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  • ISBN: 9780856831539
  • Pages: 128pp
  • Size: 216 x 138mm

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  • ISBN: 9780856831621
  • Pages: 128pp
  • Size: 216 x 138mm

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Economists know that the optimum conditions for private enterprise are achieved when taxes on the earned incomes of labour and capital are reduced to zero but, because neoclassical economic theory insists on treating land as capital, they dismiss the obvious alternative to taxing labour and capital – the unearned income from land.


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“Tax economists overwhelmingly support the idea that a tax on land represents an excellent source for government revenue.”
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A former economist at the U.S. President’s Council of Economics Advisers, Professor Tideman, assembles arguments supporting this thesis which can be traced back to Adam Smith’

“Both ground-rents and the ordinary rent of land are a species of revenue which the owner, in many cases, enjoys without any care or attention of his own. Though a part of this revenue should be taken from him in order to defray the expenses of the state, no discouragement [emphasis added] will thereby be given to any sort of industry. The annual produce of the land and labour of society, the real wealth and revenue of the body of the people, might be the same after such a tax as before. Ground-rents, and the ordinary rent of land, are, therefore, perhaps, the species of revenue which can best bear to have a peculiar tax imposed upon them.” Wealth of Nations, BkII, Ch 2


Each year Chancellors of the Exchequer pile on new taxes with little regard for their damaging effect on the economy – the most recent example being George Osborne’s windfall tax on the oil and gas industry. The way out is to appreciate the point Adam Smith is making: that the optimum conditions for private enterprise are achieved when taxes on the earned incomes of labour and capital are abolished, which complements the fairest and most efficient way to finance the public sector: out of unearned income from land.

This principle, as Prof. Tideman explains, has been developed and endorsed by economists, including Nobel prize-winners, in a theoretical tradition stretching back over two hundred years. It is, therefore, puzzling why governments have continued to tax the earned incomes of labour and capital to the detriment of the individual tax-payer and industry.

The explanation put forward is that a century ago neo-classical economists obscured the distinctive qualities of land as the source for public revenue. This theoretical revisionism confused governments, as Vic Blundell illuminates in his review of Labour’s flawed attempts between 1947 and 1976 to tackle the land issue.

To implement the policy recommended by Adam Smith and others, it is necessary to recognise land as a distinct economic factor, not part of capital, as modern economists contend. To this end Prof. Gaffney provides an exhaustive analysis of the distinctive qualities of land, and Dr Foldvary gives examples of how this economic paradigm can solve many of the problems facing modern governments.

‘For at least the past decade, it has been recognised by business, the tax professions and the Revenue alike that the tax system is too complicated, is getting more complicated and urgently needs simplifying.’ Peter Wyman in The Times