A Land Value Tax for Wales?

Taxing our Most Important Resource

Molly Scott CatoReader in Green Economics, Cardiff School of Management

Where we are going

• What is land?• Why does it matter to a green economist?• Who should gain the value/benefit from land?• How would a Land Value Tax work?• What has been happening elsewhere?• What are likely yields from a land tax?

Land according to the classical economists

• ‘the distinguishing feature of land is that it is essentially in fixed supply to the whole economy even in the long run’

• It includes all the resources contained in the land• Not considered inherently different from capital and can

be discussed as an equivalent ‘factor of production’• Private ownership leads to efficient use of land• Can be sold in a market which determines its prices in

terms of supply and demand• Can provide a living from rents

Land as Common Wealth• ‘That we may work in righteousness, and lay the

Foundation of Making the Earth a Common Treasury for All, both Rich and Poor’

• Gerard Winstanley, St. George’s Hill, London, April Fool’s Day 1649

• ‘A fundamental difference between the indigenous concept of land and the western idea is that indigenous peoples belong to the land rather than the land belonging to them’

• Daniel Zapata of the Xikano Xiximeka tribe of Arizona

Green economics as political economy

• The three crises—ecological, energy and financial—are different aspects of a systemic crisis

• Addressing them simultaneously allows us to transcend the old fight between labour and capital by bringing land (environment) back into political economy

• [We] have ‘forgotten’ that the economy and all its works is a subset and dependent upon the wider ecosystem. . . Modern citizens have not only lost contact with the land, and their sense of embeddedness in the land, but at the same time they have lost those elemental social forms of more or less intimate and relatively transparent social relations. Thus a basic aim of bioregionalism is to get people back in touch with the land, and constitutive of that process is the recreation of community in a strong sense.

Why the globalised economy is unsustainable

• Extended supply chains

• Weakening of community bonds

• Climate change imposes limits on consumption and transport

A Bioregional Economy

• A bioregional economy would be embedded within its bioregion and would acknowledge ecological limits.

• Bioregions as natural social units determined by ecology rather than economics

• Can be largely self-sufficient in terms of basic resources such as water, food, products and services.

• Enshrine the principle of trade subsidiarity

A Balanced Economy

Who gains the benefit from land?

• Henry George, Progress and Poverty, 1880

• The ‘single tax’• Site-value tax or Land

Value Tax• At present we are

effectively renting land and labour overseas to provide for our needs

Structure of Land Value Tax

• Land Value Tax is levied on the annual rental value of each parcel of land

• Based on unimproved value, so not a tax on capital

• Need a baseline survey of the values of certain types of land and survey of land holding

Canons of good taxation practice

• Cheap to collect• Difficult to evade• Should fall lightly on production—sales and

employment taxes discourage economic activity– Discourages speculative land holding, e.g.

Olympic site in Greenwich– Encourages active use of land

Reasons for taxing land

• It is fixed• The proceeds of the

most valuable resource should be shared

• It leads to efficient use of land and means it is not left ‘idle’

Reduce the concentration of land ownershipCan work with planning system to influence land use

Who Owns Monmouthshire?1872 2001

Total acreage 289,377 209,185Agricultural acreage

274,908 142,089

Non-agricultural acreage

14,468 67,096

Population 195,448 86,248Owners of nothing at all

187,634 43,348

Total dwellings 36,169 33,000Smallholdingsa 4970 197Small landownersb 2844 1387Large landownersc 76 20Acreage of large landowners

171,258 12,649

Percentage owned by large landowners

59.2% 20%

• Decline in the amount of land available for agriculture, presumably the result of housing pressure, which is indicated by the rise in the number of dwellings

• Vast reduction in the number of smallholdings and the smaller, but still highly significant, decline in the proportion of land owned by small landowners

• While many more people now own some land, this is likely to be only the plot their house stands on, and around half the population of the county still owns no land at all, while 20% of the county is owned by large landowners

• The population of the county has more than halved

• LVT combines practical advantage with moral justice. Landowners did not create the land, so, however legitimately they may have acquired it, land it is owned ultimately only by "right" of conquest. And just as landowners didn't create the land, neither do they create its value. Land values are conferred by the existence of the human community and its collective economic effort. It is therefore morally just to redistribute the advantages of holding (as opposed to using) land which otherwise accrue to private profit.

Land taxes in different countriesAustralia Some form of LVT in every federal state

Russia Following privatisation of land in 2001 land tax was set at fixed rate per hectare

Denmark Land tax levied on all private property, at a rate that varies between municipalities

USA Two-rate property and land tax used in Pennsylvania; two rate system used in Pittsburgh 1913-2001

Canada Some cities and provinces tax land values at higher rates than improvements

How might this work as policy?

• Property, as owned by most people, already heavily taxed

• Could be used to introduce resource-based taxes of absent landowners and water resources

• Could be used as a planning windfall tax• In conjunction with planning policy to build a

sustainable, self-reliant economy

One Planet Development

• TAN 6: Welsh planning policy for the countryside

• ‘Development that through its low impact either enhances or does not significantly diminish environmental quality’

• OPDs should, ‘over a reasonable length of time (no more than five years) provide for the minimum needs of the inhabitants’ in terms of income, food, energy and waste assmiliation’

LammasEcovillage

• Pembrokeshire County Council Policy 52

•Local resilience: security of supply•Local communities to make decisions about land use•More self-reliance and less need for welfare?

Land reform and food production

• ‘A large majority of studies show that smallholders in developing areas produce more per hectare than big farmers.

• The land reforms of the 1950s in Japan, Taiwan and South Korea were followed by rapid growth in farm output. So were land reforms in West Bengal, India, in 1969-84

• Professor Michael Lipton, ‘Smallholders can spearhead growth’, FT, 20 April 2010

Land Reform in Scotland

• ‘A comprehensive economic evaluation of the possible impact of moving to a land value taxation basis’

• Recommendation of the Land Reform Policy Group, 1999

• Glasgow is considering replacing Council Tax with a Land Value Tax

Estimates of yields for ScotlandCT band Council

taxLVT % change

A £766 £513 -32.9B £894 £636 -28.8C £1021 £820 -20.0D £1149 £1056 -8.1E £1404 £1415 +0.9F £1660 £1908 +15.1G £1915 £3261 +69.7H £2298 £6153 +165.5

Contribution of different land usesLVT at 3.16p/£ Current

contributionContribution under LVT

Agriculture £574,117,680 0 15.1%Sporting estates £5,687,314 0 0.15%Forestry £42,407,200 0 1.12%Derelict land £0 0 0Urban vacant land

£51,942,500 0 1.37%

Residential £2,422,661,400 50% 63.72%Industrial £163,925,000 15% 4.31%Business/retail £541,023,600 35% 14.23%Infrastructure 0 0 0Urban open space

0 0 0

Total £3,801,764,694 100% 100%

Knowledge is power

• PCS proposes ‘compulsory register for all land in the UK to help future housing decisions’

• Land is a resource whoseimportance will growbecause of climate changeand food insecurity

• It should fairly shared and politically controlled

Find out more

www.greeneconomist.org

gaianeconomics.blogspot.com

Green Economics: AnIntroduction to Theory, Policy and Practice (Earthscan, 2009)

Environment and Economy(Routledge, 2011)