Thursday, 9 May 2013

Getting into practice for Saturday...

There's the usual rag bag of KLN's in the comments at Tim Worstall's:

sam // May 8, 2013 at 4:23 pm.
I don’t know anything about LVT. Does this mean that farmers would be hugely hugely taxed but you could own a penthouse flat in kensington worth eleventy squillion quid and be exempt? Cos that seems a bit silly.

Sam doesn't even know about land rental values, let alone about tax. The rental value of a single Kensington penthouse is one or two hundred times as much as the rental value of an entire typical UK farm, so the LVT on the penthouse would be one or two hundred times as much as the tax on the farm (to the extent that we even bother collected LVT from farmland).
Jim // May 8, 2013 at 5:47 pm
Its quite simple – under income taxation your labour belongs to the State (or rather a proportion of it, the proportion to be decided by people like RM). Under LVT your property belongs to the State and you may live there as long as you pay the rent (which is what LVT effectively is), the rent again to be decided by people like RM. Don’t pay the rent, get chucked out by the Landlord.

Personally I find the former less of an imposition as one can at least stop working so hard if income taxes rise. It's considerably harder (and more inconvenient) to move house every time the LVT goes up. And the idea that you can no longer own property free and clear of State interference for me is the worst part of it of all.


Your earned income is derived from your genuine personal property (i.e. yourself, a wasting asset) and you can, for example, take it abroad with you if you wish. Land rents are not and can never be your personal property as they are derived from the existence of a stable and law-abiding society, which in turn requires "State interference" or the threat thereof to protect the value of those rents and have a legal system for deciding who owns what and for "chucking out" people who don't pay the rent to their landlord. Try buying, selling or renting land in Haiti, Somalia or Afghanistan.

And why is somehow better for people to pack in working in response to an actual or perceived tax increase rather than for them to trade down to a cheaper home, freeing up their old home for somebody who is working and is prepared to pay for it, i.e. is putting their personal property to best use and making optimum use of land?
SadButMadLad // May 8, 2013 at 6:47 pm
“The value of land for taxation purposes should be based upon its optimum permitted use, so farmers would not be badly hit, while landowners sitting on developable land could build it out or cough up.” So all land will be taxed as if it was fully developed with tower blocks on it then? Because all land can be developed. The only thing holding it back is planning...

Like Sam, he doesn't have the first clue about land values either or even about planning. Very few people actually want to live in tower blocks (they'd rather have a house with their own front door and own garden) but they will put up with living in a tower block if it is in a very favourable location, i.e. in a city centre. That's why cities look like they do.

People are not be interested in living in a tower block in the middle of nowhere. In the absence of any tax or planning system whatsoever, nobody is going to build a tower block in the middle of nowhere, he'd end up losing money (simply hooking up the site for mains utilities would probably bankrupt him).

The only place where building tower blocks is commercially viable is in city centres, and even a lot of those lose money for the developer and his initial financiers. In economic terms, the optimum permitted use of 99% of farmland is, er, as farmland. So the extra potential rental value of farmland in the middle of nowhere which happens to have planning permission for a tower block is exactly £nil, and if every field in the whole country had planning for a tower block, it would be even less than that.

And nobody said that having LVT means you abolish all planning laws. LVT works perfectly well with or without planning restrictions.
john77 // May 8, 2013 at 10:08 pm
@ Lotus 51 We are not discussing the classic LVT which is based on the actual (realisable) value of ALL land (to which kaalvtn’s comments relate as a parody of the ill-founded criticisms, while pretending the well-founded ones do not exist) but the vote-grabbing variant proposed by CLASS. See my previous comments. If you cannot be bothered to read the thread, don’t post on it

Another arsehole. If he really has an "well-founded criticisms" he's free to post them over at kaalvtn in the comments. Only he hasn't done, so we can safely assume he has none (and his previous comments were drivel as well).


SumoKing said...

Does ATED count as a crude form of LVT?

Mark Wadsworth said...

SK, yes of course!

It is a splendid tax, as it happens, no more than 0.7% of market value per annum, which is a lot better than random amounts of 7% SDLT and 40% IHT and 28% CGT. I'd rather pay the 0.7% every year and have done with it.

But as the KLN goes "Rich people will avoid it by putting their land into the name of an offshore company." ;-)

Kj said...

SadButMadLad is right though, you would pay like your lot in the middle of nowhere were a fully developed tower block, if you've got planning permission that is, it just wouldn't be worth any more than if you had planning for a bungalow. Planning only interferes when there is no planning, or that optimum use as judged by the market, is above the use permitted in the planning permission. In both cases they depress land value and the tax. Planning has more external effects than internal -> no planning on one plot makes the value and tax higher in the surrounding plots with planning.

Richard Allan said...

Kj, as Mark already pointed out, if you built a "fully developed tower block" "in the middle of nowhere", you would lose money, so the tax would be pretty much nil no matter what you had planning permission for.

Kj said...

Yes. That's what I said.

Bayard said...

The first commenter you quote, Sam, is suffering from a common language problem. For him and many other people, "land" means farmland, countryside, fields etc. For them, a landowner is someone who owns farmland. Hence his comment about farmers and penthouses.

Kj said...

B: exactly, and when it's built on, it's not land anymore, it's a house. Also reflected in the comment from some of the others: when you got planning permission, you either build or pay up. No, you pay up, whether you build or not is up to you, that's sort of the point.

Mark Wadsworth said...

Kj, RA: there's no need to think too hard about this. Apparently some towns do not have planning or zoning restrictions at all, everybody can do what he wants.

For example Houston, Texas. Nonetheless, all skyscrapers are in the town centre, then it's blocks of flats, then it's terraced houses and further out it's detached houses.

The further out you go, the cheaper the land and the bigger the gardens.

And that town still has property taxes and the property tax on a skyscraper is still a hundred times as much as the tax on a detached house at the edge of town.

B, Sam's "language problem" is that he can't understand the word "value" in "land value tax".

Bayard said...

Mark, I wouldn't dismiss this misunderstanding too lightly; you could waste a lot of time at cross purposes if you don't allow for it.

Mark Wadsworth said...

B, I'm not dismissing it. I've seen this crap about "all farmers would go bankrupt" a thousand times and it just goes to show how stupid people are.

Or is it that they are fundamentally opposed to sensible taxes and just deliberately overlook the word "value" and then make stuff up on the hoof?

Bob E said...

MW - re ATED's - there is a splendid para [repeated here helpfully split into its component sentences by yours truly to aid readability] at the foot of this piece

"The introduction of the 15% tax rate for SDLT last year was controversial given the penal rate and the limited exclusions.

The ATED should be seen in a similar light. In the case of the ATED, however, there is an even greater element of unfairness as it will catch properties already held by companies and which were acquired in good faith prior to the tax being introduced.

Furthermore, as the ATED is a fixed annual amount, it will need to be funded by taxpayers who may be asset rich but cash poor and who may not, therefore, have the ability to pay."

Bayard said...

Mark, that's not the problem. It's not that Sam thinks that farmers will go bankrupt, it's that he, and many others, think that farmers are the only people who own land. To him land only exists in the countryside, therefore a land value tax can only tax farmers. If it doesn't have green things growing on it, it's not land. I used to think this way, before I realised what I was doing, e.g. when I heard the saying "When times are hard, put your faith in God and your money in the land" I would think of farmland, not city real estate.

Mark Wadsworth said...

Bob E, classic stuff.

If these Homey f-ers can track down a single cash poor non-domiciled tax-evading oligarch widow who owns her £2m plus mansion through an offshore company, I'll take my hat off to them. And then eat it.

It also raises the question - how can you buy your home via an offshore company "in good faith" if the only reason for doing so was to avoid IHT and SDLT and CGT? I call that "malice aforethought" at best.

B, fair point. Which is why I like the term "Domestic Rates" instead of LVT, everybody knows what it means and what it applies to.