A tax-replacement rent?
Address by Gavin R. Putland to Prosper Australia's Office Launch, May 31, 2013.
In my April report to the Executive, I included a section called Reflections on ‘strategy’, which began [and I quote]:
If you had to pay eitherthen obviously you would prefer (b), because you would save the equivalent of $Z/year. It follows that:
(a) $X/year in tax, plus $Y/year for your private rent or mortgage, plus $Z/year in tax-related compliance costs (in cash or kind), or
(b) $X/year in site-rent to the government, plus $Y/year for your private rent or mortgage,
(i) the use-value of land is automatically sufficient to replace existing taxes;
(ii) the capacity of land to replace public revenue is in addition to, not instead of, its capacity to yield private rent; and
(iii) the switch from (a) to (b) can be voluntary.
[Unquote.] I went on to assess that plan against the criteria set out by Morgan Harris in 1978, in his critique Henry George: Prophet of the Good Society (also known by its first subheading, “The Henry George movement is dead”). The plan passed on all criteria.
What I'd like to consider tonight is: How much do we lose if the switch from (a) to (b) isn't voluntary? Obviously we don't lose in economic terms. We gain in economic terms because the transition to a Georgist system is faster and (presumably) simpler. We immediately get a situation where $X/year in site rent is paid by the former taxpayer and replaces the former tax bill, and the aim is then to get to a situation where the site rent is paid by the owner and reflects the value of the site. The obvious opportunities to make the necessary adjustments are transfers of title, and the adjustments are simplified because we know that all the sellers and buyers and landlords and tenants are already under the new system.
So, what I mean is: How much do we lose politically if the switch isn't voluntary?
We don't lose the advantage of immediately entrenching the reform. Indeed we entrench it more firmly, because we not only make the old taxes optional; we get rid of them altogether. Anyone who wants to reverse the reform will need to bring back the old taxes — with all their administrative machinery and compliance costs.
We retain the advantage that the site-rent paid to the government is not for the use of the site, but rather for the right to be free of tax while using the site. But because everybody is free of tax, maybe we shouldn't call it a tax-exemption rent, because that sounds too much like a privilege. Maybe we should call it a tax-replacement rent (TRR).
Let's evaluate this against the Harris criteria, and see how well it retains the advantages of the voluntary system:
We're still giving the lady what she wants: Presumably she still wants to save $Z/year. And we're still asking her whether she wants it. But we're only asking once, in the election campaign. If we win, we're no longer giving her a choice. That of course may affect our chances of winning.
We're still not selling a tax, which Harris likens to selling a “gas guzzler” instead of a car. We're selling an end to taxation — whose price is a rent.
We're still not drawing attention to adding taxes to land. We're drawing attention to subtracting taxes and compliance costs (and adding a rent).
First step: We're still not threatening people with taxes. We're still not even speaking of a single tax. We're speaking of taking taxes off.
Second step: We're still presenting ourselves as untaxers.
Third step: We're still not confusing ends and means, and we're still not offering a tax as either. We're still offering the abolition of taxes as the end, and a rent as the means.
Fourth step: We're still selling the elimination of all taxes. And we're still not contradicting ourselves by proposing to replace them with a tax.
Fifth step: And we're still not contradicting ourselves by proposing to collect rent as a tax. The tax-replacement rent is still voluntary in the sense that you don't have to occupy a particular site on which a particular rent is payable. But it's no longer voluntary in the sense that you don't have to be part of the new system — unless we lose the election.
There's still no contradiction in paying a rent on land that you own, because you're not paying it for the land; you're paying it for the right to be free of tax.
In the language of the workshop of 4th April, we're still emphasizing “benefits, benefits, benefits” — that is, benefits of tax abolition. And we're still asking the people whether they want it. But we're no longer asking them individually; we're only asking them collectively, in an election.
If we win, we're still making it unattractive to hold land in an unoccupied state, for speculative purposes.
In conclusion, if the change isn't voluntary:
The advantages are: speed, simplicity, and firmer immediate entrenchment.
The disadvantages are: We're only asking once. We won't be saying after the election that if you don't like the new system, you don't have to be in it. If we win, you're in. And that may make it harder to win.