Tuesday, 24 May 2016

Killer Arguments Against LVT, Not (397)

Here's the second half of the drivel I looked at yesterday, from the FT comments:

We did a small study to discover how many owners would have to sell up in a street where prices are at their highest [if LVT were implemented]. We reckoned there were 12. The street was in Cambridge and the owners were the most vocal that exist, professors! One house sale might not affect prices too much but 12 would certainly burst the bubble. Yes it needs bursting but carefully and sympathetically.

Fact free drivel. How many houses are on that street? What level of LVT is he talking about? Very low level like Council Tax; middle of the road LVT to replace existing taxes on land, buildings and capital; or fairly full-on LVT to replace large chunks of VAT, National Insurance, higher rate income tax etc? Has he factored in the corresponding tax savings? Has he fuck.

One house sale might not affect prices too much but 12 would certainly burst the bubble. Yes it needs bursting but carefully and sympathetically. There would be more upward pressure on the price of starter homes as it takes 100 years for the supply housing to adapt to changed demand.

Ah, the old Homey switcheroo -- say something irrelevant or downright incorrect and then contradict yourself with something equally irrelevant or downright incorrect, thus making it impossible to have a sane argument. If the price of some homes goes down, that is A Bad Thing, if the price of other homes goes up, that is also A Bad Thing.

Either way, actual selling prices themselves are irrelevant, what matters is the rental value, which is dictated by much wider forces than a few people, or even a lot of people selling up and trading down (with a corresponding number trading up). The chances are all the movers would remain within the same area doing the same jobs (or not as the case may be) and it is this collective effort which dictates the overall rental values of homes in an area, not exactly who lives where.

[There follows an ad hominem attack on all Georgists, skip that].

By the way there is an interesting question: are non income producing assets really wealth? Houses are a cost while one lives in them. Council tax has to be paid out of income. The question is an old one, asked in the first ever book on economics, the Oikonomos of Xenophon. Don't suppose Henry George thought about it.

FFS. I ask you. Are things like old master paintings, gold coins "wealth"? Of course they are. What about other assets - cars, fridges, computers. Are they wealth? Of course they are. HG devoted a whole chapter to this topic, as it happens.

But that is a sideshow, LVT is not a tax on "wealth", it is a user charge. It is not like rent, it is rent. What you are paying for is the benefit to yourself, like buying food, going on holiday or running a car or whatever. But having decried LVT incorrectly as a tax on "wealth" he then says that Council Tax (and by implication LVT) has to be paid out of income. It's the Homey switcheroo again.

Have you no sympathy at all for those who while earning big money acquired a very nice house and in retirement can afford to stay there provided they are not taxed out of it?

Yes, we do have sympathy for all low income people, hence most of us recommend a roll up and defer option for pensioners. But we do not see why those who hit the housing jackpot deserve more sympathy that those who didn't.

Myself I owned a house in the premier residential location in the North of England and hung on to it for 20 years after retirement. I traded down 11 years ago. The move cost £35,000, most of it tax. Not many retired have a net income of more than £35k.

So what? What is the relevance of any of this?


Bayard said...

"Has he factored in the corresponding tax savings? Has he fuck."

It is a reasonable suspicion that LVT, if it is introduced, will be on top of, not instead of, all existing taxes, i.e it will be introduced by a government trying to raise the tax take without putting up the existing taxes because of political dogma or whatever.

However, that is mostly an argument against more taxation, not against LVT as such. You could probably come up with a similar set of arguments against introducing an income tax on top of an existing land based taxation system.

Physiocrat said...

Existing taxes are at the expense of land rental value. They come out of the same pot. In the unlikely event that politicians knew what they were doing, they would go either for a series of revenue-neutral shifts, starting with replacement of all existing property taxes including Stamp Duty, UBR and CT, and then going on to cuts in the VAT rate, since that is the most regressive and damaging tax in the Chancellor's armoury. The stage after that would be an increase in income tax and PAYE thresholds.

These tax cuts would mostly settle in increased land values, but combined with the LVT would also reduce welfare costs as more people could afford to go to work instead of relying on benefits.

But then politicians are not the sort of people who think things through, especially when they get together to make decisions.

Mark Wadsworth said...

B, that is one of few valid arguments against LVT, however, I still think that some things would be better if LVT were on top of existing taxes.

Phys, but Poor Widows In Mansions will not benefit much from reductions in income tax or VAT.

mombers said...

"are non income producing assets really wealth?"
If not, companies should be able to provide employees with tax free housing, which can run into the hundreds of thousands of pounds rental value for a nice spot in London. This argument only makes sense if you say that so long as you don't actually produce anything in exchange for your right to live somewhere, it's OK. I.e. sitting on your arse is exempt from a tax penalty. Those with no assets face an ever increasing uphill battle to acquire them because the act of producing wealth is slapped with tax.