Land Value Capture makes Transit Self-financing

Tolls, Taxes: Globe and Mail: April 19, 2013

Ontario Premier Kathleen Wynne is right to forge ahead with Toronto-area transit upgrades, even over the complaints of parochial mayors. However, instead of new taxes and tolls – which will pit suburban dwellers against downtown residents and businesses – the new transit should be financed by collecting the rise in land values that the new infrastructure itself will generate.

Land-value capture makes warranted transit “self-financing,” with no need for politically unpopular new tolls or taxes.

Frank de Jong, president, Earthsharing Canada, Toronto

Who will pay for GTA’s transit fix?: Toronto Star, April 13, 2013

On top of being political suicide, road tolls will encourage people to avoid downtown Toronto, and taxing HOV lanes will discourage people from using them.

The better way to fund transit is for Toronto or Ontario to capture the rise in land values (economic rent) that accrues to the land near publicly funded infrastructure. Toronto is already using tax increment financing (TIF) to finance the York University line. Many cities, notably Hong Kong, finance transit with Land Value Taxation.

Land Value capture makes transit self-financing. Warranted new transit always generates more wealth than the cost of the infrastructure — wealth that should accrue to the city or the province and used to finance the transit. And since a land value capture is levied against land value only — not buildings — it will not penalize land owners for new construction near transit stops.

Unlike tolls, sales and income taxes, collecting the rental value of land isn’t a additional tax; it doesn’t take the money people actually earn. Instead it collects the unearned rise in land values (economic rent) that always occurs near new infrastructure making it the ideal source of revenue to finance transit.

Frank de Jong, President, Earthsharing Canada, Toronto

A Just tax: Nassau Guardian, April 5, 1013

Why is it so hard to understand the justice and benefits of capturing the community created value of land for the community?
Classical economists such as Adam Smith, Henry George, defined land as all free gifts of nature (urban land, harbours, etc.). These get value because people, both local and foreign, want them for personal or commercial use. So, no matter who 'owns' the gift of nature (land) there is a location value called economic rent which is exclusive of any production on or from that location.
When economic rent goes into private hands (ie beaches are given away to corporations, land values are uncollected) legitimate government revenue is lost and taxes like the proposed VAT are applied to the production process. Not only is land speculation rewarded but building houses, trading goods and services etc. are punished by taxes. Naturally people try to avoid these taxes by smuggling and other forms of corruption.
When economic rent goes to honest government it encourages better use of locations as there is no tax penalty to build or work. It reduces pollution and pays for infrastructure that helped create the economic rent in the first place.
Why is this so difficult to understand? Why is there so much ignorance of it and opposition to it?

John Fisher, Earthsharing Canada


Canadian government info on Land Value Capture status in Canada and around the world.