3.2.1-5: What is Land Value Capture?
Module 3, Section 2.1-5
What is Land Value Capture?
2.1 Module Three – “What is Land Value Capture?” – introduces a way to build a fair economy via an ethical and practical approach to public finance policy. Simply put, Land Value Capture equitably returns to everyone the value – “land rent” - that attaches to land due to natural opportunities and the contributions of society as a whole. Sometimes called "land value taxation" this is not a tax that burdens productive ativities; rather, it is a type of property tax focused solely on the value of landsites and natural resources. Taxes on wage income and productive activities can then be reduced or ideally, entirely eliminated.
2.2 When land rent is captured for social purposes and needs, there is no private profit to be made in the unproductive activities of land speculation and real estate investment. Thus land is no longer treated as a for-profit commodity, and the boom (and consequent bust) cycle is eliminated. Land prices are stabilized. In areas where a few have been hoarding or underutilizing land, land value capture is a steady nudge urging these lands to be released so that others who need them can use them.
2.3 Full implementation of land value capture policy provides a solid source of public revenue to pay for social needs such as water and sanitation systems, schools, libraries,access to information technology and the internet,roads for transport and/or public transport systems, and other public services.
2.4 When land speculation is no longer an economic incentive, funds previously directed to profiteering in land become available to invest in productive enterprise and for improving the stock of housing and other buildings. With no or greatly reduced need to borrow to buy land people are also freed from the extra burden of high land mortgage interest payments.
2.5 Production of genuinely needed basic goods and services is encouraged in yet another way with the land value capture policy approach. A corollary of the public collection of land rent is the reduction or best the complete elimination of taxes on wages and productive capital. Removing the tax burden from the backs of workers means they will receive their full payment for their labor. People who want to begin their own individual or family owned enterprise or cooperative will be encouraged to do so because their productive capital – tools, machines, communication and other expenses – would not be taxed. Nor would houses and other buildings be burdened with taxes, further increasing the capacity to buy, build and renovate needed dwellings and other structures.
Pure rent is in the nature of a ‘surplus’ which can be taxed without affecting production incentives. - Samuelson Hancock and Wallace, Economics, 2nd Australian ed., p. 623