Sobers is starting to ask the right questions in the comments to an earlier post:
I feel honour bound to break up this little LVT lovefest with some contrary views.
While I agree the State in effect guarantees private property ownership, I do not see that there is any necessary link between what the State does, and what it taxes. I can see no reason why the State cannot be funded by means other than LVT and still manage to enforce private property.
Well there's your answer.
A car factory funds itself by making cars. A plumber funds himself by fixing taps. Everyody does what he does best. So why doesn't 'The State' charge for the value of services it provides and in which it has a monopoly, i.e. protecting exclusive possession of land?
The State is involved in many things, should LVT fund them all? Why is it 'better' to fund the NHS from LVT than income tax or VAT?
Sobers is getting ahead of himself and is jumbling 'taxing' with 'spending'. I trust he's happy with the concept of the NHS charging patients for services, in which case why can't 'The State' charge landowners for services? Where's the big difference? Anyway, I'll deal with this point further down.
'The State' is not a thing in itself. It is merely a convenient way of people organising things. Most of us are happy to stick to the rules and we employ policemen, army and so on to protect us from those that don't. This is a mutually beneficial state of affairs and enables us to become wealthier, happier etc that if we all hand to stand guard 24/7 over 'our' land with a shotgun.
Going back to my car factory, the factory owner charges customers market rates for the cars he sells; he pays the workers market wages; and he keeps the profits for himself.
With land, it is people and the productive economy (with the government as referee or coordinator, i.e. to ensure that roads and railways and sewage works get built) which creates the value. Landowners are merely consumers of that value - so why should all the value created by 'The State' accrue to landowners (by massively undercharging them)? Remember that without people and a productive economy and a peaceful 'state', land would be worthless.
In Sobers' view, it is preferable for the car factory to provide their cars for below cost (or even free) so that all the value accrues to the lucky owners of cars (whoever they are); for the workers to be taxed on their wages (to pay for the roads, petrol and repairs for the car owners); and for the owner of the factory to go empty handed.
It is quite easy to explain why Land Value Tax is "less bad" than income tax, so by replacing income tax with LVT, we have sorted out 'the workers' (who thus pay rent on land they consume, and not rent on their own skill and efforts). The productive economy would not be affected by LVT, it would merely pay for the privilege of occupying more favourable locations (so hands back the extra income it receives from exercising that privilege and excluding competitors).
You are making the arbitrary link that the State makes private property possible, therefore the property should be taxed to fund the State, in its entirety. This makes no logical sense to me.
OK, we've dealt with the position of the 'consumers' and the 'workers' in my car/land analogy, we now have to deal with the 'owner'.
It is quite clear who owns the car factory (the entrepreneur, the shareholders etc) and in a normal world, they receive the net profits or dividends. Would these shareholder tell their sales teams to drop the prices they charge as they are happy to do without profits? Methinks not.
But who is 'the owner' of 'The State'? Surely it is all of us, whether 'land owners' or not (and most of us are, to some extent). So if each of us owns a 1/62 million share of the ownership of 'The State' and 'The State' has the power of charging for the value that we all create (either in our capacity as productive workers, law abiding citizens or as voters) why should it not do so and dish out the 'profits' as a Citizen's Dividend?
At a push I can see that perhaps land should be taxed to the extent it costs the State to run the Land Registry etc. But why should land taxes pay for education, health, defence, social security?
We've covered defence already (on which we spend tuppence ha'penny, it's the foreign wars and macho posturing that cost the big bucks).
A Citizen's Dividend is an admirable replacement for the welfare state.
Of course, the government is pretty useless at running things in which it does not have a monopoly, such as education and so on, and we'd do far better to accept that education is a merit good, and dish out a certain amount of cash as 'education vouchers' (and pay a slightly lower Citizen's Dividend) or we would go the whole hog and just pay out a full Citizen's Dividend and leave it up to people to decide for themselves (personally I prefer the former option).
The same goes for the NHS. It is up to citizens to decide, democratically, whether they would rather have a lightly lower Citizen's Dividend and for the government to provide a basic level of healthcare, or whether they would rather take a higher Citizen's Dividend and take their chances with insurance companies and competing providers (or any combination of the above, whereby we recognise that health is a merit good and subsidise it with health vouchers).
Forbidden Bible Verses — Genesis 10:21-32
2 hours ago
18 comments:
Taxing and spending are two sides of the same coin. You decide what you want to spend, and set your tax types/rates accordingly.
Your analogy of a car factory does not fit what the State does. It is more akin to a conglomerate. It has fingers in many pies. Thus I repeat, just because ONE of the State's services it supplies to its citizens is the protection of private property, it is by no means the only one. Defence, law and order, education, welfare, environmental protection, welfare provision etc etc. I see no reason why the landowner should have to provide the revenue to fund all these services.
And its no good saying 'Oh well we'll privatise the NHS and education and give everyone a Citizens Income' because NONE OF THAT IS GOING TO HAPPEN!!!!
90% of people vote for parties of the status quo, of big government, of cradle to grave State provision. You need to forget LVT and campaign for Small Government instead. If you can get agreement on that then LVT falls naturally into place.
If LVT cannot fund the State pretty much as it exists now (give or take 10%), its a dead duck. You are not so much arguing for LVT as a shrinking of the State by 80%. I would love for that to happen, and if it did I'd probably accept LVT paying for the remainder. But its not.
The 'problem' we have today is not LVT or no LVT, it Big Government. Solve that and everything else will
fall into place naturally.
Sobers: " just because ONE of the State's services it supplies to its citizens is the protection of private property, it is by no means the only one. Defence, law and order, education, welfare, environmental protection"
Hang about here. Defence, law and order, environmental protection ARE the protection of private property and not IN ADDITION TO.
The 'profit' that 'The State' makes can be used to finance education and welfare (whether by direct provision, vouchers or Citizen's Income).
"You need to forget LVT and campaign for Small Government instead."
I campaign for both. They are not mutually exclusive.
"If LVT cannot fund the State pretty much as it exists now (give or take 10%), its a dead duck."
As a matter of maths and economic logic, LVT could replace all other taxes £ for £ (it's Ricardo's Law, I have illustrated this many a time using existing and accepted statistics on net household incomes after tax and housing costs).
So you probably would be able to raise enough LVT to cover all useful government spending, which is about three-quarters of government spending.
As it happens, current taxes only raise enough to cover three-quarters of total government spending, and the other quarter is deficit financed.
So LVT ties in nicely with cutting Big Government and reducing the deficit. What's not to like?
"Your analogy of a car factory does not fit what the State does. It is more akin to a conglomerate. It has fingers in many pies. Thus I repeat, just because ONE of the State's services it supplies to its citizens is the protection of private property, it is by no means the only one."
You seem to be looking at the form rather than the substance. Take your list for example...
"Defence,"
Protection of private property
"law and order,"
Protection of private property
"education, welfare,"
Neither of which can logically be provided by *any* form of taxation at all. I'll come back to that...
"environmental protection,"
interestingly, protection of public property, with some private property protection thrown in
"welfare provision etc etc"
I'm sure we just had that one...
"I see no reason why the landowner should have to provide the revenue to fund all these services."
When it comes to things like education, healthcare etc. I would tend to agree with you, except that the same charge can be levelled against any other method of funding other than direct, non-subsidised user charges (which basically means running it purely as a business with no taxation used). If you say landowners shouldn't have to pay to run it, you also have to say that *no-one else* should have to pay to run it in any way, other than those who directly use it.
"90% of people vote for parties of the status quo, of big government, of cradle to grave State provision. You need to forget LVT and campaign for Small Government instead. If you can get agreement on that then LVT falls naturally into place."
I'm going to go out on a limb here and say that LVT/Small Government are totally orthogonal concepts. It's perfectly possible to be a big government LVT'er or a small government LVT'er just as much as you can be a LVT small governmenter or a non-LVT small overnmenter.
The reason I think LVT is more important than small government is that to me, big government came about from a desire to solve problems caused by previous small governments unwillingness to implement LVT. What most small governmenters don't appreciate is that if all the government does is protect private property *without* charging for that priviledge and then gets out of the way, then those who have more such property gain a greater benefit from that protection and will naturally use it to their advantage to maintain that benefit for themselves. If there's no cost to hoarding the land they will do so and let government do the hard work of protecting the claim for them *for free*, at the cost of everyone else.
Small government ended because it didn't work. We ended up with big government because people didn't realise what the solution was. We threw out the baby with the bathwater.
"I see no reason why the landowner should have to provide the revenue to fund all these services."
Who is "the landowner"? As far as I can see he is either a landlord, an owner occupier or a speculator. OOs generally don't own much land, unless they are farmers, but most of the land owned by farmers is not worth very much and there is a good case for making it not subject to LVT. Nearly all other OOs will be homeowners who currently pay Council Tax and a good deal of income tax. As MW has pointed out, most of them will be better off and why should they care how their tax is paid?
Then you have the landlords, agricultural, residential and commercial. They are all already making money out of their land, so LVT is exactly the same as income tax, except that if they make more money from the same amount of land, they pay the same amount of tax. However, they will end up paying more in tax overall, but, on the other hand, they tend to be richer than average. Also, with landlords, we do not get the situation of having a tax with no income to pay it.
Finally. we have speculators - well, f**k them.
F, good points. But LVT tends to set an upper limit to the amount of tax that can be collected and spent or redistributed
B, good list.
Agreed on farmland (provided we end farming subsidies and continue subjecting farm rents to income tax, about 50% seems fair to me).
You missed off pensioners who would have to be exempted (for political reasons).
And I'm not sure commercial landlords would be worse off. They currently pay Business Rates and corporation tax/income tax; and their potential rent is depressed by the amount of tax that their tenants have to pay.
Under my cunning plan, the total tax generated at any place of business would be a lot less than it is now, so 'the pot' would be a lot bigger. Quite how the extra in the pot is shared up between business owners, workers and landlord is an unknown.
"Hang about here. Defence, law and order, environmental protection ARE the protection of private property and not IN ADDITION TO."
Technically you can add education in there too. If all the "dumb" chavs (many of whom are not dumb at all) were well educated, crime would be lower. Crime in general is against one's person or property!! I rest my case.
SW, indeed. Education is a 'merit good'.
Although it primarily benefits the person getting it, these benefits spill out across society as a whole, so it helps the economy (which helps land values) and helps reduce crime (which helps land values).
Which is why, in my paternalistic way, I would always earmark some tax revenues for education or education vouchers. Even Adam Smith supported the idea of state-funded education, so there.
"LVT tends to set an upper limit to the amount of tax that can be collected and spent or redistributed"
Agreed. I have a theory that the Laffer Curve starts at full market rent.
Agreed that LVT sets an upper limit to the amount of tax that can be collected. However it's a pretty high limit. The Henry George theorem basically implies that it's about the same as the maximum amount that you can raise by our current mish-mash of taxes.
You also have to bear in mind that the increase in GDP which would result from single tax LVT's increased efficiency relative to the current taxation setup would mean that the economy could bear even higher taxes than our current one can. So if you wanted to run a full welfare state with even more generous provisions (and waste) than our current one, a high rate LVT is probably up to the task.
Not that I'm recommending it. MW's 8% rate plus Citizen's Dividend sounds good enough for me.
D, ta for back up. That's what I assume as well, but have little way of proving it.
Mark, thinking about the LVT on farmland issue, I reckon the fairest way is to have a "Farmer's Allowance" for the first, say, 300 acres being zero rated for LVT (remember Farmer Giles will be paying LVT on the little bit of residential land his house occupies). That way the small farmers, who mostly struggle and work long hours for very little return, would not be clobbered, whereas the big landowners, to whom 300 acres is a tiny percentage of their landholding, would pay LVT like every other landlord. 300 acres may be a little stingy, I don't know what is viable these days for dairy or cereal production.
B, average land per agricultural worker is 100 acres. Average farm size is about 100 acres which doesn't make sense, of course, so heck knows what the real figure is. Maybe there isn't one.
But as I've said, LVT on farm land is a red herring. Scrap the ag subsidies and let them have a CI instead is far more important
That link gives 57 Ha as the average size, which is 140 acres, which makes a bit more sense. After reading that I'd put the Farmer's allowance at 100 Ha (247 acres), which would cut out all but the richest 14%. But yes, scrap the subsidies and give the farmers the CI instead.
B, instinctively, I like that idea, with three caveats:
1. My main reasons for being indifferent about LVT on farm land is because even full LVT wouldn't raise much money, maybe £2 billion or something (so exempting three quarters of land means you'd only raise £0.5 billion), AND because ag land values have a lot to do with the physical land itself (which involves a lot of input by the farmer) and not just the location.
2. As a tax advisor, I can see a lot of loopholes. What if husband, wife and two sons have a 950 acre farm - would they be allowed to split it into 4 separate exempt lots, or does that count as one farm, of which 603 acres would be taxable?
3. I'm not a Merrie Olde Englande type - it may well be the case that large farms with large fields are simply more productive than small farms, and so they shouldn't be discriminated against. I doubt it very much - the best way to get more out of land is probably to break it up into smaller bits and use more manpower, more greenhouses, more polytunnels - but who knows?
Thinking about this logically: it costs £x to protect private property rights, etc. There are ?62m people in the country, so why not £x/62m tax each. However, some poeple have more than others so a fairer way would be to tax based on amount of property owned, or the amount of land occupied. Sounds like LVT to me. Income tax, NI, etc all seem to be extras to pay for politicians' vanity projects to me.
You could go for a wealth tax but I take the point that most possesions aren't productive. You could also only tax land being used to generate income, but that would be complicated and just up the tax on those parts of land.
EKTWP, yup, that is like having a ten per cent LVT or something, seeing as the value generated by 'protecting land titles' is about ten times as much as the cost.
Feel free to scrap publicly collected income tax, but what you'll find is that landlords will just collect an equivalent amount privately as extra rent.
They already do this, as house prices across the UK are largely a multiple of incomes in each area.
So if you want to earn an extra £10,000 by moving to a higher wage area, you'll find that you pay an extra £5,000 income tax/NIC/VAT and an extra £5,000 in rent.
If you get rid of that £5,000 income tax/NIC/VAT (good riddance) our migrant worker would have to pay by getting a better paid job in a better paid area, then that extra £5,000 rent will become an extra £10,000 rent.
I fail to see why it is that much better for landowners to collect that income tax, and possibly its worse.
Will they then not have to pay more LVT? I thought that was half the point?
EKTWP, yup. Readily available statistics show that house prices are effectively the same as an additional 70% inome tax (assuming house price to earnings ratio about five). This is the ultimate stealth tax which the Home-Owner-Ists never mention, and brings our marginal rate close to 100%.
So LVT in the higher wage area would be £5,000 higher than in the lower wage area. All this means is that the tax would be openly and publicly collected and not stealthily and privately collected.
How we spend it is another debate (once we have completey phased out income tax etc).
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