Sunday 7 October 2012

Killer Arguments Against LVT, Not (242)

George Osborne, in The Daily Mail:

Adding a new tax band to the council tax for big homes is merely a sinister ploy to let tax snoopers get into people’s homes, he maintains.

"You would have to send inspectors out [to revalue every home in the UK] and it wouldn’t raise much money,"(1) he says. "I’m not going to let the tax inspectors get their foot in the door."(2)

Osborne warms to his theme: "Nor will there be a wealth tax or annual tax on assets,(3) temporary or otherwise. It is completely unenforceable. It would become a tax avoider’s charter.(4)

"We want to encourage wealth creators and make Britain a place where people want to invest.(5) It is a complete economic delusion for Labour to say we are just going to tax the rich and that will deal with Britain’s problems – and the country knows it. It is not a them and us situation."(6)

1) So what? When they do the Business Rates revaluations every five years, or when they did the rebanding/revaluations in Wales/Northern Ireland, there is/was no increase in total revenues at all, it is just a question of re-apportioning the total bill more accurately.

2) Nice one. Go for the Big Fat Lie. A properly administered tax on land does not require any internal inspections whatsoever, it is done at a higher level by looking at actual site rental values, which are very easy and cheap to establish. And in real life, there are no such regular internal inspections for Business Rates purposes, there were none when Wales did its Council Tax rebinding in 2003 and there were none when homes were revalued for Domestic Rates purposes in 2005.

3) But the Tories are perfectly happy to continue Labour's policy of having a stealth wealth tax on cash savings, also known as 'negative real interest rates' which is a straight wealth transfer from cash savers to landowners generally and leveraged land price speculators in particular.

4) Agreed. A general 'wealth tax' is a terrible idea. But a tax on the rental value of land is not a wealth tax as the rental value of land is not net wealth, it is merely a measure of the wealth transfers from renters to rentiers (TM Neale Upstone).

5) Aha. This makes a change from LVT being an attack on Poor Widows In Mansions. As it happens, the interests of high earners who want to buy somewhere nice and the Poor Widows who are holding out for higher prices are diametrically opposed. Even if the new Council Tax band(s) were an additional tax, then it would enormously strengthen the bargaining position of high earners who want to trade up. And if a high earner already owns a nice house, well, he's better off paying a bit more Council Tax than having his business clobbered with higher VAT and National Insurance bills.

6) But Georgie boy, the whole thing is "them and us". It's about renters versus rentiers. There are plenty of high earners (or 'wealth creators' or 'hard working families', to use the jargon) who are net renters, because all the taxes on income they pay or bear vastly exceed the value of the services which they get from the nation-state (whether in cash in or kind or land rents). And there are plenty of lower income people who are net rentiers, whether that's BTL landlords, pensioners, civil servants, bankers, politicians or the unemployed.


Bayard said...

It's just so transparently "We don't want to tax the rich, because they are our friends" that I wonder who they think they're kidding?

However, the reluctance of governments to revalue land-based taxes is a serious weakness and, ultimately, what finished off Good Queen Bess's LVT, though it had a good run. The problem is that, as a political ploy, it works and has been shown to work.

Mark Wadsworth said...

B, agreed, politically this appears to be a gold mine, as is Home-Owner-Ism generally. But ss it happens, GQB's original Poor Rates are still going strong in the form of Business Rates.

benj said...

I've been a life long "the Tories are the least worst" believer all my adult life. I even thought Osborne might be a reasonable bloke.

Not any more. There can't be any excuses for this, as his LibDem colleagues must have spelt some economic facts out for him.

I wonder what Tim Montgomerie will say? He assured me in a reply to a post in The Times, Osborne was on side in higher property taxes.

Mark Wadsworth said...

BJ, yes, there were early flickers of hope from Camerosborne a few years ago, but these have been firmly extinguished.

And I'm quite sure that Camerosborne are only too well aware of Tim Montgomerie's point of view, and I wish Tim the best of luck on his mission.

But who cares? If the large parties want to all pander to the hard-core Home-Owner-Ist vote, then that means the other 40% of the electorate would all vote YPP, if they could be made aware of us and enough candidates stand etc.

Bayard said...

"You would have to send inspectors out [to revalue every home in the UK]"

I wonder if Georgie boy was thinking of this:,Date