Killer arguments against LVT, not (47)

Sobers steps up the oche. I've left his comments in italics and interleaved my answers to save scrolling:

A free market is willing buyer/willing seller.
Good start...

If I am forced to sell because I have a large LVT bill I cannot pay I am not a true willing seller. I do not wish to sell but have to for financial reasons beyond my control.
Yup. As at present, people with the highest incomes will get to live in the nicest houses; people who can generate the highest profits by trading from a particular location will bid the highest rents and get the tenancy.

Just for fun, let's rephrase that in terms of the current UK property market: If I am a young newly-wed forced to rent a small flat rather than buy a semi-detached house because I can't afford to take on a ludicrous mortgage I cannot pay, I am not a true willing tenant. I do not wish to rent but have to for financial reasons beyond my control.

Land is a limited resource, it has to be rationed somehow, and price rationing is the best form of rationing. Wilfully and maliciously restricting the quantity of available housing is a far more brutal use of force/rationing than simple price rationing.

You wish to ascribe to some bureaucrat the power to decree that 'this land/property could be used in this way, and as such is to be taxed as if it were being so used'.
Unlike our current NIMBY command and control economy, where land usage is dictated to the n-th degree? And where potential purchasers or tenants have to pay top dollar to win the right to live at or trade from one of those allotted spots? In a Georgist system, there would be no bureaucrats to decide anything of the sort.

That is not compatible with the rights of property owners in my view. A massive part of your self determination has been taken away from you by the State (the collective).
Again, that's a useful description of the NIMBY command and control system. And since when are 'free markets' derided as 'the collective'?

Someone somewhere will always have a way of making more money than you from a piece of land or property.
Well, no they won't, by definition. Once a bit of land is being put to a use which maximises the personal enjoyment of its occupant (use as a home) or its income generating potential (use as a business) then that is the end of that.

So for whatever usage you decide to put your land/property the LVT will almost always be levied at a rate above that of the income generated.
Nope. The LVT bill would always be equal to or slightly less than value of the maximum enjoyment/income potential of that bit of land. Or else nobody would want to occupy it. In any event, how does this compare unfavourably with suckering people in to vastly overpaying for land and buildings via a deliberately stoked property price bubble? The use value may turn out to be less than you think, but we are stuck with the debts (aka 'financial crisis', which inevitably follows a property price bubble).

LVT decides that cash today is more important than anything else. Whatever you can to today or tomorrow to generate the most cash is what you have to do, because that's what you will be taxed upon. It allows nothing for long sightedness, and forward planning for things that 'the markets' do not foresee.
Simply not true. At least if you misjudge what income you can generate (or how much personal enjoyment you would derive from using that land as your home), your capital loss from a longer term business venture which fails will be minimal and you would not be saddled with a massive bank debt.

I'll give you an example. A friend of mine bought an old run down pub in a small market town in Wales 20 years ago. The most economically efficient usage would probably have been to close it, turn it into flats, or a single dwelling, and sell it, or rent it out.
Yes, this is largely because under current rules, business premises are liable to something akin to LVT (called Business Rates) but housing is much more lightly taxed. So all things being equal residential land sells for a lot more than commercial land.

And let's take a step back here - from the point of view of a pub landlord, what was the biggest single infringement of private property rights in recent years? Answer - the smoking ban. When have I ever spoken up in favour of that?

So that's what she would have been taxed on.
Nope. Why distinguish between uses? LVT would be the same for commercial or residential. There would be no such distortion.

But she chose to run it, slowly turning it into a restaurant/bar, and opening a shop on part of the premises as well. Her business now is very successful, generates more profit than the rent from a few flats would, and is undoubtedly worth more to the ambiance of the town than more flats.
Hooray. So surrounding houses sell for more because they are in an area with a better 'ambiance'. So Sobers' friend took the risks, did the hard work, and who benefits?

Everyone told her she was mad, but she had the vision to create something different, something that 'the markets' were not providing.
Ah, the markets! But Sobers' friend and her customers are 'the markets'. She spotted a gap in the market and filled it.

If she had had to pay LVT based on the potential capital value, rather than income tax (which she paid virtually none to start with as the business took time to get off the ground) it would never have happened. And the area and its inhabitants would be the worse off for it.
Yeah, but the price she paid for those business premises was depressed by the future Business Rates liability. Were we to scrap Business Rates and simply hike corporation tax or VAT by 10%, then would her total financial commitment in terms of mortgage repayments + Business Rates + income tax have been much different?

Further, we'd probably find that Sobers' friend is paying several times as much in VAT or Employer's NIC as she is in income tax, and that she'd have had to pay these taxes even in the period when she was not making a profit. Those are the real killer taxes - the ones that have to be met out of the owner's capital - not income tax in itself (which is merely a tax on the return to capital).

LVT will always favour the quick fix, the easy option. Anything that takes time, is hard and difficult, will always be trumped by those that say 'I can make more money here than you can'
What 'quick fix'? In the instant case, the 'quick fix' would have been to get 'change of use' from (heavily taxed) business premises to lightly taxed residential use.

Sobers' friend had a plan, it worked, great. Most businesses grow and evolve gradually. Power companies budget decades ahead before building a power station or similar. It took them decades to get the Channel Tunnel up and running. And so on. Some place have been pubs for centuries - and what Sobers' friend did was turn an old pub into a pub/restaurant.

The price she was prepared to pay (capital purchase price + future Business Rates) was less than her expected future income (net of income tax). If Business Rates or LVT were doubled and ten per cent knocked off income tax or VAT, then her calculation would have been the same and the upfront capital cost would have adjusted down accordingly.

So there we have it. Under a Georgist system, the rewards and hence incentives for success are greater (no income tax or VAT); the 'punishment' for failure is lower (you don't end up saddled with a huge great debt to the bank for the premium you paid over and above the bricks and mortar value) and the rewards to doing nothing (merely owning land) are nil.

What's not to like?