The Free Lunch

Merryn Somserset Webb favours land value tax

In a philosophical article in Saturday's FT (4 December 2021) Merryn Somerset Webb writes that she 'favours land value tax'  as she explores aspects of ownership and capitalism.  She refers to land wealth as communal wealth.  The article is about  how selfish we allow our society to be.

Owners of land are gaining as 'house prices' keep booming everywhere. People and firms are putting their wealth increasingly into property and prices are responding - upwards. Just take note that every building deteriorates so the gain is in the underlying land value. Lloyds Bank's new chief Charlie Nunn is hoping to quadruple 'the budget for its private home rental market'  (FT 6 December 2021) which is great for landlord rents and the bank gains the security of the underlying land value gain but not the renters. 

Value in land is largely dependent on location, which is about the ease with which work can be found nearby, such as rail links, good roads, business employment, etc. These things are nothing to do with the land owner's skill - but rather utility providers' provision of good services and such things as planning permission. The land owner can make a desirable valuable house which takes cost and ingenuity but the land value is quite outside their ability to make any individual difference to, land value is a gift from society, the community around. It's just that owners get the gain but renters don't.

This quite unfair situation has another facet for end of life social care. The current plans (see Kings Fund) are for there to be an £86,000 cap on care charges. The scare is that homes may need to be sold to pay for care at some point.  Will a home be safeguarded?      

A much fairer method of paying for care is to tax land value. Almost every piece of land with or without a house or building on it has  value and a small percentage tax charged every year would go to providing end of life care for all. Those with the higher priced property would pay more which would be proportional to the gain in value that society has created on their land.  In the setting of land value tax a allowance below which no land value tax would be payable would be set, so that many poorer homeowners would be land tax exempt. Renters who will never have any prospect of land value gain and thus no land tax, would gain the universal state-provided care but not be charged at any time. Home owners would be paying over some of their lifetime property gains for their later life care as they pay the tax. 

These ideas should be seen in the context of wider tax reforms where income tax paid would be allowable against a liability for land value tax. A gradual tax shift from tax on wealth gained through work onto community inspireded wealth would happen. 

Fairness comes through using community inspired wealth to pay for community needs.

Charles Bazlinton. Author: The Free Lunch- Fairness with Freedom