Thursday, 29 October 2015

Reader's Letter Of The Day

From today's Evening Standard:

Oliver Healey writes (Letters, 27 October) that "A London income tax could be used to eliminate the in-work poverty that millions of Londoners face because of high living costs".

The dividing line is not between high and low earners. It's between those lucky enough to have bought their own home more than 10 or 15 years ago and private tenants. A long-standing owner-occupier can live quite comfortably on a modest income, but private tenants lose half their income in rent and really struggle, even on above-average salaries.

What would bridge this gap is a London-wide property value tax to be distributed to all Londoners as a universal dividend. An average household in an average value home would break even; owners of "prime London"* would finally start paying for the privilege; and renters/recent purchasers would be able to use their universal dividend to cover half their rent or mortgage, thus reducing their living costs to a tolerable level.

Mark Wadsworth, Young People's Party

* With the benefit of hindsight, I should have included "BTL landlords". Ah well.


View from the Solent said...

Whilst I have some sympathy for the concept, why specifically London? Would it not apply to other cities, albeit perhaps on a lesser scale? Who decides? Who determines what the rate of tax will be? etc. etc. Sounds like a recipe for more proliferation of the state to me.

Mark Wadsworth said...

VFTS Why London? Because I was responding to a specific inane suggestion on a London income tax and presumably London welfare system.

Apart from that, if you read my letter you will note I was not recommending a London-only LVT/CI system, I was just stating facts and offering a solution to the issue raised by the previous letter writer :-)

As to how it would work, does it matter? Slap a small % tax on land and buildings and dish it out, it is easy to identify over-claimants from other sources, like if 8 people claim to be living in the same one-bed flat.

This is NOT proliferation of the state in any way shape or form. Under current rules, "the state" (i.e. society, the system, the nation, the taxpayer, whatever you want to call it) channels wealth from non-landowners to land owners. I see no harm in putting a stop to that.

Oliver Healey said...

Well the rational thought behind the London Income Tax is to reduce the burden of taxation on Londoners who are in the low to middle income brackets.

Why London well the fact that housing costs are significantly above the national average.

I am aware of the Land Value Tax principle an idea that stretches back many years.

Thank You for your comments and for your additional circulation of the principal concept of London Income Tax.

Yours Sincerely

Oliver Healey De Montfort University Student Leicester

ThomasBHall said...

Hi Oliver,
Mark is pointing out that a London Income Tax is a silly idea- and instead points to the real source if inequality (of opportunity as much as anything else). What do you make of his actual arguments? Will you drop the London Income Tax now?

mombers said...

Since 25% of private tenants have part or all of their rent covered by Housing Benefit, which is means tested, these people already face very high marginal tax rates. A London income tax will first of all have to be a tiny rate to avoid tipping people into total marginal rates above 100%, and will harm those worse affected by high rents. As Mark says, the best subjects for extra taxation are those on low incomes but with very valuable property. Being mortgage free is like having a second income. I have a bunch of mates whose housing is taken care of my Mum and Dad, and they find it very easy to work part time with half hearted efforts at a career.

Rational Anarchist said...

Not sure if I'm missing something, but surely as soon as you announce that anyone living in these postcodes gets £x a month extra, the rents in those areas will shoot up (by about £x for each adult expected to be living there)?

Not because the landlord has to pay extra, but because there's an additional benefit to living there.

You'd also have to be careful how you did it, else you'd encourage all sorts of deception - e.g. my wife and I live in a two bedroom flat, but use the second as a dining room. Bring this in and we could move someone in from outside London for lots of extra cash.

I'm all for LVT and some sort of citizen's income setup, but tying the income to address will entirely defeat the purpose of the LVT angle, so far as I can see.

Mark Wadsworth said...

RA, yes there is dome circularity involved, but rents would clearly not go infinity. This sort of thing works much better on s nationwide basis.

Mark Wadsworth said...

RA, and that wasn't really the point of my letter, was it?

Rational Anarchist said...

Oh, don't get me wrong - I agree 100% with your assessment of the problem. I'm just not sure the solution would work.

I was thinking about this the other way. Best solution is likely to be country-wide LVT and CBI, but if we were looking at a London-wide LVT then what would be the best way to distribute the income?

If we tie the cash to the place people live, then it will tend to push rents up as per Ricardo. If we want to prevent this, we need to tie it to something else.

The advantage that these people have is a position in the centre of London, so perhaps we should give some of the money to people who do not have that but would be advantaged by it. It's tough to target the money to people who work in London without giving advantage to the companies based there, but you could make a good argument for using the money to subsidise transport in London.

Sorry if I seem argumentative - I'm 100% with you on what the problems are, just want to figure out optimal solutions :-)

Oliver Healey said...

The Right to Buy Property Industry has been given light touch regulation and actual state sponsored expansion through Tax Exemptions and Tax Breaks.

The rising cost of housing in Greater London could be tackled if the London Assembly was given control over Stamp Duty, the proceeds of which could be used to help fund house building and renovation projects in overcrowded boroughs. As I have stated in the London Progressive Journal...

I see that there are problems in London that need to be solved that is why by eliminating tax subsidies, reducing taxation rates on low and middle incomes and by taking action over the cost of housing in London. Land Value Taxation is an interesting concept and one that I have no predisposed opposition to.

Mark Wadsworth said...

OH, you've changed your story or your original letter was heavily edited.

First you said you wanted a local income tax, now you say you want to reduce tax rates on low and middle earners.

Does this mean that you want a "local negative rate basic income tax and a local additional higher rate income tax"?

Why? It's not high earners' fault that housing is so expensive and they are not the ones benefitting, it is the landowners and bankers. Tax them! Which you do via LVT.

Anyways, like I was saying SDLT is a terrible tax, LVT is much better. And LVT is much better than income tax or higher rate income tax.

Hooray for more social housing. It sounds like a good idea to spend a London LVT on social housing but

a) This is less "fair" than a universal dividend (or cuts to basic rate income tax) because only the lucky social tenants benefit and not private tenants.

b) Social housing doesn't need funding, it pays for itself. It is a profitable activity.