1. Using the Big Bath approach (see points 2 to 4 of my post of yesterday), we establish that with a single tax/LVT system, the rate for developed, non-agricultural land in Swindon would be about £24/sq yard/year.
2. We could of course just leave it at that. There is an automatic reduction for people who live in a block of small flats (for whom the tax bill would be about £3,000 - £4,000 a year) and an automatic increase for people in detached houses with huge gardens, for whom the tax would be over £20,000 a year, so it would be inherently 'progressive'. Don't forget to knock off people's Citizen's Income from that, which would be about £3,500 for a single adult, and £11,000 for Mum, Dad and two kids.
3. Or we could sub-divide Swindon into postcode sectors and work out relative values depending on the relative average selling values of semi-detached houses in the last two or three years (prices taken from houseprices.co.uk) and then pro-rate the £24 up or down accordingly. The results are shown in the second column from the right in the table below, and range from £12 to £46.
4. This approach is probably going too far - it would be 'hyper progressive'. The chances are that the houses in the cheaper postcode sectors (in particular SN2 5.., which appears to be ex-council houses if Google Maps is to be believed) have smaller gardens, so to apply a lower rate to a lower tax base would give them a double-discount. Conversely, houses in the more expensive areas will have bigger gardens, so to apply a higher rate to a larger tax base would be bordering on punitive.
5. I can't be bothered working out how big plot sizes are, but without further ado, we can average out the Big Bath figure of £24 and the figure from the more detailed workings (between £12 and £46) to give us rates for £18 in the cheapest postcode sector and £35 in the most expensive postcode sector (the outlying villages of Cricklade, Ashton Keynes and Latton etc).
6. Remember that this rate is set to give the wiggle room of 20%, i.e. whoever is in charge of working out the values, setting the rate and collecting the tax can exempt about a fifth of land and buildings - whether he or she uses that wiggle room to exempt pensioners, churches, people with big gardens or any combination of the three is up to him or her. Click to enlarge: 
PS, it took me all of two hours to do to do 29 postcode sectors, once I had the spreadsheet set up (there are about 10,000 postcode sectors in the whole of the UK, so doing the whole of the UK would take me six months, full time). HM Land Registry could no doubt do the whole job in a few weeks.
PPS, the birthday party was snowed off so the few hardy survivors gathered at our house instead.
Christmas Day: readings for Year C
9 hours ago
23 comments:
It's going well so far. All looks very practical for towns.
Now... what about rural places?
500,000 in the country gets you a house plus a load of land -- a paddock or something for your stupid horses, plus a house.
500,000 in London gets you a standard sized house, so the LVT per square yard would be considerably lower in London than in $THE_COUNTRY.
It wouldn't be unusual to have land measured in acres... say 2 acres. Not a farm so agricultural concessions wouldn't apply (or would they)?
2 acres = 9680 sq yards, say 10,000
10,000 * 24 = £240,000 a year LVT
That seems unpractically large. To be able to afford £240k a year, you'd expect them to be earning £500k a year. There are plenty of plots that size round where I live, and while they're probably relatively rich, I'd be surprised if they could afford £240k a year.
Or would the LVT per square yard be significantly lower than the national average for rural areas by nature of your method of calculation (average of (sale price / area))?
500,000 in London gets you a standard sized house, so the LVT per square yard would be considerably lower in London than in $THE_COUNTRY.
Please ignore that sentence. It doesn't fit with your method of calculation of LVT at all.
I have to say it doesn't look good for those that live in the country. I've just measured my garden(its not that big) and multiplying by the relevant rate gives me £24K per year. Less my citizens income of £3.5K, and council tax of £1K, leaves me down about £19K.
Now given my income I'd probably be happy with that. I'd save more than that in income tax. But there's lots of people who live around here that wouldn't earn anything like what I do, and have bigger gardens, they couldn't afford anything like that level of LVT.
And given the average based system you have, there's no way you can get your LVT reduced until enough people in the postcode have sold up at lower prices. This system would overnight reduce peoples house prices by large amounts. If they had a mortgage they could be bankrupted straight away. But even if they could still pay the mortgage, they couldn't get the LVT reduced, even though the house is now worth a third or a half what they paid for it, because of the average based system.
Under your system pretty much everyone in rural areas would be screwed. Other than the mega wealthy (to be paying £40K in tax you need to be earning well north of £100K) no one could afford to live there.
Anyone who lives alone and has no kids is also penalised. Great, another way the single person has to subsidise the breeders!
OP, these grand houses in the countryside are a non-issue. We know that a grand house with two acres of land is currently worth (say) £1 million, expected tax bill £80,000 (say).
Whether we express that as 10,000 yards x £8 per square yard, or restrict the definition of garden to a maximum area of 1,000 sq yards surrounding the house, impose a rate of £80 on that and exempt the other 9,000 sq yards as quasi-agricultural land is neither here nor.
S: "If they had a mortgage they could be bankrupted straight away."
Nope. If you have a £200,000 mortgage, you must be earning £50,000 or so a year. Marginal effective tax rate on income in the UK is about 50%, so our hero is paying currently paying/bearing £25,000 income tax, NI, VAT etc and can afford the mortgage. By the time this is phased in, he's paying £25,000 LVT and no income tax, NI, VAT etc. Big deal.
"Under your system pretty much everyone in rural areas would be screwed."
Nope, see my reply to OP above.
"Other than the mega wealthy (to be paying £40K in tax you need to be earning well north of £100K) no one could afford to live there."
I might as well say "Other than the mega wealthy, no one could afford to buy a new Mercedes every three years." Mercedes still sell cars, don't they? In any event, if young people with big mortgages can afford it, why can't older people (with presumably no mortgage) afford it (assuming we just exempt pensioners and have done with it? And seeing as they probably pay 2'6 for their house forty years ago, there's no issue with 'negative equity', is there?
"Anyone who lives alone and has no kids is also penalised. Great, another way the single person has to subsidise the breeders!"
We were all young once - even single people - it's all swings and roundabouts. In any event, my suggested CI of £1,750 per child per year is far less than it costs (in direct costs and loss of mother's earnings) to raise a child.
If you earn 50K/pa as a single person you pay approx £15K/pa in tax. Not £25K. If its a household income of £50 even less than that if its 2 people earning £25K. As for VAT, yes some prices would come down, but I bet that most businesses would try to keep the prices up to increase profits (as they would no longer be taxed either). There would be a long term downward pressure on prices, but not immediately. In year 1 everyone would have to pay full whack LVT, but not necessarily get the benefit of of lower VAT.
And I don't get why you say a £1m house would have an 'expected' LVT of £80K. Surely there is no expected value, as you're not taxing the market price, just the square footage? If my small garden equals a LVT bill of £25K, I know of plenty of houses with bigger gardens than mine that would end up paying nearly that much, and they aren't worth anywhere near £1m.
And it wouldn't just be 'grand houses' in the country that would be paying £50K+. Take the SN8 area (which is actually in Oxfordshire I think). According to your figures the average house price is £230K. But there's a SD of £55K. So there's plenty of houses in the 175-200K range. Not 'Grand houses' by any means. But with a reasonable sized plot, say 20 yards x 60 yards, 1200 sq yards, at the top rate of £46/sq yd thats £55K pa. At the smoothed rate of £35/sq yd, its still £42K pa. Do you really think that people who live in 175-200K houses can afford LVT rates of £40-60K?
The whole things is mad. If you exempt pensioners, then you'll just get geriatric enclaves, where no-one under the age of retirement can afford to live, unless they've won the lottery.
This is why LVT is wrong. You're effectively taxing capital, at rates that are fine IF you have the income to match that capital. If you don't (ie you have an expensive house, but an an average, (or even above average) income) you're screwed. There's no way you can afford such rates of LVT. You'd have to sell up asap.
And who could afford to buy such houses if they were all on the market at once? Even if you had the capital (and they'd be cheap) you still need the income to pay the LVT. So no-one could afford them. We all know only 10-15% of people pay higher rate tax (c. £45K). so the number of people who can afford to pay tens of thousands in LVT as well as their mortgage is severely limited.
S: "If you earn 50K/pa as a single person you pay approx £15K/pa in tax."
???
You pay or bear or generate the following taxes:
a. Income Tax - 20% x £45,000 = £9,000, plus about £1,000 higher rate
b. NIC 11% Employee's + 12.8% Employer's = 23.8% x £44,000 = £10,500
c. Council Tax + TV licence fee £1,500
d. VAT about £3,000
Total £25,000.
------------------
"Even if you had the capital (and they'd be cheap) you still need the income to pay the LVT. So no-one could afford them."
???
You know all about Business Rates. That's pretty close to LVT as I envisage. Somehow selling prices and rents adjust up or down to accommodate and most commercial premises are occupied.
And if it is true that houses in Swindon cost £175,000 and the plots are 1,200 sq yards, clearly the LVT rate would be in the order of £12 per square yard. I made it clear that I did not bother adjusting for plot sizes.
"If you exempt pensioners, then you'll just get geriatric enclaves, where no-one under the age of retirement can afford to live, unless they've won the lottery."
This is a political thing - you were the one who suggested exempting 'rural communities', to which I might retort: "If you exempt 'rural communities', then you'll just get city slicker enclaves, where no-one who hasn't retired from the City with a massive bonus can afford to live, unless they've won the lottery."
S, it's not even clear to me what you are trying to prove, it's always helpful to back up arguments with facts:
1. The post did not refer to the postcode district SN8, it referred to the postcode districts SN1 to SN6. Postcode sector SN6 8.. is a subdivision of the postcode district SN6, which is quite different to the postcode district SN8.
2. You can't get much more than a three bed terrace for £175,000 or less in postcode district SN6. I doubt whether the largest plot of those houses listed for sale is more than 500 sq yards.
500 x £35 = £17,500. Knock off £3,500 Citizen's Income = £14,000 tax bill.
If you have bought a house costing £175,000 with a ten per cent deposit, with a mortgage of 3.5 times salary, you are earning £45,000, total current tax bill about £20,000.
£14,000 is less than £20,000. What's the problem?
3. In the completely different postcode district SN8 (which is not part of Swindon), you don't get much for £175,000 os less. Nothing with a plot size of anywhere near 1,200 sq yards and that's for sure!!
My bad - I meant SN6 8xx not SN8.
Put an annual salary of £50K in here:
http://www.uktaxcalculators.co.uk/custom-tax-calculator.php
And you get tax payable of just over £14K in 2010/11, and a bit more in 2011/12.
I don't regard employers national insurance contributions part of the tax a person pays. Long term maybe, as employers can pay higher wages. But day 1 of LVT, no-ones getting 12.8% extra income because their employer no longer has to pay employers contributions.
Council tax of course is part of the tax paid.
VAT is as I said before - initially there would be no reduction as businesses tried to make as much money as possible under the new regime. Long term prices would fall yes, but not initially. Also a reasonable amount of stuff is currently zero rated so generates no VAT anyway.
And anyway, haven't you always argued that VAT is NOT paid by the end customer, but the business? That the market sets the price for a good and VAT is a tax on turnover, that is borne by the business, not the consumer? You can't have it both ways you know! Anyone would think you're a politician or something.
And even if you include VAT @ £3K, it still all adds up to £18.5K not £25K. If you split the £50K into 2 salaries of £25K the tax taken goes down to approx (£5750 x 2) + £1.5K council tax +£3K Vat = £16K. Without the VAT contribution those figures are even lower at £15.5K and £13K respectively.
Basically anyone who owns a house that is worth more than they could afford on their CURRENT income is screwed by LVT. They might have inherited a house, or some money, and gotten a bigger house than their income would allow. Or they might have made money in the past and invested it in a house and downsized their career. Or they were lucky and managed to buy a house in a poor area that got gentrified. Or bought a plot of land, got planning and built the house themselves. (I personally know such a man - he and his family lived in a mobile home for 15+ years while he built his house himself, on evenings and weekends - he is a builder - he's spent his a large chunk of his life building that place and now you want to tax him on it just as he's starting to wind down his working days. He could never afford the LVT on it, its a 4 bed detached on a decent sized plot. On your values its LVT would probably be in the £25K area. Less his £7K of CI he'd have to be paying £18K in tax to break even. I KNOW he's not making £50K plus!!!)
S: "On day 1 of LVT, no-ones getting 12.8% extra income because their employer no longer has to pay employers contributions."
Of course not. So phase in LVT over three years or something. If existing employers want to keep the NI savings to themselves, they'll find that their better employees bugger off and set up their own businesses. Free markets will find out the optimum way of splitting the tax saving.
VAT is indeed borne by the producer, not the consumer. So it's people who go out to work who pay VAT. It's a tax on 'value added', it's a tax on profits or wages. It's the worst tax of all. So our hero with a salary or business profits of £50,000 is adding value of £50,000, therefore (if he runs or works for a VAT-able business) is generating VAT of £8,750. So let's split the difference an call it £3,000?
And Employer's NI is the second worst tax of all. It reduces employment.
"Basically anyone who owns a house that is worth more than they could afford on their CURRENT income is screwed by LVT."
I could retort: "Basically any young person trying to start off in life who owns nothing but the clothes on their back is screwed by Home-Owner-Ism"
So what? If you want to stick up for the Home-Owner-Ist coalition, feel free to do so. I'd prefer to stick up for the people who go out to work an generate wealth etc.
"On your values its LVT would probably be in the £25K area. Less his £7K of CI he'd have to be paying £18K in tax to break even. I KNOW he's not making £50K plus!!!"
So? Does this man earn more or less than £18k to cover the tax plus £10k to cover living costs? How many young couples are there who earn £28k between them who can afford to live in a four-bed detached mansion?
I thought LVT was all about taxing the land and leaving the bricks and mortar alone.
"They might have inherited a house, or some money, and gotten a bigger house than their income would allow."
Someone who has a bigger house than they can afford under LVT is in no different position than someone who outgoings are such a large part of his income that he cannot afford to pay income tax. Think about a tenant in a large house, not on PAYE. He's paid his daily expenses, he's paid his rent and the tax bill arrives. He can't afford to pay it. He is faced with exactly the same option as your hypothetical tapayer - move house.
"Or they might have made money in the past and invested it in a house and downsized their career."
Houses are only an "investment" when there's a house price bubble. It would be equally valid to say: "Or they might have made money in the past and invested it in a car". In my grandfather's day, no-one thought of a house as an investment and most avoided buying when they didn't have to.
B, thanks for back up.
"I thought LVT was all about taxing the land and leaving the bricks and mortar alone."
Actually, it's primarily about taxing the value of the planning permission (which is strictly rationed) which in turn is a function of [generosity x location x scarcity]; the physical land (which is limited by nature) is a slightly seconday issue.
So turning to the thorny issue of houses in the countryside (as defined), it doesn't matter whether it's a worker's cottage, a city slicker's retreat or a manorial farm house.
The value of the house has relatively little to do with the size of the garden (unlike in urban areas), and by having a ten acre garden in the wilds of nowhere you are not depriving anybody of anything*. But because we have to Protect The Hallowed Greenbelt, the embedded planning permission in the house itself is worth hundreds of thousands of £'s.
Which comes neatly back to your suggestion that we tax farm houses in the same way as any other houses (i.e. on the embedded value of the planning permission), but exempt the physical land surrounding it (or tax it at a token £10/acre or 0.2p/sq yard).
* If you choose to graze Jocasta's ponies rather than growing a few thousand £'s worth of crops, that is your opportunity cost.
PS, I'm waiting for Sobers to come back with some examples of houses in SN6 with 1,200 sq yard plots which you can snap up for £175,000.
@Bayard: the only people who could possibly be in the position you state (house costing too much to pay income tax) are self employed people. And thats very unlikely as you'd never get a mortgage on a big house unless you could prove you had the post tax income to pay for it. Everyone else has their tax removed at source so they could never get into that situation.
Look, if we were in the reverse situation, having LVT and people were saying lets tax income instead, I'd be arguing against that too. Its because its manifestly unfair that you change the entire system of taxation over night, that people have based their entire lives, careers, savings and investments around. It would be just as unfair if you went from a LVT system and people who had purposely lived in small houses, but had big incomes, were facing massive income tax bills. People have the right to expect that the basic system that they will be taxed upon remains reasonably stable. Rates may go up and down a bit, allowances change. But you know where you stand today, next year, 10 years, when you retire. If you LVT enthusiasts managed to get what you want, how could anyone know with any certainty how long it would last? How long before some politician jumps on the bandwagon and says 'Its unfair that millionaires in city penthouses pay less LVT than working people all over the country. Lets reintroduce income tax for the rich'? And so the ball starts rolling.
Lets face it, the system we have isn't perfect (neither is LVT BTW) but its what we've got. Short of turning the entire countries finances upside down, its not going to change. Live with it.
And actually I do think that someone who has worked all their life deserves to have their 4 bed detached house, if they've managed to achieve one. They have put in 40-50 years of hard graft, they should be able to reap the rewards. I see no reason why they should have their hard work taken away from them so some spotty 22 year old straight out of Uni can buy a cheap house.
S: "It's because it's manifestly unfair that you change the entire system of taxation over night."
Correct. So let's phase it in over three or four years. The number of people who would be actually worse off (assuming no change in behaviour) is only about 1 in 5 (or whatever). It cannot be beyond the wit of mankind for local councils to sort out some transitional or relieving provisions.
" If you LVT enthusiasts managed to get what you want, how could anyone know with any certainty how long it would last?"
History tells us, not very long. The vested interests have been winning the propaganda war for centuries.
"How long before some politician jumps on the bandwagon and says 'Its unfair that millionaires in city penthouses pay less LVT than working people all over the country. Lets reintroduce income tax for the rich'?"
Well yes, politicians are pathological liars, but that simply ain't true. Millionaires in city penthouses would be paying a lot more LVT than the average family. And most proper LVT-ers oppose income tax as vehemently as they support LVT. So seeing as it would probably be a left-wing politician calling for income tax, LVT-ers would suddenly be seen as right wing, pro-capitalist etc.
BTW, if the millionaire chooses to rent a room off his Mum & Dad, so what? LVT is a tax on consumption of land - there are plenty of clean living millionaires who don't pay a penny in tobacco duty or alcohol duty because they don't smoke or drink. Does this bother anybody? It doesn't bother me.
"They have put in 40-50 years of hard graft..."
We've done this to death. Just exempt pensioners. Next question?
And why pick on spotty 22 year olds? It's 16 year old school leavers who are quite happy to start as apprentices who are being f***ed over as well, y'know?
"And thats very unlikely as you'd never get a mortgage on a big house unless you could prove you had the post tax income to pay for it."
Er didn't you say ""They might have inherited a house, or some money, and gotten a bigger house than their income would allow."? Where do mortgages come into this? I live in a big house, I am self employed, I don't think I'm that unusual. Yes, I would be worse off under LVT, but I still think it's a good idea, because soon I'd be better off.
"Actually, it's primarily about taxing the value of the planning permission"
Fair enough, so a 4-bed house of x sq yards of floor area plus a double garage is taxed the same regardless of condition? That seems a good idea as it get rid of the idea of a "home improvement tax" as bandied about by LVT opponents. Would it be correct to say that the tax base was "the value of your land as a building plot with permission for a house like yours? However isn't this the same as "market value less rebuild costs?"
B: "Would it be correct to say that the tax base was "the value of your land as a building plot with permission for a house like yours"? However isn't this the same as "market value less rebuild costs?"
Yes, it's two ways of saying more or less the same thing.
PS, as to this "They might have inherited the expensive house", well big deal. Say I inherit a yacht stationed at the most expensive marina in Europe with annual mooring fees of £100,000. Can I ring up the marina and tell them that there's no need for me to pay for the location value because I simply can't afford it. Does it make a difference if the marina is owned by the local council?
PPS, I've trawled Rightmove and for £400,000 or so, you get a nice house in those expensive areas of SN6, but the gardens don't seem too big (400 sq yard plot size, say). There's one such plot in the middle of Highworth with planning for a four-bed detached, asking price £200,000*. Call it £150,000 build cost for a tip top quality house, with a bit of profit margin for the developer, selling price £400,000.
If you want a big f- off garden of 1,000 sq yards you're lookint at paying a million quid.
* So at £35/sq yard, the tax is £17,000/year, which is about 8% of current market value of the (theoretical) house, job done.
B, on a lighter note, it's very gracious of you to say that "Yes, I would be worse off under LVT, but I still think it's a good idea, because soon I'd be better off."
I'm a chartered tax advisor, I've been doing it all my life. If they abolished all existing taxes, then I'd be as redundant as a lamp lighter or a typesetter. Hey ho, you can't win 'em all.
Sobers: "I don't regard employers national insurance contributions part of the tax a person pays. Long term maybe, as employers can pay higher wages. But day 1 of LVT, no-ones getting 12.8% extra income because their employer no longer has to pay employers contributions."
You'd be surprised at what "i'm passing on this Employer's NI saving to everyone's wages" will do for staff morale, Hundreds of thousands would get this straight away, a quick & easy pay rise that doesn't actually cost the employer anything!
I see no reason why they should have their hard work taken away from them so some spotty 22 year old straight out of Uni can buy a cheap house.
And that's where you're argument falls down, why the hell not? I see no reason why the only way a young person can live independently from their parents is by renting. There are plenty of 22 year olds out there with young children who would most certainly want the security of knowing they own(mortgage) their home & pay their taxes on it and are then tied to the locality of the school their children attend instead of worrying about the landlord jacking up the rent and having to move elsewhere due to the lease being up for renewal.
A few points:
1) Who pays LVT, tenant or landowner?
2) Why would the tax on a city penthouse be loads more than a surburban detached house say? The sq footage isn't going to be anything much different, and as its only 1 part of a block of apartments, its only going to pay a fraction of the LVT of the entire block, which, as you constantly remind us is based on the land value/area, not the building on it. If you're currently earning £1m, you're paying approx £4-500K in tax. Are you telling me the LVT on a flat would be £400K+?
3) Its manifestly unfair to base the values to calculate LVT on sales under the current system. Day 1 of LVT would mean pretty much every house in the UK had a different value to the day before. Small houses would probably go up in value (more people who are currently renting could afford them with their extra CI income, plus more demand for people downsizing), and bigger houses would fall (loads of people trying to offload them to downsize). But your LVT bill would be based on the old values. The only way to arrive at new values is for huge numbers of people to move house. You might have to downsize only to find that a couple of years down the line the house prices in your old area have come down and you could afford to live in your old house again. But its already sold, so hard luck!
4) The seriously rich would be loving this too. Big country estate, most of which is farm land so exempt. House itself and gardens, perhaps a couple of acres, 10000 sq yards say @ £40/sq yard = £400K. If your incomes over £1m you're quids in straight away. Can you hand on heart say that a system that gives the Roman Abrovitches of this world more money at the expense of people infinitely poorer is ever going to be considered fair? Or stand a cat in hell's chance of making it onto the statute books?
5) Whats to stop me selling my garden to an overseas company (or rather paying them to take it off my hands) and leasing it back? You can't get the LVT out of the overseas company, and you can seize the garden if you like, but I'm still the tenant and have the use of it for as long as my lease or tenancy holds. Which could be hundreds of years.
7)Chances are that I'd be quids in under this new LVT system anyway. I run my own business which is pretty profitable, so tax wise I'd probably break even, especially as there'd be more incentive to expand if there was no income tax to pay. And you're not liberalising the planning laws so if I get planning for some housing on my land I pay no CGT. Great stuff. I'm all right Jack. But I do feel sorry for those poor b*ggers less well of than me who'll see their life's work go up the Swannee. Ho hum. I suppose its pretty Biblical really. To him that hath shall be given and all that. Not my idea of fairness tho.
a) Whoever is registered freeholder. If he can add it to the rent, then good luck to him.
2) On a flat in a high rise in Swindon, the tax would be £1,000. On a high rise in Mayfair, it would be £100,000.
3) No it's not unfair. As a general rule, the value of the house you live in is proportional to your long-run average income (this tends to diverge from current income for people who have lived somewhere for decades, but on average, everybody will have owned three homes in his lifetime). So in the spirit of making the tax under the new LVT fairly similar to the old tax under income tax, let's base it on total selling values.
And why do you keep saying that 'huge numbers of people would have to move' for new relative values to be established? Whether there are ten sales or a thousand sales in the year, the new price is the new price.
4) So what? The Abramovich's of this world also own mansions in London on which the tax will be £500,000 a year. Same for Philip Green. And that's probably more tax than they pay presently.
5) Then the overseas company forfeits the land, and as your interest is subject to his, you get turfed out too. That's basic landlord and tenant law.
6) There is no 6).
7) Truly entrepreneurial chaps will be better off, as will all 'hard working families'. That's the whole point! It's not 'how much' income you have that matters, it's 'what kind of income' - earned income or passive income from land?
I'm agnostic as to planning laws, but clearly, your gross capital gains will be lower with LVT (even if there's no tax on the gain itself). Where people will make money is buy building houses, renovating houses, knocking down bungalows and squeezing two semi's in instead.
In your system there is no difference where your income comes from. It could be earned income from employment, interest on capital, dividends from a company, or profits from a wholly owned business. Its all taxed at zero. The only thing taxed is your property. Where does the earned/unearned income distinction come from?
And while its true to say that your house is roughly proportional to your income, I suspect the SD on that is large. In fact I would hazard a guess that the majority of people could not afford to buy their current house on their current income. Its only possible because a) they bought it cheap years ago, b) they inherited it, c) they inherited some capital and put it in the house, d) they used to make more money, but have downsized their career once the mortgage was paid, e) they are retired and paid off their mortgage while in employment and now live on pensions, or f) some combination of all above.
And you're saying if there was only one sale in the postcode area in a year, the LVT for the entire area for the next year would be based on whatever price per square yard was achieved in that sale? That means there are going to be massive variations year to year. Year 1, loads of expensive properties are sold. Tax goes up in subsequent year. Year 2 more lower priced houses are sold, tax goes right back down again. No-one would be able to know year to year what their LVT would be, especially in postcodes with a big variation of housing types. A very expensive house (sold very occasionally) would cause a massive rise in the next year.
I'm not sure about your landlord/tenant statement either. Its not how it works in farmland. Tenants have security of tenure for 3 generations. So it is legally possible.
S: "In your system there is no difference where your income comes from. It could be earned income from employment, interest on capital, dividends from a company, or profits from a wholly owned business. Its all taxed at zero."
Yup, correct so far.
"The only thing taxed is your property. Where does the earned/unearned income distinction come from?"
Nope. Not 'property', that's a stupid word. The only thing that is taxed or charged for by the government is income or benefits arising from a government protected monopoly position. This is primarily exclusive occupation of land.
"I would hazard a guess that the majority of people could not afford to buy their current house on their current income."
Correct! You have made a real breakthrough with that insight. Under LVT, by definition, people would be living in a house which they could afford to buy - there will be no system whereby some people f*** over other people any more.
"And you're saying if there was only one sale in the postcode area in a year, the LVT for the entire area for the next year would be based on whatever price per square yard was achieved in that sale?"
That is a completely hypothetical example. In an average postcode sector there are 3,000 addresses, and in most, there will be one or two hundred sales and purchases a year (especially if there's a lot more 'right sizing' going on once LVT is phased in).
It's barely conceivable that in any year there would only be one single sale in an entire postcode area (about 210,000 addresses) or even in one postcode district (about 10,000 addresses).
If in doubt, please apply common sense to these matters. I might as well say, seeing as the government lives off income tax and VAT, what happens if the entire population stops working and lives off its savings for a year, only buying food? It's not going to happen, so why worry about it.
PS, you never provided evidence of houses in SN6 costing £200,000 or less and having a plot size of 1,200 sq yards!! So I declare myself the winner of this round :-)
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