An argument advanced by Deniro and before that by The Fat Bigot (link below), which adopts the fairly standard Home-Owner-Ist practice of completely abandoning logic or facts or anything:
"have you thought that there may be political consequences of millions of people paying no tax whatsoever and all government spending being funded from people who own property.... Under LVT renters would pay no income tax, no duties , no VAT. My question is what would those who do fund Government say about that. And what would be the political power of the renters and the owner occupiers. Would the owners say no taxation without representation and no representation without taxation. Don't you think the political consequnnes of taxation are different from the economic distinction."
OK, ignoring the use of the emotive term "millions", conflating the terms "property" and "land" and the fact that "Under full-on LVT owner-occupiers would pay no income tax, no duties , no VAT" either, let's do facts and logic:
1. Everybody lives somewhere. Either you're an owner-occupier, a tenant or anything in between (such as living with your parents and chipping in towards costs).
2. Currently, about seventy per cent of UK households are owner-occupiers, just over ten per cent are private tenants and just under twenty per cent are social tenants (local council or Housing Association). UPDATE: Sobers addresses the issue of social tenants in the comments, that's the least of our worries.
3. Logic says, for every tenant there is a landlord.
4. So let's assume there are ten identical houses on the street, all owner-occupied and all paying the same tax, fair enough.
5. Now let's assume that (say) two of them are rented out, by a purely private agreement between landlords and tenants. The tax on those two houses is exactly the same as on the owner-occupied ones. Just to remind you of a bit of basic maths: each owner-occupier pays one-tenth of the tax due on that street. His tax bill is not affected, neither increased nor decreased, by the precise tenure of the other residents. Somehow or other, the landlord and tenant have to share that tax bill between them; either the rent is a fixed lower figure and the tenant pays the LVT on top; or the rent is a higher fixed figure and the landlord pays the tax out of the gross rent.
6. At this stage, what are the eight owner-occupiers whining about? The fact that the tenant doesn't pay enough, that the landlord pays too much, what? If the landlord thinks he's paying more than his fair share, then he can sell the house again, nobody's forcing him to be a landlord, yes?
7. As we also know, ignoring capital gains/losses, the cost of buying and the cost of renting are usually much the same. If the landlord decides to sell because he thinks that he was shouldering too much of the LVT, and the eight owner-occupiers don't want to shoulder it (which is what they were whining about in the first place), then who's going to buy that house? One of the tenants, of course, so hey presto, we now have more owner-occupiers, result! The selling price will adjust up or down until so that the tenant is no better or worse off than when he was renting. Call me old-fashioned, but I'd always assumed low and stable house prices and higher levels of owner-occupation to be A Good Thing.
8. In real life, higher taxes on land values and lower taxes on incomes lead to higher levels of owner-occupation, as we well know from all the studies. The Fat Bigot of course claims that exactly the opposite would happen: "There are no checks on how high the tax rate will be other than the ballot box, and once recipients outnumber payers the result is obvious...".
Do the Home-Owner-Ists seriously believe that under LVT, people will abandon owner-occupation and sell their homes to a landlord for a depressed amount, knowing full well that they will end up paying much the same amount of LVT as before plus an unknown amount in rent, losing the right to decorate or renovate as they please and losing some security of tenure? I dunno. Are they that brainwashed? Possibly...
9. Or let's assume that one of the eight owner-occupier households has an adult child or children living with them, and that being old softies, they don't make that child pay any rent or contribution at all? Will the other seven owner-occupiers go and knock on their door and complain that their adult child is not paying enough tax?
10. Probably yes, to be honest, but then the retort is: the couple with adult child are using their land more intensively/efficiently, it's like three people sharing a car on the way to work; they have to put up with the hassle but can split the petrol bill three ways. If we follow Home-Owner-Ist logic, then fuel duty would have to be graded according to how many people are in the car; if a single person fills up, it's 80p a litre, if there are two people in it, it's £1.60 a litre and so on.
Happy Vilemas
2 hours ago
24 comments:
Yes. I agree with all the points you've made here. But just to add, part of the rationale behind LVT is that it compensates those that are denied access to the most valuable and/or sought after land, in exchange for giving up a portion of their liberty (the right to roam and settle on previously unoccupied land) they either receive cash or non-cash benefits. So it's not like the homeowner is paying out without receiving anything in return, they're paying full market rates for the land they occupy, and if they're unhappy with this arrangement they're always welcome to join to non-tax payers and move.
CD, just for fun, allow me to don my Homey/Faux Lib cap...
"it's not like the homeowner is paying out without receiving anything in return"
My home doesn't generate an income, it's just somewhere to live.
"they're paying full market rates for the land they occupy"
Oi've poid for moi laarnd. Whoi should Oi poi rent for moi own laarnd?
"if they're unhappy with this arrangement they're always welcome to join to non-tax payers and move."
So you Commies want everybody to be forced onto the streets so that [unnamed dark forces] can buy up all the houses for cheap and leave them empty and boarded up?
For the life of me, I can't remember which particular [unnamed dark forces] would want to do this, but hey.
Haha, you've got to admire the determination of your average Royal Libertarian, I certainly couldn't put up with a life of spouting nonsense just to avoid facing the obvious. But I'd have a teeny bit more respect if put their hands up and said that it's a fair cop, the system is rigged but there's not a thing you can do about it.
It's not like they support subsidising the food bills of little old ladies in mansions is it? They expect them to pay full market rates just like everyone else. And we can't adopt this principle in public finance because..?
Logic says, for every tenant there is (at least) one landlord.
Tenant can have multiple landlords?
What about social tenants? Do they escape LVT? If so there's going to be a very long queue for council houses (even longer than now).
All social tenants, all private tenants and all leasehold owners are paying Ground Rent right now as part of -- or the whole of -- their overall rent. And Ground Rent is LVT in all but name.
It's just that the private tenants and the LHOs are paying it to their landlords instead of to HMG. The social tenants are already paying it to HMG (or more precisely to HMG's local government subsidiaries). So they haven't escaped LVT and they won't. But they won't be any worse off than they are now either.
CD, does it really take that much grit and determination to just go with the winning side's propaganda? I suspect that some of them even genuinely believe what they are saying.
JH, I've now amended that bit.
S, why do you so often abandon logic and common sense before commenting here? As D explains, and as you well know, council tenants ALREADY pay rent and council tax, both, effectively, to the government, these two are far more than the LVT would be in most areas (and a lot less in others).
D, ta. I get that objection time and again "Oh but it's not fair people in council houses won't pay it, whine, moan" despite that not being true even now. And it certainly won't be true once LVT is in place.
The consequences I had in mind were not ownership but political.
Tennants would fund LVT through the rent the same way as employers fund income tax through the salary bills. But a party promising to abolish income tax would get elected as employees feel the incidence of income tax is on them.
So, for example would the homeowners consider the number of people who don't pay any taxes, dislike it and vote LVT away in the next available election.
Deniro. Following that line of argument you ight say that everyone pays LVT and no imcome tax, except State employees who have to pay income tax.....
Den: "for example would the homeowners consider the number of people who don't pay any taxes, dislike it and vote LVT away in the next available election?"
History proves, sadly, that British people will always vote for stealth taxes over in-your-face taxes; for the fast buck rather than the hard-earned one etc.
So the pressure will always be for LVT to be kept as low as possible, which is fine by me, provided this is offset with lower CI/lower govt spending and not replaced with stealth taxes on incomes.
If Homeys are stupid enough to believe that "tenants don't pay tax", they are free to vote for the party which promotes lower LVT, but seeing as slightly more than half the population will be net beneficiaries of a full-on LVT/CI system, they'd be cutting off their noses to spite their faces.
L, exactly. It always puzzled me why civil service salaries are taxable, why not just pay them a smaller tax-free amount and have done with it?
So let me get this straight. Private tenants would find their rents rising as they and their landlords shared the cost of the LVT (the exact proportion to be decided by the marketplace, depending on income levels, amount of housing available etc etc). They would lose some of the gains from abolition of other taxes in the form of higher rents. They would probably be better off at the end but maybe not by much.
Whereas social tenants would pay exactly the same rent as now, no council tax (which private tenants pay now too) and get all the benefits of the tax abolitions. So they would be far better off. How would this not cause a massive rise in demand for social housing?
Why should one section of society escape LVT entirely? Why does a private tenant 'pay' LVT (via higher rents) but a social tenant doesn't?
Social rents are artificially constructed - the council sets them, rather than the market place. So to put councils in the same position as private landowners they should be charged LVT and have to get it back in the form of higher rents from their tenants, just like a private landowner would.
Councils are the legal owners of their housing stock, why shouldn't they have to pay LVT like the rest of us?
S, you are now doing straw man stuff:
"Whereas social tenants would pay exactly the same rent as now, no council tax (which private tenants pay now too) and get all the benefits of the tax abolitions."
Where and when did I ever say that?
Council House rent and Council Tax is effectively the same thing, it's the same tenants paying money to the same recipient, so for a very start, the rent and CT gets rolled into one figure and Housing Benefit abolished.
However, I'm glad you applied commonsense and came up with this suggestion:
"Social rents are artificially constructed - the council sets them, rather than the market place.
So to put councils in the same position as private landowners they should be charged LVT and have to get it back in the form of higher rents from their tenants, just like a private landowner would."
I absolutely and completely agree, this is what I have said all along. Councils should charge market rents, which of necessity more than cover the LVT element. And if we find that really poor people can't afford the rent, then councils can just build more of it, which will not only push down rents in social sector but also rents (and hence LVT) in the private sector, everybody wins!
MW - They won't pay civil servants net of tax as it would reveal to the rest of us just how evil and nonsensical income tax is
"Mark Wadsworth said...
council tenants ALREADY pay rent and council tax, both, effectively, to the government, these two are far more than the LVT would be in most areas (and a lot less in others). "
So presumably in the areas where the rent is less than LVT social tenants will have to pay more?
If you think what a fuss is made about civil servants not having to pay pension contributions, then you can imagine the outpouring of spite and envy if it was thought they didn't pay income tax either.
The government also pays VAT on stuff it buys, which is equally nonsensical.
Anon: "presumably in the areas where the rent is less than LVT social tenants will have to pay more?"
Yes of course. If in doubt, apply commonsense. Do I really have to spell this all out every time?
Average homeowner - pays less income tax*, pays more LVT.
Average social tenant - pays less income tax, pays more rent (inclusive of LVT).
Average private tenant - pays less income tax, pays more in rent/LVT.
Average landlord - pays less income tax, pays/bears more of the LVT. And he can whistle for capital gains because there won't be any.
The winners are those who derive most of their income from actually going out and working (or running a business, blah blah) and the loseres are those who derive most of their income (cash or non-cash) from land rents.
* Please note, "income tax" in the wider sense includes income tax, NIC, PAYE, VAT, corporation tax, means-tested withdrawal of benefits etc etc.
B, indeed. And govt departments dutifully hand over Employer's NIC to HMRC, which gives it back again as funding. Madness.
Ah, well that wasn't clear from your previous post. It seemed as if you were saying social rents would stay the same after LVT as before. I mean you can compare the two quite easily - often ex council houses are for rent privately at rents higher than the council ones next door.
I think thats a hard sell though - unless council houses are worth less than their rebuild costs the LVT would be something, and thus social rents would have to rise. Couple this with CI only and you're going to get plenty of sob stories of people who are getting less benefit than before and their rent has gone up too.
S: "you're going to get plenty of sob stories"
So what? Most arguments against any sort of tax or welfare reform, in particular LVT/CI boil down to sob stories.
Turning to the topic in hand, social rents-plus-Council Tax would only go up noticeably in South East. But there are plenty of unemployed people in social housing in South East who can swap places with people in social housing elsewhere in the country who are able and willing to work.
Social rents-plus-Council Tax would be hardly affected in most other places and might even go down in some.
All social tenants, all private tenants and all leasehold owners are paying Ground Rent right now as part of -- or the whole of -- their overall rent. And Ground Rent is LVT in all but name.
This fits in with my current favourite model for new social/"affordable" housing. Currently the definition of "affordable" housing appears to be something ridiculously pokey since the land part of the purchase is significant. The best way to make housing affordable is to decouple the house from the land. So rather than the council sell off land to developers it keeps hold of the land and new residents get a mortgage for just the cost of the house build. Once they move in, they pay a ground rent to the council which would effectively be an elevated council tax. I reckon this could bridge the gap between social and private housing and be a useful tool to demonstrate the principles of LVT.
QP, exactly.
The problem with all these bollocks 'shared ownership' schemes are that they merely serve to con people into 'getting onto the property ladder', i.e. get them hooked on debt and signed up as mortgage slaves.
This is because ownership is split vertically, e.g. you buy 25% of the bricks and 25% of the land.
Far better to have shared ownership where ownership is split horizontally. You own 100% of the bricks and just rent the land. And splitting blocks of flats into multiple ownership is bollocks anway, far better for one company to own the whole building and to rent out individual flats.
For sure, you might like to own shares in the company which owns your block, that is a separate issue.
QP wrote: This fits in with my current favourite model for new social/"affordable" housing
You and me both. For some time now I've thought it would be possible to sidestep the lack of political will for LVT/CI by setting up a community land trust which would buy property then sell the houses and lease the land, charging a ground rent and paying the leaseholders a dividend in the form of a credit against their ground rent (plus cash if their ground rent was less than their dividend).
Poor Widows In Mansions might well find this particularly attractive if they sold their land to the trust but retained the building since they would get a large cash figure up front, yet would still be able to live in their mansions, using the income from investments which they will have made using the cash from the sale to pay the ground rent and Mansion Maintenance. They might even be able to fund a no-longer-poverty-stricken lifestyle. Miles better than one of those "reverse mortgage" con tricks.
MW you seem to have complexified the most obvious of straight forward responses to these objections. e.g.:
Another objection may be that taxation and representation cannot safely be divorced. It may be desirable to combine political power with the consciousness of public burdens, but the present system certainly does not secure it. Indirect taxes are mostly raised from those who pay little or nothing consciously. In our large cities, elections are decided by things similar to what influenced the Roman masses, who cared about nothing but bread and circuses.
Substituting a LVT for numerous others would hardly lessen the number of conscious taxpayers. Instead, the division of land now held on speculation would greatly increase the number. It would equalize the distribution of wealth. Even the poorest would be raised above abject poverty, while overgrown fortunes would be cut down.
The dangerous classes politically are the very rich and very poor. A person gains interest in government from feeling part of the community and its prosperity. Neither the very rich nor the very poor without an LVT are part of the community.
Also everyone pays rent, either in tax, mortgage interest or rentals. With LVT all rent funds government. Everyone has a stake in government now. What's their point?
D, fair enough, but there's a free market equivalent to that, it's called "trading down" which achieves the same thing.
RS: "Substituting a LVT for numerous others would hardly lessen the number of conscious taxpayers. Instead, the division of land now held on speculation would greatly increase the number."
That is exactly what I was driving at, see 7) and 8).
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