Saturday, 17 November 2012

Killer Arguments Against LVT, Not (250)

Two snippets emailed in by Bob E:

From The Guardian

David Gauke, the Treasury minister responsible for tax issues, told [Caroline] Lucas in a letter that it was already clear a land value tax (LVT) would be expensive (1) and an unfair burden on property developers,(2) which own undeveloped sites that currently escape tax.(3)

From The Telegraph:

David Gauke, the Exchequer Secretary, made £67,000 in profit from the sale of his London flat, but under parliamentary rules is not required to return all the profit he made to the expenses watchdog...(4)

Earlier this year, Mr Gauke said that it was “morally wrong” for people to negotiate discounts with plumbers and traders by paying them cash. He suggested that such a deal helped traders to break the law by allowing them to evade VAT or income tax.(5)

Getting down to the nitty gritty:

1) What does he mean by "expensive"? Does he mean "would raise a lot of revenue"? If he does, that means that we can abolish income tax, VAT and National Insurance.

2) Even under a full-on LVT-only system, the tax on those sites would only be an average of £10,000 - £15,000 per plot per year, which is a lot less than the total current tax burden on each new home built, i.e. the income tax and NIC for construction workers and sub-contractors, all the taxes embedded in the prices of raw materials, the corporation tax on the profit from selling the house (a large part of which is the planning gain uplift) or the capital gains tax on the planning gains uplift (if the builder bought the land with planning).

3) Yes, the capitalised selling value of the undeveloped plots would fall, but so what? Under an LVT-only system, home builders will be paying less in tax (assuming they can finish off the houses fairly quickly once they get planning), it is only a one-off loss of the unrealised-unearned profits currently embedded in the value of their land banks.

Even ignoring the fact that they'd pay less under an LVT-only system, actual home builders (i.e. not the land speculators who make money by getting planning permission) will win in another respect: instead of borrowing money to buy a plot with planning for (say) £150,000 and paying £10,000 a year interest to the bank/bondholders (this is a privately collected tax on top of the publicly collected taxes they currently pay), they'll get the land for pennies and will be paying the £10,000 - £15,000 a year LVT to the local council, so if the worst comes to the worst, they can abandon the project and walk away, with no windfall loss and owing the bank/bondholders nothing.

4) This is how easy it is for the Home-Owner-Ist élite to corrupt the politicians, they just give them all a London flat, allow them their first delicious hit of tax-free windfall rent collection and then they're hooked for life.

5) Yes, David, but those taxes are very "expensive", so you're against them in principle, aren't you?


Bayard said...

"What does he mean by "expensive"?"

I think he answered that question himself: "land value tax (LVT) would be .... an unfair burden on property developers".

Now remembering that the same "property developers" are the biggest donors to the Tories after the financiers, it's fairly obvious it means "LVT will cost my friends money". I love the idea that anything that prevents the rich getting even richer at expense of the rest of us is "unfair". That's classic Tory.

Mark Wadsworth said...

B, yes, that must be it.

Whereas not having VAT on those tireless wealth-creators the banks and making residential construction zero rated for VAT is of course entirely fair, making them pay as much tax as everybody else would be an unfair burden on them.

Lola said...

It does make you so bloody weary doesn't it?

Mark Wadsworth said...

L, yes, it's all a bit boring. These people just tell lies all the time, and a few minutes thought shows us they are telling lies, so we debunk that one, and by then they've told more lies and so on. We cannot possibly win against that level of propaganda.

Robin Smith said...

The people keep voting for it though. For the same reasons.

Its a collective moral problem. It cannot be solved by practical politics.

So we have to start looking upstairs for the answer?

Or look forward to the next system wide default. Maybe next year, maybe 100 years. Who knows, but its coming.

Mark Wadsworth said...

RS: "It's a collective moral problem"

Yes. As you once said, "We have to learn to be nice to each other" but that pre-supposes that people are capable of being honest, starting with being honest with themselves.

Lola said...

MW/ RS 'There's no lies as big as the lies you tell yourself'.