Oh dear, here we go again ...

Adam Collyer left a comment on Killer arguments against LVT, not (28):

Your point a): wrong. The landowner created wealth, represented by money he earned. That was not created by "society in general".

I agree that this applies to today's First Time Buyer. He commits himself to creating wealth (i.e. going out to work and earning money) of £500,000 over his lifetime and to devote a third of that to buying a house. Assuming that house price inflation and interest cancel out, by the time he has paid off the mortgage, he has an asset worth approx. equal to the wealth he created by working and was prepared to commit to paying off the mortgage. No prob's.

But he is not only paying for the bricks and mortar, he is paying for the land/location value, which was created by "society in general". If he buys a car, he is paying for a car that was created by a car manufacturer. If he buys ice-cream he is paying for ice-cream that was created by an ice-cream manufacturer. And if he buys land he is paying for something that was created by "society in general".

Until this point is agreed there is little point pursuing the argument. I am not talking about how the wealth is generated by the purchaser, I am talking about the value of the land. Or does anybody in their right minds suggest that had they decided to rent and not buy, and stayed a tenant all their life, but otherwise lived in a similar house, done the same job etc, that they have never created anything of value?

"Two thirds of households already pay 1% or more of the value of their property in Council Tax (plus IPT, VAT on domestic fuel etc) each year." Maybe that's true over the country, I don't know. [It is true, or else I wouldn't say it] But if two thirds are going to pay less, the remaining third will be paying A LOT more. And they will be concentrated in certain areas of the country.

Half-true. Adam cheerfully misses out the bit where I said that I would roll all property and wealth related taxes, in other words Inheritance Tax, Stamp Duty Land Tax and Capital Gains Tax into the 1% property tax. So it is not true that people in larger houses would be worse off overall (some would, some wouldn't).

"If you went mad and started charging £60 per acre tax [for agricultural land]"; which you would be at your suggested 1%. So the farming would cease AND THIS IS A DEADWEIGHT COST.

Adam appears to overlook that farmland is subsidised by about £50 per acre (which sets a floor under the rents that the owner is prepared to let the land for - if the rental value is < £50/acre, he does better to leave it fallow and just collect the subsidies - the deadweight cost of a subsidy!) and appears to be worth, at current market values, (say) £7,500 per acre. If the subsidy were scrapped, the capital value would fall to maybe half that, ergo, the tax would be £37.50 per acre, rather less than the rental value that a tenant farmer is prepared to pay of (say) £50. It helps in these matters if you understand the whole tax/subsidy system and approximate capital market values and rental values and so on.

In any event, the clue was when I said "If you went mad...". Adam is arguing in favour of income tax (by definition). It would be pointless for me to say "Income tax is bad because if you went mad and charged it at 110%, the country would grind to a halt". This is neither an argument for or against LVT or income tax. This is an argument that tax rates should be set intelligently, in such a way as to minimise deadweight costs. It just so happens that the margin for error with LVT is much higher. We know that following the introduction of the 50% income tax rate, a lot of hedge fund guys buggered off to Switzerland, where income tax is about 40% (and where they also have a 1% property tax, natch). Now forgive me if I've missed something, but what would happen if we hiked income tax on rental income to 50%? How many landlords would take their properties abroad and thus deprive UK tenants of somewhere to live? I'd guess none?

"Most [Land Value Taxers] agree that radio spectrum, landing slots, cherished number plates, fossil fuels, offshore drilling rights etc are included"; it's not going to be a simple tax then, is it?

Adam appears to overlook that we already have taxes (or user charges or licence fees or whatever you call it, usually set by an auction process) on radio spectrum, cherished number plates, fossil fuels and offshore drilling rights, and in the grander scheme of things this is all fair enough. So what the Land Value Taxers are saying is "We might as well auction off the landing slots as well" (and maybe get rid of more stupid taxes like Air Passenger Duty).

"[If the government's only source of tax revenue were] LVT, which by definition reduces taxes as a % of GDP to 20% or 30%"; that's a controversial assertion and I don't believe it. You are making heroic assumptions about the deadweight costs and admin costs of raising current taxes.

It would be helpful if Adam could suggest his own estimate of how much of GDP would go in ground rents (actual or implied), in the absence of any other taxes. Would it be lower or higher than 20% or 30%? What the deadweight costs of other taxes are is pure guesstimation, but has little to do with the point I was making.