Thursday, 2 January 2014

Your handy cut-out and keep guide: Poll tax, land value tax, income tax

Here's a summary of my longer article at KAALVTN:

I just don't get it.

How can LVT-opponents simultaneously claim that both poll tax and income tax are preferable to LVT? That's like you saying that 20 degrees is an uncomfortable temperature and that you'd prefer a mixture of 10 degrees and 30 degrees.

AFAICS, LVT has all the advantages of Income Tax (with none of the disadvantages); all the advantages of a Poll Tax (with none of the disadvantages); and beats both hands down in other respects. LVT is the Goldilocks tax which sits comfortably in the middle.

If you want, you can make LVT a bit more like a Poll Tax* or you can make LVT more like Income Tax**. Or indeed you could do both at the same time, although I'm not really sure what the point of that would be, unless you really want the base the entire tax system on the narrow interests of a tiny minority of Poor Widows In Mansions.

* Under Domestic Rates, the tax payable for the most expensive homes was a hundred times as much as for the cheapest; with Council Tax the ratio is only four-to-one, in other words Council Tax has a large Poll Tax element and a small ad valorem element.

** By having discounts or exemptions for lower earners in high value housing, capping a household's LVT bill at a certain percentage of total income and/or by having a deferment/roll-up option for pensioners.


Ian Hills said...

"I just don't get it".

Perhaps LVT opponents tend to be tight gits, and make up excuses.

Derek said...

@Mark: a little table like this would make the basis of a good Wikipedia article comparing different kinds of taxes -- especially if you added in a column for sales taxes. Got to be careful about neutrality, sources and Wikipedia style but if you can pull it off, it pays dividends.

@Ian: LVT should have the lowest collection costs and evasion statistics. And that means that for any given level of government expenditure the average tax payment per individual should be least of the three. So if you're a tight git, you should be supporting LVT all the way.

Spot on with the other point though. LVT opponents are past masters at making excuses, no question there.

Mark Wadsworth said...

IH, to be honest, it's not so much that the bulk of the Homeys want to pay less in tax, what they really want is the opportunity - or the illusion thereof - for making unearned windfall gains on house prices.

D, I'll leave Wiki to you. We can't put Sales Tax (or VAT or Purchase Tax etc) on that table because it is off the scale of Godawfulness and has absolutely no merits whatsoever.

As to your second point, agreed on the maths, but whether you support high tax-large government or low tax-small government is a completely separate issue.

Moley said...

I have a very simple solution to the poor widows in mansions problem. How about you pay your property tax on the price you paid for your house back in in ninety clickety click, or whenever. This is the system they use in Italy where I pay my yearly property tax based on the registered price I paid for my holiday home (don't hate me, I paid cash for it that I had ACTUALLY SAVED UP).

RandP2 said...

I do think the Sales Tax (VAT) could be a useful additional column. It would get two ticks only in my estimation: takes into account ability to pay (through exemptions), and can include a tax free allowance. Other than that it fails on all other scores

Mark Wadsworth said...

M, some people have suggested that, but it's sub-optimal, remembering that if some people are "underpaying" somebody somewhere else must be "overpaying".

For PWIMs, the least-bad solution is the "defer until death or sale' option, but I'm not really too fussed what we do.

R, please remember that VAT is borne legally and economically by the producer/the seller, and not by the customer.

It is a tax on gross profits (or 'value added') and because of all the exemptions for the usual monopolists (landowners and banks) it is far, far worse than income tax/corporation tax.

So while low income people don't consume a disproportionate amount of stuff which includes VAT, a lot of unemployment is simply down to VAT, so in that sense, it increases inequality.

And there is a "personal allowance" for VATable businesses, i.e. up to turnover of £79,000, but it is an all or nothing thing so acts as a huge barrier to growth, i.e. if you turnover is £78,999 you don't need to pay over the VAT but if your turnover is £79,001 then you have to pay VAT on all of it.

Bayard said...

M, the simple solution to the PWIM problem is that they don't exist. In all their column-miles of print against LVT, not one organ of the Home-Ownerist press has ever produced a real live example of a PWIM. They are simply a theoretical construct, like Schroedinger's cat.
The best argument against the construct is the one Mark produced, although with operating LVT, the option of buying an "LVT annuity" on retirement (ie paying a lump sum to have your LVT paid for you until you die) is another one.

Mark Wadsworth said...

B, some clever professor looked into this and there are in fact a few PWIMs.

She established that of all the Poor Widows struggling by on pensions credit, 4% owned a home worth more than £100,000.

And on the facts, UK pensioners have income net of income tax of approx. £160 billion a year, so don't me that on the whole they wouldn't be able to afford £40 billion a year in LVT.

There is of course a fairly high correlation between a pensioner household's income and the value of its house, which softens the blow further.

Unknown said...

For every poor widow in a mansion there are thousands of poor tenants being fleeced by greedy, feral, bloodsucking parasite landlords (of the older generation). But of course the PWIM votes Tory, so that is all that matters!

Bayard said...

"She established that of all the Poor Widows struggling by on pensions credit, 4% owned a home worth more than £100,000."

Well bully for her. £100,000 doesn't buy you a mansion in any way, shape or form, not even in Neath. Even round here in West Wales it will only buy you a very small two-bed end of terrace. How many of those PW's owned a house worth more than £500,000?

Mark Wadsworth said...

GM, a good point, well-made.

B, that was her whole point, PWIM's are a complete irrelevance - she's a Lib Dem/mansion tax sympathiser.

Robin Smith said...

Eh? There's no row for:

"Requires state force"

And no column for LVC

Hardly an objective table, when you are so well aware of alternatives.

Unknown said...

@Mark: a little table like this would make the basis of a good Wikipedia article comparing different kinds of taxes -- especially if you added in a ...