Ricardo's Law ~ House Prices and the Great Tax Clawback Scam
Written and Narrated by Fred Harrison
Author of the book Ricardo's Law (Published by Shepheard Walwyn, 2006)
Click here to see the High Definition Short film, Ricardo's Law (2008)
Running Time: 7:36
I accuse governments of running a scam against the people who elect them. I know this is a serious charge. But governments use the tax system to milk the poor. Why do they do it? To enrich people who own land.
The scam began centuries ago here in the Palace of Westminster. It is operated by all democratic governments around the world. The biggest winners are those who own the best locations, such as homes overlooking Hyde Park, here in London, or with a view of Central Park in New York or across the harbour in Sydney.
The taxman operating out of the Treasury – this building behind me – work with a doctrine called “progressive taxation”. This is supposed to transfer income from the rich to the poor.
That sounds fair, doesn’t it? But I have discovered that progressive taxes are a cover up for a cruel hoax played on people with low incomes.
This is how the scam works. The people who live in these apartments are tenants. Britain has 4m of them in the public sector. They pay rent to their landlord, and they pay taxes to the government.
The homes in this street in Knightsbridge, near the famous Harrods store, are worth millions of pounds. The people who live here are in the top 20% income bracket. On average, they pay about £1.25m in taxes over their working lives. That’s about $2.5m American or nearly $3m Australian.
The people who rent their homes tend to be in the lowest 20% of incomes. Over their working lives, they pay – on average – about £250,000 in taxes. That’s fair, isn’t it? The rich pay five times more than the poor in taxes.
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I explain in my book, Ricardo’s Law, that progressive taxes have the opposite effect.
People who rent their homes pay taxes to fund schools, hospitals and police protection. They pay for what they receive. But what happens down the road in Knightsbridge? Let’s go and find out.
(Long shot of FH walking away from camera, towards Knightsbridge)
The rich who live here pay a lot in taxes, but the government gives the money back to them. How do they do this?
Government spends our taxes on infrastructure such as highways and railways. That increases the productivity of the economy. Now, because of the way the market economy works, those gains in productivity are transformed into land values. That value appears as ‘windfalls’ or ‘capital gains’.
Those capital gains are not shared out equally, among all of us. Taxpayers who rent their homes are excluded. The windfalls are pocketed by people who own land. The rise in property values more than offsets the taxes they pay into the public purse.
So who pays for the public services that the rich people use? The people on the lowest incomes.
Families on the lowest incomes subsidise the lives of the rich. Is that fair? There’s only one way to make the tax system fair. Parliament has to tell the taxman to stop collecting taxes from people’s earned incomes. We need the kind of tax reform that Winston Churchill and the Liberal government nearly achieved 100 years ago. But the landlords blocked them.
If we cancel taxes on people’s wages, how do we pay for public services? By levying a charge on the value of land. People who live in valuable locations, like the families who live at the back of Buckingham Palace, will pay much more than those who live in less expensive properties. That’s fair. And it also happens to be the best way to fund the services we share in common.
Visit Fred's site at www.fredharrison.org
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