How would a land value tax operate and what does it entail?

In theory, a land value tax makes sense

Will Andy Burnham enact the property tax, and will it function in practice?

What is a tax on land value?

Rather than being a tax on the actual property, a land value tax is an annual levy paid on the value of the land on which a property or no property is situated. The fundamental premise is that land's value is determined by its location rather than the quality of the development that occupies it. Additionally, a location's value is derived from its surroundings. A land value tax is an equitable and effective method of taxing what economists have referred to as the "unearned betterment" portion of a property's valuethat is, the increase in value that has nothing to do with the owner's efforts and everything to do with the state and community. Is it near a city center? Is it in an area with excellent transportation links, good schools, beautiful parks, hospitals, and so on? Generations of taxpayers paid for all that civic infrastructure.

Is a tax on land value a novel concept?

Absolutely not. The ancient idea that people who enclosed common land for agricultural use had an obligation to share some of the resulting crops is where land value taxes originated. In Anglo-Saxon England, people's responsibilities and liabilities for things like the upkeep and repair of bridges, fortifications, and army personnel were evaluated using the hide, a unit of land measurement of about 120 acres. Adam Smith argued in favor of a land tax a millennium later in The Wealth of Nations (Book V, chapter 2), arguing that it would benefit the landowner and not interfere with other economic activity. He came to the conclusion that "nothing could be more reasonable." Another ardent supporter was David Ricardo. The most well-known advocate of a land value tax in more recent times was Henry George, a free-trade activist and journalist from the United States in the late 19th century. Winston Churchill also had a strong affinity.

What makes land value taxes so well-liked?

It's one of those intriguing concepts (like congestion pricing or universal basic income) that garner support from a remarkably diverse range of voices. Land value taxes appeal to left-wingers because they collect unearned rent and lessen land ownership inequality. Land value taxes are attractive to free-market liberals because they tax a fixed resource without deterring investment or labor. According to David Goodhart on Substack, the main argument in favor of such a tax is that it "allows us to raise more money from the unproductive rich without disincentivising the productive rich." In 2010, Andy Burnham supported the policy as "aspirational socialism" during his initial run for the Labour leadership."least bad tax" was endorsed by Milton Friedman, the mastermind behind the "neoliberalism" that the new prime minister detested.

Why was it referred to as the "least bad tax" by Milton Friedman?

Milton Friedman, economist.

Milton Friedman, economist.

Because it is best for states to do as little harm as possible to incentives that encourage growth and enterprise if they are required to tax. Employment is discouraged by income taxes. Profit taxes discourage businesses from investing and trading. However, the amount of land available is fixed; raising taxes won't make it less available. According to Edward Lucas of The Times, "even the most tax-shy landlords cannot take their acres offshore or dodge the tax with legal jiggery-pokery." A land value tax also "stimulates growth by penalizing inactivity." Landlords should either use their land or sell it to more productive owners, lowering the price if needed, since they pay the tax anyhow. In other words, by discouraging land hoarding and speculation, land value taxes help mitigate "grey belt" decay and even out booms and busts.

What is the appropriate level of land value tax?

Dan Neidle, a former City lawyer who now advocates for tax reform, is another supporter. He is in favor of doing away with stamp duty, which discourages people from relocating, which hinders growth and labor flexibility; council tax, which is outdated, unfair, and under-taxes the wealthiest; and business rates, which are arbitrary, stifle growth, and encourage perverse incentives. Neidle's Tax Policy Associates think tank suggests a land value tax set at about 1.3 percent to replace the 100 billion that these three poorly crafted property taxes generate. Models ranging from 0.48 percent to 1 percent have been proposed by other groups. The combined amount of stamp duty and council tax is about £57 billion. Compared to council tax payments, at least 63% of people would benefit immediately from the 1.3 percent rate, and in the long run, everyone would benefit from the boost to the economy.

For homeowners, what would a land value tax entail?

Millions of southern England homeowners would soon have to deal with enormous new yearly tax bills. Additionally, there are other reasons why land value taxes are difficult to sell politically. Because there is a clear potential for disagreements and legal challenges against a levy on a hypothetical value, initial implementation is difficult. Opponents also fear that the tax would be unjust to low-income, asset-rich homeowners, particularly the elderly. A land value tax would be a one-time windfall tax on the current generation of landowners if it weren't phased in over time. This is because, once implemented, land values would decline to reflect future tax obligations. Additionally, allowing pensioners with limited funds to pay the land value tax from their estates runs the risk of transforming it into a covert inheritance tax.

Will land value taxes be imposed in Britain?

Andy Burnham seemed to retreat this week from a much more moderate version of tax reform that he had advocated as recently as last weeka significant increase in the personal allowance to exempt more low-income individuals from income tax. Therefore, it is improbable that he would have the political clout or authority to implement such a drastic change this side of a general election. However, it might be an idea whose time has come. The administrative burden and fierce opposition of landowners caused Lloyd George's Liberals' early attempt at a land value tax in Britain to fail. However, given the political will, the task is not insurmountable thanks to modern technologies. Land value taxes have been implemented in Australia, Canada, Denmark, Estonia, Singapore, and Taiwan, among other countries. "Burnham has been correct about this for sixteen years," Neidle writes in The Sunday Times. "Whether he's willing to be correct today is the question."