Killer Arguments Against LVT, Not (161)

From The Economist:

Deep down, Lib Dem advocates of property taxes, led by the business secretary, Vince Cable, know that it is soak-the-very-rich populism, not economic efficiency, that makes the cause popular (1): hence Mr Cable’s battle-cry of “Mansions can’t run away to Switzerland”. (2)

Yet not every mansion-dweller feels rich (or has a Swiss bank account). (3) In the inner circle around Nick Clegg, the deputy prime minister, there is said to be “no appetite” for a debate about whether someone with a house worth £1m is unacceptably rich; (4) some, for instance, are widows living in London family homes bought decades ago. (5)

1) So what? He appears to accept that taxes on the rental value of land are economically efficient, good, but you try explaining this to the man in the street and you draw a blank. It is better to do the right thing for ostensibly the wrong reason than it is to do the wrong thing for actually the wrong reason. In a toss-up between raising a couple of £ billion with a 50p top rate of income tax or a Mansion Tax, the Mansion Tax wins every time.

2) That is surely the whole point; it's simple to assess and collect; evasion is nigh impossible etc. The value of land is generated by society as a whole; the value of UK land is generated by UK society. So there is every reason to tax UK land and no reason to tax a mansion which a UK-resident happens to own in Switzerland (or a villa which Dearieme's favourite Guardian writer owns in Tuscany).

3) Few people feel rich, because the amount you seem to have to spend always keeps pace with what you earn.

4) Who invented this concept of "unacceptably rich"? What on earth is he talking about? In any event, if you actually understand maths, you could just as well argue that shifting from taxing incomes to taxing land rental values is a wicked free-market capitalist* plot to reduce the tax paid by higher earners - if every household in a street of similar houses pays the same amount of LVT and little or no income tax, clearly, it will be the higher earners who benefit most.

* It's just that real free-market capitalism is poles apart from The Daily Mailexpressgraph's or The Guardian's description of it; what they are referring to is craven worship of land owners and rent seekers.

5) Ah, The Poor Widow Bogey. The easiest way of fixing that, politically, is to just exempt pensioners' main residences (it's not ideal in economic or administrative terms, but hey). So we exclude the one-quarter of households which are 'pensioner households' and every other household pays a third more than they would have done if pensioners were willing to chip in (or to roll up the unpaid tax like in Northern Ireland).