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Land Value Taxation: Rebuttals to Common Objections

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Author Topic: Land Value Taxation: Rebuttals to Common Objections  (Read 7198 times)
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« on: August 23, 2010, 03:57:01 pm »

Isn’t the LVT based on Karl Marx's labor theory of value?

No. Karl Marx’s labor theory of value asserts that the exchange value of something is determined by the labor expended to produce it. Henry George flat-out rejected this view:

    "It is never the amount of labor that has been exerted in bringing a thing into being that determines its value, but always the amount of labor that will be rendered in exchange for it."

Why, then, do some mistakenly identify Marx's labor theory of value as being one of the core premises of the LVT? Because many LVT advocates often describe land value as being created by the community, and, in so doing, sacrifice clarity for brevity. What they actually mean is this: It's not that members of the surrounding community create land value itself, but that they create (or rather “produce”) the goods and services which give rise to that value.

As any real estate appraiser will tell you, the value of land is the value of “location.” And what determines the value of location? The degree to which people in the surrounding marketplace compete for access to that location, due primarily to the proximity it affords to such things as nearby schools, libraries, hospitals, parks, shopping malls, etc. -- all of which are provided mostly if not entirely by people other than the individual titleholder.

Hence Max Hirsch’s conclusion that:

    "The value of labour-products is the measure of the service which their rightful owner has rendered to the community. The value of land is the measure of the service which the community is expected to render to the owners of land."

-- Democracy vs. Socialism, p. 348

And hence Robert De Fremery’s observation that:

    “The difference between publicly created and privately created values, once seen, is never forgotten. Both result from the competitive bidding within society for the right to consume or use something. But it is of utmost significance that privately created values result from competitive bidding for goods and services produced by man, whereas publicly created values result from competitive bidding for something no man produced--the land upon which we live and work and whose value increases as the community in which it is located grows. In the one case men are bidding for goods and services produced by each other as private individuals. In the other men are bidding for the important right to use part of the earth's surface. In the one case you have privately created values. In the other you have a publicly created value.”

Isn't the LVT based on the Marxist idea that the right to land is a collective right?

No, it is based on the Lockean idea that the right to land is an equal right.

By that I mean: the idea that an individual has "property" in land only to the extent that there is, in the words of John Locke, "enough, and as good left in common for others."  In that sense, the right to land is not a collective right, but an individual right that exists independently of the collective (i.e., society). The “equality” of this right is merely a limitation that arises from the presence of others with like rights.

By contrast, a collective right to land dictates that an individual has no right to use any land unless society has granted him such right.

With the equal right to land, one does not require the consent of society to use land. The right to the use of land belongs at birth to each individual. So while the consent of others is not needed, it is, nevertheless, necessary that in the exercise of that right, one does not infringe upon the equal right of others -- i.e., violate Locke's proviso that there be "enough, and as good left in common for others." And since the rental value of land provides an accurate measure of the extent to which said proviso has been violated, "others" should be compensated in accordance with that value.

At the same time, of course, taxes on wages, sales, houses and capital goods should all be abolished, since they violate the exclusive right that each individual has to the fruits of his own labor.

It is, of course, an age-old tradition among royal libertarians to rail self-righteously against the notion that all individuals have an "equal" right to land (and hence to its rental value). Yet what they either fail to realize or refuse to admit to is that, in so doing, they are rejecting (in effect) the most fundamental "property right" of all -- that of self-ownership -- because one cannot even be a "self" in the first place unless one occupies a naturally-occurring geographic location on the globe.

In short, to "be" is to be -- "somewhere."

Thus, assuming everyone agrees with Michael Badnarik when -- in his book, Good to be King -- he defines a "right" as "something you can do without asking for permission," it follows that, whenever anyone suggests or implies that only those with land titles have a "right" of access to the earth on which all must live yet which none produced, that person is essentially saying that the countless millions without land titles have no "right" to life itself.

    "Place one hundred men on an island from which there is no escape, and whether you make one of these men the absolute owner of the other ninety-nine, or the absolute owner of the soil of the island, will make no difference either to him or to them.

    "In the one case, as the other, the one will be the absolute master of the ninety-nine--his power extending even to life and death, for simply to refuse them permission to live upon the island would be to force them into the sea.

    "Upon a larger scale, and through more complex relations, the same cause must operate in the same way and to the same end--the ultimate result, the enslavement of laborers, becoming apparent just as the pressure increases which compels them to live on and from land which is treated as the exclusive property of others. Take a country in which the soil is divided among a number of proprietors, instead of being in the hands of one, and in which, as in modern production, the capitalist has been specialized from the laborer, and manufacturers and exchange, in all their many branches, have been separated from agriculture. Though less direct and obvious, the relations between the owners of the soil and the laborers will, with the increase of population and the improvement of the arts, tend to the same absolute master on the one hand and the same abject helplessness on the other, as in the case of the island we have supposed. Rent will advance, while wages will fall."

-- Henry George, Progress and Poverty, pp. 347-8

That, incidentally, is largely why I regard the Austrian School's aristocratic concept of "liberty" to be a sick joke.

    “The Austrian School came into existence when a bunch of Viennese rent-gouging landlords didn’t want rent control on the rents they could gouge out of their tenants in old Vienna, so they hired a bunch of scribblers--and that’s the Austrian School.”

-- Webster Tarpley, World Crisis Radio broadcast, 9/27/08

Isn't the very concept of taxing land values rooted in Marxism?

No, it's rooted in classical liberalism, which long predates Marx.

The right-wing reactionaries who blindly insist otherwise are -- whether they realize it or not, and whether they have the intellectual honesty to admit it or not -- essentially accusing many of the Founding Fathers of being Marxists:


Why America's Founders Wanted a Property Tax on Land Value, And NOT a Sales Tax!

Why a Land Value Tax?

Land for ordinary citizens

William Penn wanted to keep aristocrats from grabbing up land as they had in Europe. He declared Pennsylvania a "commonwealth" where each landholder would pay a modest rent that "would put an end to taxes, leave not a beggar, and make the greatest bank for national trade." The first tax in Pennsylvania was a land value tax.

Thomas Jefferson also saw that land monopoly made ordinary Europeans poor, while cheap land made Americans rich. He also proposed taxes on real estate to prevent land grabbers from driving land prices up.

Keeping taxing power local

Under the Articles of Confederation, the federal government taxed each state on its land value. Each state would tax each county, and citizens would never have to deal with state or federal tax collectors. Our founders did not trust strong central governments. They believed that people govern their own communities better than powerful states can govern them.



Isn't concentrated ownership of land moral and just, so long as it's the result of "voluntary" transactions?

No, because if only some people "own" the earth, then only some have a "right" to live upon it.

All individuals must have access to the earth in order to exercise their right to sustain their own lives. Thus, to allow the earth to become the unconditional property of a relative few is to deny this right to everyone else, since it makes the latter obligated at birth to pay the former for mere access to the planet -- as if the former were responsible for the earth’s very existence.

While the private appropriation of land rent may seem harmless at a micro-level, at a macro-level it constitutes an entitlement scheme whereby Group A receives payment from Group B, even though Group A renders no service in return. In that sense, it violates the fundamental right that the members of Group B have to the fruits of their own labors.

    "As soon as the land of any country has all become private property, the landlords, like all other men, love to reap where they never sowed."

-- Adam Smith, The Wealth of Nations, Bk 1, Ch. 6

    “Given a stationary population and private ownership of all land, improvements in manufacturing methods do not, in the long-run, increase the earnings of labour and capital, but are absorbed by rent.”

-- Max Hirsch, Democracy vs. Socialism, p. 446

    "I am using the word wages not in the sense of a quantity, but in the sense of proportion. When I say that wages fall as rent rises, I do not mean that the quantity of wealth obtained by laborers as wages is necessarily less, but that the proportion which it bears to the whole produce is necessarily less. The proportion may diminish while the quantity remains the same or even increases."

-- Henry George, Progress and Poverty, p. 216

If some people fail to see this, it is because they, in the words of Henry Hazlitt, "overlook the woods in their precise and minute examination of particular trees." In this case they overlook the effect that the private appropriation of land rent has on the economy as a whole in their precise and minute examination of particular transactions, and how these transactions benefit particular individuals or groups. Overall, the payment of land rent to the few at the expense of the many imposes on the latter artificially high costs of living, on the one hand, and artificially low wages, on the other.

To learn more about why the current land market is anything but "voluntary," read the following article by Fred Foldvary:

As a general rule, taxation is wrong since it involves the use of force. Is a tax on land rent an exception to this?

Yes, for the simple reason that "force," as such, is neither good nor bad. If used to defend one's person or property from aggressors, or to enforce payment of a rightful debt, it is a good thing. If used to harm the person or property of a non-consenting other, or to enforce payment of a wrongful debt, it is a bad thing.

A tax on wages or capital-goods returns implies that the income one receives in return for the exertion of one's labor or the use of one's capital goods belongs (at least in part) to others. This conflicts with the basic libertarian principle that you have an exclusive right to the fruits of your labor.

A tax on land rent (or "rent" for short) implies that the income one receives for the value of the land one holds belongs to others. Since land itself (a) is not the fruit of anyone's labor, and (b) is that to which all have an equal right of access; and since the rent of land (a) is not a return to either labor or capital goods, and (b) reflects the extent to which Locke's proviso has been violated, a "tax" on rent does not conflict with the principle that you have an exclusive right to the fruits of your labor, but is in fact a just and necessary means of upholding that right.

Thus, the part of one's income that is taken via the taxation of wages, sales, houses and capital goods constitutes the enforcement of a wrongful debt, whereas the part of one's income that is taken via the taxation of rent constitutes the enforcement of a rightful debt.

As Henry George puts it on page 46 of Property In Land: "As to what constitutes robbery, it is...the taking or withholding from another of that which rightfully belongs to him. That which rightfully belongs to him, be it observed, not that which legally belongs to him." [Emphasis original]

Still, right-wing critics will argue, a tax on rent involves the use of force, and is therefore wrong. The problem with this argument becomes evident when they are presented with the scenario of a tenant no longer able to pay a titleholder for the value of the land he is using, and then asked whether or not it would be legitimate to use force to remove the tenant from the titleholder's land. They typically answer “yes” to this question, and when pressed for an explanation, finally concede that yes, there is such a thing as a legitimate use of force when it comes to upholding a rightful debt.

The dispute, then, is not over whether force, in and of itself, is right or wrong, but whether the debt in question is right or wrong -- i.e., whether or not the taxation of land rent conflicts with the libertarian principle that each person has property in himself and, by extension, in the fruits of his labor. Geolibertarians hold that it does not so conflict, since land rent, as mentioned before, is not a return to either labor or capital goods.

Land rent (as the term obviously implies) is in fact a return to land -- meaning the percentage of one's income one could receive simply by renting out the land one holds to someone else. Yet to whom does land’s rental value rightfully belong?  Since this value derives, not from what the individual titleholder does, but from the growth and activity of the surrounding community -- and since it reflects the extent to which "others" are denied access to land they wish to use, and to which they have an equal right of access -- it follows that this value is rightfully owed to these others, while wrongfully owed to titleholders.

In that fundamental sense, the LVT is not a fee for using land, but a fee for the government-enforced privilege of denying use of that land to everyone else. The more valuable the privilege, the higher the fee. That's why it's called the benefits received principle, and hence why the upper and upper-middle class titleholders who rail hysterically against the LVT are essentially saying that (double standard alert!) they should not be required to pay for the benefits they receive, but that working class non-titleholders should be required to pay -- not once, but twice -- for the benefits they receive. 

Won’t the LVT make it more difficult to acquire land, especially for poor people?

No, because land rent, as explained earlier, gets paid either way -- regardless of whether or not it gets diverted into the public treasury.

Even when you pay the sale price of land, you are paying land rent, since the sale price is simply capitalized rent (i.e., the rental value divided by the interest rate). And since land is fixed in both supply and location, decreases in land value taxation are invariably capitalized by titleholders into higher rents and land prices. Thus, people in general, and the working poor in particular, end up paying back in higher rents and land prices what they presumably get from the tax cut; and pay back even more in terms of (a) a lower margin of production (and thus lower pre-tax wages), and (b) a heavier reliance on wage and sales taxes. 

So, once again, it is not a question of if land rent gets paid, but to whom and on what basis -- to a mere subset of the population, on the basis of the earth on which all must live yet which none produced being exclusively "owned" by that subset; or to everyone equally, on the basis of the earth being that to which all have an equal right of access? Georgists and geolibertarians believe it should be the latter, since that is the only just and practical way of establishing true equality of opportunity without enforcing “equality of outcome” in the process.

As for the poor people that right-wing ideologues, limousine liberals and foundation-funded poverty pimps all laughingly profess to care so much about, the LVT will actually make it much easier for them to acquire land, since it will (a) greatly reduce the “rack-renting” to which land speculation invariably gives rise, and (b) dramatically increase wages both by raising the margin of production and by reducing (and eventually eliminating) the need for either wage or sales taxes.
« Last Edit: February 12, 2011, 10:01:18 am by Geolibertarian » Report Spam   Logged

"For the first years of [Ludwig von] Mises’s life in the United States...he was almost totally dependent on annual research grants from the Rockefeller Foundation.” -- Richard M. Ebeling

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