SA 88. Is there another way? by Tommas Graves

Reprinted from article in “Land and Liberty” Spring 2019

Well, we made one rather important mistake. We allowed certain lucky people the ownership of land. We ignored the fact that it is impossible to own land, and we ignored the natural law which states that all people must have equal rights to it. We then failed to distinguish between right and wrong when we allowed the “owners” to keep the location values attaching to sites, which had been created by the actions of the community as a whole.

The results have been dire. The vast number of us then had nothing to sell but our labour. We lost the right to receive the whole added value arising from our work. Wages reduced to subsistence level. We were forced  to rent our living space from “owners”. So now we see that businesses pay rent for their space, pay taxes in a huge number of ways, keep unwarranted amounts for themselves, and are pressured into continuous growth. The payment of rents by businesses and working people creates inequality. Those in command of such wealth have ensured that the laws of the country are directed to their benefit.

We are now entering into a sort-of end-game. Rents naturally rise to the maximum affordable, because there is nothing tangible supplied that can be used as a measure of value. Rents are now so high that young people can no longer save for a deposit. Land prices are so high, reflecting the rents, that all sorts of speculators are drawn into the market. Land becomes “owned” by fewer and fewer, reflecting the consolidation of wealth. On the misery side of the equation, hardship and homelessness drives many into drugs, and now shorter lives.

Had we not better sit up and think? Where did we go wrong? Do we have enough conscience left to see what we did?

What we should have done is that land should be held on secure tenure, not amounting to ownership. The user has the right to use subject to paying the community the location value of that site. The location value is the natural recompense to the society  which together has provided all the benefits of a site. Society then does not need taxation.

The result would be that no-one would hold land they did not need. This would now produce freedom for the vast number of us, able to work. We now have the option of setting up by ourselves, where we can receive the whole value of our efforts. Businesses would now be bidding up the wages from working from them. Partnerships and common ownership arrangements would flourish.

The price of land would reduce to nil, as the rents which sustained it are exchanged for the payment of location value to the state. A house can then be bought for the building costs alone. The non payment of rents brings inequality gently to a close. Now, inequality only results from extra work or talent. Every improvement  of facilities will bring a natural reward in higher location values.

One simple change. Why don’t we go for it?

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SA 87. Time for a look at Rent by Tommas Graves

Reprinted from an article in Autumn copy of “Land and Liberty”

The two problems of inequality and housing are now getting acute, and we need to reappraise what we are doing.

First, we need to be clear that Rent, as now understood, stands for two quite separate factors. On the one hand, part of what we pay for is the “hire charge” of the house and other man-made items. On the other hand there is the charge for the use of a site. In this article we shall refer to Rent as the site charge. How much is each will depend on many factors. If a buyer knocks down the house, we can be sure that all the rent is a site charge. With a new property, maybe a substantial portion is the hire charge. All the recent increase in property prices is solely the site charge, hereinafter designated as “Rent”.

From the point of view of those that pay rent, the level now leaves them no margin for saving for a deposit. As a result the ownership of property by those in age range 20 to 50 has sharply declined. There is even talk of the constant battle to pay ever increasing rents leading to life shortening of 20 years or so. Why does rent always go up, never down?

This is because nothing tangible is being supplied, so that rent will rise to the maximum affordable. Every increase in the general level of wages will lead to a rent increase. But also, any government scheme to “help to buy” will lead to a rent increase. There is no let-up possible for those now locked in to the rental market.

From the point of view of those who receive rent, it is seen as an excellent investment. As rents increase, so do land prices. The price for land is the current value of a stream of rents for the foreseeable future. Thus we have the attraction of “buy to let” whereby anybody with cash to spare will buy up property, thus adding impetus to land price rises, which, of course leads to further rent increases. And rent received is something for nothing. All that is being supplied is access to a site which is actually free for all. Land is supplied to the human race for no charge whatsoever. We accept the provision of air to breathe, with no charge. Why should it be different with land?

Thus, we have the two problems, inequality arising from receiving something for nothing, and a housing problem getting tighter and tighter. Is there a way out?

So, we must ask, “Why does a site have value?”  First, it is obvious that the landowner contributes nothing to the value solely as landowner. We can readily see that the nearness of a station or road network does contribute to land value, as do nearness to a city. And, in the cities themselves we see the highest land prices.

It becomes clear that site values are the result of communal efforts, paid for by taxation or borrowing. Ask yourself three questions; “What is site value? Who created it? Then to whom does it belong?”

The site values have arisen directly form communal efforts to provide facilities to enhance the quality of life. The way to pay for these facilities is to collect the benefits arising. We can say that rent is the natural source of Public Revenue. It does not belong to the landlord.

But, as a result of not collecting from the natural source, we have created a tax system which adds its own distortions. For example, much of our taxes are collected through wages, more or less doubling the cost of employment and all government expenditure.

Surely we should begin to collect site values, and use the proceeds to reduce taxes. We will find that reducing taxation has the effect of increasing land values. But it will also change the forces giving rise to wages, which will rise more nearly to the value actually created by work. The rent now paid to landowners is pure waste of government resources.

Maybe we can see that this is the way to remove the major cause of inequality, whilst making it possible for our younger generations to buy a house for the price of a house.

Is it not plain that receiving rent into private hands is theft, theft from the rightful owner, the community as a whole which created it.

 

Tommas Graves July 2018

 

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SA 86. It’s rather Odd………….. By Tommas Graves

 

Two Martians are looking down on GB. With their amazing eyes they can see a huge number of people all at once, and they also can see all money movements, whether in cash or entries on bank statements.

The first one speaks; (I translate from the Martian!)

“Gosh! Look at them all going to work. The ones who go to work make everything they want, and you can see the Added Value they create. It’s enough for all their food and expenses, and enough to pay for any improvements they want to increase their production.”

Second Martian. “But look, they don’t get much of it. It seems that there is one person in charge of the whole product, and he only pays the workers a small part of their product. Then he pays a lot more to government offices, then he sends another chunk to some people with bigger houses who don’t go to work.”

“First Martian. Yes, and look, the workers have taken their money and used some for their expenses, but they also send chunks to the people with bigger houses who don’t go to work. And now the government is sending some of the money sent to them back again.”

Second Martian. “Well, what do they do that for? And look again! Some of the money is coming back from the big houses, to be used by the workers for the improvements they want to increase their production. But I can see that it still belongs to the people in the big houses, and they add an extra bit before the money comes back to them.”

First Martian. “No wonder they have bigger houses then.  But what makes them send all that money only to borrow it back again? That seems senseless to me.”

Second Martian. “There is no-one forcing them to do it, so they must be brainwashed to do such funny things. You would think it would be much more sensible for those who do the work to keep back what they need for improvements.”

First Martian. “But then the ones with bigger houses could not have them.  I suppose they would be rather sad. But all the rest would be much happier.”

Second Martian. “It’s all rather odd. There’s nowt so queer as folk!”

Tommas   21.2.2018

 

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SA85. Born to become a Georgist by Ole Lefmann

Marking his 90th year!

As a child in Copenhagen in the 1930s I realised that all grown up males in the family were
shop owners who made it a point of honour to be self-employed, able to pay for satisfaction
of their own wants and the wants of their closest relatives, not being a burden to anybody
else, definitely not burdening the society.
They urged for what then was called Free Trade: Trade free from governmental restrictions
and customs tariffs, and they disliked taxes.
The elder members of the family had all grown up in straitened circumstances and they
believed that like themselves everyone in the society could make a fair living by using their
natural talents. “Everyone is the architect of his own fortune” was a motto frequently heard
those days. They were sceptical to Socialism and its taxes, and definitely against those days’
Communism and its planned economy that was spreading elsewhere in Europe.
_ _ _
When in 1940 in the age of 11 years I asked my dad, how the public authorities should be
able to pay school teachers, fire fighters, policemen, and other civil servants if they could not
collect taxes, he told me that all pople pay rent of the land they use for housing and
business, and that the size of the rent of land relates to advantages the user of the site can
enjoy from the site in question and its surroundings.
And my father continued that the advantages available from the sites are not, and have not
been provided by individual human beings, but were or had been provided by nature or by
the society’s citizens in common, who therefore should enjoy of the values of the
advantages of land. If the Government would collect the rent of all land from landowners it
would not have to tax working people’s income.
That explanation was too complicated to me at that time. I found that teachers, policemen,
fire fighters and presumably other public servants were needed, and I accepted that when I
would earn some income I should contribute to the expenses of the society by paying taxes.
However, when in the late 1950s, as a newly married husband in his late 20s, I worked long
extra hours for my employer and earned extra money away from home where my wife
disliked being alone in the evenings, I one day became aware that the tax authorities took
70% of my extra income.
70% Income Tax
The 70% tax on extra income became clear to me when in 1959 I did my tax-declaration for
1958, and became aware that in my tax-declaration for the previous year, 1957, I had made a
mistake by summing up a column of figures to a sum that wrongly was Danish Crowns 1,000
higher than it should be. I told the tax authorities about my mistake and they agreed to pay
me back DCr. 700.
That made me understand that extra income was taxed 70%.
I found that 70% tax of extra income was out of proportion and complained to my father who
repeated his above-quoted answer. Then I became determined to find out how to get rid of or
avoid the Income Tax System.
Danish supporters of the Income Tax system were not happy with it either; they found that it
could not collect enough revenue to pay for the modern society’s expenses. Every six months
the politicians had to pass new tax laws through Parliament, until in the mid of the 1960s the
Danish Government introduced a new tax called MOMS, being the same as the English VAT
(value added tax). It was collected when people used the remaining part of their already taxed
income. In the beginning the MOMS was collected by 5% of all purchases, but over a few
years it was increased to 25% on all purchases of goods and services. To the politicians the
most important advantage of the MOMS system was, that it was self-regulating: when market
prices increased also the revenue of MOMS/VAT increased, so politicians would no longer
have to pass new tax laws every half year.
77½% Tax on Income and Consumption
When a Danish taxpayer earned an extra income those years he/she had to pay 70% tax of it
PLUS when he/she used the remaining 30% of it, he/she was taxed 25% VAT of the
purchase.
Thus, the total tax claimed from producers’ extra income was 70% PLUS (25% of 30% =)
7½%, leaving the producer with a purchasing power of only 22½% of his/her extra income.
_ _ _
Earlier, in the years 1942-1944, in my age of 13-15 years I joined a scout troop that had a log
cabin at a site next to a forest called Hareskoven, 12 kilometres north of Copenhagen. In the
weekends the scouts rode their bicycles to the log cabin or they went there by an oldfashioned railway from the then outskirts of Copenhagen. Walking from the railway station in
Hareskoven to the log cabin we went through a residential area of detached one-family
houses with gardens. I liked this area and hoped one day to be the owner of a house with
garden like these.
In 1958 I became aware that an empty building site was for sale in the area I liked, and soon
thereafter my wife and I had bought the empty plot on conditions we could afford. We
expected that after 10 years’ time we would have paid up the mortgage and then we hoped to
be able to pay a builder for building a house on it; and after the ten years we reckoned that the
old-fashioned railway line might have been replaced by an extension of the Copenhagen
metro.
However, two years later I was called by phone by the owner of the detached one-family
house next to our building site. He wanted to buy our site and offered a good price that we
accepted. The amount that remained in our hands when we had repaid our mortgage and paid
estate agent and lawyer and taxes, had the size of the salary I could earn (before tax) for one
years’ work. That was the outcome of a less than two years’ investment of a down payment
and a few instalments + interests.
Then we found a house for sale (10 km west of Copenhagen) that was near to the house of
my parents-in-law, which suited my wife’s and my demands. My wife was pregnant, and her
mother would look after our soon new born child when my wife and I went to our respective
working places on weekdays, so we used the profit from selling the building site in
Hareskoven to the down payment for the house near my wife’s parents, and took mortgages
for the rest. It was a detached single storied one-family house, but small (104 m²), with a nice
garden. We lived there for 10 years. Then our daughter needed a bigger room, and my wife
and I would prefer to live nearer to the centre of Copenhagen where we both went daily to
our working places and our daughter went to school.
So, in 1969 we found a building site for sale in the outskirt of the Borough of Copenhagen
and bought it and asked a building company to build a big standard house 160m² + 90m²
basement that had all the qualities we had dreamt of plus a very big garden. We paid a down
payment and took mortgages for the rest. We lived there for 15 years. Then our daughter now
24 years old had moved from home, and we in our late fifties felt that the big garden was
more a burden than the pleasure it used to be.
We then bought a big flat – without a garden – in a block of flats near the row of lakes round
the inner Copenhagen, but in a short distance to green public parks including Copenhagen’s
Tivoli. When our ‘dream house’ was sold we had more money at our disposal than we had
ever dreamt of.
In 1995 we moved to a four-bedroom house in the northern part of London that our daughter
who had settled down there with her husband had bought for us for £72,000. The market
price of that house was in 2015 estimated by Estate Agents to £630,000.
This report about our acquirement of labour-free income is not unique. All owners of landed
properties experience it and enjoy it currently year after year, while people who don’t own
landed properties or other lucrative monopolies suffer as they have to pay frequently
increasing rent of land (included in the rent tenants pay for use of a flat) to their landowner
PLUS taxes of their income and consumption. They do not suffer from paying the rent of
land, because that pay is for advantages they can enjoy from the location they have chosen to
live on and its surroundings; but they suffer from the taxes they at the same time have to pay
of their income and consumption. As my dad told me: Taxes on income and consumption
would be unnecessary if the Government would collect the rents of land from landowners
instead of taxing working people’s income and pensioner’s interests of savings they had
saved out of their earlier income.
_ _ _
I used much time and efforts to study history and how political economy functioned and how
it had functioned earlier in Denmark and in other societies. I wanted to spread my knowledge
to as many people as possible and in 1979 I published a booklet (60 pages, A5) in Danish, in
which I ultra-shortly described the important social-economic cohesions that most landless
Danish citizens were and still are unaware of. I described them as seen from three different
points of view that were topics in Denmark in 1979 ‘s public media and on the political
scenery:
• one view, that people of Conservative conviction used to urge for (a free market),
• another view, that Social Democrats – led by the then Danish Prime Minister – wanted
to implement (ØD = economic democracy), and
• a third view proposed by me who then stood for election to a seat in the Danish
Parliament (equal rights).
I believed, like Henry George and many followers of his ideas had believed before me, that
when people in general would understand that they are robbed every day, month, year of their
natural equal rights to shares of the free values of nature and society that are available to
mankind as Rent of Land, then they would use their democratic votes to claim back their
shares.
Translated into English the title of my booklet would have been: “Three Synonyms: A Free
Market – Economic Democracy – The Society based on Equal Rights” 1
. The booklets were
spread to friends but did not find the many readers I had hoped for.
When many years later I had moved to London (1996), I intended to write the booklet in
English, but realised that I would need a deeper knowledge of the British society, than I had.
Instead I decided to describe in English my understanding of the societies I have lived in, in
Denmark and in England, both of which are based on the same (dis)order of taxes on citizens’
income and consumption, while landless citizens without lucrative monopolies are excluded
from access to the advantages that nature provides freely, and from advantages provided by
all citizens in common.
I am still working on that description.
Ole – October 2018
Ole Lefmann was born 1928 in Copenhagen, Denmark, in a family of shop owners, urging
for Free Trade and low or no tax on income. In his early days he worked in retail, in
wholesale, in export and in import businesses; and he graduated (BCom) 1963 from The
Copenhagen Business School.
As he wanted to propagate the ideas of Henry George he preferred a job that gave him
the spare time he needed. It worked out to be thirty-four years in insurance business where he
began as salesman and later assessed claim notifications and paid compensations for
damages. He taught colleagues at the Danish Insurance Academy about private persons’ legal
liabilities and about insurance of private liability, and wrote in Danish the textbook Insurance
of Private Liability (1st edition 1987 and the updated 2nd edition1991).
About public matters he wrote (in Danish) two booklets: Three Synonyms (1979) and
Out with the old Tax (1993) and many articles, letters to the editor, and essays. Together with

1 The three descriptions were called Synonyms because ‘A free market’ was described as a genuine Free Market in which, like in a genuine Economic Democracy and in The Society of Equal Rights, no individual citizen or company can profit economically from a monopoly. Certain monopolies are allowed to exist because they are vital to the society, but in the genuine free market all citizens benefit economically equally from the values of nature and the values of the society’s synergy and from the values of allowed monopolies. These themes will be
dealt with in more detail in this essay Thoughts on Society.
Dr. Robert V. Andelson, Alabama, USA, he sent (in English) Open letter to Pope John Paul
II (1997) and together with Karsten K. Larsen he wrote the Chapter DENMARK in Dr.
Andelson’s book Land-Value Taxation Around the World (2000).
He served for 8 years as Deputy President of ‘The International Union for Land Value
Taxation and Free Trade’ (theIU) followed by 12 years as that movement’s Assistant General
Secretary and created theIU’s first website (1999) and maintained it for 10 years; gave
presentations at international conferences (Ütrecht, Holland 1982, United Nations’ NGO
Forum in Copenhagen, Denmark, 1995, and London 2010); wrote a series of three articles
about PRIVILEGES to the English magazine Land and Liberty (2007-08) and gave to the
audience of the English Henry George Foundation’s Library Group (2012) a presentation and
slide show about PRIVILEGES, and (2017) a presentation about A review of The Danish
Henry George Foundation, 1902-2017, now closed down.
In 1957 he married Ulla (passed away 2015). In their retirements they moved to
London (1996) to be close to their daughter (their only child) who had married a British
citizen and settled down in London where they brought up two daughters. Here Ole translated
Fred Harrison’s book The Silver Bullet (2008) into Danish (2010) and Henry George’s The
Science of Political Economy (1897) into Danish (2012).
[Photo 2001]
Ole Lefmann, 41 Coleraine Road, London N8 0QJ, United Kingdom.
Email: ole.lefmann1@virgin.net
Phone from UK: 020 8881 7965 – Phone from abroad: +44 20 8881 7965

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SA84. Happy Nation by Lasse Anderson

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Reprinted from “Debt Death and Deadweight” from https://landresearchtrust.org/
CHAPTER 4
Denmark: the constitution of a happy nation Lasse S. Andersen

DENMARK is one of the European nations that can be held up as a
model for others to emulate. It is evident that this small Scandinavian
country has accomplished things that are universally envied. For many
years it has been ranked as one of the happiest places on earth, seconded only
by Norway in 2017. It is the least corrupt country in the world according
to Transparency International. And it has the best quality housing stock in
Europe, measured in terms of living space.
These outcomes are the result of many things, not least the country’s long
and peaceful tradition of compromise and cooperation in parliament. But
it is also to a large extent the result of Denmark’s long history of taxing and
regulating the housing market.
This history begins early in the 19th century when Frederick VI, who ruled
from 1808 to 1839, abolished hereditary servitude and liberated the peasants
from the landlords. This allowed a new class of smallholders to emerge.
And in the same period, a system of land taxation – the so-called hardkorn
tax – was introduced by the liberal-minded landlord and nobleman Count
C.D.F. Reventløw (1748-1827). This tax was basically a tax on the estimated
produce of land and it ensured that a steady revenue flowed from the large
manor houses and rural estates to the crown. As such, however, it was clearly
designed for an agrarian society and it gradually grew insufficient and unfair
as industrialisation and urbanisation progressed during the 19th century.
In 1903, the government abolished the hardkorn tax in favour of a tax on
income and property in general. This government, however, was dominated
by landlords and large farmers who, in effect, tried to shift the tax burden
away from themselves and onto the small farmers, the industrial workers, and
the urban elites. The property tax was particularly hurtful to the small farmers
because it was a tax on buildings as well as land and, naturally, buildings
constituted a higher share of the total value of their small farms. Luckily, the
small farmers were highly organised and educated due to the existence of
rural folk high schools, created by the priest and politician N.F.S. Grundtvig
(1783-1872). A counter-movement quickly took hold in many of these
schools.
The small farmers wanted land to be liberated from the entailed estates of
the noble landlords and they wanted to implement a system of land value
taxation which fell equally on all land – urban sites as well as farm land. They
had been inspired by what had happened in the 1880s. That was when a
debate had arisen in Denmark about the merits of the solution proposed by
Henry George, the American social reformer whose book Progress and Poverty
had made it clear that the rent of land was the only ideal and just source of
taxation. A group of folk high school teachers led by Jakob E. Lange heavily
influenced the public debate on the issue of tax reform, and by 1905 they
were represented in parliament by a new political party, the Radical Liberals,
who demanded and quickly achieved the regular revaluation of all land for
the purpose of taxation (Lefman & Lassen 2000).
And so, because people reacted to the shifting of taxes in 1903 and steadily
gained more representation in parliament, the tax system was gradually
improved. In 1916 all the land in Denmark was revalued. In 1919 all entailed
estates were abolished, liberating a lot of idle land to productive use. And
in 1922 and 1926 property taxes were replaced by a general tax on land
values, with the gradual removal of taxes on improvements on the land. Also,
a system of regular revaluation of all sites was initiated; a system which has
continued – in various guises – to this day (Müller & Mǿrch-Lassen 1989).
Denmark was one of the richest countries in the world by 1930, and in
spite of the Great Depression its economy kept growing in strength and
enjoyed a Golden Age in the decades following World War 2. With the
subsequent growth of the welfare state, however, the income tax quickly
became the primary source of public revenue, and the revenue from the land
value tax, which reached its peak in 1960, fell in proportion to the income
tax and, later, also the consumption tax (VAT). In 2015, the revenue from
property taxes accounted for about 4 % of total tax revenue.1
A civilized housing market
Even though revenue from the land value tax generally has declined since
the 1960s, this fiscal policy has nonetheless contributed significantly to
stabilizing the housing market. Along with some key regulations, it has
safeguarded the Danish market from the excesses of property speculation
which distort the London property market. Foreign nationals operating as
1. http://www.skm.dk/english/facts-and-figures/the-tax-structure
The Acts of Parliament
cash-rich speculators can buy and sell houses and apartments in the British
capital purely to make a quick profit. Alternatively, ‘hot’ cash can be invested
in upmarket dwellings (and left empty) as a safe haven for investors who do
not wish to risk their money in the stock markets. This is not permitted with
real estate in Denmark. Section 1(1) of the Acquisition of Real Property Act
stipulates that persons who are not residents of Denmark and have not lived
in the country for a total period of five years previously may only acquire
title to real property after having obtained permission from the Ministry of
Justice.2
Since 1972, because of the fear that Germans would buy all the summer
houses near the beaches, Denmark secured an exemption from EU rules to
protect the ownership of these dwellings. Some cities have (on a dispensation
from the rules) allowed foreigners to buy city houses to be used for vacation
purposes. The owners are, in the main, Norwegian nationals in northern
Jutland. But they have to demonstrate a relationship to Denmark, such as
having a history of vacationing in the area for many years.
Long-term vacancy of properties is discouraged in Denmark. If an owner
moves and does not wish to sell his property, he must rent it out – or at least
try to sell it. If a property is empty for more than six weeks, the owner has to
report to the municipal authority, which then seeks to provide tenants which
the owner has to accept. This is why, in Copenhagen, we would not experience
the situation that existed in London, where 1,652 high-value properties were
vacant for up to two years in the borough where an estimated 80 people
were burnt to death in Grenfell Tower in June 2017. Of the survivors, only
12 households had been re-accommodated a month after the inferno, with
dozens of people living in temporary accommodation. Some of the owners
of the nearby vacant properties included foreign royalty and east European
oligarchs. More than a third of their properties had been vacant for more
than two years (Batty et al 2017).
Because vacant land is subject to the land value tax, property owners in
Denmark have an incentive to ensure that the dwellings are occupied. Urban
sprawl does therefore not blight Danish cities as it does cities in other countries.
And anyone in Denmark can log onto the government’s website and view the
valuation of each site in the country. If the land value tax was returned to its
former glory and levied at a higher rate, the regulations mentioned above,
which limit the liberty of the owners, would be less necessary, but in the
absence of a substantial land value tax, they have proven to be very beneficial
for the housing market.
2. http://justitsministeriet.dk/arbejdsomraader/civilret/foreign-citizens-acquisition-real-property

Politics and property owners
Almost all politicians in Denmark are reluctant to go against the interests
of the county’s many home owners. In the autumn of 2016, however, the
level of anxiety among politicians reached a high-water mark when a new
and improved system of land and property valuation was presented for
implementation by the Ministry of Taxation. It was estimated that the new
system, because of its accuracy, would cause taxes – especially the land value
tax – to spike in the large metropolitan areas, which had been substantially
undervalued for decades. For this reason, mainstream politicians quickly
initiated talks about how to protect property owners from future tax increases.
The result of these negotiations was a broad settlement about property
taxation that heavily favours the current home owners.
The present minority government is composed of three political parties:
the center-right Venstre, the Conservative and the Liberal Alliance parties.
The latter two wanted to abolish the land value tax completely (claiming that
they saw no justification for this method of raising revenue). All three parties
shared the desire to render the property tax less progressive, but they were
opposed in this by a majority composed of the other six parties in parliament.
And so, on May 2, 2017, the Danish government concluded a settlement on
property taxation with three of the opposition parties. Thus, six parties out
of nine represented in parliament supported a settlement that was intended
to ensure that the new and improved system of valuation (which would come
into operation in 2018/2019) did not generate a higher total revenue from
property taxation. This, however, was only the latest in a line of political
initiatives that were supposed to stabilize the property market and prevent
property taxes from rising exorbitantly.
In 2002, the center-right government tied the estate tax to the then
nominal value of property.
In 2003, an artificial ceiling on the land value tax was imposed. The
change permitted an annual increase of no more than 7% on land
values, which meant that the land value tax in most cities lagged
behind the actual development of the housing market. Because of
this artificial ceiling in particular, 90% of all land was not taxed on
the basis of its market value in 2014.
The coalition government’s settlement abolishes these defects. But the price
of returning to the status quo ante is extremely high. To safeguard property
owners from higher taxation, the rate of taxation will fall dramatically. The
floor beneath the land value tax, which has hitherto been at 1.6% of the
assessed value, is abolished, and the previous maximum of 3.4% was reduced
to 3%. Municipalities have been instructed to lower the tax rate if their
expected total revenue from property taxes exceed the revenue they collected
before the implementation of the new system of valuation.
Furthermore, current owners will receive a permanent tax deduction
equivalent to the nominal difference between new and old taxation. If the
value of their land/property increases, they will be taxed fully on the margin,
but the fact that the deduction is permanent means that they will be undercharged for as long as they remain in their homes. Payment of increased taxes
may be deferred, becoming a form of mortgage: a debt to the government
which can be discharged from the proceeds when the property is sold. The
debt is interest-free for increases 2017–2020, after which interest will be
payable. But home owners can opt out of this scheme after 2020 and pay the
increased taxes. Why make a charge simple when you can make it complicated –
and at a later date, using the complication as an excuse for abolishing it!
The outcome of these initiatives means that the settlement will result in
a very unequal taxation of land values between regions as well as between
neighbours. Because the old valuation system, as well as the artificial
limitations on property taxes, favours the large cities at the expense of the
more rural locations, the largest deductions and the largest lowering of
rates will occur in the municipalities of the largest cities. Copenhagen, in
particular, is favoured over the other cities of Denmark.
We may suspect that the measures taken to curb the taxation of land
and property are based on political fear of property owners. Commentators
suggest that the possibility of repeal and reform is minuscule. But if this bias
in fiscal policy does persist, it entails the risk of jeopardising a key building
block of the social solidarity which has characterized Danish society for more
than a century.
Bibliography
Batty, David, et al (2017), “Revealed: tycoons who own 1,652 empty homes
in the Grenfell area”, The Guardian, August 2. https://www.theguardian.com/
society/2017/aug/01/names-of-wealthy-empty-home-owners-in-grenfell-boroughrevealed
Müller, Anders & Mǿrch-Lassen, Gregers (1989), “Land Valuation and Fiscal
Policy in Denmark”, in Ronald Banks, Costing the Earth, London: ShepheardWalwyn
Lefmann, Ole, & Larsen, Karsten K. (2000), “Denmark”, in R.V. Andelson, LandValue Taxation Around the World, 3rd edn., Oxford: Blackwell.
Debt Death and Deadweight

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SA83. Ulm is buying up land, sent by Dirk Lohr

German real estate: Renters’ woes are speculators’ profitsGermany’s cities are facing a crisis: They’re just too popular. Living space is getting increasingly tight; property values and rent prices are skyrocketing. But the city of Ulm might just have the solution.

Ulm is buying up land

The city of Ulm in Baden-Württemberg is an example of how things could be reorganized in future. Here, the administrative system protects construction land from speculation — and has done for more than 125 years.

The administration of this alternative land policy happens not far from Ulm’s famous Minster. The local authority real estate office oversees the plots of land and buildings in public ownership. Continue reading

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SA82. Radical Tax Reform by Duncan Pickard

      1 Comment on SA82. Radical Tax Reform by Duncan Pickard

RADICAL TAX REFORM: THE ANSWER TO TAX EVASION, BUDGET DEFICITS AND WELFARE CUTS

The governments of almost all countries have budget deficits and increasing national debts. The taxes* they currently collect are unable to meet the increasing costs of health and welfare provision for their older people and for the care and education of their young ones. Because the taxes they impose on earned incomes, employment and trade have severe negative effects on economic activity, the bases of the taxes are reduced, which means that different sources of revenue are needed. Continue reading

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SA 81. All taxes come out of Rents, by Rumplestatskin.

Received via Prosper Australia.

Mason Gaffney has for years been describing the nature of economic rents and its relation to taxation. His key idea, which would have been uncontroversial prior to the rise of the neoclassical school, is that all taxes come out of rents (ATCOR). This means that a single tax on the rents earned from ownership of natural resources can always provide sufficient taxation revenue.

Let me explain.

To do this I first need to be clear about why rents are not a feature of current mainstream economic reasoning. Continue reading

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SA 80. The Housing Crisis and the Common Good, by Joseph Milne

Why do we have a housing crisis in the UK? Why is it that a wealthy country, increasing in wealth each year, cannot provide enough housing for its citizens? I am sure you know of the latest figures which show that fewer and fewer young families can buy a home, and that more and more are forced into rented housing with very little security. In 1990 about two thirds of people aged 35 purchased their own homes, now it is just over one quarter. Fewer and fewer young people can afford to even save up for a deposit, let alone get a mortgage. In the 1970s a home cost about three times one person’s income, and that was about the amount the old building societies would lend. Now a home is about ten times the annual income of one person. Continue reading

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SA 79. The “housing crisis” is no such thing, by Mark Wadsworth

The ‘housing crisis’ is no such thing. It is a ‘transfer of wealth’ crisis

Reprinted from “Young People’s Party” submission to the Intergeneration Commission.

The current state of the housing market is not a ‘crisis’ – something that suddenly happens because of unforeseen forces outside the government’s control – but the inevitable result of quite deliberate changes in government housing policy over the last thirty years, i.e. the dismantling of the old system.

There is no lack of physical housing in the UK. All we are seeing is a massive transfer of wealth (via house prices and rents) from younger generations to those lucky enough to have inherited land, or acquired it cheaply in the past (the Baby Boomers). Continue reading

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