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Property Tax vs Land Tax ...

The fundamental reason for the maldistribution of wealth in a free enterprise society is "rent seeking" via private ownership of land, infrastructure, and natural resources.

Frank deJong says that it takes the focus of a Ph.D. to understand Classical Political Economic Theorem. What he really means is that serious focus is required to see through the confusion in mainstream economics that clouds-over the central cause of poverty – the rat-race that is undermining public health: the 'business' of land and resource speculation that has led to distortions in 'Free Market' economic models.

We now must deal with crisis caused by more than a thousand years of dysfunctional economic practices. Over the past century, we've been subjected to extremes of unsustainable rent seeking: aka Laissez Faire, neoliberalism, economic rationalism, market fundamentalism, Thatcherism, Reaganism, neoconservatism, neo-imperialism. The best way to sustainably 'fix' the economy for everyone is to tax the value of land and resources instead of taxing productivity.
Maireid Sullivan

A tax on rent would affect rent only: it would fall only on landlords and could not be shifted. The landlord could not raise the rent, because he would have unaltered the difference between the produce obtained from the least productive land in cultivation and that obtained from land of every other quality. – David Ricardo, Principles of Political Economy and Taxation (1817), Ch 10, Sect 62 

By putting an ad valorem charge on the use of land, a Georgist economy would tend to preserve the environment. It would put a halt to leapfrogging over lands held speculatively vacant and the unnecessary sprawl into hinterlands. The current regime aids the rape and pillage of the environment by treating land as a commodity and inflating speculative bubbles that burst – with the sort of economic results we're now witnessing.
– Bryan Kavanagh
, Land Valuer (Ret.) Australian Tax Office. 

If you wanted to reduce the unpopularity of the property tax, the way to do it would simply be to provide for an effective method whereby it could be withheld at source, in small payments and that would eliminate a large part of the objection to it.
Milton Friedman

UK Georgists are offering just such a choice via a 'back door'
– an extremely clever choice and very Georgist.

An option to switch from taying taxes on your income to signing a "Covenant" on the value of your land, - a Covenant which remains on the property's title.


Exempted from other taxes
– that's the proposition

Location Value Covenants vs Mortgages
The Systemic Fiscal Reform Group (SFR Group) is a Cambridge-based economics think tank studying existing and alternative tax and welfare structures, their effectiveness and impact on the efficiency and stability of the economy.
>>> more here
and here

Excerpt
:
"With a mortgage, the money is created out of nothing by the banking system. With an LVC, the money is created out of nothing by the government. Swapping out the vast majority of mortgages in the UK is practicable. Location Value Covenants offer better deal than mortgages because:

* much less bank infrastructure to support
* no interest is paid by government on new money created
* more stable payments for home owners
* lower initial payments

In summary: The LVC "cuts out the middleman" of the mortgage system. Banks function of creating new money and collecting land rent off owners through variable interest is deeply damaging to the economic system. Land Value Covenants are a direct "slot-in" replacement for bank mortgages in the existing economy. Land Value Taxes *cannot* serve this transitional role.
Location Value Covenants are the "Prosperity Pill" we've all been looking for!

Selected comments from former Australian Tax Office Land Valuer Bryan Kavanagh, via private discussion.

Oh, for a Georgist system that had people wanting to rush headlong into it! You can opt into the proposed system whereby, if you accept a covenant to pay rent on your title--on the locational value of your site (i.e. the rent), and pay less taxation--the payment stays with you, and succeeding purchasers of the title who will pay less for the property and less tax because of the covenant on title.

Being able to avoid other taxes if you opt in is likely to be so popular--except with the banks, of course--that many people would be keen to opt in.
This would act to assist most people and tend to isolate the extremely big rent-seekers. It has two main benefits: it is optional--therefore, those who complain about it don't have to join the system--and it concomitantly reduces the taxes of those who opt in (and the land price payments of future purchasers of the property).

... if there are a number of ways of implementing significant land value capture, LVC (locational value covenants) being optional, but clearly beneficial to the vast majority of people, must surely rank near the top and be worthy of investigation? I'm no expert on LVC, but can't find any holes in it as an implementation alternative. For a while, there'd be two markets, but pretty early down the track when young people are looking for a home, they'd surely be seeking one with an LVC on its title, because of the relatively insignificant land value. Would that not eventually leave those who didn't wish to opt into the system out on a limb?


Critique: Property Tax Vs. Land Tax

In this video lecture, Charles (Chuck) L. Marohn, Jr. PE. AICP explains the difference between property tax and land tax and demonstrates why one makes more sense than the other, he has neglected to clarify one important point:
Land Tax is a tax on the value of the land, not the land itself.
This demonstration works well enough for adjacent properties, but fuels the erroneous argument that a land value tax would fall heavily on farmers rather than urban and commercial centers.

Excerpt:
The property tax system punishes investments that improve the value of property. The Land Tax system punishes, if we're going to talk about punishment, property that is left idle. In the current era that we're in we need properties to become more and more productive over time. To have a system that punishes that is completely counterproductive. ... we need to switch from a property tax to a land tax so that we don't reward idle low-productive properties and we don't punish people who invest in bettering their community.

Analysis of the 'value' of Land Value Tax (LVT)
By Dan Sullivan
Saving Communities, Pittsburg, PA.

Excerpts
LVT is fundamentally fair

Whether the criterion is ability to pay or reflection of benefits received, LVT is the most fundamentally fair broad-based tax available. The biggest obstacle to adopting LVT is that interest groups try to get benefits for themselves at the expense of others. Under LVT, everyone pays in proportion to the benefits they ultimately receive. As a result, property tax penalizes most home owners, who usually improve and maintain their homes better than absentee owners. The property tax on improvements also discourages construction while it rewards those who milk run-down properties or sit on vacant properties with light taxes.

Privileged interests oppose LVT
The great difficulty in advancing LVT is that it shifts the tax burden onto those who not only have the most ability to pay, but have the most ability to influence political leadership and public opinion. Yet LVT has often been supported by wealthy people who put public interest ahead of their personal enrichment. >>> more

PASSTAX defined:
Rates and land tax are notionally already in the gross rent paid by a tenant, and cannot be ‘passed on’ again to the tenant:
 

If, as claimed by vested interests, the land value tax can be passed on, why do not these representatives of special privilege pass the measure and allow their friends to pass it on?  The reason is they know that the land values tax cannot be transferred. 
– E.J. Craigie, former South Australian politician, circa 1958.

A.  THE CLASSICISTS:

1  Though the landlord is in all cases the real contributor, the tax is commonly advanced by the tenants, to whom the landlord is obliged to allow it in payment of the rent.
– Adam Smith "Wealth of Nations" Book 5, Ch 2

2  A tax on rent falls wholly on the landlord.  There are no means by which he can shift the burden upon anyone else... A tax on rent, therefore, has no effect other than the obvious one. It merely takes so much from the landlord and transfers it to the State.
– John Stuart Mill (1806-1873) "Principles of Political Economy"  Book 5, Ch 3, Sect 2

3  The power of transferring a tax from the person who actually pays it to some other person varies with the object taxed.  A tax on rents cannot be transferred.  A tax on commodities is always transferred to the consumer. 
Professor James E Thorold Rogers "Political Economy" 2nd ed Ch 21, p 285

4  A tax levied in proportion to the rent of land, and varying with every variation of rents... will fall wholly on the landlords. – Walker's "Political Economy", p 413

5  The incidence of the ground tax, in other words, is on the landlord.  He has no means of shifting it; for, if the tax were to be suddenly abolished, he would nevertheless be able to extort the same rent, since the ground rent is fixed solely by the demand of the occupiers.  The tax simply diminishes his profits.
– ERA Seligman "Incidence of Taxation" pp 244-245

6  A tax on rent would affect rent only: it would fall only on landlords and could not be shifted. The landlord could not raise the rent, because he would have unaltered the difference between the produce obtained from the least productive land in cultivation and that obtained from land of every other quality.
– David Ricardo, Principles of Political Economy and Taxation (1817), Ch 10, Sect 62 
 
7  The way taxes raise prices is by increasing the cost of production and checking supply.  But land is not a thing of human production, and taxes upon rent cannot check supply.  Therefore, though a tax upon rent compels owners to pay more, it gives them no power to obtain more for the use of their land, as it in no way tends to reduce the supply of land.  On the contrary, by compelling those who hold land for speculation to sell or let for what they can get, a tax on land values tends to increase the competition between owners, and thus to reduce the price of land. – Henry George, Progress and Poverty (1879), Book 8, Ch 3   

B.  SOME MODERN ECONOMISTS

1  Pure land rent is in the nature of a "surplus" which can be taxed without affecting production incentives. 
– Paul A Samuelson, Hancock & Wallace, Economics - An Introductory Analysis (Australian Edition) Ch 28 p 595

2  .... the complete inelasticity of the supply of land means that a tax on land rent has no effect on price or output and therefore does not alter resource allocation...This outcome is in contrast to property taxes on buildings.
Jackson & McConnell, Economics, 2nd Aust Ed pp 540-541

3  The (land) tax cannot be passed on to consumers... The failure of the single tax idea does not change the fact that a large increment of value does accrue to the owners of land, particularly in or near urban areas, due to the growth of the economy, without the landlord having to contribute any productive factor services in order to earn it.
– Richard G Lipsey, An Introduction to Positive Economics (3rd ed.)

4  Aside from its compelling appeal to the public's sense of justice, a single tax on land has another advantage over most other forms of taxation - it is neutral in its effects on production incentives and resource allocation.
– Waud, Hocking, Maxwell & Bonnici, "Economics" (Australian Edition)

C.   SO, FOR THE SAKE OF EFFICIENCY AND GREATER HOUSING AFFORDABILITY, WHY NOT PUT MORE REVENUE WHERE IT ULTIMATELY FALLS ANYWAY?

It is in vain in a country whose great fund is land to hope to lay the publick charge of the Government on anything else; there at last it will terminate. The merchant (do what you can) will not bear it, the labourer cannot, and therefore the landholder must: and whether he were best to do it by laying it directly where it will at last settle, or by letting it come to him by the sinking of his rents, ... let him consider. 
– John Locke, Some Considerations of the Lowering of Interest (1691).

I have not lost any of the principles of public economy you once knew me possessed of; but to get the bad customs of a country changed, and new ones, though better, introduced, it is necessary first to remove the prejudices of the people, enlighten their ignorance, and convince them that their interest will be promoted by the proposed changes; and this is not the work of a day.  Our legislators are all landholders; and they are not yet persuaded that all taxes are finally paid by the Land.

Benjamin Franklin, Letter to Alexander Small, (September 28, 1787).

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