Land value taxation is a form of taxation designed to tackle the basic cause of poverty and ensure economic justice.
There is an old saying which points out that when you give a hungry man a fish you feed· him for a day but when you teach him to fish you feed him for a lifetime. Like most old sayings, this one is a reminder of something so obvious that we hardly ever notice it. It remind us that the most efficient way to help the poor is not to give them the small share of our own wealth that we can spare, but to help them to help themselves; to enable them to create their own wealth by their own efforts.
The source of all human wealth – the food, water and shelter that we need to stay alive for a natural life span and the luxuries, like fast cars and jewellery, that we enjoy – is the planet earth itself. And the only way for human beings to obtain what they need from the earth is to work. All forms of human wealth, from corn crops to i-pods, are the product of human energy, mental and physical, that has been used on the raw materials of the earth.
When we teach a hungry man to fish we increase the skill with which he can work on the natural resources of his environment. But the knowledge and skill of the worker is only one side of the equation of wealth production.
The Cause of Poverty
We could also help the hungry man by taking him to a section of the river where shoals of fish gather and he could catch more fish in less time and with less effort than he had previously needed. He would then be richer because of his access to better natural resources.
But if one day the fisherman arrives at the riverbank to find that the local landowner has erected a fence along the river and covered it with ‘keep out’ signs, his newly acquired fishing skills will be of no use to him. He will be hungry again. A barrier between human energy and the earth’s natural resources means poverty.
The landowner may have decided to increase his own wealth without the effort of working for it by charging the fisherman for the right to stand on the bank and take fish from the river. Our fisherman will not now be able to keep all the fish he catches. He will have to give some of them (or their value in money) to the landowner as entrance fee to the river bank.
The landowner may have decided instead to run a business supplying fish to nearby towns, hiring a team of fishermen and organizing the transport and sale of their catch. Or he may have decided to rent the whole river bank to an entrepreneur who wants to run such a business.
If there are still unfenced rivers the fisherman can get to, he now has a choice. He can fish for himself on a different river bank or he can hire himself out to the landowner or some entrepreneur who has made an arrangement with the landowner. But he will not accept as wages less than the value of the fish he could take for himself from the free river.
When all the rivers within reach have been fenced (i.e. claimed as private property), the fisherman’s skills are of no use to him unless he can persuade the landlord or entrepreneur to hire him. And how much of his own catch he can demand as wages depends on how many others there are in the same situation. If there is a long queue of fishermen needing to get through the fence to the river and it is obvious that not all of them will be hired, he will be forced to work long and hard for low wages in order to get a job.
Of course, there are ways in which the community to which he belongs may take action to alleviate our unfortunate fisherman’s poverty. Instead of lowering wages to bare subsistence level by competing against each other for jobs, all the fishermen in need of employment may come together in a trade union and refuse to work for less than a ‘living’ wage.
Our poor fisherman may be one of those whose labour is not required by the person in control of the river bank. But he will be saved from starvation if the level of compassion in his community leads to the setting up of a safety net for the unfortunate. A tax will then be imposed on earnings to provide a fund out of which the jobless and low paid can be given welfare benefits.
As employees or recipients of welfare benefits, fishermen have been reduced to dependence on others, either for the opportunity to earn a living or for the means to stay alive. As wage earners they do not receive the whole of the wealth they have worked to produce and as taxpayers they have to give up still more of their earnings to relieve the poverty the fence between them and the river has caused.
Those in control of land (river banks, agricultural land, oilfields, housing land etc.) receive, as rent for the use of ‘their’ land, wealth they have not in any way worked for. They have not had to work to create ‘their’ land because it is simply the surface of the planet, from which all earth’s creatures, including humans, must take what they need to survive.
In many places and at many times in human history dire poverty has been the consequence of allowing some people to charge others for access to their own planet. Here in our own country, the Trade Unions, the Welfare State and the huge increase in productive capacity since the industrial revolution have combined to free us from the poverty of rags and hunger, but even now, in the twenty first century, we do not have universal prosperity and equality of opportunity. The gap between the richest and the poorest is huge and growing. Instead of the poor living in slums we now have the socially excluded living in ‘sink estates’ and sending their children to ‘bog standard’ schools.
The practice, long established in all human societies, of treating land as a private possession, like a house or a car or a coat, leads at worst to desperate poverty, at best to inequality of opportunity and economic injustice. Yet there is a need for individuals and groups to be given the right to occupy particular plots of land and exclude others, in order that they may live and work undisturbed. How can we satisfy this need without simply putting up with the haphazard, unfair and inefficient division of the earth’s resources that our predecessors have left us with?
Land Value Taxation
Land value taxation provides the answer. A simple peasant society like that of the medieval strip farmers could solve the problem easily by dividing the available land into roughly equal plots and rotating their allocation at regular intervals so that everyone got a fair share of the most, and least fertile, land. A fishing village where no one had put up a flag and said ‘this river bank is mine’ could do the same. A moden technological society requires a more sophisticated solution but the same principle remains – every human being born on earth has an equal right to a share of the earth’s resources.
All citizens can be given a stake in their country’s land by the simple method requiring everyone to pay rent for the land he/she occupies. The rent paid is proportional to the amount and quality of land occupied. It is paid into a communal fund which can be used to provide the public services every society needs. If there is a surplus, this can be distributed as citizen’s income.
The collection of land rent is commonly called land value tax because it provides a source of revenue for the funding of public services. It is not, however, a tax in the usual sense of the collection of an arbitrary proportion of a citizen’s wealth. It is payment for the use of a share of what is naturally a common inheritance and a common responsibility – the earth itself. Those who have taken most from this common inheritance pay most and those who have taken least pay least. In this way everyone benefits from the value of all the available land.
Land value tax has practical advantages over our current taxes. It does not burden industry and commerce. It is impossible to avoid or evade. It is simple and cheap to administer.
It does require a fundamental shift in human attitude. But if we really do want to ‘make poverty history’ and sweep away ‘social disadvantage’, we have to start with fundamentals.
It is not enough to try to redistribute the wealth human beings have already created.
We need to share the natural resources we use to create wealth in an equitable manner so that everyone occupies only the land he/she needs but benefits from the use made of the whole of the planet.