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The Social Justice of Site Value Rating
The Efficiency of Site Value Rating
How Valuations would be Made
Both for reasons of social justice and for reasons of economic efficiency, site value rating deserves a continued place in the programme of the Liberal Party.
The case for site value rating in terms of social justice is founded on two understandings: first, that the value of land in the absence of economic development is the common heritage of humanity, and second, that increases in the rental value of land arising from economic development and government expenditures should be collected by governments to finance those activities. What is meant by "land" is the unimproved value of sites and the value of extractable natural resources such as North Sea oil.
While there may someday be institutions capable of implementing a recognition of land as the heritage of all humanity on a worldwide basis, in the absence of such institutions each nation should implement a recognition that land within its boundaries is the common heritage of its citizens. This is accomplished not by making the nation a gigantic Common or by instituting government management of all land, but rather by requiring all persons and corporations that are granted the use of land to pay a fee or tax equal to what the rental value of the land they control would be if it were in an unimproved condition.
The case for site value rating in terms of economic efficiency is founded on the fact that a tax on resources that are not produced by human effort is one of the few sources of government revenue that does not reduce incentives for people to be productive. Two other revenue sources that have this virtue are taxes on other government-granted privileges such as exclusive use of radio frequencies and taxes on activities with harmful consequences, such as polluting the air. An economy will be more efficient if revenue sources that do not diminish productivity are employed to the greatest possible extent before any use is made of taxes that impede productivity.
What makes a tax efficient is that the amount of tax that is due cannot be reduced by reducing productive activities. When incomes are taxed, people can reduce the amount of taxes owed by working less. They do so, and the productivity of the economy falls. When houses are taxed, people can reduce the amount of taxes owed by building fewer house and smaller houses. They do so, and the housing shortage worsens. But when the unimproved value of land is taxed, there is no resulting diminution in the quantity of land. Thus taxes can be levied on land without diminishing the productivity of an economy. And shifting taxes from other, destructive bases to land will improve the productivity of an economy.
Subsequent sections explain in more detail these social justice and efficiency arguments for site value rating, describe procedures for implementing such a tax system, and explain why a variety of potential objections are without merit. ...
Site value rating embodies the principle that people are allowed to keep what they produce and must pay annually for the value of the naturally occurring and socially created resources they use. This principle can be extended to take account of individual actions that have noticeable effects on the rental value of land surrounding that which individuals use themselves. When land is used in such a way as to raise the rental value of surrounding land, as by providing parking near a commercial center or by providing improvements that are beautiful to see, the person who creates that value should receive it. Correspondingly, when people use land in such a way as to lower the value of surrounding land, by generating noise, noxious smells, air pollution, or unsightly views, they should be charged according to the reduction in the rental value of the surrounding land that results from their activity. The opportunity to be paid for adding to the value of surrounding land will generally make land more valuable. And the requirement to pay for harmful consequences of land use will tend to inhibit such uses of land.
The whole practice of planning should be replaced by a system of charges for harmful consequences of land use and payments for beneficial ones. Planning is motivated by a concern for the harmful consequences that can result from land development. But the resulting restriction in land development makes planning permission all the more valuable to the few who receive it, with the result that vast fortunes are made by contriving to appear to have, in one's person or in one's projects, whatever attributes are regarded as attractive by those who grant planning permission. With so much money at stake, it is virtually impossible to avoid bias. A recognition of the impropriety of the large gains from receiving planning permission leads planning bodies to be ever more strict about granting it, and the result is ever higher prices of homes, to the detriment of first-time buyers.
When there are harmful
consequences of land development, these are
generally manifest in lower rental values of land near the land that
is developed. The effort that is now devoted to determining whether
to grant planning permission should be spent instead on identifying
the magnitudes of the harmful consequences of development. Then
everyone who wishes to develop land, and everyone who has title to
land that is already developed, should be charged those costs. Those
who have land that is adversely affected by development would be
compensated automatically through the reduction in the rates on their
land. ... Read the whole article
Karl Williams: Land Value Taxation: The Overlooked But Vital Eco-Tax
I. Historical overview
II. The problem of sprawl
III. Affordable and efficient public transport
IV. Agricultural benefits
V. Financial concerns
VI. Conclusion: A greater perspective
Appendix: "Natural Capitalism" -- A Case Study in Blindness to Land Value Taxation
The LVT assessment process shifts and refines our focus from monitoring human activity, onto our use and abuse of natural resources, as any responsible form of stewardship should. The potential effect of such a focus on everyday attitudes is inestimable.
The process of monitoring and assessing LVT itself leads to a more subtle, more environmentally-appreciative understanding of how best to prioritise conflicting demands on land. Should a tract of land best be used for green space for local residents, a light rail corridor or employment providing development? LVT assessment inherently weighs the pros and cons of a whole range of intangible costs and benefits for the wider community now and into the future, and eliminates corrupting "NIMBY" motives and rent-seeking behaviour that influence existing planning and development decisions. In response to the accusation that LVT assessment is little more than a best guess at quantifying values that are inherently unquantifiable, LVT advocates respond "Guilty as charged!" However, they then add, "Our good guesses are based on solid, objective methodology and are better than wild guesses, and even most wild guesses are better than the decisions made today." Currently, many natural resources are almost assigned a worthless value because, not entering the mainstream marketplace, they usually have no $ tags hanging off them - hence the existence of externalities whereby the environment is plundered as near worthless. So even wild guesses at the value of land and other natural resources are better than the present situation, in which the "no guess" decision effectively assigns natural and community resources a zero value. read the entire article
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Wealth and Want
... because democracy alone hasn't yet led to a society in which all can prosper