Killer Arguments Against LVT, not (90)

I've heard this argument a dozen times if I've heard it once, the first time here, when I was still arguing for a very modest reform (to replace Council tax, Council tax benefit, Stamp Duty, Inheritance tax, Capital gains tax and the TV licence fee with a flat tax of approx. 1% on the value of residential land and buildings):

Bill: This idea... has IMO all the the electoral attractiveness of the poll tax (and that is being unfair to the poll tax).

The sheer stupidity of that comment baffles me to this day.

1. He overlooks that the (admittedly deeply unpopular) step of replacing the old Domestic Rates with a flat Poll Tax (aka Community Charge) was a step in completely opposite direction; it was a regressive move, and the people who went on the riots were the people and households right at the bottom who were suddenly several hundred of pounds a year worse off. The large majority of homeowners were a couple of hundred pounds better off, and those in the biggest and nicest houses were presumably significantly better off (good contemporaneous account here).

2. What I was suggesting was neither 'progressive' nor 'regressive' and was about simplification as much as anything; some of those at the bottom would lose their housing benefit, but for eighty or ninety per cent of households, LVT would be much the same as their Council tax (less Council tax benefit, where relevant) plus TV licence fee is now, plus or minus a couple of hundred pounds a year even at the margin (bearing in mind that most Council tax benefit claimants are in the lowest Council tax bands A and B, and so instead, they'd get a lower LVT bill which would be payable in full).

3. In a world where the Lib-Cons think it's OK to take away Child Benefit from a random selection of higher earning households and the EMA from a random selection of low-to-middle income households (a loss of a couple of thousand quid a year each),or where the Lib-Cons can merrily hike VAT by 2.5% and National Insurance by 2% (making working households several hundred pounds a year worse off) I don't think the LVT idea was particularly radical.

4. Those who would gain most would be those with proper wealth besides the inflated value of their house which brings them over the Inheritance tax threshold; those who are thinking of buying or selling a house (who would save the Stamp Duty and/or capital gains tax, where relevant). And bearing in mind that I explained the roll-up option for pensioners, not even they (or their heirs) would be materially worse off in the long run (no Inheritance tax, and the resale value of houses would go up by the amount of the Stamp Duty cut).

5. So even if you could identify people who on closer inspection genuinely ended up paying more in the long run (and there would be some, obviously, e.g. no more 'single adult' discounts as there is for Council tax and many of those in the top decile housing-wise whose house is worth £300,000-plus), these are exactly the people who would not be going on riots, and on a crude political level, I don't see why they would be so much more deserving of public sympathy than e.g. people clobbered by the 50% income tax rate (not that I support the 50% rate, I'm just giving an example).

6. And on an administrative level, LVT beats the Poll Tax (or TV licence fee) hands down: there's no need to track down every adult, you just do the rough and ready valuations and send out the bills. A house can't just disappear, can it?

7. Finally, I'm an enthusiast of universal benefits (like a higher tax-free personal allowance, a Citizen's Income/Pension, health and education vouchers etc). If there really were items of public expenditure which cost a similar amount for each person and benefit each person equally (without flowing straight through into higher house prices, and I struggle to think of any apart from perhaps the cost of running elections), then the way forward is to reduce the personal allowance (or other universal benefits) accordingly, rather than dishing out £x per person universally with one hand and clawing back £x per person universally with the other.

Go figure.