The case for a land tax

Traditionally social justice was served by taking away from the rich to feed the poor.  Mintoff once colourfully compared the role of the state to that of the sun which helps water evaporate from the sea (the rich) to form clouds (the welfare state) which rains on the grass which feeds the workers.  

Surely most European countries owe free healthcare and education to this system.

One legitimate criticism of this system is that it tends to penalise those who have invested their productive energies to contribute towards economic growth. 

Throughout the west centre right parties promising to slash income taxes are winning the battle for the hearts and minds.  Parties of the left can ignore this at their own peril.

Yet this could come at the cost of a breakdown of public services which are equally in demand.  It could also endanger investment in a green and renewable technologies as well as social mobility. 

For contrary to what is claimed by conservatives, it also costs money to reform welfare, from providing sheer money to providing tools for advancement.

In Malta both major parties seem to have converged on the need to cut income tax.    

Before the election the Nationalist Party had made a solemn pledge to slash the top rate of income tax for everyone earning less than €60,000  a year.  

It is now facing a quandary.  Surely the same government claiming that Malta is out of the recession cannot keep on telling us that it can’t cut taxes because we are facing a recession. 

The Labour Party has politically seized the moment calling on the government to honour its pledge to cut income tax without entering the merits of how this shortfall in income will be made up for.  Muscat did hint  to the need of a shift in the tax system in my latest interview with him but that needs further explanation. 

Surely the state would collect more VAT if people spent more instead of paying taxes, but it is doubtful whether that would be enough to make up for the shortfall.

Yet there is a third way between ‘tax and spend’ and the ‘tax less and spend less’ models…. it is the argument that taxes should be shifted from work towards pollution and speculation.

And if we go in that direction, the first thing that comes to my mind which should be taxed, it is land, especially land which is left vacant for speculation.  

The land tax could also include a mansion tax on huge  estates.

The land tax should be part of a package which on one hand reduces income tax while targeting other forms of unearned income, like the super-profits enjoyed by banks and privatised monopolies  and the returns accruing to the already wealthy through speculative investments. 

A carbon tax could be another welcome option which should be considered.  But that needs a lot of thinking and public consultation to ensure that it does not end being socially regressive.  Lets start discussing it now but in a transparent and open way.

Taxes on speculation (and pollution) should be adopted as an alternative, not an additional, means of raising public revenue. The ultimate goal should be to free a large chunk of the middle class from the income tax system.