According to the UN-Habitat Agenda: “The failure to adopt, at all levels, appropriate rural and urban land policies and land management practices remains a primary cause of inequity and poverty. It is also the cause of increased living costs, the occupation of hazard-prone land, environmental degradation, and the increased vulnerability of urban and rural habitats, affecting all people, especially disadvantaged and vulnerable groups, people living in poverty and low-income people.”
Proutist Alanna Hartzok, the author of The Earth Belongs to Everyone and co-director of Earth Rights Institute in Pennsylvania, USA, is helping to lead a progressive tax reform movement based on land use. Inspired by classical economist Henry George (1839-1897) and his book Progress and Poverty, she points out that speculation and private profit from land rent are major sources of unearned profit in capitalism–and one of the major causes of poverty.
“Land Value Capture” is a way to build a fair economy via an ethical and practical approach to public finance policy. Simply put, Land Value Capture equitably returns to everyone the value–“land rent”–that attaches to land due to natural opportunities and the contributions of society as a whole. Sometimes called “land value taxation” this is not an economic democracy tax that burdens productive activities; rather, it is a type of property tax focused solely on the value of land sites and natural resources. Taxes on wage income and productive activities can then be reduced or ideally, entirely eliminated.
When land rent is captured for social purposes and needs, there is no longer profit to be made by holding unproductive land for speculation or real estate investment. Thus the land is no longer treated as a for-profit commodity, but rather as a commons, meaning what used to be and should be “held in common”, that is, collectively owned or shared by the population.
Property taxes in the United States, India, and many other countries include an assessment of both the sale value of the land and the value of whatever buildings are on the land. So tax increases whenever a building is constructed or repaired, thus acting as a disincentive for improvements. However, the land value tax eliminates taxes on houses and buildings, and shifts taxes to the value of land sites.
Fifteen cities in the state of Pennsylvania, USA, have implemented a partial reform called ‘two-rate’ or ‘split-rate’ property tax: lowering taxes on buildings, thereby encouraging improvements and renovations, while raising the tax on land values, thus discouraging land speculation.
“Tax bads, not goods” is the slogan of the Green Tax and Common Assets Project, which works in conjunction with the University of Vermont Masters in Public Administration Program. They report, “If work, income, wages, and investments in productive activities are taxed less, these items will be encouraged. If resource use, land use, and pollution are taxed more, resources will be conserved, the land will be used efficiently, and industry will avoid pollution.”
Hartzok writes: We see this situation all over the world: people working longer and harder and still unable to buy affordable housing, a basic necessity of life. Traditional property taxes penalize small homeowners for improving their properties. High rents and high-interest loans and mortgages put people further behind. We need to stop taxing labor, in order to increase the purchasing capacity of middle and lower-income people. Land value tax or resource rent should be understood as taxing the unearned billions of dollars of income that a few capitalists reap from the gifts of Nature. This system is similar to the “polluter pays” taxes that have drastically reduced air and water pollution in countries that have applied them. This unearned income needs to be shared equitably to benefit the community as a whole.