Killer arguments against LVT, not (38, 39)

Just to set the scene, people like Henry George realised that not all 'taxes' are collected by the government. My view is that "All money that changes hands purely because of existing laws (as distinct from free exchange) counts as 'tax'. " (and eighty per cent of respondents to an earlier Fun Online Poll agreed).

As a simple example of the similarity between publicly and privately collected taxes, consider this: it makes little difference to the outside world whether:

a) The rate of VAT on taxi journeys is increased (prices will go up; quantity demanded will go down; and some taxi drivers will be put out of work), or

b) Whether the local council restricts the number of taxi driver permits (quantity supplied goes down; people who would otherwise have become taxi drivers can't find work; and taxi drivers with a permit can charge higher prices). The permit system doesn't even benefit future taxi divers; before they embark on their taxi-driving career, they have to buy a permit on the grey market, so they have to hand over a large part of their future super-profits on Day One and then spend the next few years earning it back.

The former, VAT, is a publicly collected tax; the latter (restriction on the number of permits) is a privately collected tax, aka 'super-profits' aka 'rent'. Full post with pretty supply-demand curves here.

While I oppose publicly collected taxes on incomes and production, I have to break ranks with the Home-Owner-Ists and Faux Libertarians because I also oppose privately collected taxes - the most significant privately collected tax being the returns to land ownership. So, even more left field, I simultaneously support the view that 'Private land ownership is theft'* and the view that 'Taxation of incomes is state-sanctioned theft'. I square the circle quite easily by suggesting we make the punishment fit the crime - scrap income tax (and VAT etc); tax land values instead; and dish out the proceeds as a Citizen's Dividend (so by definition, the average household in an average house would be neither a net taxpayer nor a net claimant).

So to every argument against LVT there are two opposite counter-arguments. To illustrate this, let's look at two comments which stalwart LVT-opponent IanB left on a recent post:

You are forcing them to pay a rent to the State, assessed by the State, under threat of being dispossessed. What the state assigned tenant thinks the land is worth doesn't come into it. You (as the State) set the rent arbitrarily, and if they can't afford it they get kicked out.

Notwithstanding that he overlooks the Citizen's Dividend bit, which would cover the rent on most houses (i.e. you are indifferent if LVT goes up because your CD will go up in line), I batted this back as follows:

Let's look at land 'ownership' first: "You are forcing [tenants or mortgagees] to pay [rent of mortgage repayments] to the [landlord or the bank], assessed by [the landlord or the bank], under threat of being dispossessed. What the [tenant or mortgagee] thinks the land is worth doesn't come into it [but at least he can move out]. You [as the landlord or bank] set [the rent or mortgage repayments] rent arbitrarily, and if they can't afford it they get kicked out."

Now let's look at income tax: "You are forcing [wealth creators] to pay [a large proportion of the wealth they create] to the State, assessed by the State, under threat of being dispossessed. What the [wealth creator mutually agrees with his customers or employer] doesn't come into it. You (as the State) set the [income tax rate] arbitrarily, and if they can't afford it they get [put out of business or made unemployed]."

IanB followed up with this:

The issue is why you demand that the State extract a rent from every square foot of land in the nation, in perpetuity.

To which I would have responded (had I been able to summon the energy):

Let's look at land 'ownership' first: "The issue is why you demand that [private landowners] extract a rent from every square foot of land in the nation, in perpetuity [without compensating society in general]"

Now let's look at income tax: "The issue is why you demand that the State extract a [tax] from every [penny of earned income] in the nation, in perpetuity."

So that's two more supposedly 'killer arguments against LVT' dealt with, no doubt the next one will be along soon (perhaps you can be lucky number 40! Maybe play the Old Widow Bogey again, or something?).

I tell you, four years ago, I stumbled across LVT and considered it more an intellectual curiosity than anything else (a tax which had positive knock-on effects), and I wasn't really too fussed; what has really steeled my resolve is that none of the hundreds of arguments I have heard against it stack up in the slightest - especially if you compare those arguments with arguments against private land ownership and/or arguments against taxation of incomes and production.

* For clarity: I have nothing against people having state-protected exclusive possession of land; society would break down without it (I do happen to live in the real world, y'know). But those who benefit from the state-imposed restrictions on others ought to compensate those others. The bitter irony is that the main reason we have private landownership in this country is because of the profligacy of the state in centuries gone by, different topic.