CCS wrote:
>
> Good serious thinking.
>
> > The only public revenue that is truly just and justified is that which
> > is associated with and derived from the government's proper role in
> > creating and allocating property rights in natural resources,
>
> But I would argue that the government does not "create" property
> rights. Such rights preceed and are independent of government and
> originate in production. Even the right to the use of raw land is
> created by those individuals who made it humanly useful. Government
> may, by protecting those rights, make them more valuable.
The right to exclude other's from nature's benefits is a government
granted right and it has economic value. Land titles are government
created legal rights to the exclusive use of natural resources. Land and
natural resources are prior to human employment and use and to economic
production. The human community uses nature as a source of raw materials
and a sink for the holding and/or absorbing and breaking down waste and
byproducts of production. When nature's supply of raw materials
(including geographic area of land) is limited, often human demand for
these resources cannot be met at a zero price, so unrestricted
exploitation of the resource results in a shortage. The allocation of
natural resources in these circumstances is characterised by
inefficiency and imprudent use (e.g. a fishery will by inefficiently
over-harvested if many fishers can access it without restriction). In
order to use the price mechanism to ration the limited supply of natural
resources efficiently, normally it requires government to establish
exclusive rights in natural resources, which are government created
property rights. Examples include fishing quota and land titles. The
economic value these exclusive rights confer on their holders is called
economic rent or ground rent. Holders of these exclusive rights
generally also engage in economic production, so that the value of their
economic production consists of two parts: 1. the value added by the use
of the natural resource and 2. the additional value added by the use of
labour, capital and risk-bearing. The suppliers of labour, capital and
risk-bearing should keep the full wages, interest and profit they earn
by their supply, the government can take the economic rent of the
natural resources for public revenue. The fact of adding some value to
the production process, and employing natural resources to add the
balance of value, does not create a property right, either legally or
morally, to the balance of the value added. Nature supples an inelastic
natural resource, human communities are the demand only. The market
clearing price is determined by the intersection of the supply and
demand curves. In the absence of demand the value of natural resources
is zero. Thus the human community is the source of ground rent. The
governments of human communities have sovereignty over the natural
resources in a defined geographic area, and their policies for the
allocation of natural resources, and for human interaction generally in
their community, determine the demand for natural resources and
therefore the rent. The more hospitible are public policies to human
production and welfare, the greater the demand and therefore the greater
the rent. Public expenditures, if they add value in net terms, create
their own funding in the increases in the rent of land (in an open
economy where there is a common world interest rate and wage rate).
>
> > The sovereign's public policy in a geographic area makes that area
> > hospitable or inhospitable for human use, and in demand. Thus the public
> > policies, and public expenditure of the sovereign are responsible for
> > the demand for land and thus ground rents.
>
> It is responsible for SOME of the demand and SOME of the ground
> rents. But the same is true for all other productive activity. By
> protecting other types of property rights derived from production,
> the government also makes them more valuable than they otherwise
> would be. Land and ground rents are not unique in this regard. In
> all cases, the only way to measure how much of the value is due to
> government protection of rights is by the marketplace.
Human demand is responsible for all economic/ground rent, as the supply
of land is inelastic. Government could theoretically make its
jurisdiction a wasteland and all its land sub-marginal, by adopting
policies to make land inhospitable to labour and capital, no ground rent
would arise because the demand for land would be less than the supply at
a price of zero. Any improvement in government of the area could result
in an increase in demand so that it exceeded supply at a price of zero.
There is no baseline of government activity that can be used to measure
what rent is due to an improvement of government over the baseline and
what rent is baseline rent. Every jurisdiction and government is unique.
The only way to accurately measure rent is the marketplace. This is best
done by having tradable perpetual titles to land, so that the prices
titles change hands can be observed, recorded and analysed. Land
transfers can be analysed between unimproved capital value and improved
capital value by observing prices of land sold for redevelopment, and by
other land sold by subtracting the optimal deprival value of the
improvements from the total value. Regular value taxation of the
unimproved capital values (Land Value Tax) can then occur based on the
inferred unimproved capital value of all titles. This levies only the
economic rent and does not tax improvements at all.
>
> >> "Ground-rents, so far as they exceed the ordinary rent of land, are
> >> altogether owing to the good government of the sovereign, which, by
> >> protecting the industry either of the whole people, or of the
> >> inhabitants of some particular place, enables them to pay so much more
> >> than its real value for the ground which they build their houses upon;
> >> or to make to its owner so much more than compensation for the loss
> >> which he might sustain by this use of it."
>
> Interesting that Adam Smith had it exactly right!
>
> > Public revenue derived from the ground rent of land and natural
> > resources, such as from Land Value Tax, is just because there is no
> > injustice or violation of individual liberty or the free market in
> > collecting it.
>
> If it collects the tax involuntarily that certainly violates
> individual liberty and is not a free market! The marketplace is
> the standard of justice.
>
> CCS
land titles, whether taxed or not, are government intervention. Like
fiat money, land titles confer rights of economic value based on
government decree. Land value tax is part of a land tenure or land
allocation system, it is no more interventionist than untaxed land
titles. The tax is not passed on to the users of land, has no economic
deadweight, and does not distort economic activity. People voluntarily
pay the rent of land because of the advantages the exclusive use of land
offers them, the governemnt simply collects this revenue via a regular
value charge on the titles it issues. People voluntarily choose to hold
land based on a contract of sorts between the government, which issues
and protects the titles, and title holders, who value land based on this
contract. They can them use this land themselves or rent it to others.
One can subsist without holding land -- supply labour and savings to the
market, receive wages and interest, and spend your income in the utility
maximising manner, which will include some use of land (rent).
David Hillary
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