Why Libertarians Should Support Land Value Taxes
by Ryan Hinds
“Tax reform” has been a term used by politicians of all flavors, especially in the wake of our struggling economy. For example, the Republican governor of Louisiana, Bobby Jindal, has sought to eliminate the state income tax by increasing the state sales tax, joining the ranks of Texas and Washington. To Democrat Mark Dayton, governor of my old home state, Minnesota, tax reform embodies California voters’ decision to raise income taxes on the wealthy; ironically, the governor wants to lower corporate taxes at the same time. However, these reform efforts are akin to rearranging the lifeboats on the Titanic. Many Americans see income and sales taxes as polar opposites. But, like our two major political parties, they are more similar than different.
Income taxes reduce your take home pay, which means that you have less money to spend or invest, both of which negatively affects the businesses around you. Consequently, fewer people are employed and the effect ripples throughout the economy. This is known as the “deadweight” cost of taxation. Sales taxes have the same effect, as they make everything you buy more expensive. Yes, I know you wanted a BMW, but you’ll just have to settle for a Toyota instead!
I used to be a big FairTax supporter. As an engineer with a sense of logic, the FairTax seemed like a dream come true. I mean, who wouldn’t want to get rid of the dreaded IRS and encourage corporations to expand in the US? I was so excited about the prospect of a national sales tax (Yep, I’m pretty nerdy!) that when my friend, an economics student at Santa Clara University, told me about the land value tax (LVT), I shrugged him off. Not until later did I realize that he was right and I was wrong.
Mark Twain accurately noted, “Buy land, they’re not making any more of it.” Land and natural resources, unlike income and sales, will not disappear when taxed. Consequently, LVTs have no deadweight costs, and for the same reason, cannot be evaded; I challenge you to hide your land in a Swiss bank account. Taxing land also helps revitalize inner-city neighborhoods, as landowners must maintain their property in order to pay the LVT. With cities a more attractive place to live and work, there is less pressure to develop outlying areas, minimizing infrastructure costs.
The LVT would not be difficult to implement, as most state and local governments already collect property taxes. It merely requires that improvements (which are already listed separately on your property tax statements) be exempt from taxation. Finally, you can add that pool you’ve always wanted without attracting the taxman! A certain portion of the proceeds would be submitted to the federal government, with the total tax paid not to exceed the land rent (which is based on the assessed value of the land).
Land and natural resources are required not only for sustenance, but economic growth. Because they cannot be artificially produced, for them to be unconditionally in the hands of a few people denies the notion of equal opportunity as espoused in the Declaration of Independence. Libertarians, such as Adam Smith and Thomas Jefferson, supported the LVT as a means to both protect the rights of the landowner (to maintain private property), and to compensate others for being excluded from his/her holdings (in the form of public services and/or a citizens’ dividend).
It is time for us as libertarians to adopt the land value tax and reject the big-brother approach to taxation, which requires confiscating the fruits of our labor to fund the government. The LVT, as it does not require the government to view confidential financial data, better fulfills the libertarian belief in individual privacy. For this reason, the LVT fits our vision perfectly and should be readily embraced by liberty-minded people.