Ian B trots out the bizarre argument that taxing land values is only a short step away from enslaving half the adult population here:
... the big flaw in LVT is that it is a tax levied on what you think somebody can potentially earn from an asset (1), and that flaw will always remain. It is the equivalent of taxing all women on their potential earnings as prostitutes, regardless of whether they do or not, because they could rent their bodies out, you will tax their bodies as if they all do rent them out (2). I don't think many women would be thrilled (3), on demand of the Whore Value Tax, to be told that it's fair because your WVT assessor has assessed a high potential rental value.
You want to force every landowner to get on their back and think of England, or pay a regular fine for not doing so (4). It's simply morally wrong.(5)
I'm sure I've dealt with this before, but to recap...
1) There are two ways of looking at this.
a) The easiest way is to look at what somebody is prepared to pay for exclusive possession to a certain site. When you buy or rent a house, the mortgage lender or landlord will check you have sufficient income to pay the mortgage or the rent. So LVT is a tax on consumption of land. Sure, the land is not physically consumed, but it is consumed nonetheless in the same way as you 'consume' a hotel room or the pitch for your tent or caravan when you go on holiday. The rent you pay is a combination of facilities provided by the owner and for access to things that are not provided by the owner, i.e. hotels or campsites nearer the beach, the museums, the mountains or with a view over the sea or a lake command more rent than those further away.
So in one sense, LVT is a tax on consumption. My most-hated tax, Value Added Tax is also sold to the gullible public as a tax on consumption but it is not - it is a tax on gross profits of a business (i.e. a supertax on net profits plus salaries).
b) The other view is to look at land values as a function of how much people can earn if they live there and work nearby*. We know that there are wide disparities in average incomes across the UK, but if you deduct actual or notional housing costs, the picture is much flatter - i.e. you can earn £40,000 doing a certain private sector job in London but the mortgage or rent for a home within reasonable commuting distance is (say) £15,000 a year.
Maybe in Newcastle, the best paying similar private sector job that the same person can find would be £25,000 a year but the mortgage or rent for a physically similar home to the one he could have rented in London would only be £9,000 a year. So if that person takes the job in London, he is paying two kinds of extra tax - another £5,000 in income tax and National Insurance, which is publicly collected and an extra £6,000 in 'ground rent' which is privately collected.
* 'Nearby' is a question of commute time, not geographical distance, which is why in the South East, property developers and estate agents advertise properties as 'X minutes from Y station' and state that 'Y station is Z minutes from Liverpool Street/Kings Cross/Paddington Station'.
So take your pick whether LVT is more like a tax on consumption or a semi-voluntary income tax (for a given job, you can always choose a home with a longer commute time, or a flat in a block with more storeys, or a house with a smaller garden and so on).
2) Again, there are two ways or looking at this nonsense:
a) I have read all the arguments put forward by Adam Smith, David Ricardo, Henry George and Milton Friedman, all of whom I would consider to be towards the small government or libertarian-with-a-conscience end of the scale, and I know a lot of Land Value Taxers across the political spectrum and a few Christian ones as well - I don't think any of these have ever proposed a Whore Value Tax. This is tantamount to slavery, for crying out loud.
What the LVT-ers are campaigning against is that the bulk of the population are already enslaved twice over - once by the state who collect the 'public' taxes, and then again by the banks and the property market which collects 'private taxes'. We could, in theory abolish income tax and so on, but you cannot abolish 'ground rents' (short of shutting the state down and allowing anarchy to ensue, which I am not recommending either, before Ian B accuses me of it). As long as the state protects and guarantees exclusive possession (subject to you paying the rent or mortgage in full, of course), there will always be ground rents.
b) On a practical or political level, Ian B's idea is a non-starter of course, and I don't see why I should dignify it.
3) Nor many men either.
4) In a world where we have fines on finding a job (loss of means-tested benefits), fines on earning more (income tax and National Insurance), fines on gross profits (Value Added Tax) and fines on net profits (corporation tax), all of which are hugely economically damaging, that's another complete non-argument. The point is that the public collection of ground rents is not a 'fine', it is a 'service charge' or a 'user charge' or a tax on consumption etc (see above). Ground rents are an irreducible minimum of taxes - the only question is, should they be collected privately or publicly?
5) As I may have mentioned before, simply stating that something is 'morally wrong' doesn't give me much to rebut. That's about as uninteresting as the tabloid majority saying that 'taking drugs is morally wrong' or that 'homosexuality is morally wrong'. LVT is a largely voluntary tax - like VAT, for example - if you want to live in the nicer bits of west central London, it'd be £100 per square yard per year (or the appropriate fraction if you live in a block of flats), for Outer London it would be £5 to £10 per square yard per year, but, assuming the usual skewed distribution of values, the land tax on two thirds of privately-owned developed land across the UK would be £3 per square yard per year or less.
PS, I have used £3 per square yard as a reasonable mid-figure, by assuming that all existing property or wealth related taxes (Council Tax less Council Tax Benefit, Business Rates, Stamp Duty, TV licence fee, Inheritance Tax, Capital Gains Tax, Insurance Premium Tax etc) which currently raise about £60 billion per annum were divided up by the total amount of privately owned, developed non-agricultural land, which is about 4 million acres. So that's a good place to start.
We'd then phase out The Worst Taxes (VAT and Employer's NIC, static shortfall £120 billion, dynamic shortfall £60 billion) and reduce grants to local councils by a corresponding amount. It is then up to local voters to decide what they want to pay for collectively by majority - a flashy new council-run sports centre with swimming pool might lose £8 million a year, so that'd be an extra 10p per square yard per year or an extra 2% on your land tax (I'd vote against, maybe my wife would vote in favour) and so on.
The £1 billion annualised cost of Crossrail might be an extra £2 per square yard for the areas that benefit (let's say a quarter of Greater London, for sake of argument), so it's up to businesses and homeowners to decide whether the increase in capital or rental values, or the increase in amenity or shortened commute times is worth £2 per square yard - either it is or it isn't.
And before some faux-libertarian tells me that 'Crossrail should be privately funded' or 'the ticket prices should cover the cost', even if it were, land values within a certain radius of the stations will increase by a significant amount, so I'd ask them, why would or should a railway company make such a massive investment? That's like expecting painters and decorators or roofers to provide their services to landowners for half-price (which is exactly what this London Borough is seriously proposing). See also Empty Property Grants, more taxpayer-funded subsidies for people who allow properties to fall derelict.
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Ian B then continues in his next comment:
All "rights" in those terms exist because of state enforcement. (6) That is, using the WVT example, the only reason women can assert ownership of their bodies is due to state laws against violence and rape (under the current system, let's not get into anarcho capitalist enforcement), otherwise anyone could invade their bodily property without repercussions. As such, the state's legal system protects bodily property ownership and creates the opportunity for bodily rental (prostitution). The same argument applies as to land. Land property rights are just one of the property rights the state protects. (7)
6) I agree that things like copyrights or patents are created by individuals or businesses but the 'rights' only exist because the state protects them, which is why there is a good argument for a modest income tax on copyright or patent income.
Ian B's view that people ought to pay for the right to not have their bodies violated is extreme, but in real life, people are prepared to pay for this - so house prices in an area with a good police force and low crime levels will always be higher than in another area where crime is (perceived to be) higher. So however we finance the police, it is always the landowners in the lower crime areas who benefit. The only relevant consideration, which applies to all 'public' services of course is 'Is the increase in rental values that arises from ... greater than the cash cost of providing ...?'.
Or, in Ian B's parallel universe, let us imagine that Country A were mad enough to introduce a Whore Value Tax and Country B replaced as many taxes as possible with Land Value Tax. To which country would a lot of people from Country A migrate? How many people would migrate into Country A? In which country would people live happier lives? And hence, where would rental values be higher?
7) Land and property rights are, in economic terms the most important 'property rights'. But yes, the same logic applies to radio spectrum, landing slots at airports, fuel duty (you're paying for the roads as well as the physical petrol), copyrights and patents, cherished number plates and anything where there is a state protected monopoly.
These forms of 'property' only exist because of The State - unlike your own body or physical possessions which are only protected in principle. In reality, you have to them protect yourself , rely on good luck or insure privately. Ask yourself, how many stolen goods get returned to their owners? How many murdered people does the state bring back to life? How many fraud victims get their money back?
Saturday, 17 April 2010
Killer arguments against LVT, not (33)
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41 comments:
What you clearly don't get, Wadsworth, is that while you are getting agitated about petty problems of taxation, the nation's City Councils are tackling The Big Problems, such as equipping rivers with ramps, so that if cows get into them they can climb out again.
http://www.cambridge-news.co.uk/Home/Popular-cattle-moo-ve-to-reclaim-their-space.htm
D, that is yet another thing that we can put to the vote - do you want a penny on your land tax to pay for this? Yes or no? I vote no, as it happens. Anglers and farmers might well vote yes. Only farmers don't get a vote as they wouldn't pay the tax.
Well done Mark, you get the Straw Man prize of the day. I was not advocating taxing womens' bodies, I was demonstrating in a Bastiatesque manner where your argument leads- that is, he wasn't arguing for a law against sunlight, but showing that protectionist arguments justify one.
Really Mark, stick to the honest argument.
LVT is not a tax on "consumption" no matter how you twist your reasoning, it's tax on assets. That's the whole moral issue. You're trying to charge people as rentiers whether or not they earn an income from rental. That is where the parallel occurs. All women have a potential to earn some rental from their bodies, but you wouldn't tax every woman on the presumption that they do.
If you want to tax rents, go ahead. What you're promoting is that taxation of an asset that might potentially be rented which is a different thing entirely. What you are actually trying to do is fine people for not being rentiers!
Ian B: All "rights" in those terms exist because of state enforcement. That is, using the WVT example, the only reason women can assert ownership of their bodies is due to state laws against violence and rape (under the current system, let's not get into anarcho capitalist enforcement), otherwise anyone could invade their bodily property without repercussions.
No, there absolutely could be repercussions. The person being violated could violate in return. You're only looking at half the effect. There might be no repercussions through the legal system, but the violated could retaliate and also face no repercussions through the legal system, even if the wrong person is targeted for retaliation.
The basis of rights to bodily integrity is at root reciprocal; we all benefit because we gain more from others being restricted than we lose by being restricted and we all gain fairly equitably.
It is exactly the same reasoning that underpins asserting equal rights over pre-existing natural resources.
PS, just to clear things up for you, Bastiat wasn't arguing in favour of mass window breaking to stimulate the economy either.
Paul, there could be repurcussions from trespass if the landowner has a shotgun. When we talk about the state defending rights, we know that it often cannot, and that people could instead take things into their own hands to defend themselves, and often do. But the state takes it upon itself to defend our bodily integrity from rape in the same way as it defends our land from trespass, by persecuting violators as best it can.
You can't stop all rape, and you can't stop all trespass. But they are both against the law, for the same reason, and are thus a consistent analogy. If Mark wants to assert that property rights are a creation of the state, then so are all other property rights. You can't have it both ways.
Ian B, fair play, you oppose the taxation of state-protected monopoly rights.
Assuming we can agree that there are certain things that are best done collectively (like defence, law and order, refuse collection, whatever), then we must also agree that 'the state' has to somehow collect the money to cover the cash cost. Feel free to email me a summary of why taxing incomes (or turnover or gross profits) is economically less damaging or morally superior to taxing state-protected monopoly rights and I will post it.
(Or send me an email and I will add you as a guest contributor to this 'blog and you can post what you like.)
PL, ta for backup.
Ian B: "You can't stop all rape, and you can't stop all trespass. But they are both against the law, for the same reason, and are thus a consistent analogy."
I disagree completely. I find the analogy inconsistent. Part of the reason is found in this statement of yours:
"Paul, there could be repurcussions from trespass if the landowner has a shotgun."
Of course, there could, but if you try to assert control over a huge amount of land, there might be repercussions too. The "landowner" might find a lot of people, each with a shotgun, introducing him to those repercussions.
The analogy would only be consistent if both restrictions were being applied on a reciprocal basis such that no reasonable person would feel they are being hard done by by being restricted.
Mark, what I oppose is the deliberate misrepresentation of my clearly stated position in a blog post. I have visions of sitting across from Andrew Neil trying to defend myself against the charge that I want to force every woman into whoredom. I have no plans to lead a minor political party at the moment, but you never know, do you?
Land is "state protected" as is all property in the sense you describe. It isn't a monopoly though, as I'm sure you're aware, other than that all property is a "monopoly" of its owner- as indeed is my rectum, which I may or may not choose to rent out to somebody who desires to use it.
Really Mark, I expect better from you. This post is blatantly dishonest.
The analogy would only be consistent if both restrictions were being applied on a reciprocal basis such that no reasonable person would feel they are being hard done by by being restricted.
I feel pretty hard done by by Megan Fox's selfish monopolisation of her poonani. That isn't actually an argument I can use to be granted rights to it, though, is it?
Property is property, Paul, regardless of whatever feelings people might have.
Ian B: "I feel pretty hard done by by Megan Fox's selfish monopolisation of her poonani. That isn't actually an argument I can use to be granted rights to it, though, is it?"
As I said, it comes down to reciprocity. Take this statement you made:
"Land is "state protected" as is all property in the sense you describe. It isn't a monopoly though, as I'm sure you're aware, other than that all property is a "monopoly" of its owner- as indeed is my rectum, which I may or may not choose to rent out to somebody who desires to use it."
If the law denied you the right to monopolise your rectum, you might have a point with your Megan Fox comment. As it is, that comment just says that you object to having to reciprocate the rights you demand the right to enjoy yourself, which is not the same as objecting to the system of rights as a whole.
"Property is property, Paul, regardless of whatever feelings people might have."
Property is obviously property. That's a tautology. Unfortunately, it says nothing about whether a given system of property rights is just, equitable or any other number of things. Slaves were property, but today, you can't claim a human being as your property and that was down to "whatever feeling people might have."
PL, as ever, keep up the good work.
Ian B "Land is "state protected" as is all property in the sense you describe. It isn't a monopoly though.."
But land ownership is, by definition a monopoly. A car is not a monopoly, if somebody buys a VW car and you also want a VW, then VW churn out another car, and there is a free exchange of goods and services and you get your VW. There is no scarcity value to a VW.
But they cannot just churn out another flat overlooking Hyde Park or Central Park. The only reason they have such high value is because of scarcity (and the NIMBYs do their best to replicate this scarcity value on all parts of the country under the banner of 'Protecting The Hallowed Greenbelt')
Megan Fox is hot, but there are many other people, who by accident of birth or cunning camera angles or plastic surgery are just as hot. And, as Joan Collins said 'Being born beautiful is like being born rich - but you get poorer over time'.
As things stand, Megan Fox is equally hot whether she is in New York or in the Sahara Desert. her hotness bears no relation to the actions of the state. But land values differ by a factor of millions between New York and the Sahara Desert.
Similarly, Megan Fox will get older and uglier and one day she will die, and her hotness will die with her. But the descendants of the Normans who stole our land are still reaping the rewards.
Mark, you seem to be attempting to discuss monopoly whilst suffering the enormous handicap of not having a fucking clue what a monopoly is. Your argument is thus just meaningless, because your language is simply wrong.
Monopoly has nothing to do with whatever you think "scarcity value" is. A monopoly is control of a sector by a single supplier. These are not the same thing.
Ian B: "A monopoly is control of a sector by a single supplier. "
That's not perfect, but it's a good working definition.
Now, please explain to me - without swearing -
1. How the right to exclusive occupation of any particular plot of land (or radio frequency, or airport landing slot etc) is not a monopoly.
2. Whether that right would exist in the absence of 'The State' (bearing in mind that 'The State' is nothing more than 'whoever has the biggest army').
3. Why the rental or capital values of different plots of land have such hugely different values within a town or within the UK or even across the world. Is it because of the wealth-creating efforts of 'the landowner' or is it merely a by-product of what everybody else is doing?
4. In your own words, what do you think came first - 'The State' or 'Land ownership' or are they indeed the same thing? Can you imagine 'land ownership' without 'The State'? Do you think you can turn up somewhere in the world and declare yourself to 'own that land'?
Unless your army is a lot bigger than the army of whoever was there first who tell you 'No it f***ing well isn't', then you can't. And if the only way you can impose yourself as landowner is to have a bigger army, then is not all landownership the result of force? So why is it so terrible that the people who exercise and benefit from that force are expected to also pay for it?
How the right to exclusive occupation of any particular plot of land (or radio frequency, or airport landing slot etc) is not a monopoly.
For the same reason that owning one car is not a monopoly of the motor car sector.
Everyone "monopolises" the individual items in their possession, as with Ms. Fox and her body. When people talk economically about monopoly, they mean monopoly of economic sectors, because it goes without saying that any owner of any particular item is its "monopolist".
You're trying to pretend that ownership of land is qualitatively different to onwership of some other item by sniding in this word "monopoly" outside it usual usage.
I could grow nothing but vegetables in my garden and sell them for a profit, how much should I be taxed for not having used my land in that way? If I shouldn't be taxed for non-vegetable production, why should I be taxed for not renting-out rooms?
Ian B, you are deliberately missing a very simple point.
1. If you own a particular car then that is of course not a monopoly because the manufacturer can always make enough to meet demand. The car industry is reasonably competitive so the car manufacturers do not make super-profits.
2. If you own a particular plot of land then that is a monopoly because somebody else who would like to live in that location cannot just go to the manufacturer and order another one. The whole system has been arranged so that landowners can make superprofits. These cannot be competed away. Ergo it is a monopoly.
3. Exactly the same applies to radio spectrum. Of course no single broadcaster owns the right to broadcast on all frequencies, the rights have been split up. So there are lots of 'local' monopolies.
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TFB, as I have explained several times, the land tax tax would be set as a percentage of what people are prepared to pay for that plot. What they want to do with it once they own it is no concern of mine.
LVT is a consumption tax - which is what VAT is supposed to be (but isn't). So under your logic, if I buy an item and only use it once or twice and then stick in the attic, I ought be able to demand a partial VAT refund?
You know this all perfectly well. So the answers to your question are "I have never said that people would be taxed as if they grew vegetables in their garden. Neither have I ever said people should be taxed as if they rented out all their rooms".
This is just a slightly less misogynist version of Ian B's Whore Value Tax, so I have already answered all that.
Ian B, I can't see why a tax on assets is intrinsically worse than a tax on income. In order to have such assets, you must have earned money and bought them. Under the income tax system you are taxed as you earn that money, under the asset tax, you are taxed after you have spent it. It's the same tax, just applied at a different time.
If, under the asset tax system, you spend all your untaxed income on assets and have none to pay the asset tax, then you have to sell some of those assets (which you wouldn't have been able to afford to buy under the income tax system anyway) to pay the tax and more fool you.
It's really no different from a non-PAYE taxpayer, having spent all they earned in the previous tax year, having no income to meet that previous year's tax demand.
How is it right that landowners should pay for an improvement on someone else's land? If the land prices go up due to a station being built then the ticket price has not been set high enough, or some other economic argument. If Tesco build a new store in a village should the villagers pay Tesco for the privilege? Surely not!
B, that's a good way of explaining it.
E, wot? No, people should not 'pay' Tesco directly for the privilege (when did I ever say that?), but the additional ground rents that the government could collect would go towards cutting other taxes, like taxes on incomes and wealth creation, so Tesco would pay less in such taxes (and possibly more on the land it occupies).
So, I've answered your second question. Now consider this:
I'm a tenant (and ultimately looking to buy), so if something good happens (better rail service, new shops, state school improves, whatever) then the area becomes more desirable and my landlord would put the rent up; or a vendor would put the selling price up.
So I'll reply to your question "How is it right that landowners should pay for an improvement on someone else's land?" with a question of my own:
"How is it right that tenants or purchasers should pay extra to the landlord or the vendor for an improvement which the landlord or vendor has not contributed towards or paid for"?
If the land prices go up due to a station being built ...
... you don't want to pay extra in tax. Maybe you don't even use the station. However, if/when you come to sell your house, do you wish to enjoy the higher price made possible by the station being there? Or will you fix your selling price to the market value before the station was given planning permission?
If your house becomes more valuable due to the construction of the station, will you forego th
Oops, please ignore that last half sentence.
Bayard, it's not the same thing at all. Income tax has its own severe problems, but is at least only paid once, when you have earned some money to pay the tax. An asset tax is a state rent on simply owning something, paid every year in perpetuity. Mark's LVT is just a slimy way of making the State everybody's rentier.
If I earn £10, I might pay £2 tax on it, but then I'm done with the state. An asset tax takes the £2 every year, even though the asset isn't earning any money. Mark keeps trying to pretend that his asset tax is a "consumption tax" by his methodology of torturing the language into new and interesting shapes, in that some homeowner sitting on a piece of land is supposedly "consuming" the land, which is simply not true.
With an income tax or a profits tax, the State taxes you once. With an assets tax it taxes you again and again and again until you are forced to part with the asset because you can't afford the taxes, since any non-earning asset (e.g. the land of an owner occupier) generates no income.
And this, we must remember, was always stated by Georgists as the reason for the tax. They wanted it to force people to sell off their land assets or force them into production. Effectively, in terms of land it forces everyone to be a rentier on behalf of the State, or be dispossessed by that State.
Ian B: "An asset tax is a state rent on simply owning something, paid every year in perpetuity. Mark's LVT is just a slimy way of making the State everybody's rentier."
I didn't say 'assets' generally, I said land. It's not 'my' LVT, it's Adam Smith's LVT, David Ricardo's LVT, Herny George's LVT and Milton Friedman's LVT.
As to 'the state' being 'everybody's rentier', that's the whole point, isn't it? As things stand, there are two big rentier classes - the state sector which lives off income tax, and the landowners who benefit from very lightly taxed (and hence ultimately subsidised) land ownership.
You can quite easily shut down the state sector and scrap income tax (conceptually at least) but that still leaves us with the other rentier class. As the benefits of the right to exclusive possession far outweigh any perceived costs, it is, in itself A Good Thing, but the problem is the rent-seeking element.
"Effectively, in terms of land it forces everyone to be a rentier on behalf of the State, or be dispossessed by that State."
I vastly prefer the Georgist idea, that wealth creators pay rent to landowners and landowners pay on the monopoly element, to the current situation where wealth creators have to pay a third of their income in tax to the government and another third in rent or mortgage repayments.
All these young people who are expected to borrow six times their annual salary just to buy a modest house, have they not been dispossessed? What moral superiority does the Home-Owner-Ist coalition of banks, governments, NIMBYs etc have?
And why this hatred of 'the State'? Who creates the land values? By and large it is society in general. And who enforces the rights of landowners? By and large it is 'the state'.
Ian B, you are the gift that keeps on giving:
"Mark keeps trying to pretend that his asset tax is a "consumption tax" by his methodology of torturing the language into new and interesting shapes, in that some homeowner sitting on a piece of land is supposedly "consuming" the land, which is simply not true."
If I pay for and occupy a seat in a cinema to watch a film, am I not consuming? If I rent a hotel room for a holiday, am I not consuming? If I rent a house, am I not consuming?
If land occupation is not 'consumption' and has no value to the occupant, why are people prepared to pay so much for it?
I imagine that you'd be pretty miffed if I went into your house and ate all the food from your fridge, as I would have 'consumed' it.
SImilarly, I imagine that you would be equally miffed if I occupied your house for a few months, as I would have 'consumed' it, despite the house might be physically identical when I finally get evicted.
I can't be bothered with your other paragraphs as I have already covered them before.
Mark, you certainly do keep giving. I wouldn't describe it as a gift though.
The point you're ignoring here is that you aren't taxing the man who sits in the cinema seat for consuming the service. And you're not even taxing the owner of the seat for providing the service. You're taxing the owner of the cinema seat for simply owning the seat, whether anyone "consumes" it or not!
This is the central problem you have. If you don't like rents, fine, tax rents. But you're not taxing rents. You're taxing the ownership of an asset that may be rented, as if it always is just as, in my original example, the State is taxing every woman as a whore because every woman has the potential to be one.
You can't get out of this problem; there is a fundamental difference between taxing actual trades and taxing potential trades that actually did not occur.
Ian B, feel free to criticise what I say, but don't accuse me of having said things that I didn't say, this does not advance the discussion (or help justify your own idea that taxing incomes is OK):
"You're taxing the owner of the cinema seat for simply owning the seat, whether anyone "consumes" it or not!"
Nope. A tax on land values is a tax on, er, land values. It is not a tax on the seat or the building or the screen. I think you are confusing Land Value Tax with Business Rates (which is a tax on the building value as well as the land value, so isn't such a bad tax really).
A cinema owner in the town centre is at an advantage to a cinema owner in the middle of nowhere, because there are more potential customers and better transport links etc. This is reflected by the fact that land values and rental values are higher in the centre of town than in the middle of nowhere. Land in town centres is in limited supply, this drives the price up.
The bank will still demand the same mortgage repayments from the cinema whether the seats are occupied or not. A landlord will demand the same rent from a tenant whether his business succeeds or not. And as LVT (and to a similar extent Business Rates) reduces the capital cost of the land, the overall outlay to the cinema operator or tenant business would not change significantly.
So if you want to run a business from a town centre, you have to make at least as much profit as any other business could from that same location. So if the cinema can't make enough money to pay the rent or mortgage, it would fold and somebody else would open a different type of business.
In the real world, not some fantasy world where women pay a WVT, successive governments have experimented with Business Rates free zones and all that happened was that landlords put up the rent and vendors put up the selling prices. It had no particular positive effect on business activity. It is an observable fact.
Ian B: "You can't get out of this problem; there is a fundamental difference between taxing actual trades and taxing potential trades that actually did not occur."
Again, please stick to looking at what I said. In the Georgist world, there is neither a tax on actual trades nor on potential trades. There is no income tax, full stop. There are no protectionist measures. There are no quotas or tarrifs or trade restrictions.
Henry George's point (picking up from Smith, Ricardo et al) was that instead of private individuals collected monopoly values created by society in general and protected by the state, those monopoly rents are collected by the state on behalf of society in general and spent on 'Good Stuff' (whatever that may be from time to time).
Mark, I didn't say that you are advocating a tax on actual trades. I am criticising the fact that you are specifically advocating a tax on potential trades. That is the centre of Georgist policy!
You assess the rental value of land, then tax it as if rented. You are taxing its potential rental. There is a tax on potential trades in your philosophy. That is what Georgism is.
I've already discussed the fact that your "monopoly" is not really a monopoly at all. Ricardo was not a bad economist, but he did not have modern economic knowledge. Particularly he had no correct Theory Of Value. He didn't understand where values of any kind- for products, goods, rentals, etc- came from, so produced wrong reasoning based on wrong theories- on the Labour Theory Of Value (which is flat wrong) and a "Land Theory Of Value" based on a simple agrarian economy with landlords and serfs whose positions were dictated by tradition and the state.
Hardly any of us are tenant famers any more, and those who are are operating under different conditions today. and while his theory had some significant utility in explaining e.g. the exploitation of the enserfed Irish by their absentee landlords, it doesn't scale to the modern economy. You can't keep thinking of rents in terms of bushels of corn, because all that disappeared two centuries ago.
The whole of Georgist theory is an attempt to hammer the square peg of the modern economy into the round hole of a limited, antiquated theory which only had a narrow application to a specific social milieu. It's like trying to explain black holes with Newtonian mechanics. It won't work, because the theory is outside its explanatory domain.
Ian B: "You assess the rental value of land, then tax it as if rented. You are taxing its potential rental. There is a tax on potential trades in your philosophy. That is what Georgism is."
No it isn't. If anything, it is taxing the right of exclusive use of a location based on the value of that exclusive right.
We already have resource taxes on the electromagnetic spectrum, oil drilling licences, etc. I don't think anybody could reasonably claim they are based on potential rentals and exactly the same applies to location right taxes.
"The whole of Georgist theory is an attempt to hammer the square peg of the modern economy into the round hole of a limited, antiquated theory which only had a narrow application to a specific social milieu."
Nonsense. It is a theory applied fairly widely and successfully in the modern economy, as in the examples above.
No it isn't. If anything, it is taxing the right of exclusive use of a location based on the value of that exclusive right.
That assessed value being the rental value.
Nonsense. It is a theory applied fairly widely and successfully in the modern economy, as in the examples above.
None of which are based on an appeal to Ricardian economics or Georgist theory or any other ideoligical basis. They are just based on the principle of taxing everything that moves, and everything that doesn't applied by modern governments, not the application of some particular Georgist (or other) theory.
Ian B: "That assessed value being the rental value."
Of course it's the rental value.
Generally when I pay to use something for a given period of time, I would describe what I pay as its rental value. What would you describe it as?
...and the point is, for the umpteenth time, that the LVT is a tax on the land's potential rental value, regardless of whether it is actually rented.
So to praesis the last few comments, we have-
Me: "[It is] taxing its potential rental value".
You: No it isn't. If anything, it's taxing its potential rental value.
Ian B: "...and the point is, for the umpteenth time, that the LVT is a tax on the land's potential rental value, regardless of whether it is actually rented."
No, it is a tax on the actual benefit enjoyed by the title holder.
So to praesis the last few comments, we have-
Me: "[It is] taxing its potential rental value".
You: No it isn't. If anything, it's taxing its potential rental value."
For some reason, you seem to have become confused into thinking that LVT is a tax on anybody who might potentially hold the title to the land. It isn't. It is a tax on the person who actually holds the title.
No, it is a tax on the actual benefit enjoyed by the title holder.
There is no actual financial benefit to a non-rentier, so presumably you instead are taxing some notional pleasure in owning something. So, anything I gain a benefit from owning can be taxed? Like, I gain a benefit of pleasure from my cat, so that makes it fine to tax it?
The point is, you are taxing financially something which is not financial, if I understand you correctly.
For some reason, you seem to have become confused into thinking that LVT is a tax on anybody who might potentially hold the title to the land. It isn't. It is a tax on the person who actually holds the title.
Not at all. If you think that you have misunderstood me. It is a tax on landowners merely for owning land, regardless of any financial benefit. As I keep saying, you're taxing rent regardless of whether any rent is collected for the land.
Ian B, as Paul and I have tried to explain, the tax would be on the value of the state protecting your right to exclusive possession of any particular site.
How do we measure this value? Well, it must be, by definition, roughly the same as the rental value of the site, i.e. the rental value of the whole building minus rental value of the bricks and mortar.
You then say that we are trying to tax potential rent. I suppose you could argue that, but so what?
As I have said before, this is how privately collected taxes (mortgage repayments or rent) work - seller and buyer or landlord and tenant agree a price that the occupant has to pay monthly in advance for the foreseeable future. So why is so terrible for publicly collected taxes to be done on a similar basis?
As I explained before, LVT is best seen as a tax on consumption. VAT is often misdescribed as a tax on consumption, so let's go with that for now.
So three people pay for a cinema ticket and pay the VAT on top. One person may enjoy the film, another other may hate it and another may leave half way through. Would you say that the second and third persons are entitled to a partial VAT refund because otherwise they are being taxed on 'potential' enjoyment?
Ian B, you're resorting to lies again when you describe Georgism as "... based on the principle of taxing everything that moves"
Nope. Georgism is about taxing things that DON'T move (like land, radio spectrum, oil licences, airport landing slots etc). So there.
This seems to me to be a case of two different principles, with Mark advocating "pay as you go" (the state continually provides you with certain services, so you must continually pay for them) and Ian B advocating a more Socialist "from each according to his abilities" (the state provides the services to everyone, but payment is to be based on the ability to pay).
I don't agree with Ian B, because a every pound paid in an asset tax is a pound saved in income, profit or turnover tax. The fact that the same asset is taxed year after year is irrelevant, it's still the same pound. Besides, everyone has some income, even if that income is provided by the state.
Ian B: "If I earn £10, I might pay £2 tax on it, but then I'm done with the state. An asset tax takes the £2 every year, even though the asset isn't earning any money."
I think Bayard has addressed this point admirably (twice) - if the choice were as simple as you make out, then taxing incomes might have some merit. But that is not the choice and never will be:
The choice is between:
- Country A, where Paul Luckett, Bayard and I are in charge, where it costs you £3 to rent or buy somewhere and the state collects £2 of that (to repay the national debt or cut taxes or spend on 'good stuff' or dish out as a Citizen's Dividend), so your net income is £7, and
- Country B where Ian B is in charge, where it costs you £3 to rent or buy somewhere and you also pay £2 income tax so your net income is £5.
The landowners might vastly prefer to own land in Country B (but will merely bid up the price to a 'normal' return); but all the wealth creators will flock to Country A.
See also bankers moving from London to Switzerland to take advantage of the lower income tax rates, despite the fact that Switzerland does have a 1% property tax. PS, the streets of Switzerland are not lined with asset-rich-but-homeless pensioners, just in case you were thinking of trotting out the 'Poor Widow Bogey'.
Ian B: "There is no actual financial benefit to a non-rentier, so presumably you instead are taxing some notional pleasure in owning something."
Why do you assume it has to be a benefit which results in cash changing hands? If I rent a house, I gain no cash benefit from it, unless I sub-let. That clearly doesn't mean I'm not personally gaining a benefit from the house; in fact, it's quite the opposite, otherwise I wouldn't pay to rent it. You seem to be hypothesising an alternate universe in which, if I am not generating a cash stream from an item, it is delivering no value to me.
"So, anything I gain a benefit from owning can be taxed? Like, I gain a benefit of pleasure from my cat, so that makes it fine to tax it?"
No. We've been over this countless times.
"It is a tax on landowners merely for owning land, regardless of any financial benefit."
No, it is a tax on title holders in proportion to the value of the state granted titles. It's a bit of a side issue, but there is no such thing as a landowner in the UK, unless you're referring to the Crown.
"As I keep saying, you're taxing rent regardless of whether any rent is collected for the land."
You do keep saying it, but it doesn't make it any less incorrect.
Take for example the one thing which probably comes closest to a Georgist system in the UK - mobile phone licences which are auctioned off for a fixed period of time. You could make the same argument there and say that the amount being paid is collected regardless of whether or not the licence holder manages to generate an income stream from it. However, that fundamentally misses the point. You could just tax whatever rent the licence holder collects, leaving someone with a licence they don't use to pay nothing, but that isn't what LVT purports to do. The idea is to collect the market value of the licence (or a proportion of it) from the licence holder, not to collect a proportion of any rent they may obtain by sub-letting it.
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