The counter-arguments which the Home-Owner-Ists and Faux Libertarians bring to bear are usually completely without foundation. If not, they focus on such a tiny part of the whole picture as to be meaningless and thus contradict all their other counter-arguments which focus on another tiny part, and so on. So actually it's easier to deal with their nonsense in batches.
So here's today's batch:
1. You Georgists just hate landlords, you are closet Communists who hate those who have achieved something. If you impose LVT, there'll be fewer landlords.
2. You Georgists just hate owner-occupiers because [insert spurious motive, often same as for landlords]. If you impose LVT, there'll be fewer owner-occupiers.
3. LVT is pointless as landlords would just add it to the rent, so tenants would end up worse off. So there'd be fewer tenants.
4. LVT would "force" all owner-occupiers out of their homes, they'd have to sell them for a pittance. If pushed as to where all the former owner-occupiers would live, the Homeys and Faux Lib's claim that they would be "forced" to rent.
5. If tenants don't have to pay LVT, there'll be a massive underclass not paying LVT who will always clamour for tax increases at everybody else's expense.
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They all cancel each other out, don't they?
IF 1 is true, then 2 is not (there's a fixed amount of housing, which has to belong either to landlords or owner-occupiers, if we get fewer landlords we'd get more owner-occupiers and vice versa). If 1 is true then 3 can't be true (either the landlord or the tenant has to bear the tax but not both). If 1 is true, then 4 is not true (why would we propose a system that forces owner-occupiers into landlord's arms?). If 1 is true, then 5 is not (where will this underclass live if there are no landlords any more?)
IF 2 is true, then 1 is not (all housing has to belong to either landlords or owner-occupiers). If 2 is true, then 3 is not (if tenants don't want to rent they'd buy instead, so there'd be more owner-occupiers). If 2 is true, then 4 might be, but if 2 and 4 are true, then 5 can't be (if we want to make owner-occupiers worse off, why give them a get-out-of-jail-free card?)
IF 3 is true, then 1 is not (either the landlord or the tenant has to bear the tax, but not both). If 3 is true then 2 is not (tenants would stop renting and buy instead as that would be cheaper). If 3 is true then 4 is not (LVT can't simultaneously force tenants to become owner-occupiers and force owner-occupiers to become tenants). If 3 is true, then 5 is not (why would tenants clamour for tax increases they have to bear themselves?).
IF 4 is true, then 1 is not (if LVT forces people to rent from landlords who have just snapped up their homes for a pittance, it is pro-landlord, not anti). If 4 is true, then only if 2 is. If 4 is true, then 3 is not (why would owner-occupiers sell up for a pittance just end up paying even more to a landlord?). If 4 is true, then 5 is not (if we hate owner-occupiers, why give them a get-out-of-jail-free card?)
If 5 is true, then 1 or 2 might be (but 1 and 2 rule out 5, as I explained above). If 5 is true, then 3 is not (either the landlord or the tenant has to bear the tax, but not both and certainly not neither). If 5 is true, then 4 is just not a problem (owner-occupiers can shed themselves of the LVT payments by becoming tenants).
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So not only do these Killer Arguments cancel themselves out using pure logic, taken individually, they were all nonsense to start with:
Re 1: Under current rules, the overall tax rate on gross rental income is about forty per cent (council tax and business rates come out of gross rents, the balance is liable to income or corporation tax and repairs are liable to VAT and so on). Under a full-on LVT/CI system, people's disposable incomes before rents would double, so gross rents would double as well and the average tax rate on gross rents would be seventy per cent (zero per cent on the bricks and mortar, hundred per cent on the site rental value). The landlord's net income would be much the same, do the math.
Re 2: If you impose LVT, there would be far more owner-occupiers, because derelict and vacant homes would come back on the market; as would second homes and holiday homes, under-occupied homes etc. It's got to do with marginal utility of consumption. If something is provided free to some people and others have to pay through the nose, the former group will grab as much as they can and the latter will do without - if everybody has to pay the same, then people will just use what they need.
Re 3: Complete hokum. People go along with the delusion that "VAT is added to selling prices" when in fact, based on proper evidence, two-thirds of VAT is swallowed by the producer/supplier in lower margins, because supply is less price-elastic than demand. Seeing as the supply of land is far less price-elastic than VAT-able supplies, the chances are that nearly all the tax would be borne by the landlord.
Re 4: No it wouldn't, because LVT would replace taxes on incomes, profits, output, wages etc. At the margin, those with a high house price-to-income ratio might trade down, but this would enable others with a low house price-to-income ratio to trade up (the exercise being a slightly positive sum game as it will lead to a more efficient allocation of housing). The total number of owner-occupiers would not change. And trading down can be in absolute terms or in relative terms - if the NIMBYs allow more housing to be built where it's needed, their LVT bills will go down, because the owner-occupiers of the new housing will have traded up and will thus be paying a larger share of the total LVT bill.
Re 5: Not true either. By and large, around a tenth of households are private tenants, so there's no question of there being a 'massive' underclass. The LVT bill would be the same whether a home is owner-occupied or tenanted. So either the owner-occupier pays it in full (he cannot pass it on) or the landlord and tenant share it between them somehow. Landlords are free to express rents as a lower net rent + LVT if they so wish. And nobody is forcing the landlord to be a landlord, he can always sell out to the tenant and then the LVT is the new owner's problem.
Twitter, Twatter, Twot
22 minutes ago
5 comments:
I see the Independent have been musing about what Not Red Ed might have been hinting at in his speech today - I say musing, they might of course have received some behind the scenes briefing about what Not Red Ed specifically didn't say in his speech but what he has in mind - and the published text of the speech doesn't appear to contain any specific references to what the Indie says he "had in mind" ...
"The "squeezed middle" championed by Mr Miliband would not face higher taxes, which would be targeted on the highest earners. Rather than extend the 50p top tax rate, Labour might impose a new property tax, which would be harder to evade.
One option would be similar to the mansion tax on homes worth more than £2m which was advocated by the Liberal Democrats at the last election. Although they have pressed it recently inside the Coalition, David Cameron and George Osborne are not keen and the Government looks unlikely to adopt it – leaving the field clear for Labour."
Labour edging towards being non home ownerist ? Believable ? What next, a commitment to build much more social housing ? How many such commitments between 1997 and 2010 with what outcome ?
Anon 14.37, I read that in the ES just now.
Don't worry, there are two mutually exclusive groups of politicians: those who propose MT and those who are in government*. Once Labour got booted out, they were all falling over themselves to propose MT or LVT or similar. And if and when they get back in, they'll forget all about it.
* Clegg & Cable are exceptions who prove the rule.
Yes _ I had picked up the ES piece too - and had a glance at the comments on it just to make sure the "traditional" 'it would be a totally unfair outrage if such a tax was introduced' ones were fairly represented, and thankfully they are, even one which posits that the idea is a bad one because it might work!
"None of you (at time of adding this comment) have considered how this will effect the elderly, who, in many cases, only have the property they live in as any sort of investment. Someone over retirement age has worked and paid taxes all their lives, paid their mortgage off and have only just been able to relax after keeping greedy MPs and many hangers-oners in the coseted life they "expect". What are they going to do? Sell up and move, thus losing the prospect of leaving some money to their children so that they can buy a home of their own? It's a disgusting idea and should be very loudly dropped immediately.
- Rod, Epping, UK, 11/01/2012 13:47
This is a very silly and impractical idea. Taxes are levied on a financial transaction when the value of the assets concerned can be precisely ascertained. A house is like anything else - it is worth what a buyer will pay. So how do you determine the value of houses around the £1,000,000 band given that markets fluctuate all the time? The majority of levies will be challenged in court and HMRC will spend more in litigating the matter than the tax raised. This is further proof that Ed Miliband is not up to the job.
- Ian, London - UK, 11/01/2012 12:40
This is one of Red Ken's ideas.
He has always been in favor of raising taxes and he would love this one.
Think of all those socialists like Red Ed And Balls paying the tax on there million pound houses in Muswell Hill.
Red Ken would have so much money to spend Lee Jasper's salary would be 1.25 million a year.
and Mrs Red Ken well she would be worth at least that.
Yep that's the Labour party for you , every brilliant think tank idea just happens to be more and more taxes.
RED KEN WILL RAISE YOUR TAXES
- The Pigeons, Muzzers, 11/01/2012 12:25
Another tax on incentive.
The HMRC have become the arbiters of social mobility in this country.
Are you eating in or taking away ?
- Hansel, London, 11/01/2012 12:23
I think a mansion tax is crazy. Will this be as well as Stamp Duty? It annoys the hell out of me that by working hard, saving hard and being careful with money to afford a nice home that we're then facing the prospect of having to pay more tax. Let's hope this doesn't come into play.
- Adboy1, London, 11/01/2012 12:07
Anon, it's the usual KLNs, isn't it? I'm sure I've batted all those away over the last couple of years.
I was reading the article "2011 Land Report 100" ("America's 100 largest landowners" here: http://www.landreport.com/americas-100-largest-landowners/ ) -- for entertainment only! -- and was flabbergasted that #1 on the list owned 2.2 million acres. That's over 3400 square miles, which is bigger than the state of Delaware. And Ted Turner has nearly as big an area.
Of course, land area isn't equal to land value, but even going down to the Robinson family (#90 on the list), they own a 103,000 acre private Hawaiian island (Ni'ihau). An LVT would be a nice way to return some of the community-generated value now given to these families back to the community.
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