Some people just care about practical or personal concerns, and value capture is just as relevant from this perspective. Through it we begin to replace income taxation with a straightforward, efficient, and non-invasive revenue source.
What does this mean in practical terms?
It doesn’t require teams of IRS auditors to snoop into every transaction you’ve ever made. You can’t hide your land in a Costa Rican bank account. The current “property tax” system isn’t even that different from a methodological perspective; it would only need to change in two ways. It would need to stop including improvements as part of the taxable value of real estate, and it must raise the rates up to near the full annual rental value of the location.
The one thing basically all economists agree on is that “incentives matter.” The shift in incentives under value capture would cause dramatic and positive changes in the relationship between citizens and their community.
“Since natural, resource values are purely social in their origin, created by the community, should not the rent go to the community rather than to the Individual? Why tax industry and enterprise at all-why not just charge rent?” Albert Jay Nock, Henry George: Unorthodox American
Our current system has very perverse incentives. Want to build a restaurant? Pay up. Want to buy up a prime location and hold it out of production? By all means, go for it. Want to build a community centre to help the poor? Congratulations, you’ve just raised the rents for all the landless people in the area, and may have just “helped” them right out of a home.
The Cost of Exclusion
As a landless person you have essentially no stake in your community. I walked through a poor neighbourhood once and was shocked to find a big pile of garbage sitting out in the open in a vacant lot. I then saw one of the local residents walk by and chuck yet more garbage into it. I was puzzled by why anyone would do such a thing, but it makes perfect sense now. Even caring for the cleanliness of one’s community is of little benefit to the landless. Cleanliness raises rents, and littering lowers them.
You can see the same thing with the contentious issue of gentrification. Have you ever wondered why gentrification is so despised? Why should people hate that their community is improving? They should be rejoicing! Right?
Well, they would be under any sensible economic arrangement, but now it merely causes displacement and hardship. Wouldn’t it be great if improving the community actually… you know… improved the community. What a revolutionary thought!
“I do not claim that [Henry] George’s remedy is a panacea that will cure by itself all our ailments. But I do claim that we cannot get rid of our basic troubles without it.” John Dewey, Steps to Economic Recovery
Given the fundamental nature of land, and access rights over it, unless the land question is taken into account, one of the primary consequences of any otherwise-positive economic reform, including the repeal of other special privileges, will be an increase in rent to landlords.
“What has destroyed every previous civilization has been the tendency to the unequal distribution of wealth and power.” Henry George, Progress and Poverty
Inequality is dangerous to liberty, and can enable vicious feedback loops of rent-seeking, which sets the stage for corporatism on one hand and state socialist counter-reactions on the other. Vast fortunes should not be worshipped by those who love liberty. They should be looked at sceptically, and seen as a red flag that something is amiss. Most great fortunes are not the result of voluntary interactions in the market, but by direct or indirect state intervention on behalf of the powerful. The mother of all those privileges is land speculation.
It’s time we heed the actual words of the classical liberals, so that we may create a system that works for everyone. No more compromises between prosperity and equality, freedom and justice. We can have it all.
– Edward Miller