In The Times:
Sir,
You describe (leading article, July 23) how housebuilders have “sat on large banks of land in expectation of higher returns tomorrow”. The obvious answer is to institute a “land value tax”, so making it too expensive for developers to sit on land without developing it.
D. B. C. Reed, Northampton.
For the doubters among you, this won't hurt genuine home-builders. Instead of paying £1m for some land and paying the bank £70,000 a year interest to sit on it in the hope that the land will appreciate in value (which in the long run it always does) they will end up paying a total of £70,000 in total for [interest + LVT].
In other words, if the LVT were set at ten per cent of the land value, the operation of the free market would force the land value down to £400,000, the interest would be £30,000 and the LVT would be £40,000 a year. The genuine home-builder (who is employing people and creating something of value) gets on with the job, builds and sells the houses and makes just as much money as he would have done anyway.
Saturday, 25 July 2009
Reader's letter of the day
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6 comments:
Yep,
When you tax something, you get less of it.
So when you tax the price of land, it costs less.
However when you tax work and wages, you get less work and thus a smaller economy.
One of the benefits of an PVT* is that it actually increases money velocity as people are incentivised against just sit on a property.
*PVT = Property value tax. i.e. it treats land and intellectual property the same.
Are you advocating PVT/LVT as an alternative to existing taxes, such as stamp duty?
Yes.
I'd do away with taxes when ownership changes.
Fausty: AC1 and I disagree on the details, but the general idea is that, in order to make a start, LVT or PVT replaces Council Tax, Stamp Duty Land Tax, Inheritance Tax, TV licence fee, Capital Gains Tax, Insurance Premium Tax, VAT on domestic fuel etc etc.
Fiscally neutral would be an PVT of 1% per annum on current property values.
Thanks.
On the face of it, it sounds like a neat idea, if it can be introduced in a form which suits everyone.
Over time, parties would probably seek to tweak it (much like they tweaked flat rate taxes of olde 'til they became monstrous, as they are today).
What might protect the system from bastardisation?
F, "What might protect the system from bastardisation?"
People like AC1 and I will.
Of course politicians will always take the easy way out and tweak it, refuse to update values and introduce all manner of exemptions and so on to keep the home-owner lobby happy (who are too daft to realise that they are being robbed via VAT, income tax and National Insurance instead).
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