Killer Arguments Against LVT, Not (195)

Pogo, in the comments to a recent post:

@Mark... Of course I don't think that council tax covers all council expenditure - I thought that it was about 25% not 10%. However, it's rationale is that it's "paying for services rendered"..

"The government and society in general provide services, landowners consume them."

Bollocks! People consume services. My garden, for instance, consumes nothing supplied by the council, neither does my house. The people living in it are the consumers. I fear that you let your, somewhat irrational fanaticism for LVT cloud your view of reality at times.

Perhaps I phrased that a bit clumsily, strictly speaking I should have said "The government and society in general rental values, landowners enjoy or collect them, and even they do neither, they deprive others of them."

1. I'm not irrational. It's the topsy turvy world of Home-Owner-Ism, where borrowing counts as saving and where income counts as expenditure, which is irrational. Or, as I'll illustrate, where customers demand services for free (or below cost) and where shareholders are forced to pay. I know simple analogies are usually wasted on the Homeys, but here we go...

2. A quoted plc sell goods and services to its customers; it makes a profit on that activity and then distributes the profits as dividends to its shareholders. Those dividends which the shareholders receive are not in exchange for "providing a service", they are a one-sided payment in exchange for nothing apart from the shareholder being a shareholder.

3. Each company does what it does best, making shoes, printing newspapers, developing new medicines, whatever; it tries to maximise its profits, and the more it does so, the wealthier are its shareholders. The shareholders want the company to sell its goods and services for their profit maximising price and want to receive the maximum in dividends.

4. Now, let's apply the same logic by treating a "state" as a quoted plc. There is only one thing that "states" do particularly well, that is to have armies, police forces, land registries and a legal system, in other words, to monopolise force. They are rubbish at most other things. That's all "a state" needs to do.

5. A "state" is a semi-voluntary kind of corporation; everybody who lives in the land area controlled by that state is a part-owner or shareholder, the only way to opt out is to emigrate, but let's gloss over that. So every citizen owns a share in "the state" where he lives and for which he has a passport etc.

6. Now, having an army and a police force costs money, but what sort of revenues do "states" or the existence thereof generate? Land rents of course! If there is complete anarchy, there are no land rents whatsoever; by having law and order, rental values rise and rental values can be collected - question is, by whom? Is there any reason why "the state", on behalf of its shareholders/citizens shouldn't charge market value for generating those rents, rather than providing those services free to the land owners and allowing the land owners to collect them; and then forcing the shareholders to pay for the running costs?

7. We see with a quoted plc that the customers are expected to pay for what they get (shoes, newspapers, medicines) and then the shareholders receive dividends. In my view, exactly the same principle should apply to "the state". Think about it, if you want to become an owner-occupier or landlord in a civilised country, you hand over cash, fill in some forms and hey presto, you're away. Now try becoming a landlord in a failed state like Afghanistan or Somalia, you just can't do it. Without a well functioning state, there is no land ownership.

8. So our "state" provides one main service, which is generating land rents (defence and law and order are subsidiary to that); and it ought to charge the profit maximising price (close to 100% of land rents, i.e. Land Value Tax) for that service. It spends what it needs to spend on the core functions (defence, law and order, land registry), and then it dishes out the (huge) surplus as dividends (or a "Citizen's Dividend").

9. For sure, there are things like public goods like roads or education which are not strictly speaking in the remit of "the state", but if it can spend £1 and boost rental values by £2, it is money well spent. So some of the money available for dividends is reinvested rather than being paid out. A landlord would still be a landlord if the walls are getting a bit grubby and the carpets are fading, he doesn't pay for redecoration and new carpets out of the goodness of his heart or for the benefit of his tenants, he does it because every £1 spent on redecoration or new carpets boosts his rental income by £2.

10. When the state pays for roads or education, it is not providing services to its shareholders, it is either paying dividends or investing for the benefit of landowners. The services, or the value thereof, accrue to its ultimate customers, the land owners. There is no earthly reason why people should pay to attend a school, seeing as they are already being deprived of the cash alternative (vouchers for schools) or to pay toll charges to use public roads (fuel duty is a rationing measure only because we don't have nearly enough roads to meet what demand would be if petrol were cheaper).

11. So for land owners to wail that citizens should be forced to pay for the cash cost of services provided (via, basically, a Poll Tax or income tax) in order that the land owners can bank the value of the services they receive for a lower price (or preferably free) is, to quote Pogo, "irrational". That's a bit like BMW customers saying that they should be given the cars for free and that BMW's shareholders should pay BMW for the privilege of being shareholders.