I'll leave the last word on The Budget to Dick Puddlecote and move on to more pressing matters.
1. Khards over at HPC (which seems to be defunct at the time of writing) said he'd mentioned LVT to his colleagues, and one of the rhetorical questions put to him, was: "Ah yes, but what about a high earner foreign couple who are over here to earn as much as they can, live in a small flat and want to return home again in a couple of years? Is it 'fair' that they get away with paying less tax than a single earner family in a 'modest' house with a garden, where mum stays at home with the kids?"
Answer: it's a trick question, because it is a diagonal comparison (notwithstanding the Child Benefit which the family gets and the two-earner couple doesn't, which evens things out).
The reply is: if there are two high earner foreign couples and one lives in a big house and the other in a small flat, is it fair that the couple which occupies more land, which is a scarce resource (in an economic rather than a literal sense) pays more? Yes.
And if there are two single-earner families, one of them can only afford a small flat and has to take the kids to the park to play, and the other can afford a 'modest' house with a garden, is it 'fair' that the wealthier couple pays more? Yes.
2. Another common diagonal comparison is: "What about a pensioner couple who've paid taxes all their life, if there are four young people sharing the house next door using twice as much local services. Why shouldn't the four young people pay twice as much?"
Bullshit. Why not compare four young people who can only afford a house-share with a two-earner couple next door who can afford a house to themselves? The four sharers are prepared to put up with the aggro of sharing so that they can benefit from sharing the rent, the utilities etc. Sharing is usually not a choice, it's a necessity. If the two-earner couple can afford a house to themselves, that's their choice and good luck to them; they are always welcome to take in two paying lodgers if they want to pay less tax and have more money to spend on cars or holidays.
And why not compare a pensioner couple with a large house to themselves with a pensioner couple in a small flat? Why is it 'unfair' for the pensioner couple in the large house to pay more than the pensioner couple in the small flat?
3. Then the diagonal comparisons are taken to extremes: "What about a Poor Widow In A Mansion who bought the house for 12'6 back in the 1940s; why should she pay more tax than a millionaire who lives in a bedsit? That gain is only on paper, she doesn't have a cash income to pay the tax."
Nope. Let's do a proper comparison. Why shouldn't the Poor Widow, who has struck property gold and won the lottery of life and who can bank her winnings any time and still afford somewhere nice with enough money left over to pay the tax for the rest of her life, pay more than a genuinely Poor Widow [whose husband was a coal miner and died of lung disease twenty years ago etc] who still lives in a back-to-back that's barely beaten inflation since the 1940s?
Apart from the fact that there are very few millionaires who live in bedsits (with or without LVT, you can save a lot of money by trading down from a swanky home into a bedsit - how many of them do?), if one millionaire really chooses to live in a bed sit to save money and another millionaire wants to live in a nice house, why is it so terrible if the millionaire in the bedsit pays less tax? If you are going to argue that both millionaires 'should' pay the same amount of tax, then you might as well argue that non-smokers ought to cough up a few hundred quid tobacco duty every year, or that teetotallers should pay a few hundred quid alcohol duty.
4. The Homeys then usually take the "millionaire in a bedsit" example to extremes and say that all millionaires would trade down and so the tax base would collapse. Well, apart from the fact it wouldn't happen (or else why don't millionaires buy a second hand banger for £1,000 instead of a Bentley for £100,000, which includes about £50,000 in embedded taxes?), so what if they did? If everybody sold their second homes and holiday homes, if all empty homes came onto the market, then the price of housing will fall until somebody else is willing to buy them; and the people most likely to buy them are people who want to actually live in them (or buy them to rent out to somebody who wants to live in it).
So what is the net impact of all this? Very little indeed. At the moment, we've got twenty-six million homes and twenty-six million households to live in them; once everybody has sold up for as much as they can get and moved out, prices will - by definition - fall to a level where everybody can promptly afford to move back in again because it's so cheap, then we'd have twenty-six million homes with, er, twenty-six million households living in them.
Of course, in the highly unrealistic scenario that everybody flatly refused to pay more than a bare minimum of LVT and desperately tried to trade down, take in lodgers, stay living with their parents etc, then yes, LVT revenues would fall, but so would the price of housing (the two move in tandem). Those are Good Things, not Bad Things!!
That would reduce the cost of living enormously and we'd hardly need a welfare system or the taxes to pay for it; because people would have enough money left over from their wages (after paying a small amount for buying a home and LVT) to pay to send their children to school; to take out their own medical insurance, unemployment insurance, to save up for their old age etc.
Don't forget, even if the selling price or rents of all the housing in Wales or the north of England fell so low that the corresponding LVT revenues were +/- £nil, there will always be enough people prepared to pay £5,000 a year more than £nil to live in or near London or in the south west (I know that I certainly would, as would millions of others).
Even if the tax raised from houses in the rough part of town were +/- £nil, people will always be happy to pay £1,000 a year more than £nil to have a house overlooking the park, nearer the station or near the best school (again, I know that I certainly would, as would millions of others), with a gradient in between, so the tax will always average out at a couple of thousand pounds a year per household.
This - together with Business Rates, which disproves the 'collapsing revenues' theory anyway - would still be quite enough tax revenue to pay for the core functions of the state, which are a laughable one-tenth or so of total current government spending, and everybody else can live their lives free of any sort of publicly or privately collected taxes.
Win-win!
Wednesday, 21 March 2012
Killer Arguments Against LVT, Not (205)
My latest blogpost: Killer Arguments Against LVT, Not (205)Tweet this! Posted by Mark Wadsworth at 21:56
Labels: KLN, Land Value Tax, Logic
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26 comments:
Your desparate answer to point 3 illustrates one of the major flaws in your pro-LVT argument. You simply have not answered it, all you have done is deflect a point that you know undermines your cause by claiming the questioner asked the wrong question.
It might be that few if any millionaires live in bedsits, I don't know and nor do you. But the question asked whether it is fair that someone without disposable cash with which to pay tax should be taxed as heavily as someone with disposable cash.
It is a point you used to answer by saying the land-rich but cash-poor person could charged their tax liability against their home. Later, when you realised that your first answer persuaded very few, you switched to suggesting an exemption for pensioners.
Given that your whole case is supposedly based on principle (although I cannot be sure what the principle is), any concessions are admissions that the principle is unsound.
So now you have turned to deflection by setting up an argument and answering it by saying the question is the wrong question (despite it being set by you).
You do even more damage to your case in your point 4. You describe as "highly unrealistic" the prospect of people trading-down, taking lodgers or remaining living with their parents to avoid LVT, yet these are all things you have previously argued to be necessary consequences of LVT in order for LVT to extinguish the bubble element of house prices.
Indeed, you have gone further in previous posts and have argued that the cash-poor occupying homes with more bedrooms than they need should take lodgers and that LVT should be set at a rate they can afford only by doing so. Yet now you claim it is "highly unrealistic" that they would do so, which necessarily means they would have to trade down, which you also say is "highly unrealistic".
205 reasons against LVT and, I suspect, more to come.
Yes but the mansion is only a mansion in name. Our poor widow is still having to make to with an outside bog and a tin bath in the kitchen.
Seriously, have you noticed that old widows suddenly no longer matter?
Yes but the mansion is only a mansion in name. Our poor widow is still having to make to with an outside bog and a tin bath in the kitchen.
Seriously, have you noticed that old widows suddenly no longer matter?
All of this debate seems to rely on the assumption that all taxes are equally justifiable and equally economically damaging. (See Moral Maze last night on R4) so they argue that what matters is the volume of taxes paid rather than the nature of the taxes paid.
The key is that if high earners really are EARNING then they deserve those earnings, the trick is to make sure they have to earn rather than collect windfalls, exploit monopolies, etc.
If high earners choose to consume less land and property than "average" then they are doing everyone else a favour by directly giving others more space and lowering the cost of housing for everyone. Equally if they then spend more of their disposable income on goods and services rather than land, then they are further enhancing the local community.
Contrast this with current model of the state having to get involved to force the high earners to give up their earnings and then try to patch up the community - value which ultimately ends up back with the land owners.
TFB: the question asked whether it is fair that someone without disposable cash with which to pay tax should be taxed as heavily as someone with disposable cash.
The answer to that is yes, as LVT is a user charge for consumption [of public goods]. Your entitlement to public goods does not increase merely because you have no cash. That'd be like saying "Tobacco duty is a tax on consumption of tobacco but if you have no money you get free cigarettes".
"Later, when you realised that your first answer persuaded very few, you switched to suggesting an exemption for pensioners."
Yes, I have often suggested that as a political compromise. It's up to you whether you want a good tax with a compromise or shit taxes like income tax or corporation tax where the only principle is "We levy it because we can get away with it" and which is full of all sorts of compromises, loopholes.
A more principled compromise is to ask the Poor Widow's appointed heirs to pay the tax or to defer it with interest.
"you have turned to deflection by setting up an argument and answering it by saying the question is the wrong question (despite it being set by you)."
Now you are doing something called "deliberately lying", you know (or must know if you have taken the slightest interest in the matter) that any discussion about LVT soon descends into comparisons between poor widows in mansions and groups of sharers next door/millionaires in bedsits etc. It's the Home-Owner-ists who always make these false comparisons.
You yourself once came burbling along with "A Poor Widow In who owns prime retail premises who keeps her husband's watch repair shop going" and said that it would be unfair to make her pay as much Business Rates as the successsful shop next door.
"you... have argued that the cash-poor occupying homes with more bedrooms than they need should take lodgers"
I don't say 'should'. The Homeys, authoritarians, meddlers and Socialists say "should". I merely pointed out that as a matter of fact they "could".
"Yet now you claim it is "highly unrealistic" that they would do so"
Again, you're lying deliberately. I pointed out that most millionaires live in nice big homes. I said it was unlikely that millionaires would trade down.
You must understand, if the only way you think you can defeat my perfectly valid arguments is by deliberately lying (I doubt whether you are so stupid that you genuinely can't understand the short text presented), then that is yet more evidence that there simply are not any valid arguments against Land Value Tax.
You have never come up with one that did not include half-a-dozen deliberate lies.
Phys, I know, but once she sells her £5 million Chelsea hovel, she'll be able to buy herself somewhere really nice.
QP, Home-Owner-Ists don't have morals, see for example TFB above for whom 'truth' is merely one of several alternatives.
"What about a pensioner couple who've paid taxes all their life, if there are four young people sharing the house next door using twice as much local services. Why shouldn't the four young people pay twice as much?"
Bullshit. The young people are not using twice as much local services. Apart from the overall services, like police, roads or fire brigades, which have to be provided regardless and which one person thus "consumes" as much as ten would, the pensioners "consume" far more as they are far more likely to fall ill, need care services, need an ambulance etc.
"But the question asked whether it is fair that someone without disposable cash with which to pay tax should be taxed as heavily as someone with disposable cash. "
No it didn't. Nowhere in the question is it stated that the millionaire has any disposable cash whatsoever. His millions might be entirely locked up in Old Masters, and vintage cars, for all we know.
It might be that few if any millionaires live in bedsits, I don't know and nor do you.
Anectode: In Norway, every early summer information on income, taxes paid and net wealth from last years tax returns on all persons are available online for everyone, including the press to see. I remember one of last year's news stories, "millionare builder chooses to live in flat in working class neighbourhood", with interviews of him, neighbours, and feature article about the borough in question. Statistics are freely available, and by far, there is overwhelming evidence that income/wealth corresponds with land/value in the area.
B, good point. We note that TFB did his usual barrister's trick of ignoring the question and deliberately misrepresenting what his opponent says. We note also that in no way did he attempt to explain why diagonal comparisons are in any way meaningful or helpful.
Kj, excellent. But remember that the Homeys and Faux Lib's aren't interested in facts or logic. They will seize on the few exceptions (like the millionaire builder) and say this is proof that it would be wrong for the nation to raise revenue by levying a user charge on the consumption of national resources.
Consumption is the word. As of now, "The Rich" benefit from taxpayer subsidised land-value gains (and corporate subsidies), as persons they don't place a larger burden on public budgets, so if you remove the subsidies, there is no moral reason why that builder needs to pay any more user fees than from what he consumes. Quite the contrary, most publicly provided goods are duplicated by private expenditure in the higher income brackets (health expenditure is one prominent example).
Ah yes, but what about a high earner foreign couple who are over here to earn as much as they can, live in a small flat and want to return home again in a couple of years?
The more realistic scenario, which occurs now, is the foreign (polish come to mind) worker who earns f-all compared to domestic workers, lives in a hole together with 12 mates, and still manages to send home a decent saving. I'm of the persuasion that this person deserves whatever he can honestly earn, but maybe I'm a softie for it.
Kj, the Homeys will say that you are worse than a softie. You are actually a Communist if you think it is a good idea to allow Polish workers to keep all their earned income and to plunder the windfall gains of Poor Widows In Mansions.
«Why shouldn't the Poor Widow, who has struck property gold and won the lottery of life and who can bank her winnings any time and still afford somewhere nice with enough money left over to pay the tax for the rest of her life,» «plunder the windfall gains of Poor Widows In Mansions.»
Ahhh but Poor Widows In Mansions are just a propaganda device, that's just hypocritical making excuses.
The whole LVT debate is about the HEIRS of Poor Widows In Mansions, who want to get the mansions and the enormous windfall capital gains without any risk, and ideally without any tax.
Just like the whole care-in-old-age debate is also about preserving the mansions and enormous windfall capital gains for the HEIRS, not the Poor Widows In Mansions.
Other than that, Poor Widows In Mansions have downsized and/or taken in lodgers for at least several centuries...
Blissex: "The whole LVT debate is about the HEIRS of Poor Widows In Mansions, who want to get the mansions and the enormous windfall capital gains without any risk, and ideally without any tax."
The Homeys already have their counter-propaganda in place, I'm afraid:
The likes of Kirsty Allslop primarily and selflessly want to "allow the elderly and vulnerable to stay in their homes with all those cherished memories".
She does NOT hate mansion tax or inheritance tax because it would deplete her inheritance, oh no, she does it because she in turn selflessly and nobly wants to "pass something on to her own children" and "keep hard earned wealth in the family".
The fact that huge windfall gains will continue to accrue to her is entirely coincidental and do not colour her judgment in the slightest.
PS, your comment went to spam, try using a different profile!
«Quite the contrary, most publicly provided goods are duplicated by private expenditure in the higher income brackets (health expenditure is one prominent example).»
That's not right, because what public health provides largely is insurance: that even if you lose your fortune and cannot afford any «private expenditure» you still get a no-frills level of health care.
The same for schools: if your business fails and you become bankrupt and can no longer pay Harrow fees, your children still can go to school, and have a (much smaller) chance of going to University, even if it is not going to be Oxbridge.
Because public services are for anybody, even the formerly rich, even those with a "nice" accent. That level of insurance against becoming too poor to afford private health and private education is more or less priceless, even for the currently high income or wealthy rich.
In France, there's a system whereby someone with capital pays the living costs of an elderly person living in a home until they die and then they get the property.
Problem already solved (unless you like the idea of inter-generational rent-seeking).
BTW I know at least a couple of Young Gentlemen or Ladies in their 30s who are just whiling away the time until the (not really) Poor Widows In Mansion who are their mothers or grandmothers finally leave them the 2-to-4 central London or posh suburb flats or houses that they are entitled to, with the consequent lifestyle of a Person Of Quality befitting a property rentier...
Bliss, I had to retrieve your second comment from spam as well.
I don't think that you and Kj are disagreeing, you're talking about two separate things.
SB, I am reliably informed that the French have "no respect for private property" and are all Communists.
Clearly, it is a core duty of the state to protect "private property" by paying for the care home fees of old people with nice houses. It's not quite clear how the government manages to raise the taxes without in turn plundering somebody else's private property, but hey, Home-Owner-Ists only ever look at half the equation.
«someone with capital pays the living costs of an elderly person living in a home until they die and then they get the property.»
That has been proposed here, as a way to release equity in the Mansions to "allow the elderly and vulnerable to stay in their homes with all those cherished memories".
But as we all know the issue is not letting the Poor Widows stay in their Mansions, but inheritance, and ideally tax-free inheritance.
«Problem already solved (unless you like the idea of inter-generational rent-seeking).»
Well, isn't that the definition of the traditional British Way Of Life?
More narrowly, isn't «rent-seeking» and particularly «inter-generational rent-seeking» the main culture of the Telegraph/Mail readership, who indeed are traditionalists?
Sorry about the spam. I suspect that your spam filter matches "sex" in Blissex (which is indeed the name of a Star Wars weapon designer). Also, from the posting side there is no indication that my comments are being held as spam. Note: Blogspot/Blogger seem to have some slightly weird comment behaviour in general.
That level of insurance against becoming too poor to afford private health and private education is more or less priceless, even for the currently high income or wealthy rich.
That's true, having a fall-back level of services is certainly a risk-reducer for the rich. But what is priceless insurance for the rich doesn't represent an extra per-capita cost for the public(or significant savings either, since the maybe 5% who would fly off to the US for surgery, or send their kids to private school, are after all just 5%). And in the instances where a clear difference in public provision is provided (more security, nicer streets) that's reflected in an LVT.
Blissex, maybe Blogger doesn't like ClaimID and sticks them into spam for that reason? Apart from that, agreed.
Kj, yes agreed, as usual :-)
Unlike TFG, I think Mark made one of the better arguments in this KAALVT,N. He correctly pointed out that anti-LVT people often deliberately bias their arguments by making a "good" person relatively worse off and a "bad" person relatively better off, rather than comparing like vs. like. "What, you would rather save the life of mass murderer with a heart transplant than allow a saintly family man access to Viagra?!" or some such thing. It's always poor widows in mansions vs. evil millionaires in hovels, rather than poor widows in mansions vs. poor widows in hovels, or (more likely still) evil millionaires in mansions vs. poor widows in hovels.
Oops, I meant TFB not TFG in the previous comment.
@TheFatBigot
The principle behind LVT is that you pay for what you get, and get what you pay for.
A land title is a right, granted by the state, to secure occupation, subject to various conditions. The state guarantees that right by law and also provides supporting infrastructure to make the site usable.
LVT is payment for that guarantee and the services provided to the site. There is the principle.
Snarf, thanks. I wasn't actually advancing an actual argument in favour of LVT (I would have thought those are obvious by now), I was merely debunking the typical Homey arguments against LVT.
Phys, ah yes, but the Poor Widow has paid for her laarnd, and out of taxed income to boot. Didn't I mention she paid 12'6 for it back in the 1940s? How dare the state demand a further payment later on? That is an attack on private wealth! The state collects enough tax already without people like you inventing new ones!
(I tell you, spouting Home-Owner-Ist drivel is easy, I could do it in my sleep).
I think we should have a competition with a prize for the stupidist anti-LVT argument ever.
I will pay for a bottle of Glenlivet but you will have to get it as they are a silly price at Systembolaget.
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