Sunday, 2 November 2014

Killer Arguments Against LVT, Not (344)

Here's an interesting bit of one-sided non-logic, from the BBC:

A Labour council in London has rejected its party's policy on the "mansion tax", saying the plans would affect its residents unfairly…

It said the policy could result in "many local people being forced to move out of the borough".


I can understand Labour councillors in that borough objecting - they know that LVT will speed up the inevitable process by which lower income people are displaced by higher income people, thus reducing the likelihood that they will be re-elected.

I'm not sure that's a relevant argument, it strikes me as being naked self-interest and fails on the facts - London has a very transient population, from personal experience I'd guess that considerably less than half the people working or living in London are natural born Londoners. The majority are from elsewhere in the UK, elsewhere in Europe or are 'first generation immigrants'. And all people who live somewhere are 'local'. The new arrivals are just as 'local' as those who have moved away.

But if Labour councillors are openly opposing it, by reverse logic potential Tory councillors in those areas ought to be cheering on the idea of higher taxes on residential land values, because that means there will be more high earners in the area who are more likely to vote Tory. In low value areas, the reverse applies, of course.

Anyway, the valid counter argument to all this 'political' crap is to remind ourselves of the natural justice aspect of LVT:

1. There's the traditional argument that land values are generated by, and hence belong to, the whole of society. So the proceeds should be collected and spent on things which benefit society as a whole, and/or spent on universal benefits (be they in cash or in kind, such as health and education).

2. The equally compelling argument - made much less often - is that with income tax etc, those who are forced to pay the most tax do not receive anything in return (in fact, they are less likely to use 'free' state education, the NHS or claim welfare benefits). But with LVT those who are willing and able to pay the most get something very real in return: they get to occupy the nicest houses for a lower price than otherwise and get to keep more of their own income and personal wealth.

Put 1. and 2. together and that seems perfectly just and equitable to me.

So what this Labour council is supporting is Blue Socialism aka Home-Owner-Ism aka Faux Libertarianism. People with high incomes have to subsidise people with low income in high value homes; people on low incomes in low value homes are ignored and people on high incomes who own little or no land are completely screwed on both sides of the equation.

5 comments:

Phil Jones said...

The so called 'mansion tax' is in addition to all other taxes and so presumably you would be in favour of those that have to pay it having an equivalent amount of tax removed else where, thus being part of a transition to full LVT, otherwise it just seems to be vindictive. No doubt any Labour MPs with high value properties will be exempt by some jiggery pokery.
Whilst I agree with such a system I do have a few questions;
1, How much of an effect do you expect full LVT to have on property prices and therefore rental values?
2, Would people still be able to buy their own homes and therefore still have to get mortgages, or would the state take over all property and allocate on the basis of who can pay the tax?
3, As LVT is base on rental value of the land, would LVT be based on a percentage of the value before LVT, or on a percentage of the lower value after LVT?
4, What effect do you there will be on people who have to move but whose mortgage is now much more than the value of the property?
5, Do you expect value to stabilise and become immune to inflationary pressures, or rise and fall as at present, with an underlying long term rise?

I've tried explaining to people the advantages of LVT but I just keep getting an absolute NO. With more ideas of the potential pitfalls as well as advantages I may be able to explain better as to why the idea should appeal,

Mark Wadsworth said...

PJ:

"The so called 'mansion tax' is in addition to all other taxes and so presumably you would be in favour of those that have to pay it having an equivalent amount of tax removed else where,"

Yes of course!

1, How much of an effect do you expect full LVT to have on property prices and therefore rental values?"

Don't say 'property prices', be honest and say 'house prices'.

LVT in isolation, assuming other taxes were not reduced would push down house prices. If other taxes were reduced in tandem, it would have little or no effect.

And if other taxes were reduced, this would push up rental values.

"2, Would people still be able to buy their own homes..."

Yes of course. LVT is a tax on land ownership. So clearly, the system assumes that people own land.

"...and therefore still have to get mortgages…"

The bricks and mortar would be untaxed and if you want to buy them, you have to pay for them, whether that's out of savings or with a mortgage.

"… would the state take over all property and allocate on the basis of who can pay the tax?"

LVT is not a tax on 'property' in the wider and correct sense. It is a tax on the rental value of land or location.

So under full-on LVT, there would be no taxes on truly private 'property' (i.e. wages, turnover, savings, physical assets, dividends etc) whatsoever.

"4, What effect do you there will be on people who have to move but whose mortgage is now much more than the value of the property?"

The banks can write it off and suck it up, minor issue. All nequity gets written off.

"5, Do you expect value to stabilise and become immune to inflationary pressures, or rise and fall as at present, with an underlying long term rise?"

The rental value of land as a % of GDP is very stable and on a long term upward trend.

"I've tried explaining to people the advantages of LVT but I just keep getting an absolute NO."

Join the club!

"With more ideas of the potential pitfalls as well as advantages"

For sure there are pitfalls, most of which are transitional. But what pitfalls remain are loose change compared to the pitfalls of income tax, national insurance, VAT, inheritance tax, council tax etc.

"I may be able to explain better as to why the idea should appeal"

Naked self interest. Land ownership is so concentrated that eighty or ninety per cent of households would be thousands or ten thousands of pounds a year better off if we shifted from current taxes to LVT.

Ben Jamin' said...

For this KLN ever to be finally put to bed, Land Value Tax needs a change of name.

A tax being a coercive charge on value that is produced or sustained by payer, for benefits they may or may not receive. (Which is why it lowers work incentives).

Quite rightly, taxes should be related to the ability to pay.

A Land Value Tax, isn't a tax any more than any exchange of goods and services is a tax. It's a user fee or consumption charge.

The payer receives benefits that directly relate to the amount they pay. The payer chooses their own level of liabilities, depending on the locational benefit they desire.

Which is why, income/ability to pay has as much to do with it as the price of a Big Mac.


Once you give people an inch by calling it Mansion Tax, or Land Value Tax, the water has been permanently mudded.


So, when people bring up the Poor Widow KLN, just agree with them that yes taxes should be related to the ability to pay.

But LVT isn't a tax. Despite the name

Dinero said...

If you want a Tax that captures some of the rental value of UK land how about a tax on Banks motgage portfolios. It would the most painless. There is allready something similar, the UK Bank balance sheet Levy.

Mark Wadsworth said...

BJ, fair point but it doesn't matter what we call it, the Homesys and Faux Libs will always oppose it.

Din, that's a slightly separate topic, see #345.