Killer arguments against LVT, not (51)

Martin Wolf in yesterday's FT railed against the ruinous Home-Owner-Ist land price boom-bust cycle, and concluded that it would be a good idea to reduce taxes on "effort and ingenuity and foresight" and raise more taxes from land values instead. But then he chickens out a bit, and says "Socialising the full rental value of land would destroy the financial system and the wealth of a large part of the public. That is obviously [politically] impossible."

No it wouldn't and no it isn't.

1. Over a lifetime, an average couple will have been in paid employment for sixty or seventy years between them, which is for most people their only source of wealth. At the end, the average couple ends up with an average house. Even if introducing full Land Value Tax caused house prices to halve, whether they end up with a house worth three times or six times one year's salary makes precious little difference over a lifetime.

2. It makes even less difference if the average couple had to take out a smaller mortgage to buy it in the first place; and while their children might inherit less, their children in turn will have saved a larger amount by themselves having to take out a smaller mortgage and saving half as much again in interest payments.

3. Houses are wealth; house prices are not wealth. The intrinsic value of land and buildings, i.e. their rental value, would not change - in fact, if all taxes on "effort, ingenuity and foresight" were scrapped, their rental value would go up. Conversely, with no taxes on income etc, the amount of wealth created would go up, the UK would become a tax haven for all sorts of businesses and people and rental values would go up even more etc.

4. As to the financial system, what about people who rent their homes and businesses who rent their premises? Are they destroying the financial system? Nope. Would there still be a financial system if everybody was a tenant of the land they occupy (but still owned the bricks and mortar on it outright)? Yes, of course - it's just that money would be lent to finance productive activities and not land price speculation.

5. It also strikes me that under Home-Owner-Ism, the financial system has done it reckless best to destroy itself, and that's despite all the regulations and subsidies and guarantees offered by governments around the world.