Tuesday, 16 June 2015

Killer Arguments Against LVT, Not (364)

We've heard this one a million times: "Ooh but what about the farmers, they'll all go bankrupt?". You can sort of forgive this when the man in the street says it, because he doesn't know that in the UK, 99% of the land value is the five or ten per cent of surface area which is urban/developed land, the three-quarters which is used for farming or forestry has such a negligible rental value (£5 - £50 an acre, net of subsidies) that it is barely worth taxing. What we ought to do first is get rid of the negative LVT i.e. farmland subsidies and then see how things pan out.

But here is an estate agent raising the eternal question "Is he deliberately lying or is he really stupid?":

Many commentators have advocated changing the current tax system which is linked to land and land ownership, to a new system similar to land value or wealth tax in other EU states. While the Scottish Government’s consultation highlights sustainability, it does not give enough consideration to the financial sustainability of our food production industry and how important that industry is in supporting our growing population.

The introduction of a Land Value Tax would require a revaluation of all property assets with some form of exemptions or banding. With most of our rural land involved in producing food we anticipate most of this tax burden will fall on farming families and be a further burden on the cost of food production.

None of that tax - or at most 1% of it - would fall on farmland. And a tax on rental values does not affect selling prices - it is selling prices which dictate the rental value, not the other way round. Price of wheat goes up, value of arable land goes up and vice versa.

The forestry sector would also be hampered as the land tax would be a major disincentive to planting schemes, when the Scottish Government is already 50% behind on their planting targets for commercial forestry.

Bollocks, it is the very lowest value land which is used for forestry i.e. steeper slopes, places in the middle of nowhere, places without much natural irrigation etc, which have a rental value of £5 per acre per year, tens of pennies per tree per year, with each tree increasing in value by 50p - £1 per year. Even with a tax of £5 per acre, forestry would still be profitable i.e. worth doing.

There is also a real risk that making structural changes to the way that land can be owned will lead to plummeting land values.

Withdrawing the farmland subsidies would do this, so what? And the LVT makes no difference to 'the way that land can be owned', in the same way as income tax doesn't affect your career choice much.

Given that much of the banking crisis was linked to the destabilisation of the commercial property world, politicians need to think carefully about the consequences of destabilising values within the agricultural sector.

No it wasn't. It was the bubble and subsequent bust in residential land prices which caused it. Surely he knows that? So keep prices low and you will not get any more busts. In any event, he is conflating farmland with commercial i.e. urban land.

Family farming businesses may find themselves unable to secure a working capital overdraft...

He must be aware that the price of UK farmland has trebled over the last ten years, were farmers not able to get working capital overdrafts until ten years ago? And why can't farmers do like other businesses and fund themselves out of retained profits? What about tenant farmers, what about new entrants?

... and any knock on effect on the financial sector would have widespread consequences for those far beyond the agricultural sector.

Nobody move or the puppy gets it.


Random said...

Huge differences between the main parties emerge....

Lola said...

He must have been smoking something hallucinogenic. Surely?

Bayard said...

"Is he deliberately lying or is he really stupid?"

Nope, he's doing the "land = agricultural land" meme. Urban land isn't land, it's something else, call it property or even real estate, but it's not land. Land is farmers, cows, grass, hedges, that sort of thing.

Unfortunately a huge proportion of the UK population think this way. The real answer is that this isn't a Killer Argument, because it is talking about a Land Tax and LVT stands for Location Value Tax.

Mark Wadsworth said...

R, seriously of topic.

L. that's a third possibility..

B, as I said, if Joe Public says this, that's a question of education, if an estate agent who gets commissions from buying and selling farmland says it…

Random said...

B, perhaps we should call it location value tax? :D

Mark Wadsworth said...

R, of course we should have done but it's a bit late now.