Killer arguments against LVT, not (29)

Land Value Taxers are often accused of being 'landlord bashers'*. Nope. Anybody daft enough to advance this as an argument overlooks that tenants have to pay rents out of post-tax-income, and then landlords have to pay income tax on the rents as well.

Let us imagine we slimmed down the state a bit and simplified the whole tax/welfare system down to:
a) a universal Basic Cash Benefit of £3,000 per adult per year (this is simpler than having a higher tax-free personal allowance);
b) a flat income tax of 30% on all income; and
c) a 1% property value tax (as a replacement for Council Tax, Inheritance Tax etc and an approximation for LVT).

Column A in the table below shows a couple earning £40,000 gross renting a house worth £200,000 (five times their gross income); they commit one-third of their post-tax-income to occupation costs, property tax is paid out of that etc, and the landlord ends up with £6,533 net income.

We know for a home-owner couple on the same income in a similar house, cutting income tax from 30% to 25% and doubling property tax would be fiscally neutral (they save £2,000 income tax and pay £2,000 more property tax), so that's them sorted.

Column B assumes that Ricardo's law applies and higher occupation costs soak up 75% of the increase in post-tax income (it probably soaks up more, but I'm building in a margin of error to protect the poor landlords), so they go up by £1,500 against an increase in property tax of £2,000, so the rent that the landlord collects after property tax goes down, but his income tax bill goes down as well. Once the dust has settled, in this example he actually ends up £92 better off, although you can tweak the assumptions to make him slightly worse or or even better off than that.


PS, I've also done the calculations assuming income tax is scrapped and replaced entirely by a 7% property tax. If you don't factor in the massive boost to the economy that this would entail (75% of which accrues to rents anyway), the landlord would still only be a meagre £200 worse off than our starting point.

* Of course, I actually know a lot of Land Value Taxers in person or indirectly. They represent a fair cross section of society, and a couple of them are in fact farmers, landowners, landlords or property developers - they've done the same calculations as I have and are still on-side.