Unified Location Tax (ULT)
A Unified Location Tax (ULT) would include a land size tax which multiplies land value by plot size, to give size extra weighting. For example, it would comprise of an annual land value tax of 3% of the land’s value, plus an additional 1% tax which multiplies land value by size.
This would minimize urban sprawl, the use of space and materials, and condense the cities. Small-area, high-rise properties in the city would be fairly unaffected (small plot size), as would large plots of land in the countryside (low market value). Instead, it would target urban / suburban sprawl on the outskirts of the city. With large volumes of housing supply forced back onto the market, and no more vacant lots for speculators, it becomes much more affordable to live in the center, with far more availability. In addition, it would include taxes on the built structure if particular environmental, social, or architectural guidelines were not met.We see the ULT as a means of development like an artist creating clay pottery. The taxes on land would act as a pottery wheel, providing upward pressure, forcing clay upwards from the base. Conditional taxes on buildings would act as the artist’s hands, putting downward pressure on the clay, moulding it into the desired forms.
As land taxes throw fire under the feet of land owners, encouraging them to build, develop, and utilize the land rapidly, a ULT would address the following needs:
• Enterprises that require large spaces to achieve economies of scale cannot be unfairly penalized
• Buildings must be created with safety in mind, and not solely with rapid construction
• A large and growing stock of affordable housing must be incentivized
• Relevant architecture that is agreed upon by democratic process within each governing region
• Outlets that ensure ample supply and low prices for essential consumer goods
• Construction that safeguards the environment
• Land owners are rewarded for their property’s contribution to the community
• Equal opportunity to afford land and its ULT rates
By allowing a certain number of deductions against the ULT for particular agricultural, industrial, and construction inputs and outputs (e.g., up to half of the ULT bill), as well as the wholesale purchase of Basic Essentials, it can ensure the survival of agricultural and industrial operations that benefit from increasing returns to scale.
This would effectively be a double deduction (as these expenses would also deducted from corporate profits). It would ensure that building construction is not rushed (as a matter of safety), and would reward the use of more appealing architecture and materials. Of course, to ensure that tax revenue is generated and to ensure the societal benefits of a ULT is maintained, there would need to be a ceiling for the maximum amount of deductions (as suggested, up to half the ULT amount). Unlike income taxation, it would be much more difficult to abuse deductions on land taxes. As the land registry is made public, the land’s purpose, owner, and all details of its tax payments should be public at the registry as well. Because land cannot be hidden, it would be difficult to hide false claims from the public. If land is held for speculative purposes with no activity on it, the public and media would have the ability to investigate.The ULT would encourage affordable housing and shopping, as well as land that is only host to buildings that meet the nationally/locally defined architectural and environmental codes (higher levels of water runoff with no collection, no solar panels nor green roof, etc.). This would be done through a higher tax rate on properties which do not meet these criteria. This would effectively compensate citizens for the use of the natural environment, without penalizing development, while simultaneously boosting the supply (and therefore affordability) of basic goods and affordable housing. The ULT would include a small tax on properties that don’t meet these requirements, as well as on land with no activity. The building tax would need to be implemented more like a property tax; including both the value of the building and the land under it. This is because an ugly building or a smoke-belching factory in a well-trafficked area would have a much more negative impact, to more people, in a high-value (high traffic) area versus a low-value one. Such a policy may allow for the elimination, or at least simplification of, onerous zoning laws, which tend to be an avenue for corruption and restrained housing supplies.
The only area where a ULT might need to be exempted or modified, is in the area of oil and mineral extraction, where it might encourage a more rapid depletion of the said resources. Instead, a separate tax regime must be implemented specifically for the resource sector, where rates are predictable and transparent, and rise and fall in response to price changes. The tax revenues from these sectors would be shared between the Three Pillars, a national sovereign wealth fund, and the Sectoral Banks. Because one of the Sectoral Banks is the Resource Exploration Bank, some of these funds would return to the resource sector anyway, while simultaneously stimulating diversification in other areas — potentiating these forces during resource booms.
The following is the recommended method for a first ULT implementation attempt:
Land Taxes:
3.0% - Land Value Tax (on the unimproved value of land, not on improvements nor properties )
1.0% - Land Size Tax (land value multiplied by the size of the plot)
1.5% - Additional land value tax on land for plots that are vacant or not in use at all
Building Taxes:
0.5% - Tax on buildings (based on area and property value) not meeting national/regional architectural standards
0.0- 0.5% - Tax on buildings based on environmental/water impact of the building
0.0- 0.5% - Tax on buildings based on how much of the building is used for essential living purposes (affordable housing, basic goods)
In total, a ULT consists of: a land value tax, a land size tax, a vacant land tax, and building taxes that are only applied based on social, environmental, visual impacts. It would be combined with deductions based on agricultural and industrial inputs and outputs, and wholesale purchases of basic goods. Affordable housing (defined by its price-per-square meter as a percentage of median income), for example would be exempt from the property tax portion of the ULT, moulding cities’ skylines to contain more of these units.
If up to half the land taxes could be deducted for these special inputs, the tax on land would effectively range between 2.0 and 5.5%. The building taxes would not be applied at all if the guidelines are met.
This would add a tremendous amount of upward pressure to build, while ensuring basic needs are met for the population. It also ensures their visual space is preserved, without impeding business or creative freedoms.
All properties would have a publicly visible plaque from the tax authority with a QR code, to retrieve information about its certificates, property size, purpose, land value, building value, and the tax rate being paid for the property. This would be linked with the current data in the land registry, and would ensure transparency. For example, if you walked past an office building that you thought might be a good location for living, you could see if it was paying the appropriate tax rate based on the criteria. If it was supposed to have affordable housing units, you would then be able to verify this, as the land registry information would also include a list of residents with the contact information they volunteer, along with a list of available (or soon-to-be available) units. If tax fraud was suspected, this could be reported to an independent investigatory agency.
A ULT, defined by these requirements, would maximize the benefits of land value taxation, while minimizing its faults. It would in fact be even more mindful of Henry George’s principal that physical locations are something we inherit from nature, by ensuring land would be purposed for the needs of the population, and providing an abundance of affordable housing and food supplies, all without wasted space. While an LVT as George envisioned would distort the economy away from agriculture and manufacturing due to these sectors’ spatial requirements, a ULT seeks to eliminate this distortion. Meanwhile, a ULT further treats locations as the commons, by giving the community a say in their appearance, skyline, and architectural style, while discouraging negative environmental externalities.
By using taxation as opposed to regulation to achieve these means, it preserves personal choice and allows businesses to progress and make appropriate decisions regarding their land use, instead of being bogged down in lengthy approval processes and uncertainties.As Henry George noted, one of the great advantages of land/location taxes (the ULT in this case), is that the value of land increases disproportionately to the value of infrastructure built on it, which makes infrastructure projects self-funding. For example, if a new metro line is built in a particular location, the value of that land would rise dramatically. The lower the usage fee for this metro line, the more valuable the land around it would be. (What citizen wouldn’t want to live next to a metro line that’s inexpensive or free to ride?) By capturing this increase in value resulting from infrastructure development through a ULT, these projects pay for themselves (and more, according to George’s observations). While some advocates of land taxation propose that the revenues be used toward funding a minimum income/national dividend, this would stop one of its key advantages from being realized. Instead, a ULT in its entirety would be used to fund national and regional governments. If government were dependent on the ULT for its funding, it would be incentivized to build the best possible infrastructure and government services, which would further increase its revenues. It would keep the budgets balanced, and improve location access for all.
In line with these same principles of land/locations having a public aspect to them, the New Physiocrats also advocate the Freedom to Roam laws, as implemented in Northern Europe. These laws allow for the public to have access to privately owned wilderness. It is to the benefit of hikers, campers, and boaters who set out to explore and enjoy the nature in their country. Right to Light laws may be of similar interest, which protect homes and public parks from having their natural light blocked by manmade structures.
From a practical standpoint, it may be necessary to temporarily compensate those most affected by the ULT, and give ample time to prepare citizens for its implementation. To address the political unpopularity of sending citizens a tax bill, it would be best to collect these taxes directly from paid salaries, similar to an income tax. Citizens would still see dramatic salary increases immediately (due to the shift away from income taxes, and the other New Physiocratic Programs), but the benefits would become even more pronounced once people adjust their behavior to reflect the new incentives.