Kemi is wrong, we do need a land value tax

Telegraph

a day ago

Inheritance tax has long been considered Britain's most hated duty. But in recent years, I think there's been a serious challenger to this opprobrious title: council tax.
Year after year, we pay more and more, and receive less and less in return. The system is dated, its invention was rushed and it seems to be a sticking plaster for the mistakes of incompetent councils.
In highlighting the miserable state of this tax, Kemi Badenoch is right. The constant rises are cynical, and they are a raid on 'the very people who keep this country going'.
But in her recent attack on land value tax – the idea of charging duty proportionally on the land under your home – she has revealed a fatal misunderstanding.
When she wrote on Sunday in opposition to the idea, she implicitly stated she believes it is more important whether your ancestors were friends of William the Conqueror, as the former Duke of Westminster said of his landowning wealth, rather than what you do in your own life.
Gerald Grosvenor acknowledged that his enormous fortune – he died as the third wealthiest man in the UK – was owed to his forebear, Hugh d'Avranches, being a chum of the invading Norman (along with, of course, centuries of astute management) who divvied up the nation.
At its heart, whether it is fairer to pay tax on earned or unearned income is the difference between a land value tax and our current system of income, dividends, capital gains, inheritance and corporation taxes, to name but a few.
Most famously proposed by 19th century economist, Henry George, what has become known as the land value tax was an attempt to envision a fairer and more efficient tax system – one based on paying dues for what you did not and cannot create, rather than that which you do.
In essence, land is immutable. It was here before us, and will be after us, so who can really claim to be owed economic recompense from it?
The house you build upon it, the farm you till, the mine you dig, however, are all derived directly from your ingenuity and effort. We have every right to be rewarded financially for this, and why should anyone else get a penny of our efforts?
It is also well evidenced that the more you tax something, the less we bother with that thing. If I'm going to work 50 hours and the Government is taking 25 hours' pay, I may as well just work 40 hours and still take home pay for 20. Of course, everybody loses in this scenario.
Land, again, is immutable – tax it, and it's not going anywhere.
In fact, to tax land and not the efforts upon it, encourages entrepreneurialism. If you're going to be paying to claim that land over someone else, you better make use of it. Businesses should be profitable, landlords should find tenants and developers should build.
Of course, this is much easier said than done. How does one value the land itself rather than the land and the house you've built on it? This is vital to get right. Under this system, remember, your efforts should not incur tax.
There is one particular modern day proponent of Georgism who has done plenty of work on this precise issue. Lars Doucet, using his own work and many others', predicts the value of the land in the US to be somewhere between $24tn (£17.8tn) and $44tn. Charge, say, 5pc of the value per year, and that brings in $1.2tn to $2.2tn, or 20pc to 45pc of last year's total tax revenue.
Here is my condition, though – to impose a land value tax, a government must remove or reduce other taxes.
It cannot be viewed as additional revenue, otherwise the whole system falls apart. Stamp duty is an obvious one to abolish – if you're paying rent on land, there's absolutely no justification for charging additional property taxes.
Income tax rates must be dramatically reduced, and inheritance tax should be redesigned.
Perhaps we've come too far since William Pitt the Younger to untangle the mess he created with income tax and its endless derivatives, but we owe it to ourselves to dream once in a while.
With the Bayeux Tapestry about to return home for the first time in almost a thousand years, perhaps it is time to honour Benjamin Disraeli's one-nation conservatism, and bring an end to a country divided by 'the conquerors and the conquered' depicted in that cloth.