Thursday, 13 October 2011

Killer Arguments Against LVT, Not (167)

A letter writer in the FT adopts a typical Home-Owner-Ist tactic of being an insufferable know-it-all who deliberately misrepresents what LVT is all about (or is possibly so stupid that they don't understand the difference between "annual rental value" on the one hand and "construction operations" or "transactions" on the other), thus forcing people like me to waste time debunking their crap:

Sir, I refer to the article by Nicholas Boles proposing a land tax (It sounds bonkers but we should embrace a land tax, September 30) and Geoff Copeland’s letter (October 6) giving further support.

They are too late! There are already six such taxes. They are as follows: business rates (when occupying or even not occupying a property) (1), stamp duty land tax (when purchasing) (2), Section 106 payments (when building on the land) (3), the community infrastructure levy (also when building) (4), corporation tax or income tax (on rental income)(5) and capital gains tax (when selling the land).(6)

How many more taxes are they proposing?

Clifford Lawrence, London SW1, UK

(2) and (6) are taxes on transactions, they are bad taxes as they discourage efficient use of land and are easily avoided (by simply not buying or selling), they are a random percentage of the price paid, and the price paid in turn relates to the purchaser's estimate of the NPV of the future rental value of any buildings or improvements on the site (minus any development costs). They are a million miles from LVT.

(3) and (4) are even worse, as these taxes are only incurred when a site is being developed, they discourage development (and when it's finished, it's usually sold, triggering Stamp Duty Land Tax, bleurgh). And he missed off the obligation for residential developers to sell off 'affordable housing' which is another kind of tax. For sure, the amount that the local council can cream off is vaguely related to the capitalised rental value, but apart from that they are about two million miles from LVT.

Nick Boles did not go into infinite detail in his original article, but it is quite clear that these four taxes would be among those to be replaced: "... [land value] tax would deter speculative land banks and would encourage property owners to develop brownfield sites and put rundown areas of inner cities back to good use."

(5) Income tax and corporation tax are general taxes on all income, and are only paid if land and buildings are being rented out (but a business tenant claims equal and opposite tax relief); there is no charge for owner-occupation and nothing if they are empty. For sure, imputed rents of owner-occupier businesses are included in taxable profits as well, but income and corporation tax are at least three million miles from LVT.

(1) Business Rates is the tax that comes closest to LVT, as it is an annual tax based on the annual rental value of commercial land and buildings (payable whether occupied or not, by and large), but
a) it does not differentiate between the buildings and the site itself instead of just taxing the site rental value and
b) is NOT applied to derelict or undeveloped sites, so that in itself discourages development (although when Labour reduced exemptions for empty premises in 2008 or thereabouts. occupancy rates of existing buildings went up, as we would expect).

(7) Mr Boles had this to say on Business Rates: "If we were to implement [LVT] in the UK, it would need to be deductible from business rates so that struggling retailers and other firms were not faced with a devastating double whammy – and it might in time replace business rates altogether" which seems very sensible to me. Mr Boles is a proper Tory MP, for Heaven's sake, his whole article explains that his version of LVT would be a replacement tax, and he also names Employer's National Insurance as a Bad Tax which LVT receipts could be used to reduce.


Anonymous said...

Thought I'd do a little bit of debunking myself.
In the USA where property tax is applied, homes are being "confiscated" because the "owners", for various reasons, are unable to meet the property tax bill, these are people who have repaid their mortgages in full but, having fallen upon hard times, no longer have the money to feed and clothe themselves, let alone pay properety taxes.
If property tax, which is based on land value, is levied in the UK "confiscations" will become a daily occurance.
That my friend is what you and your commie lackeys and pedantic spell checkers intend - as a "social bonus".

Anonymous said...

adopts a typical Home-Owner-Ist tactic of being an insufferable know-it-all

Sounds like most LVT'ers to me...

Bayard said...

"In the USA where property tax is applied, homes are being "confiscated" because the "owners", for various reasons, are unable to meet the property tax bill,"

Do you have any evidence for this? or to demonstrate that the properties in question were actually confiscated and not subject to a forced sale, with the owners allowed to keep the balance? or to demonstrate, as you imply, that the property was "confiscated" in advance of other assets like a car? How does this differ from the state forcing a sale of property to cover unpaid arrears of income tax? or any creditor forcing a sale of property?

Richard Allan said...

The last one was #166, this is #167.

Mark Wadsworth said...

Comrade F, whereas you in the SRF just confiscate people's income to support the lifestyles of the self-selected éilte, to which you imagine you belong. Same old, same old.

Anon, ah yes, but I actually do know it all. For example, I know the difference between "land rents" and "transactions" or "construction work", which Mr Lawrence certainly does not and which seems fairly fundamental to me.

B, good points, as ever.

Of course, it is quite clear that there will be no actual evictions involved (not under my system, just as there aren't in the USA or anywhere else, despite Comrade F's attempts to spout anti-American propaganda).

All that happens is that the LVT is deducted from people's CI as a matter of routine, and any surplus is collected out of people's income, via PAYE codes (or out of notional interest income, just like means-testing as in the UK).

The only question remaining is whether that should be capped at 60% or 80% or 100% of people's income? I'm tending towards 60%.

RA, touché, I have amended.

Anonymous said...

MW also knows that when land reclamation takes place it's not really land, it's something on top of water, if the infil for such reclamation was "transported" as spoil from a major motorway construction site, it hasn't really been transported it just appeared there - I refer to the Solent North Marina complex and the M27 motorwya.

Mark Wadsworth said...

Anon, I have always said that land which has been reclaimed is, er, land. Where have I ever said anything else? So what's your point? Is reclaimed land land or not land? A pier is built on land, for example.

Here's a clue-bat, LVT actually means "LOCATION value tax". "Land" is a slight misnomer.

"If the infil for such reclamation was "transported" as spoil from a major motorway construction site, it hasn't really been transported it just appeared there"

This is a good example of Homey and Faux Lib propaganda. There is no lie, distortion or contradiction to which they will not stoop, and why it is impossible having a sensible discussion with them. And they are incapable of distinguishing between LOCATION and IMPROVEMENTS.

I gave Anon the counter example of somebody IMPROVING his land by digging a canal or a swimming pool, i.e. by digging up and CARRYING AWAY rocks and soil. This is the opposite of his Marina example, where somebody IMPROVES the land by building piers with rocks and soil. But the locations are unchanged.

But of course, Anon was too stupid to get the point, or he was clever enough to get the point and then just completely ignore it.

Bayard said...

Anon, are you referring to Port Solent?

Mark Wadsworth said...

B, no, I think he means Port Sonelt.

Anonymous said...

You two are so funny.
Ah! Spel Cehcker raises his head once more egged on by the arch commie MW
I'm not your teacher Bayard, I rely upon my own research and so should you.
A good place to start would be:
Then, you're on your own.

Mark Wadsworth said...

Comrade F, those are the US rules and of no relevance to this discussion whatsoever.

And unless you can explain to me why fines for non-payment of LVT should be different to fines for evasion of income tax, VAT etc, I fail to see what point you are trying to make.

As B pointed out, if you evade income tax and they catch you, they can sell off your assets, including your house, to pay for it. What's the big deal?

Anyways, you have kept us entertained for a while with your Soviet ranting, but you are now on notice: keep it relevant and polite or your comments will be deleted, end of.

Bayard said...

"I'm not your teacher Bayard, I rely upon my own research and so should you."

WTF? How do you think I found out about Port Solent, except by doing a little research. One thing, however, that research will not tell me, is what is in your head. You may think you know what's in other people's heads ("MW also knows that .." above), but I don't profess to such knowledge. Since the Marina I found was called Port Solent and you were talking about a "Solent North Marina", it does seem reasonable of me to check if we are looking at one and the same thing.

Mark Wadsworth said...

B, I think we ought to wait patiently until he answers our questions.

Comrade F has pointed out that in theory, people can be fined or even evicted for non-payment, but has yet to give any real life examples of somebody to whom that has happened, and then to compare and contrast that with the number of people who have taxes deducted directly from their income by force.

Anonymous said...

Land with water on it confuses people. The waters around a country has land under it. Putting a structure on stilts in the Irish Sea, inside territorial waters, is still on the nations land, so subject to taxes, preferably LVT. :)

In Liverpool Docks, there are some permanent floating structures and proposals for homes on floating structures. These are on land with a layer of water between.

John said...

Mark Wadsworth said...

Here's a clue-bat, LVT actually means "LOCATION value tax". "Land" is a slight misnomer."

That is more accurate.

LVT is not a tax it is RECLAIMING community created wealth. Community activity, private & public, creates economic growth. The growth soaks into the land crystalizing as LAND "VALUES". The value is RECLAIMED to pay for public services. Land Value Tax should be termed Location Value Reclaim. It cannot be avoided. LAND cannot be taken off-shore

I have never been comfortable with Land Value TAX!. The TAX bit especially. The term is not accurate.

LAND - is interpreted by many as "all" land pays the same tax.
VALUE - is accurate. The current value of the land.
TAX - A tax it clearly is not.


LOCATION - is more accurate and specific. You pay relating the land to its location.

VALUE - is accurate. The current value of the land.

RECLAIM - is accurate. Community activity, private & public, creates economic growth, not the landowner. The growth soaks into the land crystalizing as LAND "VALUES". The value is RECLAIMED to pay for public services.

To sell LVT it has to be "immediately" understood by the uninitiated and changing the title is the first step.

It must not be termed as tax. Otherwise it will be regarded as just another tax - the reason it was taken off the books in Denmark 50 years ago.

Mark Wadsworth said...

John, we can call it what we like, the Homeys will hate it.

John said...

Mark, LVT is so simple. But people have been conditioned into a narrow form of thinking. Many can't grasp it - yet it is so simple.

It is not taking away anything from anybody.

The first step is get the name more accurate and reflective of what it is and does. The word TAX is emotive. take it away as it is NOT a tax.

> "...private ownership PLUS LVT..."

> Should not we be more precise than
> this? For example "Security of (private)
> tenure in return for LVT"

Tenure. Definition:
"the holding of property, especially real property, of a superior in return for
services to be rendered."

"return for services to be rendered".

Well, many view LVT as:

1. Reclaiming community created value - which soaks into the land. Which is correct.

2. A levy for the privilege for occupying commonly owned land.

Both are correct. But! Which is the best way of selling it to the public at large. I would say No. 1. No. 2 will be viewed as charging people for land which they perceive THEY already own. The Title of the land is only a set of rights, NOT ownership. The Queen (that is really all of us) owns all the land.

Another point is that the average owner/occupier would be far better off using LVT (the SINGLE TAX, no income tax). Simple studies show that all revenue can be obtained via taxing land values (or reclaiming community created value). Land Values do not slump under LVT (a fear of the the owner/occupier ignorant) - it never in Denmark as it promoted enterprise and demand for land. These points needs to be rammed home. The average person will be far better off initially and in the medium and long term.

Mark Wadsworth said...

John, yes, agreed to all that. I've just done a post on paper currencies, plastic tokens which applies just as well to land values.

All it would require is for the government to e.g. abolish some or all existing taxes, work out the relative rental values of all plots of privately owned/occupied land and work out how many tokens are payable for each plot and thus how many tokens will be collected each month, call it a five billion for sake of argument.

Each adult is then given 1,000 tokens each month (their Citizen's Dividend). If you own/occupy land which cost less than 1,000 tokens a month, you have a surplus, which you can sell or swap (or use in part payment in the shops) etc, and if you own/occupy land which costs more than 1,000 tokens a month, you have to buy up other people's surplus tokens.

So it all evens out, the market will set a value for the tokens and it requires little further government involvement apart from assessing, collecting and issuing the tokens.

Of course, the government would have to issue some of the tokens to people providing the core functions of the state, so the Citizen's Income might be only 800 or 900 tokens a month, but that just means that people with a shortfall of tokens have to buy some from policemen, nurses, street sweepers etc, who will nearly all have a surplus.

John said...

Mark, can't one token be called just a pound and just use normal money:)

The idea is nice, but I see a black market and skullduggery in tokens.

It needs more thinking through.

John said...

I laugh when I read this sort post....

"If property tax, which is based on land value, is levied in the UK "confiscations" will become a daily occurance.
That my friend is what you and your commie lackeys and pedantic spell checkers intend - as a "social bonus".

"commie lackeys" Hilarious!

In promoting LVT I have been called a Marxists, to a screaming right-wing Libertarian and all between. :)

To this confused posters point....
The reason why these people are losing their homes was because debt after debt was poured into LAND because the gains were tax free. This distorted the market and it crashed, as in 1929 and 2008.

Speculation in LAND was the prime cause.

LVT would make speculation and LAND and RESOURCES benign. Hence no world-wide financial crashes and people not being turned out of their homes.

Mark Wadsworth said...

John, of course in practice, we'd just call a token £1 and have done with it, which enables the receipts/payments system to be done electronically and so on.

But it's the same principle, and it's not as if there is no black market or skulduggery with banks and so on.

I have long been saying that land ownership is privatised tax/welfare collection - the fact that the cash payments are from private-to-private rather than private-government-private does not stop land ownership from being a tax/welfare system (albeit a terribly bad one).

With a token based tax system, the government wouldn't actually need to account for the £-s-d payments between private individuals with a surplus or deficit of tokens, but that doesn't stop it being a tax/welfare system either (albeit a much better one if the tax were on location values and the welfare payments flat rate and universal).