Saturday, 19 December 2015

Killer Arguments Against LVT, Not (382)

Buried somewhere in the hundreds of pages of the Scottish Local Tax Commission's report and supporting schedules (I can't find it again) was a new one, the first new one I've seen for years. It went roughly like this:

If we have a property tax (i.e. LVT) to cover part of local government spending which is payable by the owner, not the occupant, then this breaks the link between local democracy, local taxation and local spending decisions.

Owner-occupiers want sensible spending so there is an incentive for them to turn out and vote, but tenants will be less likely to vote.

OK, facts.

a. Turnouts at local elections are currently very low, presumably because people know that councils only have limited flexibility on how much or little they spend, what they do and how high or low Council Tax is.

b. Older people are more likely to vote than younger people and owner-occupiers are far more likely to vote than tenants, who are usually younger.

c. Younger people/tenants are likely to only live in any area for a few years, are less likely to be registered to vote and less likely to use 'local services', having finished school and seldom being in need of regular NHS treatment.

So it is quite possible that in some local elections, no younger people/tenants vote at all. On that basis, the position can hardly get worse, whoever pays the tax.

This argument is also the equal and opposite to the tried and tested one:

"If landlords have to pay the tax, not tenants, then tenants will always vote for more local services and higher taxes."

So either the first argument is correct or the second one is, more likely neither and it is irrelevant anyway. As long as everybody has the right to vote, it is up to them if they don't bother.

The next KLN in the canon adds a third contradiction:

"Tenants will pay nothing so homeowners will end up paying all the tax."

Which is also nonsense; if 80% of homes are owner-occupied they will end up paying 80% of the tax.
What all three arguments miss is that if more taxes were collected from land values (and less from output and employment), there would be less concentration of land wealth which inevitably means that many more households will be owner-occupiers (as we saw from the 1940s to the 1980s when we had Georgism-lite in the form of rent and mortgage caps etc).

In which case, the legal and economic incidence of the tax will be the same and the people paying it will be the ones who benefit from sensible local spending but who don't want wasteful spending or high taxes. Everything is now aligned nicely and it will all sort itself out.