Why’s the Land Value Tax Progressive?, Cont’d.

Hoisted from the comments:

Actually the response is simpler than that.

There are two types of income. Earned (wages or profits – currently taxed heavily) and unearned (land rents, mortgage interest, mineral extraction, capital gains etc) and state welfare and pensions (paid out of taxes on income).

For most people, their primary source of income is their actual earnings from working or running a business, and maybe they own a house with a land rental value that is a small proportion of their total “income”. Most of these people are relatively poor.

The really rich people all live off land rents, mortgage interest, mineral extraction and capital gains. So if we tax unearned income (as defined), then the middle class majority end up much better off (they save far more in payroll or sales taxes than they would pay in LVT) and the One Per Cent end up with little or nothing.

And the welfare recipients and pensioners can be indifferent whether their income is funded by taxes on earned income or unearned income.