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Re: the government need be only a fraction of its present size

Please help make the Manifesto better, or accept it, and propagate it!

I read the website that u had provided a link to.  However, I do not
understand how land tax will not be passed on as rent...  Consider the
example below.  Land (x sq ft) in a certain neighbourhood in bombay costs 20
lakhs,  A builder A buys it and constructs office building using capital 40
lakhs.  His total investment is 60 lakhs which he wishes to recover in 5
years so he charges yearly rents amounting to 12 lakhs or more if the market
can bear it.  If Henry's proposal is implemented, the builder pays a 20 lakh
(empty land value) a year of tax.  Now since all builders are being
subjected to this same tax in the neighbourhood, they will all increase
their rents.  So now our friend the builder A will charge 12 (ROI) + 20
(tax) = 32 lakhs as rent per year if the market can bear it...  So how does
henry claim that those without land will not be affected by the land tax??? 

The cost of constructing the office buildings will not change and will
remain 40 lakhs.  The only other possible thing is that no one will want to
pay the extra rent and land values will fall, say to 10 lakhs.  Now our
friend builder A who bought the land before henrys proposal will be
bankrupt, but our other friend the builder B (after the proposal) can buy
land at 10, construct office buildings at 40 and pay tax of 10/year and
collect lower rent than our other builder A, and prosper.  B now collects
50(total investment) divided by 5 years as before say, + 10 per year tax =
20 lakhs as rent.  Land values have halved, still rents have increased.  For
the same rents as before, land values have to come down to somewhere like 3
lakhs...  Suppose land values do come down to around 3 lakhs.  All our
friends who have bought land prior to the proposal's implementation will pay
3 lakhs tax, but their investment still loses 70+% of its value bankrupting
them.  Other than reducing land value and giving the government an alternate
source of revenue, what has this proposal achieved ????  

Either I havent followed Mr. Henry correctly or something is gochi... 
Please explain.


--- Cprakash <Cprakash@goplay.com> wrote:
> ---------------------------------------------------------------------
> Please help make the Manifesto better, or accept it, and propagate it!
> ---------------------------------------------------------------------
> Dear fellow debaters,
> the policy i was arguing for was propounded by Henry george, in around
> 1866, in his book Poverty and Progress. This was at a time the
> industrial revolution was up and going and he was pondering on the
> basic paradox of why despite increasing wealth, are people still poor.
> The solution proposed by him (taxing land and natural resources) is
> relevant even to this date. How do I say so ? Because the rentals in
> any big city are very high. The aggregation of people is the primary
> source of wealth and this shows up in high rents, whose benefits are
> eaten up by the people who own the land. Land is always important,
> sir. If it wasn't, then why should land prices be so high in a city
> like mumbai, where people seemingly are not dependant on the land ?
> The people who have dismissed this argument as pre-industrial have not
> been able to explain why land prices are high even in areas where
> people are not in agriculture or mining.
> 		The evaluation can come about by a mix of market (auctions ),
> evaluation (scientific & mineralogical ) and perhaps even computer
> simulations dependant on market data. These will have to be
> transperent to everyone to avoid corruption. (somewhat like open
> source software) Since only the unimproved land value is taxed, the
> property rights of those who improve the land are protected. It also
> drives land to its most efficient use. 
> 	I cannot do justice to the brilliant theory of Land value taxation in
> a single post, but please do look it up at their site
> www.henrygeorge.org
> www.progress.org
> 		No, this policy won't tax the people in primary industries any more
> or any less. For eg: compare the land value in bombay and in an inland
> maharashtrian farm.
> - prakash
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This is the National Debate on System Reform.       debate@indiapolicy.org
Rules, Procedures, Archives:            http://www.indiapolicy.org/debate/