(Part 1)

So what is Georgism (geosim) archaic and why does it make such bold claims to be the “cure-all” or “one-size-fits-all” for our social and economic maladies?

Georgism also called geoism and single tax (archaic), is an economic ideology holding that while people should own the value they produce themselves, economic value derived from land (often including natural resources and natural opportunities) should belong equally to all members of society. Developed from the writings of American economist and social reformer Henry George, the Georgist paradigm seeks solutions to social and ecological problems, based on principles of land rights and public finance which attempt to integrate economic efficiency with social justice.

Georgism is concerned with the distribution of economic rent caused by natural monopolies, pollution and the control of commons, including the title of ownership for natural resources and other contrived privileges (e.g. intellectual property). Any natural resource which is inherently limited in supply can generate economic rent, but the classical and most significant example of land monopoly involves the extraction of common ground rent from valuable urban locations. Georgists argue that taxing economic rent is efficient, fair and equitable. The main Georgist policy recommendation is a tax assessed on land value. Georgists argue that revenues from a land value tax (LVT) can be used to reduce or eliminate existing taxes (for example, on income, trade, or purchases) that are unfair and inefficient. Some Georgists also advocate for the return of surplus public revenue to the people through a basic income or citizen’s dividend.

Heres how it all started at the time, whilst on a trip to New York in the late 1860s the journalist Henry George was puzzled. He found the rapidly growing city to be a place of unimaginable wealth. Yet it also contained deeper poverty than the less-developed West Coast. How could this be? George had an epiphany. Too much of the wealth of New York was being extracted by landowners, who did nothing to contribute to the development of the city, but could extract its riches via rents. The problem could be solved by a tax on land values.

George’s subsequent masterpiece, “Progress and Poverty”, sold more copies in America in the 1890s than any other book except the Bible. It spawned campaigns for land-value taxation around the world. It also inspired a board game, “The Landlord’s Game”, a precursor to “Monopoly”. The game was designed to show how property markets naturally tend towards monopolies in which one player can extract all the rent. But an added feature, missing from subsequent versions, was a tax on the value of land—ie, a levy that, unlike a property tax, does not vary with the number of houses or hotels built on it. 

So what are some of the frequently asked question around an LVT, Land Value Tax or SLT Single Land Tax and the answers?

What is a land value tax

It’s a levy paid on the value of the land upon which property (or no property) sits, rather than a tax on a property itself. The basic idea behind the tax is that pieces of land get their value from their location, rather than the calibre of the development on them

What would the size of the tax be?

Land Value Tax equivalent to 5% of the value of a property would provide revenue to pay every adult American a Basic Income (Citizen’s dividend) of $9,400 as well as help generate growth and reduce all other taxes.

How does one calculate the tax?

To calculate the land value as a percentage of the total value of the property (land + improvements, such as a house), you would have $75,000 (the value of the land) / $250,000 (the value of the land and improvements). = 0.30 (the value of the land compared to the overall property expressed in decimal form).

Income generated from the land is taxable, after deducting any allowable costs incurred. Transaction tax in the form of stamp duty land tax can apply at rates of up to 5 per cent for mixed-use and VAT can generally be reclaimed. 

How do you determine the value of the land?

Fair market value is defined as “the price for which you could sell your property to a willing buyer when neither of you has to sell or buy and both of you know all the relevant facts.” To determine your property’s fair market value, the best method is to compare the prices others have paid for something comparable

Does land depreciate?

Land, although a tangible fixed asset, does not depreciate. Land cannot get deteriorated in its physical condition; hence we cannot determine its useful life. It is almost impossible to calculate land depreciation. The value of land is not constant on a long-term basis – it may enhance or may as well deteriorate.

How do I pay the land tax?

If your home is being placed on land that you own, your lender will likely offer or require a trust account for the property taxes. This means that you pay a portion of the property taxes each month into a mortgage escrow account and your lender then pays the property taxes when due from the escrow account.

Methods of payment?

How to pay property taxes. Typically, there are two ways to pay the bill: Write a check or pay online once a year or once every six months when the bill comes from the taxing authority. Set aside money each month in an escrow account when you pay the mortgage.

Is a land tax constitutional?

Every single province state in the Republic of South Africa has some form of property tax on real estate and hence, in part, a tax on land value. The South African Constitutional Court directly acknowledged that a Land Tax was constitutional, so long as it was apportioned equally among the provinces.

continued in part 2 next week, The Citizens Dividend (Basic Monthly Income)…..