Circular Logic by The Circular One

Spotted by DNAse in The Telegraph:

Higher property taxes will not be introduced because middle-class families are already paying enough to Treasury, a Cabinet minister has said (1). Eric Pickles, the Communities Secretary, states that hard-working home owners “put a lot into this country and don’t take a lot out" (2). Mr Pickles, whose department oversees council tax, says a mansion tax would require the revaluation of houses across Britain, at a cost of £250 million to the taxpayer. (3)

1) So, what the current government does is increase bad taxes when they come into power (VAT up by 2.5%, NIC up by 2%) and be too cowardly to scrap the 50p top income tax rate, and then use this as an excuse not to increase good taxes (mansion tax, council tax, land value tax, whatever you call it)?

2) Apart from ever rising land values, of course.

3) So he admits it would cost £5 per home? Cheap at half the price, and even that is probably overstated - HM Land Registry have all the information they need to calculate a reasonably accurate tax rate for land in every single postcode sector - it's only relative values that matter, not absolute ones. All they need to do is push a couple of buttons and press "print".

But fair enough, many people (in fact most) are paying far too much in income tax, NIC etc, so why not use my new Secret Weapon of choice, i.e. send everybody their Land Value Tax bill but give them a £ for £ credit against other tax liabilities?

If we stick to artificial distinction (all taxes are ultimately borne by households) and just look at taxes legally borne by private households (i.e. where private individuals have to sign the cheque or see it deducted from their wages etc.) we are looking at about £250 billion* (from the PSFD).

So let's assume that we decided to raise, nominally, £50 billion per annum from Domestic Rates calculated as approx. 1.5% tax of the current values of housing, then households would get a fifth of their other taxes refunded (they can use it to frank their Council Tax, TV licence fee, PAYE deductions, whatever they like), and it would only lead to a very small increase in revenues to the extent that some people have a very high house-price-to-income ratio (more than about twenty).

These people are by definition "taking just as much out" as their neighbours, who live in a similar house but have a higher income (and so have a lower house-price-to-income ratio) and therefore pay much more in tax, so that deals with item (2) most admirably - those who are already contributing enough/too much wouldn't pay a penny more - and we can use this modest surplus to reduce the deficit, cut other taxes, whatever.

* Forecast for 2011-12:
Income tax less tax credits £142.9 billion
Employee's NIC £50 billion
Council Tax £26.1 billion
Capital Gains Tax £3.4 billion
Inheritance Tax £2.7 billion
Stamp Duty Land tax £4 billion
Stamp Duty on share purchases £2 billion
Road tax £4 billion
TV licence fee £3.1 billion.