Monday, 23 May 2016

Killer Arguments Against LVT, Not (396)

BenJamin' did a bit of goading at the FT, and earned this hysterical response:

I take it you are happy to ghettoise the income rich from the income poor, to bankrupt every pension and insurance fund, and put millions into negative equity.

We have expensive and cheap areas already, largely populated by wealthy and poor people respectively. LVT merely speeds this up a bit. The part about bankrupting pension and insurance funds is completely baseless. Negative equity is a transitional issue that could be solved by the brute force of mortgage write-downs, in any event, the people with the largest mortgages will save the most tax.

Here's where the real fun starts - he manages to completely contradict himself:

The finest houses will be all owned by the income rich.

True - for high value locations.

Great gardens which are now open to the public like Kifsgate [sic] and Arley will be sealed off by their new kleptocrat owners.

These 'gardens' are not 'open to the public' like parks, they are privately owned and operated and charge admission.

The value of these gardens is not so much about location as the sheer cost of maintaining them. The LVT on remote country houses would be negligible and certainly no more than their current Business Rates bill (or is there an exemption for them?). I don't know what sort of profit or loss the NT makes on their stately homes, but I am quite sure that maintenance swallows most of the ticket price. It's like saying "Some wealthy person will buy up LEGOLAND and hog all the rides for himself".

Clearly, some wealthy people want flash gardens, and if they do, they can start pay for their own teams of gardeners if they wish - but they can do that anyway.

They will love the tax as they would pay less than if a progressive income tax were the primary tax source.

True - high income, internationally mobile people will be attracted to the UK by the low rate of income tax. Easily observable in practice.

As domestic houses have higher site values than commercial buildings the tax burden will be shifted to the domestic owner unless there is a fudge as is typical in the US.

Yes, residential land is under-taxed, but dude WTF? Industrial buildings on the outskirts have negligible location values, suburban housing land is clearly worth much more, but the most expensive locations by a factor of ten are city centres, which is mainly shops and offices etc.

Then when the crooks and corrupt of the world stop investing in Britain the land value will vanish and you have no plan B.

Wahey! So now he says that high income, internationally mobile people will stop coming to the UK! Thus completely contradicting his original line of bullshit.


Lola said...

On this High Street vs Out of Town. Surely a large, and very profitable supermarket site would enjoy (!) a higher LVT than a not very profitable town centre location. (In passing I had it reported to me many years ago that a supermarket recovers its multi-million pound investment in an OOT supermarket in less than 2 years...).

The Stigler said...

Yeah. National Trust properties, places like Arley and Longleat are right out in the sticks. And this isn't an accident. If they'd been in useful places, they'd have been turned into offices or knocked down to build shopping centres. Running zoos has a very low per acre return on land. They only do it because it makes more money than growing crops or keeping sheep on it.

Mark Wadsworth said...

L, on £ per sq yd, out of town is much less valuable, but the sites are huge, measured in acres not sq feet.

TS, exactly, thanks.

Lola said...

MW. Yes. Didn't think.

Bayard said...

"and put millions into negative equity."

So my loan is more than the security I've offered for it. How is this a problem for me? A problem for whoever lent me the money, yes, but AFAICS, it's an advantage as now my lender doesn't really to repossess and the balance of power now lies with me, the borrower.

The banks have been very crafty and very successful at spreading the meme that nequity is a problem for the borrower.

Mark Wadsworth said...

B, that is true, but it is not a pleasant experience.

Sean Vosper said...

Wouldn't publicly owned land like the NT stuff and Areas of Outstandin..., Special Scientific..., Historical..., Ecological Importance..., etc., etc., all be exempted anyway? On which point is it arguably easier to just raise the tax on residential anyway - you know to save the problem with agricultural vs other commercial uses, etc. (Although perhaps you'll then have issues with smallholdings, and flats above a shop, and so on)
Also, sorry, but I'm not getting the point about the largest mortgages saving the most tax - a little help please?

Mark Wadsworth said...

SV "Also, sorry, but I'm not getting the point about the largest mortgages saving the most tax - a little help please?"

Let's assume LVT replaces income tax completely to keep the numbers simple.

One a street of £300,000 homes, there will be a couple of Poor Widows In Mansions and some young couples who bought with a large mortgage. The LVT on those homes is (say) £9,000.

The Poor Widows pay little or no income tax or council tax anyway and so their LVT bill will be £9,000 higher than what they currently pay (they can roll up and defer of course, but that is a timing thing).

The young couples who bought with a large mortgage recently have a mortgage of (say) £250,000. To support that mortgage, they must be earning £60,000 so pay £20,000 a year income tax. So the young couples will be paying £11,000 less tax every year.

Or whatever the numbers are. The Poor Widows' loss is the high earners' gain, quite clearly, whereby "high earner" means not in absolute terms but relative to how much land you own. everybody who owns no land at all will clearly be better off.

Graeme said...

Can anyone explain why people like Murphy and "odious" Maugham bleat all the time about the iniquitous complexities of income tax (and moaning about tax relief given to wealthy folks) and how people exploit loopholes and yet resolutely fail to embrace something like LVT. It is difficult to avoid/evade tax on land. Land either exists or it doesn't, it is not dependant on some interpretation of tax law. I guess that is why Maugham is so blind and stupid. Not much money for a tax lawyer under an LVT system.

mombers said...

Where's this article BTW? I'll wade in as well.
On the point of negative equity, I reckon there will be more people who are able to climb the Gottverdammte 'ladder' due to the rungs becoming closer together so to speak. So more winners than losers. That's before taking into account the much higher post tax income that they will have and can use to pay down their mortgage to +ve equity.
I really struggle to understand why people don't grasp that their home going up by £x is of no help if they aspire to buy a more expensive home. We're up c. £100k over 2.5 years but down at least double that if we want to move to a house. Luckily it's academic anyway as a low six figure income is not nearly enough to afford even a semi in my area.
(I said 'semi')

The Stigler said...

Sean Vosper,

"Wouldn't publicly owned land like the NT stuff and Areas of Outstandin..., Special Scientific..., Historical..., Ecological Importance..., etc., etc., all be exempted anyway?"

I think you'd want SSSIs exempted and anything that's basically forbidden to build on. You can't go taxing the NT for the Avebury stones. But the house in Swindon they own that is a museum of railway life? Sure, you could. The answer in those cases is for local authorities to exempt as they see fit. If the local people perceive a benefit of a local private museum, they can pick up the LVT tab.

It's like listed buildings. If people love these fine old buildings and want them kept in the original state, they should pay the owners each year to keep them good. They're generally the beneficiary of a Georgian front of a local building, improving their environment, not the owner of the place.

The Stigler said...


Because lots of "the left" are even bigger homies than "the right". I might even suggest that the way they go after the likes of Amazon and Google is quite deliberate - to ensure that the focus is kept on low taxation of productive wealth.

The upper middle class left of this country are pretty much the establishment. You go and look at who is running an arts organisation or taking over an Oxford college and it's some ex-Guardian editor, or ex-fake charity person, and their colossal failures seem to have little effect on getting another job. Most of them couldn't give a shit about the poor. Their interest in creating more government is nearly always about more jobs and power for them. They have the nerve to criticise the monarchy for being a

Mark Wadsworth said...

G, as TS explains, a lot on the left are worse Homeys than on the right, maybe to distract attention, maybe because it's their one shot at feeling smugly wealthy, perhaps they are jealous of real high earners/businessmen. Dunno really.

M, Ben has the link.

TS, agreed, listed buildings rules are nuts anyway, but if "local people" want them, they can pay for them.

Bayard said...

"listed buildings rules are nuts anyway, but if "local people" want them, they can pay for them."

Something else that LVT would sort out. A plot of land encumbered by a building that you are not allowed to alter or demolish without official permission and that permission notoriously hard to get, is going to be worth less than a plot of land with a building on it that you can do what you like with, hence the owner of a listed building will pay less LVT, meaning that the rest of the community will have to pay a little bit more.

The Stigler said...


I like it. It's a good plan, if we can get down to building level.

More generally, I don't see a problem with society choosing exemptions. It's a bit like the thing of Apple Stores in shopping centres. They aren't just selling iPhones, they're bringing in customers for the other stores, so they don't pay much rent to be there. Or maybe there's two towns and one can get a new Korean factory. They might offer a sweeter LVT deal. Of course, those people near the new factory are going to have to cover that as a result,