Robin Smith

What I write here is my personal view as an Occupier. There are many views, all treated with respect. This is an inherent principle of the movement.

Do not pass go

26 January 2012 | By Robin Smith

I spent 7 weeks camped at the Occupy London protest speaking to a thousand people. They asked why we were there and what were we going to do about it.

My approach was not to give them a solution, but to ask what exactly the problem is and to give people the space to move into and confidence to make up their own minds.

Root cause of housing problems is hard to grasp even for Occupiers let alone banks who effectively own most of the land through mortgage assets.

The founding social organisations today are privatisation of the commons: virtually tax free private property in land. And socialisation of private property: taxation of wages, salaries and investment. Is this the right way around?

We’ve been taught this is economically sustainable so never question it. Yet everyone wants property because it always rises in value for free.

So through each business cycle, property prices are bid upwards by expected future selling price, fuelled by limitless credit and a speculative bubble develops.

The ability of people to pay the rising price for a home to live in diminishes. So too for an enterprise for a location to produce on, and for higher wages to cover taxation.

Eventually both are overwhelmed. Production stops and we enter another recession.

But is it just banks that are parasitical? There are 23 million home owners all wanting to keep the income from the rising value of their property. Homeowners are speculating as much as they want property to live in. Try getting a politician to stand up and propose ending this. They would be unelectable for 20 years.

So we do not need any more homes. There are a million empty homes, mostly ready to move into, largely unoccupied for more than 6 months.

People cannot get homes because they cannot afford them. Homes are priced speculatively high in this giant pyramid selling scheme we call an economy.

A giant game of Monopoly where nearly everyone loses in the end. The banks are merely using the housing market as yet another giant ponzi scheme.

The entire system compels everyone to reap where they have not sown. Is it sustainable? Is this sanity?

We mean to fix this by restoring the land to the commons by collecting its community created value for public revenue instead of paying it to banks. We also propose to restore private property to the individual by abolishing tax on work and enterprise.

Yes this is political dynamite too. Show me a better alternative.

Robin Smith is a London Occupier and co-founder of the economics think tank The SFR Group

Readers' comments (17)

Jono | 26/01/2012 1:23 pm
Isn't this just a convoluted way of saying you don't want to tax workers and you want instead to tax land owning individuals instead?

Can you also define what 'community created value' is? How are you going to restore the land to the commons? By the use of force? If that is your approach, there are many better alternatives.

Though the highest ranked of them is to choose to adopt Objectivism.
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F451 | 26/01/2012 2:05 pm
I'm sure if the current leadership switched from income or property tax the scaled rate would probably be something on the lines of:

A designated single home on a purpose built housing plot - 10% of value per annum
through to
A multi-acre estate - 1% of value as agricultural land
ending with
Multiple properties owned by single conglomorate - tax waived.

It is not just the system that is the issue, it is who is in control of it. Without any political opposition now to the elite, only a direct change can now be sufficinet.
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Derek Ross | 26/01/2012 5:29 pm
Jono, he's actually saying that he wants to tax non-productive people and not to tax productive people. The productive include workers but they also include people like John Galt. The non-productive are those without any useful skills who make their living by renting out things they didn't make. Like land.

Community created value is value in an item created by someone other than the owner. So for example if I own a 20 acre farm in the middle of nowhere, it's effectively worthless since there are no roads which would allow me to sell my produce to others. If someone then builds a road or a railway which ends next door to my landholding, my farm will rise in value as a result of its increased potential to get goods to an urban market. This increase in value was not the result of my own work; it was "community created value".

Lastly Robin's proposed method for returning land to the commons is one of the "better alternatives". It's described on the website of the Systemic Fiscal Reform Group. It's not the only possible way of doing that but it has the advantage of being a voluntary method. No force involved.
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Jono | 27/01/2012 0:25 am
Hi Derek - very clever.

The non-productive are those who do not 'earn' an income. Some will have inherited wealth without earning it - such acquisition is not unjust though. Making a living off an inheritance is not unjust. Would you begrudge it if I left my land to a severely disabled person, who was unable to be productive, so they could have an income from it? Would you make him pay a vast sum of tax, whilst charging his able bodied and productive siblings nothing? The principle of it is wrong.

We may agree that the type of income such land owners receive is not an achievement - but that does not permit us to discriminate by means of excessive taxation. We would not say of non-productive individuals dependent on state benefits that their income is an achievement - but neither would it be moral to discriminate against them because of this. What would they be made to pay?

This 'community created value' idea seems to be a veiled companion to Marxist argument - that capitalists/industrialists/landowners can make money without working. As a result those non-productive persons should be made to compensate workers, as those workers have not been fully compensated for their work. What then of those who are both non-productive and benefit dependent? What should they have to do to compensate workers for 'carrying' them? The principle of what this idea entails is wrong.

I checked out the SFRG - their agenda is disturbing. They want the Government to buy up huge amounts of land. This will be afforded by charging a land value tax (LVT) which is so excessive that most landowners will have to part company with their land, a process you mistakenly say is 'voluntary' (how voluntary is something if you are given the choice of economic ruin if you don't take the 'option' you are given?). The whole proposal seems to me to be a massive, sickeningly unjust, attack on landowners. To give a taste, under the FAQs on Land Value Covenants (LVC) there is the following question and answer:

"Q. What about those on high income tax who do not enter into an LVC. What about the tax revenue forgone?

A. None is lost. They would still pay income tax [LVT] at great cost to their personal economy. So be it! It was their choice entirely. This is a free state is it not?"

https://docs.google.com/View?id=dchhfnt9_793gfpbnqdd

Again - we urgently need an objectivist system. Genuinely no force required - just people treating each other like adults. Wouldn't that be progress?
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Mark Wadsworth | 27/01/2012 11:12 am
Apologies, the first version of my comment ended up double its intended length...

I am deeply puzzled by Jono's lengthy comments - either he misposted this and is responding to a completely different article, he completely misunderstood RObin's aritcle or he is deliberately misrepresenting it.

Robin said: "The founding social organisations today are privatisation of the commons: virtually tax free private property in land. And socialisation of private property: taxation of wages, salaries and investment. Is this the right way around?"

And then goes on to answer his question - no it isn't! - and suggests a good solution, or at least one worth considering: "We mean to fix this by restoring the land to the commons by collecting its community created value for public revenue instead of paying it to banks. We also propose to restore private property to the individual by abolishing tax on work and enterprise."

So basically, Robin would like to stop taxing income from labour, enterprise or productive (industrial) capital etc.

Jono then conflates "unearned income from land" with "income from investments" and veers on to the topic of inherited wealth. Robin made no distinction as to how land or investments were acquired, whether purchased or inherited or won in a lottery. The point is that

Jono then ploughs straight in with this: "Can you also define what 'community created value' is? How are you going to restore the land to the commons? By the use of force? If that is your approach, there are many better alternatives."

Robin explained that - by untaxing labour and enterprise and by taxing land values. Call that 'use of force' if you so will, but why does Jono think that taxing labour and enterprise is not 'use of force'? Does he not realise that the simple act of 'owning' land can only be achieved by use of force (albeit the owner relies on the state to register and protect his privileges)?

Jono then compounds his errors by confusing "land rental income" (which is truly unearned as the article explains) with investment income. Robin never said that investment income counted as unearned, as income from productive capital would not be taxed under his system. Why Jono harps on about inherited wealth being unearned is unclear to me - it must be quite clear that under Robin's system, inherited investment income from non-land assets would be untaxed and inherited land rental income would be taxed.

Jono then further displays his confusion/ignorance: "This 'community created value' idea seems to be a veiled companion to Marxist argument - that capitalists/industrialists/landowners can make money without working. "

Again, the article makes it perfectly clear that capitalits/industrialist on the one hand would be untaxed and landowners would be taxed. The whole "without working" thing is irrelevant, whether Marxists make this distinction or not is completely irrelevant as well.

More possibly deliberate misunderstandings or complete lack of grasp of free market economics follows: "As a result those non-productive persons should be made to compensate workers, as those workers have not been fully compensated for their work. "

Robin made no mention of how the income and profits of productive enterprises should be split between founder, investors, workers and so on, that is best left to the (free) markets. Clearly it is impossible to force an employer to pay his workers more than they are worth in the same way we cannot force customers to pay more for goods and services than they are worth.

All Robin said was that the "Location, location, location" value of land, which is of course entirely community created (parks, good schools, good job opportunities, near the station, low crime area etc - or lack thereof) should be collected (via the tax system) and spent on things which benefit the community even more (and that includes of course, welfare payments to the disabled and others who are unable to work such as pensioners), such as, er, parks, schools, police etc, and all those things which make it easier for business to do business (such as cutting their taxes!).
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Neale Upstone | 27/01/2012 11:13 am
@Jono. I'm pretty clear that Robin is not a Marxist :) A tax switch from taxing production to taxing community created value is certainly on the Georgist, not Marxist line.

If I make a tool, that tool is mine and free to pass on. If however, I own a piece of land that becomes valuable because people nearby are making and servicing tools, then I did not create the value. It is the community effect which is what creates high location values where there are services that are in demand.

Marxists make the mistake of saying that all tools should be in public ownership. SFR's proposals, which align with those of Henry George in Progress and Poverty many years ago, go in the opposite direction from the status quo, to that which Marxists want.

To this end, the SFRG agenda is not about the government buying ANYTHING, nor anyone being unable to afford to live in their home. The opposite in fact, it becomes more affordable and presents better options compared to schemes people use today, such as equity release.

The SFR agenda is contrary to that of most advocates of LVT, who want to create winners and losers by imposing a tax shift. SFR's Location Value Covenants make this a) voluntary, and b) a win-win.

The goals of SFRG are to benefit everyone *including* land/home owners, by solving the fundamental problems that our economy faces (speculation bubbles, poor use of resources, poverty).

The LVC proposals address the problems that the 1909 budget failed to, which was the proposal to confiscate assets from people by force. There's no force and no confiscation.

If you know of proposals that can do better, then we'd love know of them too.

Regards,

Neale Upstone
SFR Group
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Formerly Homeless Youth | 27/01/2012 12:28 pm
I can't get an allotment, housing benefit pays the rent. There is no common land for me to grow food upon. I have little incentive to work for wages as all they do is cover the loss of housing benefit.

Dole for life or viva la (land tax) revolution it appears. What gets me is some tory can own 20000 acre and get paid £2million when a man on the dole is denied the ability to pay to RENT just a rod of land to grow some potatoes and carrots.

Once upon time we dug for victory, now we sit in our decent homes bathrooms, dig into our arms with a bit of brown to take the pain away, one of each for £15 and shoplift some meat for your elderly neighbours so they can carry on the Sunday tradition of our ancestors. It's not that we can't do productive things, add value to society, it's not even the fact that our houses are of detriment to our health. It is the sheer cost of the roof over your head, and the inability of one to pay for it himself when he works full time.

Work full time and still have to claim dole. Yep that's me, a genuine prole.
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Adrian Wrigley | 27/01/2012 5:13 pm
I devised and developed the LVC over the past few years, aiming for a politically, economically and financially sound approach to transition to free markets in labour, capital, money and land use. It is a (geo)libertarian/geocapitalist agenda.

@Jono : "I checked out the SFRG - their agenda is disturbing."
OK. Tell me more! What is disturbing about our proposed transition to the free economy?

"@Jono : "They want the Government to buy up huge amounts of land."
Our reform does not call for government ownership of land. So I'm not sure where this comes from. Private tenure, private title is a good basis for a thriving market economy.

@Jono : "This will be afforded by charging a land value tax (LVT)"
We reject the introduction of LVT as being economically and financially fraught and politically naive.

@Jono : "most landowners will have to part company with their land"
That sounds pretty daft. That's what happened in Zimbabwe before the hyperinflationary collapse!

@Jono : "a process you mistakenly say is 'voluntary' (how voluntary is something if you are given the choice of economic ruin if you don't take the 'option' you are given?)."
The alternative we offer people is to continue with the status quo. I'm not sure how that can be construed as giving people the choice of "economic ruin".

@Jono : "The whole proposal seems to me to be a massive, sickeningly unjust, attack on landowners."
Weird. I think you must have misunderstood somewhere.

@Jono : "To give a taste, under the FAQs on Land Value Covenants (LVC) there is the following question and answer: "Q. What about those on high income tax who do not enter into an LVC. What about the tax revenue forgone? A. None is lost. They would still pay income tax [LVT] at great cost to their personal economy. So be it! It was their choice entirely. This is a free state is it not?""

"still pay income tax [LVT]"? Why do you change the quoted article by adding "[LVT]"?
income tax means Income Tax (and National Insurance in the UK), Corporation Tax on corporate persons' income. Income tax is not LVT in any shape or form.

I'd be delighted to hear more criticism and/or support for our LVC proposals, based on what we do say and believe. I'd also be keen to understand what you read which leads people to think we propose government purchase of land with the support of LVT.

My hunch is that Jono read our site *expecting* the worst, and extrapolated and confabulated the rest.

If the proposals are an attack on any particular interests, it is that of the bureaucrats administering the current tax, money and welfare system, and the bankers who "earn" seignorage on issue of the government's tax money.

Dr. Adrian Wrigley.
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Henry Law | 27/01/2012 9:18 pm
I bought a house in 1983 for £30k and sold it last week for £338?. Inflation alone would have taken the value to, perhaps, £150k so where did the rest come from?
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Jono | 28/01/2012 9:57 am
@ Neale. I had not encountered Georgism before, and having explored it further I take your point the taxation in question has more in common with it, than Marxism.

I understand the notion both Derek and yourself put forward of 'community created value'. You maintain that "it is the community effect which is what creates high location values where there are services that are in demand." Given the context, this means that high location values are created by someone other than the owner.

This notion is problematic, if I am being charitable. The tools being made, in your example, may increase prices, have no effect on prices, result in them coming down (imagine you have a property and a new machining facility is built next door - it will likely devalue the property price rather than increase it). There are externalities which could be any combination of positive or negative and hard to quantify. Then you have to disallow for deadweight (to take account for what would have happened to prices anyway) and displacement of activities and displacement of outcomes. The notion of exactly what community created value is, is vague and impractical. This can be illustrated by asking 'why did Henry Law's house price increase?' How much of his house price increase was due to improvements he had made to the house? How much was due to inflation? Or demographic change? Or regulatory changes to the finance sector? Or even environmental change? How much was due indirectly to Government policy, implemented at cost to Henry Law? Or due to the discovery of precious resources? How much was due to 'community created value'? How much would it cost you to find out?

Robin said he wanted to restore land to the commons by collecting its community created value for public revenue. "Collecting value for public revenue" is taxation by another name. Taxing community created value in land, is a Land Value Tax, and given my point above, relies on a non-market driven valuation, as community created value will at most be a component of the actual price, if it has any part to play in it at all. The risk of the tax being unfair, and therefore illegitimate, is extremely high.

Thanks for your interest in what I would propose. I'll offer you some proposals for free.

1) I'd start with a flat percentage rate tax on personal income. This point would be converged on gradually (due to the effects it would have on prices) until only it, and no other kinds of tax would exist. This would do away with a vast amount of complexity, whilst increasing transparency. The savings to the tax payer would be immense. There would be a universality in the sense that everyone would be contributing an equal share of their income.

2) I furthermore think that there should be a basic rate of tax - which will go to fund the essential functions of a Government in a capitalist and free society, but also an additional voluntary rate of tax - for example if the Government wants to offer services which aren't part of its essential functions, then it would raise funds via this route.

3) I'd further propose replacing our welfare benefits with a 'life events insurance'.

4) I also would pursue the separation of the state and the economy; Government would not be free to interfere in the economy - so no regulation and no bank bailouts.

5) Possibly the most radical would be a justice system which is free at the point of access, a bit like the NHS.

6) In terms of exchange/transactions (including land) - providing they are entered into voluntarily between willing and able parties, then there should be no interference - to the contrary the rights of each party should be protected.

7) There would be certain rights established, the right to life, liberty, private property as examples, which the democratic system would not have the power to erode.

I do not have the time, and resources of a think tank, so you are benefiting from 'lite' proposals.

I'll reply to you later Adrian!
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