It is not necessary to confiscate land; it is only necessary to confiscate rent
– Henry George (American economist and writer)
The one asset that Scotland knows well about is its land; its use, misuse and ownership. As with most of Scotland's resources, our land is largely foreign owned; no harm to the foreign owners though; most have appreciated their good fortune and many have contributed well to Scotland in numerous ways – although not all.
Land reform has been an issue at least from the time of the Gracchi brothers back in Ancient Rome – and both those brothers were slaughtered in the streets of that fair city by the henchmen of the then landed gentry; threats to land-ownership tend to bring out the worst in people.
The Feudal System virtually enslaved people to the land and much of the troubles of Medieval times (and beyond) revolved around land issues. The Physiocrats in 18th-century France (a school of economists) were the first to propose a land tax as a source of state revenue. Following this, Henry George, much influenced by the philosophies of Scots like David Hume, John Mill and Adam Smith, advocated a single tax on land and thus the abolition of all other taxes. George considered that entrepreneurs and manufacturers were handicapped by having to pay taxes on their profits which were then going to fund the infrastructure that enhanced the value of the land without the landowner having to do or risk anything.
It was all thrashed out in George's most famous book, Progress and Poverty
, which was published in 1880 and dealt with what was becoming increasingly obvious by then – the massive and growing gap between the poor and the wealthy: George explained in detail that the main problem was that landowners could hardly ever lose and actually accumulated unearned wealth through land rents whilst manufacturing and labouring were burdened by taxes and risks.
At a basic level, consider the metal detector enthusiast who purchases his equipment, has to receive the owner's permission (in England), and then spends his time searching only to have to share his find on an even split with the landowner.
George's answer to the problem was simply to tax the land – and nothing else; no improvements on the land or on its use would be taxed. Consider this in connection with the old system of rating in Scotland whereby, if you built a garage on your property or extended your house, your rateable value went up. But George wanted landowners to be encouraged to use their land and develop it rather than let it lie fallow or under-utilised.
There are a number of advantages to taxing the land: it simplifies and reduces the clerical work involved in the collection of taxes; there is no need for income tax, inheritance tax, capital gains tax and even VAT; plus taxes cannot be avoided – the land is set and all of it must be accounted for; this completely negates such things as tax havens and off-shore accounts.
Although a land tax, fairly and uniformly applied, would not end the familiar pattern of boom-or-bust cycles (which can be partly related to the effects that other nations have on the national economy), it would help smooth them out as well as making them much less common. The speculation in land values that often underpins boom-and-bust economies would be considerably reduced. In this respect, David Ricardo, one of the first 19th-century economists (he lived from 1772 to 1823) was concerned that as land became increasingly scarce compared to other assets, rents would continuously rise making certain that landowners would grab an increasing amount of the wealth of the nation. Writing around 1818, Ricardo did not foresee the great strides that were to be taken in industrialisation which would, in turn, reduce the overall effect of the power of land ownership – although land ownership was, and is, a major factor in the spread of wealth.
Nevertheless there are detrimental effects to land tax as well. Were such to be applied without due preparation, immediately prices would rise as landowners would put up their rents to compensate. This would be balanced by individuals not having anything taken out of their earnings in tax but, again, benefits would have to rise to cover costs for those not earning. Over a period though all this could be adjusted to – as those countries who do apply a form of land tax demonstrate.
Denmark, for example, has a complicated system whereby the land tax is based on the value of the land and not at a set level per acre irrespective of value. This tax is not a nationwide income tax, however, but is paid to the local municipality and the county that the land is in. In short, it represents a form of council tax and is generally set, as per act of the Danish Parliament, at between 0.6% and 2.4% of the assessed value of the land.
Australia, Canada, New Zealand and a few other nations also have forms of land tax although none apply it as George proscribed it. Estonia and Finland, perhaps, come nearest to George's original concept. In the UK, the Labour Party did set up a committee to consider land reform, including placing a direct tax on land – but they subsequently dropped the idea leaving only the Green Party with a policy of taxing the land.
It is a pity that many now equate land tax as a socialist policy and label it accordingly. In 1909, Winston Churchill appeared to agree with some form of land tax and, as recently as 2012, Vince Cable of the now defunct Liberal-Democrat Party came out in support of some form of land tax. It is not the tag that we apply to it that we must judge it by, but by the answers to the questions as to whether some form of land tax could work and how it could benefit the nation by confiscating the rent.
Bill Paterson is a writer based in Glasgow