Sunday, 9 November 2014

Killer Arguments Against LVT, Not (346)

Tim Worstall wrote one of his (presumably) paid pieces mis-describing taxes on land values as taxes on personal capital or personal wealth.

Taxes on land value are not actually taxes, they are user charges for private use of public/national capital or wealth. It's no different to a landlord charging rent. Either you agree with LVT or you agree that landlords should not be allowed to charge rent.

Lola left a comment and got this Faux Lib f-wit reply:

"Do you remember the story of ‘the tragedy of the commons’? Land open to all to exploit can be ruined – individual ownership can limit such pressure and preserve it as a productive resource.

Land Value Tax assumes that individuals own i.e. have exclusive possession of land and thereby privileged access to "the commons" (i.e. whatever it is that makes that area desirable). That's what they are paying for. So nobody will try to grab more of "the commons" than he needs and/or is willing to pay for. In its wider sense, LVT extends to all "commons" such as pollution, road use, radio spectrum, airport landing slots, extraction of natural resources etc.

They [landowners] have to continually expend resources protecting it, and maintaining it – that’s a service.

Yes, but he's talking about the building, not the land. More lies.

And the “location premium” is in large part defined by how one’s neighbours use their land, thus how a landlord uses their land contributes to the ‘location premium’ of their neighbours.

Quite true, but…

1) The rent-paying tenants contribute far more than their landlords, and our commenter overlooks the fact that there is an endless list of othe things which dictate location values (positive or negative) and it's not simple addition and subtraction. A chain is only as strong as its weakest link - so you could have the best state school in the world, but if there were no jobs or transport links in the area, location values would still be low.

2) It takes very large numbers of people to generate the 'site premium'. As a general rule, the more people, the higher the site premium. I'd be surprised if anybody generates more than 1% of the site premium of his own land (it's usually close to 0%). We can deal with this quite simply by setting the tax rate at no higher than 99% of the site premium. Seeing as the medium term aim is to tax land rents at approx. 80% and to give everybody their share of the land rent via personal allowance/Citizen's Income, that is a non-point anyway.

3) What about houses which are worth more precisely because of scarcity value, because people are prevented from building in the vicinity, i.e. in the Hallowed Green Belt?

Who creates that value?


Lola said...

Thanks for saving me the trouble of posting a response. I have responded and added a link to your post. It hasn't appeared yet, for some reason...

A K Haart said...

"Who creates that value?"

In the case of Bakewell in Derbyshire a big chunk of it must be the Peak District National Park in which Bakewell sits.

We thought of moving there once, but no chance.

Bayard said...

"What about houses which are worth more precisely because of scarcity value, because people are prevented from building in the vicinity, i.e. in the Hallowed Green Belt?

Who creates that value?"

What about all the value "destroyed" by planning restrictions in the HGB? All that cheap-as-chips farmland which should be worth hundreds of times more as building land.

Mark Wadsworth said...

L, thanks.

AKH, B, yes.

Planning rules are like canals or dams which divert water (land value) away from some land and towards other land. But it is heartily irrelevant whether the size of a town is limited by a natural feature (a cliff or marshland) or an arbitrary line (The Hallowed Green Belt). The effect is exactly the same.

Ben Jamin' said...

The site premium is based solely on how much one person is prepared to pay for exclusive rights of said site.

All other considerations are neither here nor there.

Because unlike capital, land is not created by human effort.

So, those paying for exclusive rights should pay it to those being excluded.

What actually shifts demand from one location to another is therefore utterly irrelevant.

People seem to find the economic/moral difference between demand shifting from value created very difficult to conceptualise.

Mark Wadsworth said...

BJ, yes, the how, why and who of value creation is irrelevant.

The other point is that land "ownership" is only made possible by society in general being peaceful and stable and organised*. So society in general is entitled to charge for it.

* Try buying land in Somalia or Afghanistan, for example.

Derek said...

Whenever a Royal Libertarian brings up "The Tragedy of the Commons" it's worth mentioning that the author, Garrett Hardin, was talking about an unmanaged commons, ie a free-for-all, and that while not a Georgist himself because of his position on overpopulation, he did say,

"I have known ... of Henry George's work for a long time and always thought it a shame that he could not have been born two centuries earlier and laid out the ground rules for the development of the New World."

So he wasn't against commons. He just thought that they needed regulation.