Sunday, 25 October 2015

Killer Arguments Against LVT, Not (373)

From Hacker News via Georgist Rapid Response Squad:

There's an ongoing discussion in Poland about land-value tax. The problem here is that such tax is seen as a form of asset forfeiture. Why? Because of the communist times legacy.

In 1970s and 1980s there were a lot of apartments built by communist government, most of which were given to average citizens either for free, or for some insignificant amount of money. Now almost 40 years passed and we ended up with millions of people still living in those apartments, which they got back then, or inherited.

Now, especially after Poland joined EU, market price of those apartments skyrocketed, while owners income levels stayed pretty low. So, if government introduced land-value tax most of those people would not be able to afford paying it, effectively forcing them to sell their apartments.

1. Whatever selling prices are now, proper LVT is based on current rental values. If tenants can afford to pay the rent, then owner-occupiers can afford the LVT, which will always be less than the rent.

2. As usual, the 'affordability' argument completely ignores absolute amounts. LVT does not have to be 100% of rental values on day one. Everybody would be able to afford a low level LVT of a couple of per cent of rental values (or whatever is necessary to replace whatever property taxes Poland already has).

3. Above and beyond that, if LVT is used to replace bad taxes/regressive taxes such as 29.97% of wages being paid in social security contributions or VAT at a standard rate of 23% of spending then again, just about everybody would be able to afford to pay it.

4. What is the moral difference between 'asset forfeiture' and 'income forfeiture'? Why do the Homeys think that the latter is acceptable but the former is beyond the pale? If you are a young worker in Poland and everything has been given away to/seized by the older generation, then you yourself have suffered 'asset forfeiture' already, and having half your earnings seized in tax and half of what is left in rent or mortgage repayments is just adding insult to injury.

5. Pigeons will always come home to roost. Who has lost most here, somebody who got their home for free from the government or inherited it forty years ago and has lived there rent free ever since, or some poor sod starting out in life who has always been paying privately collected LVT to those lucky people? What about 'equality of opportunity', which IMHO is far more important that 'equality of outcomes'?

I don't know how such tax would work in different setting, but here in Poland only visible effect would be rich people taking over properties for discount prices.

Another fine piece of triangulation by the Homeys. It is primarily rich i.e. land rich people who oppose LVT because introducing it would lead to much greater net income equality. If LVT really were in there interests, how come they are not campaigning for it?

It is quite possible that some low income people would sell up to higher earners, in which case, higher earners would still end up paying most of the tax, and low earners, taking all low earners together, current landowners and tenants alike, would end up paying least/gaining most. How is that a bad thing?


DBC Reed said...

The Poles could of course go back to a simpler Socialist system and
build loads of habitations for very low rent; so could we. Slamming on a high rate of LVT would indeed piss off loads of people in Poland (as it would here.) The idea is ,as John Stuart Mill said 170 years ago is to tax only land price increases heavily, leaving present land values untouched so land values stick at the same level for ever.

Bayard said...

I bet prices weren't at all-time highs when JSM said that.

DBC Reed said...

Quite. And I expect agricultural land prices, his principal concern, were pretty ropy after the industrialist Liberal Party had got the Corn Laws removed (in order Marx accurately predicted to put down wages).
The plan would be to wait for the next house price reversal and introduce JSM LVT at the bottom of the downswing. Rumours of the onset of the tax then would make land prices decline further. Once in place and revalued yearly they would decline yet further. I proposed this at the inaugural meeting of a big umbrella LVT movement, which BTW I had got off the ground,but the usual Georgist natterers trashed the idea. They are nattering still.