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Are stewardship fees fair?

Who gets the land?

What’s to stop the rich from monopolising the best land?

The rich will be in a position to monopolise the best land in a stewardship economy, just as they are in an ownership economy.  The difference is that they will pay for the privilege and everybody else benefits.  That certainly seems fairer than the situation in an ownership economy where the landowners monopolise not only the use of the land but its market rent and any increase in its market value.

Farmers

As 85 per cent of the UK is used for agriculture or forestry, wouldn’t stewardship be unfair to farmers?

The fee that a steward pays depends on the market rent of the land, not on the number of acres.  Each acre of land in a city is worth hundreds or even thousands of times more than an acre of farmland.  Agricultural and forestry land make up just 5 per cent of the value of all land in the UK, and so only 5 per cent of the revenue from stewardship fees would come from agriculture and forestry.  But the economics of farming would change significantly.

Landowners

Surely it is unfair to impose heavier taxes on landowners than on others?

In a mature stewardship economy, fees equal to 100 per cent of the market rent of the land would be entirely fair.  ‘Landowners’ would not be disadvantaged in such an economy because there would be none.

      During transition from an ownership economy it would be unfair to penalise landowners, which is why the stewardship fees during transition apply only to the increase in the market rent of land that occurs after the beginning of the transition.

A widow living in a large house

Is it fair that the stewardship fees people pay do not depend on their ability to pay them?

The situation that immediately occurs to readers when they encounter proposals for a charge on land values is that of a widow on a fixed income living in the old family house that is now too big for her needs in an expensive part of town, who finds that, through no fault of their own, she can’t afford the stewardship fee.  Perhaps land values have risen dramatically through gentrification, or because the area is sought by developers.

      There is a genuine sense of unfairness in this situation.  The widow no longer has enough income to pay the stewardship fee.  In one sense, she does have the ‘ability to pay’  as she is the steward of an asset (the land) that she could rent out for the same amount as the stewardship fee she has to pay.  But, of course, this potential income is not available to her while she continues to live there.

      The widow lives alone, so there is only one Universal Income coming in to the household.  She personifies change and deteriorating fortune, and in a world of ‘rational’ economic agents the appropriate response would be for her to move to live on a less valuable site.  But the widow also personifies vulnerability and attachment.  Having lived in this house for many years, the house is familiar and full of memories.  It is located in a neighbourhood and a web of social relationships, and to move would rob her of all this.  We all recognise that the attachment we make to a house and garden is uniquely strong in our relationships with the inanimate world.  For this reason, stewardship is not acceptable without some sort of qualification that would make it as easy as possible for the widow to remain in her home.

      At the very least, the tax system must allow her to use the value of the building (her positive equity) to defer payment of the stewardship fee.  The Land Stewardship Trust  could simply roll over the payment until it is paid when she leaves.  Or she might sell the building to a third party who will maintain it and rent it back to her as long as she wants to stay;  and use the capital to purchase an annuity to pay the rent and stewardship fee, in the same way that people now do to purchase residential care.  In either way the widow herself does not suffer, though her family inherit less.

      During transition it would be necessary to provide protection for people whose equity in the house is insufficient to provide for the payments of stewardship fees, for example by making housing benefit available to stewards.

      We inevitably view this dilemma from the perspective of an ownership economy.  Ownership economies have encouraged us to become financially attached to our homes.  In the long run, the trend in land prices is upwards and home ownership in the UK is seen as an investment  and a gift to be passed on to the next generation, rather than as a form of consumption.  For the owner-occupier, the home has often been the main source of financial, as well as physical, security – though it can be a false sense of security when homes fall in value, develop negative equity and are repossessed by mortgage lenders.

      Living in a stewardship economy would alter our sense of priorities.  Here the source of genuine security is the right to an equal share of the stewardship fees of all land, in the form of a Universal Income.  People growing up in a stewardship economy may be less strongly attached to a particular site than we are today.  When we think of the widow, we imagine that she has bought her house in an ownership economy with current expectations and suddenly finds herself subjected to a stewardship fee.

      In an established stewardship economy, especially once it had been in operation for a few generations, people anticipate the need to move home and set funds aside during working life.  One purpose, after all, of stewardship is to ensure that land is put to the best possible use, and all sorts of households in the UK live in homes with many more bedrooms than they need.  Over the course of time housing providers would supply housing units with a mix of sizes, allowing people to move to a suitably sized home without disrupting their social networks.

A millionaire

What about a millionaire who pays little or no tax?

Even in a stewardship economy most wealthy people are likely to occupy the prime sites, both for their homes and for their businesses.  People who have wealth in an ownership economy generally spend a significant amount of it on the place where they live.  In part this is because home ownership is a good investment  in an ownership economy.  But it is largely because we spend to improve our quality of life – and a pleasant and convenient place to live is high on most people’s list of priorities.

      Current inequalities  in both wealth and land ownership are greater than inequalities in income.   As Adam Smith  anticipated, a tax on land values ‘would in general fall heaviest upon the rich’ (1776 Volume III Book V Chapter II: 236).  But it will not do so in absolutely every case.

Exemptions

What land should be exempted from the need to pay a stewardship fee?  Would charities, churches and other faith buildings, local and national government all be exempt?

It is very important that no land at all is exempted from stewardship.  Local and national government need every possible incentive to make good use of their land.  Excluding particular sorts of owner, like charities and faith groups, would lead to these becoming the new tax havens.   Institutions like these, whose state subsidy in ownership economies is provided through tax exemptions, need a direct subsidy  in a stewardship economy (Chapter 8).

Why do you have to tax 100 per cent of the market rent?

Stewardship allocates land to whoever is prepared to offer the greatest compensation to others for excluding them from it.   This means that the steward actually has to pay the whole amount as compensation.  This allocation mechanism also works for the proposed transition approach (Page 128) but it would not work if the steward had to bid, say, half the market rent.

Surely it’s not fair to tax savings or wealth

In a stewardship economy land is not a form of private wealth or savings.  Indeed there are no taxes at all on savings or investment as there are in ownership economies.

Does it redistribute wealth effectively?

Surely the aim of a tax-benefit system  is to redistribute wealth from the rich to the poor?

The rationale underlying stewardship is not the redistribution of wealth, though that is the likely outcome.  The intention is to provide everybody with an equal share of the wealth of the natural world.  Any re-distributive effect arises because the rich use more than their share of the natural world.

Why not tax all forms of economic rent?

One reason for taxing land and the natural world is that its supply is fixed (inelastic)  (The Why? Supplement: Annex C).  Vilfredo Pareto  pointed out that land is not alone in having an inelastic supply, and developed the idea that any factor of production whose supply is inelastic will receive what he called an ‘economic rent’.  This is ‘the surplus received by any factor of production above the amount needed to keep that factor in its present production.’  Thus if certain skills are inherently rare, people with these skills earn an economic rent.  Or if a certain wine or painting has unique qualities, much of its price can be attributed to economic rent.

      The ethical reason for not taxing other forms of economic rent is that land and the natural world are assets on which we all have an equal claim and which should be shared by everybody; while footballers skills are their own and the ownership of a painting by Leonardo da Vinci can be traced back to its creator through a series of transactions.

      One pragmatic reason for not taxing other forms of economic rent is that the supply of highly skilled workers may not be as inelastic as you imagine – taxing their income may reduce the amount of work  they do or drive them into tax exile.

      The proposal to tax all forms of economic rent is usually made not by people who genuinely advocate doing so, but by those who are using the argument as a reductio ad absurdam to attack taxation of land.

Isn’t this just communism?

If the state collects the market rent of land then the state really owns the land – this is communism.

Stewardship certainly doesn’t look like capitalism as we know it, but it isn’t communism either.  Stewardship can support socialism  just as it can support libertarianism,  but not the collective ownership of property that characterises communism.  Land is held in trust in a stewardship economy but each plot is private property, because each steward can make use of the land as they wish without reference to the will of the collective (apart from the usual planning regulations).

      Stewardship is closely related to Henry George’s Single Tax ,  and Karl Marx could see that this is not communism – he perceptively described Henry George as ‘the capitalists’ last ditch’ (Henry Hyndman 1911:281).


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