I noticed that there has been a flurry of discussion recently about what is known as Modern Monetary Theory (MMT)). It strikes me as a bit half-baked but the proponents of MMT may have a point.
The usual view is that governments collect tax and spend it to pay for their activities. I believe this is exactly the wrong way round. As I understand it, official money is created when government spends it into circulation to cover its expenses. The money must then be withdrawn from circulation through the tax system, so as to complete the cycle and prevent the undue increase in the quantity of money which leads to a general increase in prices as the value of money falls.Now, it is essential to remember that one of the core functions of governments is to protect land rights and provide what is needed to make land habitable and productive, thereby creating sustaining its value. The government‛s primary duties are to defend the realm, protect land titles, make justice available to the people and provide the infrastructure which enables production. Without these, land would be of little value. In addition, service provided such as education and healthcare also enhance land value; one need only compare house prices in the vicinity of good schools to observe this effect.
It follows from this that the principal form of taxation should be on land, as measured by its market rental value.
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