I had lunch with a long-time MoneyWeek reader this week. He is convinced that the problems of Western economies are caused almost entirely by the fact that we tax everything the wrong way around.
To illustrate this he told me his Martian story. It goes like this. There was once a Martian manufacturer who made exceptionally good sweets he was solar-system famous for his special space-dust recipe. He also knew how much we Earthlings like candy. So with an eye to cleaning up in the Earth market, he landed in the UK countryside to look for a manufacturing site. He went to an estate agent and asked to be shown a suitable 20-acre site stipulating that it must be as cheap as possible.
The agent said he had just the right spot. So they got in the car and headed off down the motorway. They left the motorway for an A road. They left the A road for a B road. They left the B road for an unnamed road. Then they headed up a narrow dirt track. Eventually the agent pulled over and waved his arm at the isolated fields around. "This is it," he said. "All 20 acres are for sale and planning permission is already in place. Yours for £1m."
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
"Not bad," said the Martian. "But where are the services. I will need gas, electricity and vast volumes of water. And I need lots of workers. But I see no houses or schools or hospitals. Where and how will they live? And the road is terrible. How will my supply lorries arrive? It will cost millions to provide what I need here. Have you nothing else?"
The agent said he did. So they got back in the car. Down the track. Down the B road. Down the A road. Back to the motorway. In time, they arrived on the edge of a medium-sized town. The agent drove to a few empty fields surrounded by houses. "This used to be a smallholding," he said. "But Mr Bloggs is old now and keen to move to Tenerife. So it is for sale. There are, as you can see, houses, schools and hospitals as well as a good road network we are just off the motorway. And your gas, water and electricity are already here. However it does cost more - £50m."
"It is perfect," said the Martian. "Now tell me, who put the services in?"
"The state and the local council," said the agent.
"Brilliant," says the Martian, "Tell me where to send it and I will write them a cheque immediately."
"Oh no," said the agent. "You don't pay the state. You pay Mr Bloggs."
"That makes no sense," said the Martian. "If I pay Mr Bloggs whose land is only worth £50m thanks to the work of the state who pays the state?"
"Oh you will do that too," said the agent. "As soon as you are up and running you will pay rates, VAT, NI, income tax, corporation tax, insurance taxes and so on."
"I don't think so," said the Martian.
And he went back to Mars. Immediately.
Supporters of the land tax (details of how that works here) will see where my lunch partner is going with his very good story. But he takes it a step further by referring to the unearned part of the market price of Mr Blogg's land as "location value" something that is effectively a social good. And he reckons that the value of the social good should accrue back to the state rather than to the individual.
We've written about land taxes here before with our general view being that we'd be all for it if we could be certain that other taxes (income tax and so on) would be scrapped as it was introduced. However as we are pretty certain they wouldn't be, we can't really support the introduction of yet another tax. I'll come back to this we had a long lunch.
P.S We had lunch at 1 Lombard Street in London the restaurant very kindly donated lunch for a reader and me as part of the FT's annual charity appeal. So if there are any inconsistencies in the above story please accept that it is entirely their fault they kept bringing me glasses of champagne.
-
Private school fees soar and VAT threat looms – what does it mean for you?Rising private school fees could see more than one in five parents pull their children out of their current school. Before you remortgage, move house or look to grandparents for help, here’s what you need to know.
-
Best and worst UK banks for online banking revealedWhen it comes to keeping your money safe, not all banks are equal. We reveal the best and worst banks for online banking when it comes to protecting your money from scams
-
Beating inflation takes more luck than skill – but are we about to get lucky?Opinion The US Federal Reserve managed to beat inflation in the 1980s. But much of that was down to pure luck. Thankfully, says Merryn Somerset Webb, the Bank of England may be about to get lucky.
-
Rishi Sunak can’t fix all our problems – so why try?Opinion Rishi Sunak’s Spring Statement is an attempt to plaster over problems the chancellor can’t fix. So should he even bother trying, asks Merryn Somerset Webb?
-
Young people are becoming a scarce resource – we should value them more highlyOpinion In the last two years adults have been bizarrely unkind to children and young people. That doesn’t bode well for the future, says Merryn Somerset Webb.
-
Ask for a pay rise – everyone else isOpinion As inflation bites and the labour market remains tight, many of the nation's employees are asking for a pay rise. Merryn Somerset Webb explains why you should do that too.
-
Why central banks should stick to controlling inflationOpinion The world’s central bankers are stepping out of their traditional roles and becoming much more political. That’s a mistake, says Merryn Somerset Webb.
-
How St Ives became St Tropez as the recovery drives prices sky highOpinion Merryn Somerset Webb finds herself at the epicentre of Britain’s V-shaped recovery as pent-up demand flows straight into Cornwall’s restaurants and beaches.
-
The real problem of Universal Basic Income (UBI)Merryn's Blog April employment numbers showed 75 per cent fewer people in the US returned to employment compared to expectations. Merryn Somerset-Webb explains how excessive government support is causing a shortage of labour.
-
Why an ageing population is not necessarily the disaster many people think it isOpinion We’ve got used to the idea that an ageing population is a bad thing. But that’s not necessarily true, says Merryn Somerset Webb.
