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LVT Success in Denmark

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  • John
    Geoism Proven To Work On National Level Denmark prospered under the Geoist system for 3 years until right-wing vested interest of landowners scupperred it. The
    Message 1 of 2 , Jun 6, 2010
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      Geoism Proven To Work On National Level

      Denmark prospered under the Geoist system for 3 years until right-wing vested interest of landowners scupperred it. 

      The Danes, by old tradition, have been accustomed to the concept that the land belongs to the people. The rapid industrialisation and land enclosures of the 18th and 19th centuries, begun in England and made impact in Denmark challenging this tradition. More land was seized as industrialisation grew in Denmark.

      Liberals Adopt LVT

      Farmers were pressed in the later half of the 19th century; many of them found support in the ideas contained in a newly released book "Progress and Poverty", by Henry George. As the economic situation became even tougher for small farmers, a so called "Georgist" movement began and the Danish Henry George Union was founded in 1902. Some of its more active members wanted a better platform for their political ambitions, and these members cooperated with other philosophic groups and public leaders in forming the Radical Left Wing Party (Liberals), declaring that:
      1. Land value taxation, LVT, (site revenue) should collect all the publicly created rent of land for government expenses
      2. Income Tax to be abolished accelerating the free market
      Around this time of course, Karl Marx was advocating that the workers unite to fight the desperate conditions of the working man. The Danes took the line of Henry George. Social Democrats were inspired by George advocating in its political program the taxation of land value, know as site revenue.

      Parties join to create the Economic Justice Party 

      Over the next fifty years, not only in Denmark but around the world, there was long and intense debate about liberty and freedom; amongst free traders, pacifists, humanists, philosophers and religious institutions alike. Many of these people went to each other's meetings and contributed articles to each other's publications. Finally, they knew each other so well, that many of them decided to establish a union with the object of appealing to voters for seats in Parliament. The Justice Party was formed. 

      The economic policy of the Justice Party was simple; to collect tax only from the value of land and abolish all taxes on labour and capital. For a new political party, their effect was astonishing. Progress was quick and in 1952, they won 12 seats of a possible 179. They effected the appointment of a Government commission for ground rent in Denmark, who wrote its report clearly advocating the benefits of site revenue. In 1957 the Justice Party, together with the Social Democrats (Labour) and the Radical Left Wing Party (Liberals) formed what was to become the most prosperous ever Danish Government - later termed the Ground Rent Government.

      Three political parties made an agreement based upon the following:
      • Collection taxes from the values of land only (LVT)
      • Liberalisation of trade
      • A tax freeze
      It was therefore generally expected that after formation of the government, some kind of LVT would be introduced. Land speculation ceased immediately in anticipation of LVT. Legislation on taxation of increased land value was prepared, presented to parliament and passed.

      The economic effects of the cessation of land speculation were astounding and aroused much attention. On the 2nd October, 1960, the New York Times headlined, "Big Lesson from a Small Nation."

      Prior to the election of 1957, Denmark had a sizable deficit on her balance of payments, was considerably in debt abroad, and burdened with a relatively high interest rate, big unemployment figures and an annual rate of inflation of approximately 5%.

      From 1957 to 1960, the following improvements took place:
      • The big deficit on her balance of payments was turned into a surplus.
      • Denmark's total debts abroad amounting to 1,600 million kr. were reduced to one quarter of this, about 400 million kr.
      • The rate of interest, and hence mortgage levels dropped.
      • Unemployment was soon replaced by almost full employment, together with considerable increases in production and wages.
      • Inflation was brought to a standstill. All wage increases were real wage increases, the highest ever in Denmark.
      • No other taxes were levied during this period. (except one, referred to later)
      • The time was free of strikes. Industrial production went up 32%
      • investment rose 135%
      • Savings increased immensely, as once again it became profitable to accumulate savings.
      After three years in power, Denmark had no foreign debt, no inflation and an unemployment level of 1%, considered full employment. So why is this not continuing?
      • Until 1960, the Social Democrats were advocating LVT for the purposes of government social responsibilities, the Radicals (Liberals) and Justice Party advocated LVT for the purposes of income tax reduction. Minor conflict developed.

      • Prior to 1960, "Georgist" beliefs dictated that when a heavy "tax" is levied upon land value, land price will decrease. The consequences of full employment, no inflation, no foreign debt, increasing production and rising real wages however, brought about a prodigious demand for homes, enterprises and of course land. Land prices did not initially fall, as was predicted. In fact land prices rose. The Justice Party was unprepared for this.

      • In the late fifties, the Danish foreign debt was seen to be at crisis level. To assist with this, the Ground Rent Government did levy one new income tax. In addition to this of course, rising real incomes were eroded in part with the progressive nature of income tax on higher incomes. The self interested wealthy land owners had a field day confusing the fact that overall, taxes did go down by 10%. The general public found little reason to doubt the anti-Georgist literature stating that LVT was simply another tax on top of all the other taxes. The land owners had no problem in fanning the now growing belief that the "socialists", (read communists, given the Cold War era), wanted to get hold of your property.
      At the general election of 1960, the opposition used, for the time, the largest sum ever in any Danish election campaign, financed by the Conservatives and Landowner associations. Such is the power of self-interested groups. With its limited financial resources and lacking support from the daily press, the Justice Party was unable to withstand the attacks. Agitation against the LVT legislation continued after the election and the new, weakened government gave in. Further strong pressure from 
      land-owner associations had the LVT laws repealed in 1964.

      After 1964:
      • The currency surplus became a currency deficit.
      • The annual deficit on the balance of payments in 1972 was 3 billion kr.
      • Debts abroad amount today to 20,000 million kr.
      • The effective rate of interest has been doubled.
      • Land prices jumped sky-high. Denmark's overall land value rose from 17 billion kr. at the assessment of 1960 to 67 billion in 1969, and reached 100 billion at the next assessment in 1973.
      • Rents in new housing are six fold those of 1964.
      • The rate of inflation rose from barely 1 per cent to 5-7 per cent and was 8.6 per cent in 1965, the year after repeal of the land tax law in 1964.
      • Taxes have risen again and again and are today five times higher.
      A comparison between the three periods, before, during and after the so-called "Ground Rent Government," gives a clear picture of the importance of eliminating land speculation. LVT can do that painlessly.

      The failure of the Justice Party was a naïve underestimation of the facts that
      1. Population were not educated to what LVT was - Only few Danes knew what LVT was all about, most people did not know the good effects they already enjoyed because of LVT and that the possibilities of citizens in general would improve further when more LVT would be levied; people in general did not understand that the revenue of LVT belonged to them all in common.

      2. Landowners & Self-Interest Groups Oppose - The extremely powerful opposing powers dominating the public media - electronic and printed, which imposed on people in general the understanding that LVT was a tax like all other taxes, that it would be unjust if only landowners should pay all taxes, etc. Further they emphasized that poor citizens having no income or only small income would not take advantage of reduction of income taxes, which was crucial because many LVT proponents promised reduced income tax when LVT was publicly collected.
    • John
      From :Earth Rights Interesting......WEAKNESSES The Danish experiences have not revealed any weakness in LVT
      Message 2 of 2 , Jun 6, 2010
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        From :

        Earth Rights 

        Interesting......

        WEAKNESSES

        The Danish experiences have not revealed any weakness in LVT as a tax-system, but the chosen way of implementation proved to have serious political weaknesses and the law on Tax on Incremental Land-values (TIL) of 1960 had adopted too many allowances and complicated methods of calculation.
         

        LVT appeared as a tax like other taxes is no good. Danish LVT legislation before 1960 was experimental pilot projects and tests, only collecting small amounts by Land Value Taxation, which did not have the capacity to provide Genuine Democracy based on all citizens' equal economic rights to the values of Nature and Society, which in Denmark was the main purpose of the reform. Tests and pilot projects were of course fine, but opponents used the inferior effects of it to make citizens believe that there is nothing special about LVT and that it is a tax like other taxes. 

        To avoid this misunderstanding, proponents of LVT must convince the citizens of the Good Effects expected to sprout from further implementation of the LVT programme. In a democracy well informed citizens are important because they being the electors are the persons who decide whether the reform shall go on or not. 

        LVT law with many allowances ran into a disaster. The Danish TIL (Tax on Incremental Land-values) that passed through the Danish Parliament 1960, was based on 27 years' negotiations between different groups of interests and had got too many exceptions and allowances that caused complicated methods of calculation, which people in general - keenly supported by wealthy and influential opponents - found silly, unreasonable and/or even unjust. These awkward rules should of cause have been corrected; but the opinion was for abolition of the total scheme. 

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