Sunday, 8 September 2013

Bribing the voters with LVT.

At election time, the ruling party's fancy lightly turns to thoughts of tax cuts.

Tax cuts for their supporters of course and sneaky tax rises for those that support the other party, so for Labour, it's a cut to the basic rate and for the Tories, it's a tax cut to the higher rate of income tax.

These measures have a grave fault; they lack precision. Winning elections is not about getting your supporters to vote for you, it's getting people to switch sides. Rich people tend to vote Tory anyway, so tax cuts for the rich aren't going to bring many over to their side, similarly for Labour and the not so well off. This is compounded by the fact that getting an increased share of the vote is no guarantee of success, what you need is an increased share of the vote in a few key marginals.

Now imagine that our main tax base is land. Now tax cuts can be much more precisely targetted. Most Labour supporters live in cities, but crucially, many Labour marginals are urban areas as well, so a cut in LVT aimed at built-up areas will please everyone in those key constituencies. Likewise for the Tories and rural areas. Of course, it wouldn't be sold like that, it would be "encouraging people to return to the inner cities" or "taking the pressure off our more densely-populated areas" or some such similar guff.

Perhaps our politicians haven't seen LVT in this light. On the other hand, should it be pointed out?


Ben Jamin' said...

London may overall vote Labour(Boris Johnson), but it's also where the richest gain the most from monopoly rents.

OK, under 100% LVT they wouldn't have any, but what you propose it a step back towards to what we have now.

And once you do it, you'll do it again. Rewarding certain groups with monopoly privileges, that are impossible to claw back.

Nah, best let the free-market sort out LVT rates. Bribe them with more schools, hospitals, Citizens Income etc.

Mark Wadsworth said...

I'm with BJ on this. Once you've bribed homeowners once they'll be loth to give it back.

Kj said...

Denmark has done this, freezing/not revaluating ground rent taxes. And they won´t be going up again any time soon.
Having fixed rates of any tax is IMO essential for a well functioning economy, people and businesses can plan stuff.

Bayard said...

BJ, Mark, what you're suggesting is that this is short term gain for long term pain. I agree, but that is what politicians like - they tend not to think further than the next election. That's the problem with any political or or tax-raising system that doesn't benefit the ruling classes: it will be changed so that it does. Quis custodiet custodies ipses?

Derek said...

Bribing the voters with increased CI or stuff may not be great but, economically speaking, it's ten times better than bribing them with LVT cuts or delayed re-assessments. Of course, politically speaking, the exact opposite is true.

Anonymous said...

B, possibly.

D, I don't count that as "bribes", really. The LVT does not belong to the government and it's our democractic decision how the government spends it, or whether we pay off the national debt instead.

So spending LVT on "stuff which is popular" is OK (regardless of what an economist might say), I would have thought.

Bayard said...

"The LVT does not belong to the government and it's our democractic decision how the government spends it,"

That's an interesting view of monies raised by taxation and certainly not one shared by the current rulers of this country, which is, AFAICT, that public money is theirs to do what they like with. Also, 'twas ever thus.

Mark Wadsworth said...

B, well voters ought to realise it is their money and vote accordingly.

Bayard said...

Well it isn't, really. Most people pay their taxes because they have to. I mean, if taxation were voluntary, just how much do you think the Gov't would raise every year? Pretty close to bugger all, I'd say. Plus very little of the money is ring-fenced. I know some people think their NI contributions are going towards their pension, but even that is an illusion, so basically, you have money extorted from you for no definite purpose, is it surprising that you no longer think of it as "your" money?

Mark Wadsworth said...

B: "Most people pay their taxes because they have to."


Most people pay in shops because they are scared of getting arrested if they get caught shop lifting. Most employers are scared of refusing to pay wages or else all their workers would leave. Tenants pay rent because otherwise they'd be evicted etc etc.

I'm not sure what ring fencing has to do with anything. The only ring fencing which is needed is
a) All taxes, to be matched with
b) all spending.

Those two have to be roughly in balance, is all.

Bayard said...

Mark, you really need to read the book I am reading "Thinking Fast and Slow", which demonstrates that there is often a huge psychological difference between things that are rationally or economically quite equal, like the difference in giving money to a charity or paying the same money in tax, or using the same money to buy something in a shop.