Category Archives: Taxes
Last month readers from 20 countries (listed below) were attracted to the site, many reading Richard Murphy’s review of Colin Hines’ book about Progressive Protectionism but even more focussed on basic income, as John McDonnell announced that Labour has set up a ‘working group’ to investigate universal basic income, with Guy Standing (SOAS) as one of its economic advisers, a co-founder of the Basic Income Earth Network (BIEN).
For some years, America’s Nicholas D Rosen, a Patent Examiner at the Patent and Trademark Office, has advocated land taxation. In a 2012 forum entry he cites a book by economist Joseph Stiglitz, ” The Price of Inequality: How Today’s Divided Society Endangers our Future”.
Though Joseph Stiglitz expresses concern about America becoming less egalitarian and mentions reducing rent-seeking as a solution, Rosen points out that he does not mention the ultimate form of rent-seeking: collecting the ground rents of land.
He continues: “If an increasing share of gross national product is going to the top 1%, it is at least in part because they are the people who own most of the valuable land, and the rents of land are absorbing a larger share of production”.
The revered laws of the market do not apply: Rosen (2008) points out that no one is making more land to keep the price down by competition.
Rosen’s solution: tax the value of land, and cut taxes on earned income, sales and so on, making the tax system more progressive. He comments: “Unlike most schemes for doing so, it would not cause the productive to quit work, turn their efforts to finding loopholes in the tax code, or take their skills and capital elsewhere”.
Nine years later he has written a letter to the Financial Times’ editor:
Your editorial “Robot tax, odd as it sounds, has some logic” (February 21).
Regarding the possibility of taxing robots to preserve jobs, calls to mind Henry George’s Progress and Poverty. Writing in 1879, George noted that if labour-saving technology reached perfection, labourers would get nothing and capitalists would get nothing; all production would go to the owners of land, as land would still be needed despite automation.
Rather than proposing to tax robots, the great economist advocated a single tax on the value of land.
If we should ever achieve complete automation, this would enable people to be supported out of citizens’ dividends.
Short of complete automation, land value taxation still has important advantages, such as letting people keep what they earn by their own efforts, and putting the burden of taxes on those who enjoy the privilege of holding land that they did nothing to create.
He ends: “It would also help to make housing affordable and prevent the speculative bubbles in land prices that currently contribute to the boom and bust cycle”.
Edward Lucas, The Economist’s central and east European correspondent, thinks so. He fears a ‘smouldering generational resentment’: “The housing crisis doesn’t just throttle labour mobility; it crimps lives. People start families later than they want, commute longer distances and live in crowded conditions”.
One of his recommendations follows:
“We should introduce a real land-value tax. This would be levied not on the value of the house (as with current council tax, and the old rates) but on the value of the land itself.
“This has many advantages. First, it hits the rich (who own land) much harder than the poor (who don’t). In particular, it raises the cost of living in a big house, but hardly affects people in small flats.
“It penalises those who sit on land waiting for it to rise in value — as was scandalously the case for decades with Battersea Power Station. If you pay tax on land whether you use it or not, you are more likely to bring it into productive use or sell it.
“Most taxes depress economic activity; land-value taxation actually stimulates it. It is cheap to collect and hard to dodge.
“Land-value taxation also tackles the root of the housing problem: unearned income. The value of my house has little to do with my DIY skills. It has a great deal to do with the spectacular development of our once-grotty corner of London, notably the new Imperial Wharf Overground station — for which we paid nothing”.
A search reveals that land value taxation is currently implemented in Denmark, Estonia, Lithuania, Russia, Hong Kong, Singapore, and Taiwan. It has also been applied in subregions of Australia (New South Wales), Mexico (Mexicali), and the United States (Pennsylvania).
Left: latest book on the subject: https://www.qbd.com.au/land-tax-in-australia/vince-mangioni/9781138831254/
Conference: Universal Basic Income Network in Hamburg
Pathways of thought: common and uncommon ground, aims and direction when it comes to the environment: Jeremy Heighway
Looking at the aims of the conference page, it says very clearly: “A basic income is therefore a route to a degrowth society, however, a basic income does not necessarily start the ecological transformation that is so urgently needed,” and continues, “… addressing this … needs to be thoroughly incorporated into any implementation of a basic income and its accompanying measures.”
The tracks appear to go cold right there, however, as a shift is made towards four other areas of discussion, none of which intrinsically address ecological transformation. It is perfectly possible for a supporter of a basic income to ignore ecological transformation; to some extent it is even possible to be in favour of increased consumption.
The degrowth movement is a mindset; the basic income is a mechanism. This provides a possible clash from the outset, based on the question of what you hope to achieve and how.
On the societal side I think there is quite a good overlap and it is a great idea to get the movements working together. But opportunities can be missed if two groups do not also look hard at what is not automatically going to be addressed if you work together.
One huge area is, as stated above, ecological transformation. My proposal looks at eco-taxation and suggests that all increased revenue be returned to everyone evenly in the form of a basic income. However, I do not believe it would be able to help finance the true basic living-cost foundation much. It is certainly much more of an easy attachment to a basic income than a direct source of finance. Strangely, it is almost something which degrowth supporters need to be vigorous about from an environmental benefit perspective and argue for with basic income supporters.
The semi-sideline nature is maybe one reason why basic income supporters have not been very supportive of this idea so far: if it doesn’t do much to actually finance the true basic income, why complicate matters and potentially alienate people along the way with an unpopular taxation device?
Now it’s your time dear degrowth supporters: why do environmental concerns need to be considered again? And, dear basic income supporters, you can actually gain some firm supporters and new friends if you take up this idea – “… addressing this … needs to be thoroughly incorporated into any implementation of a basic income and its accompanying measures”, remember these stated aims of the conference?
Jeremy Heighway currently lives in Leipzig, was an active participant at the degrowth conference in 2014, and took part in the basic income GAP sessions. He also wrote a stirring paper on infrastructures for a parallel GAP. In his day job, Jeremy mostly does translations from German to English in the field of renewable energy.