Killer arguments against LVT, not (66)

Same thread as before, comment 11:

Howard D responded to this earlier observation "A person living in a property worth £100,000 pays around 40% of the tax paid by someone owning a property worth £1m. This is palpably unjust." as follows:

Suppose there are four earners in that £100,000 house, all generating masses of rubbish (1), using the roads heavily (2) and placing a generally high demand on local services? (3)

Then suppose there are two independent-minded (4) retired people in the £1m house (which doesn't have to be a palace these days) (5) whose call on council services amounts to little more than emptying their kitchen bin once a fortnight (6).

Now tell me what is "palpably unjust" about charging the latter less.(7)

OK, in the real world, we'd have to give pensioners massive exemptions or discounts or deferment from LVT because they are quite ruthless when it comes to exercising their votes, but glossing over that, what sort of a cretin is this man?

1) The cost of refuse collection is about one per cent of the price paid for new goods, which include 17.5% VAT. So people who 'generate masses of rubbish' have already paid the cost of having it taken away fifteen times over.

2) The cost of road maintenance etc is only about a quarter of the total fuel duty, VAT and road tax collected from motorists, so the four people have paid that cost four times over.

3) Which local services? I hate that expression. The schools? And why would the 'independent minded pensioners' mind one way or another - there are a fixed number of children, wherever they go to school? The police, perhaps? Even if the 'four earners' are a bit on the rowdy side and keep the local police busy, for whose benefit are the police? Are the pensioners not benefitting from the police?

Wasn't there a bit of a kerfuffle about long term care recently, aren't the pensioners crying out for free long term care? Would they rather shut the local school and spend the education budget on long term care instead? So that when today's working age population have retired, there'll only be a poorly educated next generation to support them? Who pays the piper calls the tune, say I.

And what about privately provided local services? The shops and the hairdressers and so on? What if all the young earners moved abroad and only pensioners were left?

4) Irrelevant. The simple fact that they are retired means that they are far from independent. Even if they aren't just getting a taxpayer funded state pension (and why would they care whether their pension is funded out of income tax or Land Value Tax?) and have invested in shares or something, they still need those younger earners to do the work to generate the profits to pay the dividends (sure, this is by mutual agreement and to mutual benefit, but no man is an island and all that).

5) Yes it does. Any home costing over £320,000 is in the top decile by value. And somebody who owns a home worth a million that isn't a palace must be a bit of an idiot, they could sell it and by somewhere pretty palatial elsewhere.

6) See point (1).

Further, Henry D conveniently overlooks the biggest service that any landowner receives from the state - the protection of exclusive possession, without which land would be worthless (and to be fair, without which nothing would function). This is of enormous value, and is a 'natural tax' that is generated by 'the state' or by 'society in general' and it will always be collected- if 'the state' doesn't charge for this most valuable service in order to return to 'society in general' the value it creates, it will be collected or retained by landowners.

And if society can't fund itself from a natural tax, it has to resort to what is effectively theft, i.e. income tax, VAT, corporation tax and so on, which leads to a downward spiral etc etc.

7) I hope you notice the way that Henry D countered a perfectly fair observation (that Council Tax is very regressive to property values) by playing the Poor Widow Bogey? Why do so many people live in a parallel universe where all pensioners have scrimped and saved all their lives but mysteriously have nothing to show for it apart from a £1m+ house, which they paid 2'6 for several decades ago?

According to HMRC Table 16.1, only one per cent of properties sell for £1m or more, i.e. we are talking about less than a hundred thousand pensioner households who live in £1m+ mansions. We may well have to introduce some exemptions or something for them, but you can't base the tax system of a modern economy on the personal circumstances of a quarter of a per cent of the population and then extrapolate from that. Why not design a decent tax system first and then work out whether there are certain people or properties that should be exempt?

I wonder, what would Henry D's views be if we turned the factual situation round and the pensioner couple were living in the £100,000 house and the four earners in the £1m house? Would he then consider it to be 'palpably unfair' for the owners of the house to be paying ten times as much in tax? Or if there were two sets of pensioner couples, one living in a £100,000 house and one in a £1m house? Let's compare like-with-like here.

And, bearing in mind that all tax and welfare systems are to a large extent arbitrary or political, what does he think would happen if we had neither the state pension nor public sector pensions (about two thirds of pensions paid out - all funded by the four younger earners he so disparages)? Wouldn't the 'independently minded pensioner couple' in their modest £1m home have traded down into the £100,000 house (which by his own admission is perfectly big enough for four active earners) years ago in order to free up capital for retirement?