A land value tax could widen asset ownership without hitting middle-income aspirations, argues David Green
Child trust funds, intended to widen asset ownership radically, were an early casualty of the coalition. A system of direct redistribution based on land could be Labour’s next policy to even out life chances at 18.
Land taxation targets ownership and rent-seeking over productive activity, such as work or worthwhile investment. Choosing a land tax over a general wealth tax has benefits. Land is easily valued, and obviously cannot be transferred abroad.
Redistributing the revenue from a land tax directly, through a system of freely tradable shares, would instantly widen asset ownership to everybody and permanently shift the balance of power in Britain.
A system of land shares would be introduced. Everyone would receive 1000 shares on their 18th birthday: this would be a simple, equal, non-means-tested benefit of citizenship. These shares would not be tied to a specific piece of land: rather, they are a hypothetical share of the entire national stock of land and its total value.
The proceeds of the land value tax would bypass the exchequer completely, and be paid directly to the holders of shares as a dividend. The dividend on each share would be the same, and the shares would be tradable only via a national land share exchange. A small commission could pay for the administration of the system.
This means that everyone in the UK begins their adult life with a valuable asset. They can hold their shares, and accrue the annual dividend; they can buy more, and watch their income grow; or they can cash in, selling them at the going rate via the exchange to those willing to buy.
The consequent expansion of asset ownership to all could change life chances and our economic system radically. Value currently tied up in land for rent would become more productive: since the general population spend more of their income and have savings which feed more directly into financial investment capital, there could be great benefits for economic growth. There could also be a flowering of popular entrepreneurship, as millions get the means for the first time to realise business ideas with crucial start-up capital.
The direct redistribution also allays fears that such taxes hit middle-income aspiration by taxing the modest goal of home ownership. Land ownership is gapingly unequal, so the vast majority of tax would be paid by a small number of extremely wealthy landowners. But the equal distribution of shares ensures that the tax liability is offset by dividends for all but the very wealthiest. Of course, everyone has the option to offset their tax liability further by purchasing more shares.
A land value tax, tied to a citizenship-based national land share scheme, would be simple to implement and to administer, and provides a tangible financial benefit for the vast majority of the population. The market for shares does all of the heavy lifting for policymakers, with the initial ownership of shares providing the mechanism for serious and permanent redistribution of wealth for more equitable and productive purposes.
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