Tuesday, 11 December 2012

Killer Arguments Against LVT, Not (289)

More fun with idiots over at Liberal Conspiracy:

20. Cherub: If there was to be such a tax it would finish a lot of farmers, resulting in larger agribusinesses becoming the norm. My feeling is that it’s better for food production and the environment to move away from such practices. There would need to be a system of rebates to protect small farms or farms on marginal land.

Nonsense. We don't need economic theory to work out what the result would be. We just need to compare farm land with allotments.

Let's say a council owns two fields, one on each side of the town/village. It decides to rent one off as farm land for a few hundred quid a year, and it divides the other one up into dozens of allotments, which it rents out for £50 a year each. So it's getting a few hundred quid a year from the first field and thousands of pounds a year from the second one. OK, on the allotments, the council will have to lay a few paths, install a couple of taps and maybe put up a fence with a locked gate, but they'll still make a decent surplus.

In general terms, "tax" and "rent" are the same thing ("rent" is just privately collected tax), and with the rent of state-owned land, they are exactly the same thing. Now, if a 'larger agribusiness" rolled into town, which field would they prefer to rent, the one with a low tax bill, or the one with the high tax bill? The former. And people who only need a couple of hundred square yards will prefer to rent an allotment for £50 a year.

So we see that the higher the rent/tax, the more widely dispersed the ownership/occupation, because nobody wants to pay more rent/tax than he has to. And the amount of food produced per unit of land on allotments is far, far higher than it is on farm land (but much more labour intensive).

Economic theory also says that this is the case; if some inputs are subsidised (land) and others heavily taxed (capital and labour), then the producer (a farmer) will maximise his profits by owning more land and using less capital (tractors, buildings and so on) and labour than the optimum.

If there were only taxes on land and none on capital or labour, then the reverse applies; farms would be smaller and more capital and labour-intensive (more poly-tunnels, greenhouses, irrigation systems and cow milking sheds; plants would be closer together etc).

Again, real life allotments illustrate the point: The land is highly taxed; allotments count as hobbies, so an allotment gardner does not have to hand over PAYE when he works on his patch; neither is he taxed on the value of the food he grows and eats; his "capital" (wheelbarrows, implements) is highly taxed (VAT and so on). So allotment gardners use a lot less land; less capital and much more labour.
Freeman then completely ignores my comment explaining that a fiscally neutral rate on farm land would be about £16/acre per year, i.e. peanuts, as well as the article itself which explains valuations and spouts this Homey drivel:

As put forward here I don’t think that it would work. Sure plots floating on oil would be subject to more tax, but what about agricultural land as compared to a Belgravia mansion. This idea doesn’t seem to sit with a lot of people idea on here that the rich should pay more tax, because in this case it would be the turnip grower with “socially important” land that would pay more. So expect food prices to rocket as inner London becomes a haven of carrot growing.

Dude, WTF? Why do these people talk about land values without knowing about land values? The rental value of UK farmland is £50 - £100/acre per year; the rental value of a five-bed house in Belgravia starts at about £100,000 a year, of which at least £90,000 is pure location rental value (i.e. the land value or the tax base). They have small gardens, so that works out at one or two million pounds/acre per year, or about twenty-thousand times as much as farmland.

The rent for the priciest 5-bed houses in Belgravia is £1 million a year, so the rental value of that land is two-hundred-thousand times as much as for farmland.

So we can safely assume that the LVT for a Belgravia mansion would be a huge multiple of the LVT bill for a whole farm (especially if farms tended to become a bit smaller); whether it is ten or twenty or a hundred times as much hardly matters.

So his comment is just cretinous, factually incorrect and completely lacks logic. Why would food prices "rocket"? If anything they would go down slightly because farmers/farm workers would be producing more food (see allotments example). In any event, the farm gate cost of food is only a tenth of the final supermarket price, so whatever happened to food prices as a result (which depend on world prices, not Uk farm gate prices), the shopper simply would not notice any difference.

And why would anybody pay tens or hundreds of thousands of pounds a year in rent/tax for a mansion in central London just to grow carrots?

What a pair of wankers.


Robin Smith said...

Dependency level Rent Seekers. Not very good at it in other words. But still trying to get it.

I found this with the Diggers, after trying to reason with them while squatting there.

"You cannot tell 'em"

You will crack one day my lad and be a zealot like me. Its just a matter of time.

A K Haart said...

"the amount of food produced per unit of land on allotments is far, far higher than it is on farm land."

Is that the case? If so, it adds another fascinating thread to the LVT argument, because surely it makes labour-intensive market gardens much more viable tax-wise.

Local food etc.

Mark Wadsworth said...

AKH: "Is that the case?"

Yes of course, go down your local allotments and have a look.

On the facts, the UK farming sector is stupendously efficient in terms of food-produced-per-man-hours-worked, it's less than half a million people (one per cent of the population) growing about 70% of our total food relatively cheaply (and doing very well with meat exports). It's the processing, packaging, transport, wholesale and retail sectors that make up the other 90% of the cost of food.

But UK farming is not very efficient in terms of land-per-unit-of-food. Because when some enterprising farmer says "I want polytunnels or greenhouses or a big milking shed or hen house or to build some accommodation for my labourers" the local NIMBYs scream him down and so the farmer says "OK, f- it, I'll just collect my ag subsidies and do as little as possible".

Physiocrat said...

BVLGARI solid gold carrots?

Chuck said...

'And why would anybody pay tens or hundreds of thousands of pounds a year in rent/tax for a mansion in central London just to grow carrots?'

Usual answer - Because the government is bunging them wads of cash and paying them handsomely to do so.

Bayard said...

"But UK farming is not very efficient in terms of land-per-unit-of-food."

I'm not convinced the reason you give is the right one. Outside the NIMBYzone, farmers usually have no trouble erecting polytunnels of whatever. There are two reasons. One is down to the cost of labour (not just tax, but also paid holidays, health and safety, etc) and the other is to do with the fertility of the land. There's not much Grade I agricultural land around and really, only Grade I land can be used in an allotment-style intensive cultivation. There's an awful lot of land in the UK that you can't do much other with except run sheep on.

Kj said...

Good response to that freeman chump, looking forward to his comeback.

Mark Wadsworth said...

Ph, yes. According to their logic, LVT can be passed on in higher food prices, so the lucky farmers in Belgravia would be able to sell carrots for about £1,000 per kilogram (that's just over two imperial pounds).

Ch, indeed, they own land...

B, yes there is Grade I (arable) and Grade II (pasture) but there is also a lot of Grade I.5, if you fertilised it a bit, put greenhouses up etc, you can still grow veg on it. ever heard of hydroponics?

Kj, you can go and read his response now.

He is a proper Homey, he makes a stupid claims (that the rental value of inner London is the same as the rental value of farm land) and then I explain that there is a thousand-fold difference, and instead of saying "Ah yes, that's a good point" he then just invents more lies and crap and propaganda.

Why don't you go over there and tell him what a twat he is?

Be warned: comments are moderated at Liberal Conspiracy, it takes a few minutes or a few hours for them to show up.

Kj said...

He had to resort to financial collapse. Maybe you ought to refer him to the fact that he'd be hard pressed to find an academic economist that disagrees about the incidence on land-value taxes.


But UK farming is not very efficient in terms of land-per-unit-of-food

Is that true though? I'd agree if you'd say "gross value per acre". But calorie-wise, it's hard to push any more out of a field than UK top yields of 4-5 tons of wheat/acre.
Allotments are probably slightly more efficient than field-scale farming in pounds of food, but the real returns to allotments vs. large-scale ag comes out of the fact that allotment holders place a large value on their own crops/their utility in growing the stuff, thus making allotment land vastly more valuable than commercial farming land as you say.