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The Development Levy

—an outline of Principle
by Bob Keall



A Development Levy reduces the purchase price paid to the original vendor. It reduces the otherwise privatized unearned gain. It does NOT increase the price.

Land Price

Land Price only arises because the community fails to collect the annual "economic rent" properly due to it. It then becomes capitalized as selling price.

Land Value is a differential value. It has no cost of production. Any annual charge, such as Rates or a Land Tax, thus reduces the price by the amount of the charge capitalized at the current rate of interest. A Development Levy is a one-off capital charge which directly reduces the price (or the profit) accordingly. By contrast, taxes on goods and services, as products of labour, increase the price.

Infrastructure/natural monopoly reticulation is a core function of Central & Local Government. which has a direct cost/benefit reflection in land values. The capital cost of this benefit must be recovered in the short, medium and longer term from the land values, rather than be privatized.

Inflation

Capitalised annual "economic rent" (land price) is the underlying cause of currency inflation.

Money is a measure of value for the labour content of goods and services for the purpose of exchange, now, progressively or later. Introducing the capitalized future value of a gratuitous licence which has no labour content into the exchange process expands the measure, but with no corresponding increase in goods and services—too much money chasing too few goods = inflation. Over time the value of the labour products diminishes, whereas the licence value appreciates, compounding the effect.

Collecting the "economic rent," annually (Land Value Rates or Land Tax) or by a Development Levy, eliminates the "business cycle" of boom and bust. The inflated/devalued currency is most rapidly reflected in higher land price which inflates/devalues the currency which ... creates a pernicious spiral—on which some live high, whilst others strive to survive.

The Economics

Cheaper land encourages genuine developers, as distinct from speculators. Cheap access to land stimulates employment on a 4:1 ratio. Every person engaging in property improvement (primary industry) generates four more jobs downstream. Expensive land has the reverse effect, and is the basic cause of wealth disparity.

The higher level of borrowing required to fund bigger mortgages is a major factor in our Current Account Deficit.

Any charge which stimulates employment, raises wages, lowers debt and reduces currency inflation is a social imperative.

The Development Levy does that!

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