Tuesday, 4 January 2011

There is an alternative to the VAT rise

VAT hammers the poor hardest, because they spend almost all their meagre incomes, whereas the rich save a big chunk of theirs…Instead of raising VAT and national insurance this year, the government could introduce taxes on carbon and financial transactions next year. And it should levy a tax on land values. Since all the land in Britain is worth some £5 trillion, an annual levy of 1% could raise £50bn a year – without depressing economic activity, because land is in fixed supply: central London can't be spirited away to a tax haven. As well as preventing property bubbles (and busts), a land tax would be fair. A mere 160,000 people (mostly hereditary landowners) own more than two-thirds of Britain – and the value of that land increases not through their own striving, but through that of others. Surely it would be better to tax this windfall gain than the hard work and enterprise of those who generate it?
Excellent article from Phillippe Legrain in today's Guardian. You can read it in full here.