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)
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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?