Uncle Tom, responding to Drewster over at HPC:
You're suffering from a bad case wadsworthitis - LVT theory hinges on a set of childish notions that don't bear close scrutiny, and there are very good reasons why it will never happen - so get better and come back to the real world... It's trite little phrases like: "Of course LVT would sort this out in no time" (see above) that are so childish. Anyone who thinks you can re-order the UK tax collection system overnight is living in la-la land.
As per usual, the Homeys are deliberately taking things out of context and seeing contradictions where there are none, not to mention behaving like spoiled little girls and resorting to name-calling.
No Land Value Taxer I have ever met has suggested we replace all other taxes with LVT "overnight"*. Drewster had not suggested this either. He merely pointed out that land and buildings would be put to their optimum use (bringing vacant ones into use, converting from commercial to residential use, or vice versa) "in no time" if commercial and residential land/buildings were taxed at the same rates. As things stand, developers have every inventive to convert commercial to residential because in most areas, Council Tax is much, much lower than Business Rates, giving them a handsome windfall gain (the capitalised value of the tax saving).
(Local councils also have a perverse inventive to allow this, as they can keep the Council Tax but have to hand over Business Rates to central government, so we'd also have to make sure that local councils keep the same proportion of each tax - the precise proportion is pretty irrelevant).
It would be quite unnecessary to have full-on LVT to achieve this - it is quite sufficient to align the tax rates on commercial and residential land/buildings; for example, Business Rates could be halved and Domestic Rates (or LVT, or whatever you want to call it) set at about 2% per annum of the current selling prices of housing. This would raise about £100 billion a year, which would allow us to replace COuncil Tax etc (see below) as well as cutting VAT to 10% (for example).
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* For my part, I have always suggested rolling Council Tax less Council Tax Benefit, Stamp Duty, Capital Gains Tax, Inheritance Tax, Insurance Premium Tax and TV licence fee into an annual LVT on residential land and buildings of about 1% per annum on current selling prices (in Northern Ireland, Domestic Rates are already calculated as 0.7% per annum on 2005 selling prices, so for them it would be no particular upheaval).
By and large, few people would pay more or less over their lifetime than they do now, and only a quarter would pay noticeably more on a year-by-year basis - the increase being the annualised amount of one-off taxes such as CGT, IHT and SDLT which they no longer have to pay. Of course, CGT and IHT would be scrapped on everything - land, buildings, shares, other investments - so that there is no tax advantage or disadvantage to investing in some things rather than in others.
Together with Business Rates, this would mean about £65 - £70 billion a year is raised from land taxes, which is only about a fifth of the total amount needed to replace all the Bad Taxes (VAT, National Insurance, income tax and corporation tax), but at least it's a step in the right direction. In Year Two we then increase the "about 1%" rate and reduce Bad Taxes a bit, and so on and so forth, the whole process would take five to ten years at its very fastest.
Friday, 15 July 2011
Killer Arguments Against LVT, Not (142)
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20 comments:
MW
"behaving like spoilt little girls and resorting to name calling"
Attaboy Markie.
The bloke sounds a bit like Richard Murphy or me at times?
I would abolish all taxation overnight. And collect all rents in the morning. I am a tax reforming terrorist. Let the banksters swing.
Alternatively there is the Location Value Covenant. Voluntary scheme. Now dont say you could run a horse and cart etc etc because each time we ask you to show us how you cannot.
Love R.
RS, OK, answer me this.
A bloke is a partner in a business in town, and jointly owns the premises with his brother (who is not a partner in that business). The bloke also owns shares in another business but takes no part in running it. His wife is an employee elsewhere, and he and his wife own the house they live in.
On which bits of land would he enter into a covenant? Would he and his business partners have to opt jointly and severally on the business premises? Would he and his wife have to opt jointly and severally on their home?
And if he opted on both bits (and persuaded his partners and his wife to do so) which sources of his income would be exempt from which existing taxes?
What if he and his partners opt on the business premises, but his wife is a Home-Owner-Ist and refuses to sign the joint election on their home?
What about any land and buildings which the company owns in which he holds a minority shareholding?
Answer me all that, with approximate numbers, and I'll then drive a horse and cart through it and show you how, by judicious use of elections and shifting titles he can get away without ever paying any tax at all.
At least my plan is nice and simple.
Adam Smith and David Ricardo had "childish notions"??
AC1, allow me to bring you up to speed with Faux Libertarian* thinking: Adam Smith and David Ricardo were proto-Communists and the originators of class envy, "even" Karl Marx thought that LVT was a bad idea.
* That's the intellectual wing of the Home-Owner-Ist movement, who at least vaguely know what Tom Paine and Henry George stood for, and hate them all the more for it.
"The real value of everything used by man is proportionable to the quantity" (nowadays: cost?) of land used for its production and for the upkeep of those who have fashioned it "Richard Cantillon pre 1774.
But the real dude is Sir William Petty whose treatise "On Taxes and Contributions" came out in 1662 and he'd already valued the land in Ireland by then. A founder member of the Royal Society.
It looks like LVT is the mainstream economic theory and all the present stuff a weird deviation.
I am with RS - Do it now. Delay only gives times for the inertia in the vested interests to corrupt the intent. If you are going from here to there (in LVT terms) it has to be done quickly. Why not 24months?
Mind you the benefit on the other side of the equation is all those functionaries in redundant jobs laid off and made available for work in real wealth creating jobs. Hell, we may even be able to use them to dig coal at a globally competitive price.
MW
Can you see what you are doing here? Corner cases. Just like the poor widow. Hardly horse and cart.
Perhaps I should start a "Killer arguments against LVC's. Not." using this example as #1?
You are victim become perpetrator.
We are looking for the general case. Find me one and I will respond in full?
AC1 Quite.
Both Smith and Ricardo thought that wages were paid out of capital.
The false wage theory that leads to offensive notions such as the world is not big enough to support a growing population. Or anti immigration. Or anti poor people. Or racism. Fear of poverty.
They were doing this because their masters told them to. As usual.
You could bang on the JS Mill form of LVT (see comments above about the late appearance of Henry George in the debate) fairly quickly.Say: that's its chums we're not going to make you pay back any of your past ill-gotten gains fron land-price inflation but will from (insert date) scalp any increase in property value threafter. The existing taxes would recover so much revenue,they could probably go down in % terms (for instance if people were now paying 1970 prices for houses as they do in Germany.)
Taxes are a convenience in some ways: I don't want to keep a machine gun under the stairs and go off on manoeuvres annually to help fend off military attack. I would rather pay towards a government -run army which I can influence through the parliamentary process (alright! alright!).Neither would I have wanted to home-school my kids.
Taxes are cost effective.Anybody for private fire insurance?
DBC: "It looks like LVT is the mainstream economic theory and all the present stuff a weird deviation."
The Georgist view is mainstream, until it comes to taking that final step. For example, we say "Land values are created by the community" and they say "You can make easy money by buying a house in an up-and-coming area, where they build a new train station". Absolutely the same.
We then say "That's why we should tax land instead of labour" and they say "And cut off this lovely source of easy, lightly-taxed income? Are you mad?".
The Homeys are as passionately against the Sentinel Tax as against any other variant for that very reason, they are still at the delusional stage where they think that rising house prices make us richer.
L, OK, let's split the difference and call it within five years?
RS, that's not a corner case, that's the sort of thing you'd have to plan for. Even with simpler examples I can see there being huge opportunities to cut somebody's tax bill far lower than you intended.
So how about this, husband earns lots of money, wife stays at home, they live in a huge mansion. If they put the mansion in the wife's name, can the husband then opt for income-tax freedom, or does teh wife have to opt the house into LVC as well?
Like I say, my way is simpler and better.
MW The more you talk about it the more you look like a poor widow. I'd stop while you can still retain credibility on the topic.
Look, I couldn't give a hoot about LVT or LVC or robber compensation as DBC and Mill recommend.
If people do not agree that abolishing taxes and collecting rents for revenue is a good idea, the most splendid and perfect way to collect them is utterly irrelevant.
If people ever do agree then any remedy will work anyway.
Infinite evidence is a noble cause on the road to changing the minds of the people. Keep it up.
RS, it was you who dreamed up LVCs.
They may be fine in principle but they would never work on a practical, adminstrative level. The fact that you can't even answer a simple question about them would suggest that you haven't thought it through or that you accept that there is no answer to even a simple question, in which case, back to the drawing board.
DBC
You quote George. But have you actually read him yet? See here for the error John Stuart Mill made:
Workers Not Supported by Capital
MW.
LVT is politically impossible. Your point is?
My point is that none will work unless people agree on the principle of abolishing tax and collecting rents. And even once they do the remedy is still irrelevant. All will work fine.
You are assuming things will be the same in the "new world". But in the new world people will be Q'ing up to submit their rents.
Its a bit like saying CI is better because government will be corrupted if you let them use it. But in the new world there will be almost no privately collectable rents to corrupt government with.
Stop doing Murphyisms on me. We are going in the same direction. Are we not?
RS: "LVT is politically impossible."
Difficult, but not impossible.
I certainly have read George (This is fast by "I've never been so insulted in my life" country)
I have read George's breakthrough- to-national-prominence article which was n't about land tax but about keeping Chinese labour out of California. For this he read JS Mill's Political Economy in Philadelphia Public Library and used Mill's argument that labour could only get paid out of previous business profits (capital)to launch a highly racist attack on the Chinese (which he never recanted).IMO he also plagiarised JSM land tax ideas at the same time .
Also Mill on wage fund=wrong
does not mean he was wrong on land value taxation.Read P&P and you will find George on Mill's tax is very thin : he admits "Future speculative advance of rent would cease"Oh is that all? I'd settle for that.And so should we all.
DBC, I'd settle for a Sentinel Tax* as well, but the Homeys hate it (as we know from bitter experience) - there'd be no more lovely "tax free" gains and the banks wouldn't be able to blow credit bubbles.
As per usual, the Killer Argument is wheeled out "But what about a Poor Widow who bought in a cheap area which becomes gentrified?"
* it might take decades for the ST to be enough to raise (say) half of all government revenues but so what, it's nice and gradual isn't it?
The idea with Sentinel Tax is that land/ house prices would freeze permanently if poss or, if they were to rise, would do so rise at a lower rate than wage inflation (The Grant Shapps formula, ST is Mill+ Keynes+ Shapps) .
Ideally,if a PoWid got caught in a gentrification outbreak,all the surrounding improvers would realise that they could get caught by the absolutely confiscatory ST and would not ask inflated prices on re-sale as newcomers would n't want to pick up the tax bill.So, since the ST is supposed to rely (not entirely) on self assessment,the improvers will understate the tax liability and say land prices have n't gone up therefore no tax due.
DBC, it's a splendid idea and everything, but don't you realise that the Homeys and Faux Libs want house prices to go up as fast as possible?
As I've said before, if the Sentinel Tax never raised a penny because newcomers simply refused to pay more than whatever the cut off value is, it could still be regarded as a partial success (by us) and as a disgusting Communist-style appropriation of Hard Working Homeowner's Birthright to have an ever larger share of Housing Wealth by the H-FL faction (cont. page 94).
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