The Fat Bigot, trained barrister he, had another crack in the comments here:
First, there is a serious risk of the sizable number not affected directly by LVT feeling it gives them money for nothing and voting accordingly (1)... Secondly, I don't see how increases in LVT won't be passed on to tenants.(2)
He refers to "the sizeable number not affected directly by LVT" and then says "I don't see how increases in LVT won't be passed on to tenants." Which is to be? Are private tenants affected or not? I'm happy to point out the logical error in either of those claims, but it would be helpful if I knew which one he'd like me to address. But here goes anyway ...
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(1). "First, there is a serious risk of the sizeable number not affected directly by LVT feeling it gives them money for nothing and voting accordingly..."
The same logic applies to any property tax, such as Council Tax (for which LVT would be an ideal replacement), so let's try applying the logic to Council Tax.
Seventy per cent of households are owner-occupiers; twenty per cent are social tenants or on housing benefit/council tax benefit (which raises a load more issues that I can't deal with here) and ten per cent are private tenants paying market rents and full Council Tax. So I wouldn't consider ten per cent of households to be "sizeable" compared to the seventy per cent who are owner-occupiers.
Secondly, although most tenants pay the Council Tax themselves, some landlords just pay it themselves and add it to the rent, so Council Tax reduces the amount that the landlord can charge in rent (the tenant is concerned about his total occupancy costs, not how it is split between landlord and local council; or whether he pays it directly to the cancel or pays it to his landlord to pass on to the council).
TFB is suggesting therefore, that I, as a tenant, am indifferent to how the local council spends its money, or how much it charges. While I may be indifferent to the absolute amount, I still like to see the council spending the money on things that actually make the area more attractive to live in (rather than wasting it on the quangocracy etc), in which sense my interests are no different to those of owner-occupiers. And if the council spends its money (however raised) on making the area more attractive, then the total amount that I, as a tenant, am prepared to pay in occupancy costs goes up. So the interests of residents are aligned with the interests of my landlord (assuming he lives in a different borough and can't vote on these matters, which he doesn't anyway).
Finally, why does TFB think that I, as a tenant, see Council Tax as "money for nothing"? I don't receive that money, I pay that money. One quarter of households are pensioners who are funded almost entirely out of tax revenues - they see pensions as "money for nothing" and one quarter of employees are public sector employees and paid out of tax revenues), they also see their salaries as "money for nothing".
While TFB and I are pretty much agreed that public sector employment is far too high, I have yet to see him address the first issue - to put numbers on it, total taxpayer-funded pensions cost about £100 billion a year whereas Council Tax, Stamp Duty, Inheritance Tax and the TV licence fee (the taxes which a one per cent property value tax could and should replace) raise about £36 billion (so allocating one quarter to pensioner households is only a nine per cent clawback).
"This is part of the reason the current government has already set in motion an increase in income tax for those on £150,000 and above and is bleating about legislation to limit bankers's bonuses. They think there are votes in "we'll raise more money from those rich people, don't worry proles it won't affect you but if you don't vote for us the extra money will have to come from you."
Agreed. But I have covered that point already in my post on UK versus Switzerland.
TFB then ploughs on:
(2)"I don't see how increases in LVT won't be passed on to tenants. Letting property is like any other business. If your costs go up you have to pass on that increase or take less profit or go bust. LVT will rise at the same proportionate rate throughout whatever area is covered by it, whether national, county, borough or parish. Anyone wanting to rent in a particular area will be met with landlords who all face pretty much the same increase and they will all want to pass it on."
Woah!
"Letting property is like any other business. If your costs go up you have to pass on that increase or take less profit or go bust."
Letting a property is not like "any other business", because of fixed supply. If taxes on petrol were doubled, then people would buy less petrol and some petrol stations would indeed go out of business for ever. If a landlord cannot cope with a modest tweak to the tax system (which would see some better off and some worse off, but worst case would have the same effect as a one per cent hike in interest rates) and does indeed "go bust", then the property would be sold to somebody else, and somebody else (whether tenant or owner-occupier) would move in.
Sticking with the interest-rate analogy, we know that higher interest rates depress house prices. Potential first time buyers are mainly private tenants, and rent levels are very, very stable (they go up in line with earnings). Broadly speaking, the total monthly amount they are prepared to pay to buy a house is much the same as the monthly rent would be on the same property. So if interest rates go up (or if Council Tax goes up), then the price of the property goes down, and the monthly cost of buying stays much the same (so landlords do not have the opportunity to increase rents).
Again, I'd be interested to see any hard evidence that rents go up when interest rates go up or that conversely, rents fall when interest rates fall (tip: they don't, and there isn't any such evidence).
Sounds as if he's been reassured
4 hours ago
5 comments:
There is a rational case for your favourite tax - my father would have agreed. But there was a rational case for the Poll Tax, and look what happened. I still think that Matt Paris is the man you have to deal with; he argues, you'll remember, that however rational the case it won't matter because the electorate will hate the very idea of it. So how can you sweet-talk, or scare, them into accepting it?
While I may be indifferent to the absolute amount, I still like to see the council spending the money on things that actually make the area more attractive to live in (rather than wasting it on the quangocracy etc), in which sense my interests are no different to those of owner-occupiers.
I'd be the same but I wonder how many would agree.
D, Matthew P explained the politics behind it most admirably, i.e. people are stupid, but instead of suggesting that people wise up a bit, he recommended that politicians just go with the flow.
JH, obviously we'd all like to see total spending go down, and hence the total tax burden, but I'd prefer want the heavy taxes on economic activity to be cut, not our modest taxes on land ownership.
Tut, tut Mr W. You have to look at the words, they are the key.
My first proposition referred to those not "directly" affected by a tax and my second suggested that they might well be affected indirectly. There's no contradiction, they are two sides of the same metaphorical coin.
TFB, seeing as a landlord could add the tax to the rent by private agreement (and accept a correspondingly lower 'headline' rent), that would make private tenants direcrly affected.
I think the taxes you should be complaining about are VAT and National Insurance, which between them raise five times as much as my suggested LVT (which is only a replacement tax anyway), nobody seems to think that the tax affects them, no matter how much the govt cranks them up. A lot of people even complained about the VAT cut to 15%.
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