories because business opportunities abound. Even unimproved buildings rise in value because their land values are increasing. The successful society is what generates the demand which brings high land values.

We will now closely examine the human mechanism  behind the success which gives rise to land value. How does it occur?  Who creates it?   Why does it happen?  Clearly every society is the product of the success of its forebears and we build on their achievements in our generation. But it is not one of us alone who creates the success. You  may be a doctor or a farmer;  a bus driver or a government minister; a banker or a teacher; or  a parent at home with the children. But you alone do not create the success. It is you together with all of us,  and myriads of others, who contribute our small part to the whole successful society of people who  live there.   Thus it is that the wealth seen in land  values is a by-product of everyone’s contribution.  This contribution is partly through people’s ordinary work and partly as they display the characteristics of good citizenship such as  being law abiding, respectful of other’s rights and so on.

Let us now examine the contribution  from  each individual to the whole success. One outcome  of each person’s contribution of work is already paid to them  as their  wages or salary. Let us call this the ‘primary’ wealth from  their work.  Another outcome  of  their work is the  wealth within land values. This is a ‘secondary’ wealth from  work.  To repeat:  there is one work and there are two benefits from it. Benefit number one is your wages or salary.  Benefit number two is the  land values, generated by you indeed, but only as you are part  of the whole community.

It is  because the secondary wealth effect in land is usually so  certain that many people purchase real property beyond their own personal needs as an investment. One of their hopes is to take some  of the gain from the secondary wealth flowing from everyone’s work and good citizenship.  These extra, speculative  buyers, by increasing demand, raise land prices even higher.   If you buy real estate property, you alone cannot add to the value of the land that comes with it.  You can add value on the land by building a house on it,  or by extending an existing house, but you cannot add to the value of  the land itself.  This is particularly  clear in the case of the owner of an empty plot of land who after buying it, keeps it for a while and then  sells it at a profit. Value has been added but not by the owner – they spent no money beyond buying it, they added nothing. The value arose from  the dynamic community that made the land desirable.

When income arises from  work done it is seen as elementary justice. It is an aspect of  the work ethic – wages are a natural and proper outcome  of work. But for people who  have no part in land ownership there will be no ‘secondary’ benefit  of land value. The work ethic  does not function for them, even though they have contributed to it  through their work and displayed good  citizenship just as much as the real estate owners have.

So how can this value in land, produced by all, be  captured for all?  Through the taxation of land values for the purpose of funding a Basic Income. These two are a logical and fair combination which will return the gain to its rightful source, that is, to all citizens equally. It is justifiable and morally compelling. It can be seen as a clear outworking of the work ethic,  which in this case is that individuals be rewarded for their contribution to the success of the whole.  Land value taxation can be implemented by any nation on the planet to pay a Basic Income  to its citizens. It is a simple, non-bureaucratic and  unavoidable form of tax. Land is always there and it is  rare for a plot to have no value to tax. Owners would not be taxed on the value of their buildings – only on the assessed value of the land of the plot. Typically for a house in the United Kingdom  this could be one third of the total  value, but the proportion will depend on the stage of the current land price cycle. Let us note here, that there is another way to solve the disparity of secondary wealth between land owners and non-landowners and that is nationalization.

But to take all land wealth into state ownership, in my view, would be a quite unnecessary and a retrograde  step. Land value taxation funding a Basic Income would achieve all that the draconian measure of  land nationalization attempts, whilst respecting every citizen and leaving those who own land to do as they wish with it. It will always be their land.

Having demonstrated the justification of  linking land  value tax and Basic Income, we will now turn  to the danger of not so linking them. If  Basic Income is to be sufficient to  bring a significant difference to the poorest citizens, I suggest it will  be large enough to raise land prices. This is because some  of the new cash in the hands of higher earners will go into  real estate. Thus could the Basic Income  be the very means of negating some  of its own good effects for the poor.  Do we really want to give the poor a Basic Income  which, whilst appearing to bring hope, might actually undercut  their new benefit and yet again restrict their property choices?

Basic Income  funded by land value taxation is a simple and satisfactory solution. The land value tax would cut the speculative attraction of  real estate property, and this would reduce, or at least steady land prices, and with them housing costs for everyone. Low income  renters would gain in two ways.  Firstly by adding to their household income  directly and secondly through moderated rents. Low income  homeowners, would be protected from  further impoverishment due to the new tax by their Basic Income. The need for government housing subsidies in both cases would be reduced. By taxing land value and funding a Basic Income  from  it, a virtuous circle would be generated in the cause of poverty reduction.

But what will voters with higher incomes who own their homes say about the new tax?  What of  their question: ‘What is in it for me?’  Currently their long term  plan might  be to cash in some  of the gain from  their home’s land value. But they might never actually obtain cash profit from it due to the timing of the real estate cycle, or  a personal disinclination to sell up when  faced with it. The answer for the majority of  these voters I suggest, will be  in the cash benefit of the Basic Income  every month. There would be prizes for politicians who ensured  that the total Basic  Income  for  most  home-owning households exceeded their land value tax liability!

There is a satisfactory symmetry, a  balance, in the funding of a significant Basic Income  with an effective land value taxation. There  is the justice of rewarding people as individuals for the secondary wealth that they collectively produce. There is the  security of knowing that speculative forces will be restrained from  inflating the cost of such a basic human need as a house or apartment. This is a compelling rationale that should appeal to any nation and across a broad political spectrum.   I would be very concerned for the effectiveness and long term success of a significant  Basic Income introduced without consideration of  its effect on  land values. I commend a land value funded Basic Income for reasons of logic, justice, simplicity and permanent effectiveness in reducing poverty.