Monday, 11 July 2016

Killer Arguments Against LVT, Not (399)

As a warm-up for the big fourth centenary edition, Ben Jamin emailed me this, from the comments to an article at the Tax Justice Network:

Nick Shaxson says:

put all your assets overseas where there isn’t an LVT, and if LVT is your only tax, then you can escape tax entirely, hey presto! May we wearily remind you that we support LVT but only as part of a comprehensive tax system. The LVT-only brigade are doing the LVT cause a great disservice through their extremism.

He is presumably one of these deluded people who think that where the records are kept is where the "wealth" is. These people believe that there really is trillions of dollars hidden in tax havens, or that land can be moved offshore. Nonsense, the reason for this is to disguise ownership, in the real world, nothing has moved anywhere.

Returning to the KLN, let's imagine that every landowner in the UK tries to sell up to avoid the LVT liability... to whom are they going to sell? If nobody wants to own it, the land goes to the Crown (in practice, Crown Estates) under the normal bono vacantia rule and the problem solves itself. In future we would all just pay rent to Crown Estates, which is a government body (we'd have to greatly reduce the % of Crown Estates income paid to the Queen is all) and the government spends that money and collects correspondingly less in taxes on income etc.

So actually, if people were dumb enough to waive their titles, things would be a lot easier for the UK government, there would be no need to assess the site-only element of rental values, the government is just a landlord charging market rent with full control over evictions procedures.

Clearly, people wouldn't all abandon their titles, we know this because 98% of Business Rates (in practice it is like LVT, it is just calculated incorrectly) are paid every year.

And few realistic proponents said that LVT would be the only tax for the time being, it is a question of phasing the other taxes out



Ben Jamin' said...

Isn't that Nick Shaxson who writes books, gets on telly and the radio saying that offshore tax avoidance is a really bad thing? Bit like Richard Murphy at Tax Research.

They cannot condemn LVT outright, because it is after all a "wealth tax".
So their tactics are to dam LVT with faint praise, marginalize it, and put forward populist anti-avoidance/socialist agenda. Thereby maintaining their own raison d'etre and crust earning potential.

Job done.

Mark Wadsworth said...

BJ, good point about wealth tax.

They claim that people can hide land offshore, which is of course impossible, but what about all the other wealth "hidden in tax havens"?? How the fuck do they propose to collect a tax on it (even if it were a good idea, which it isn't).

James James said...

Murphy, and Shaxon it appears, are both home-ownerist and anti-capitalist. They want to tax capital, and they don't want to tax land. Whereas we want to tax land and not capital. We think abolishing tax on capital is a feature, they think it is a bug.

James James said...

I have a friend who works for a pro-tax outdoor like Murphy and Shaxon. I tried to convince him of the virtues of LVT by saying, "Imagine a world without income tax." He said, "that sounds awful."

It is hard to convince socialists that LVT is good for them. They don't like inequality and they don't like the idea of reducing Philip Green's tax bill.

James James said...

Off topic:

From "Equality: the impossible quest" by Martin van Creveld:

"Some modern authors have argued that, far from wishing to abolish slavery on the way to equality, what the rebels really wanted was to become slave-owners themselves. A society without slaves seems to have been beyond their imaginations."

Mark Wadsworth said...

JJ "We think abolishing tax on capital is a feature, they think it is a bug."

Indeedy. But this notion of "taxes on capital" is vastly overplayed. In truth, western governments collect a fair bit of tax on income derived from capital (corp tax and VAT) and very small amounts on transactions in or transfers of capital (SDLT, IHT and CGT). There are virtually no taxes collected from ownership of capital (apart from the buildings element of Business Rates and similar taxes abroad).

But most of what they consider to be capital (shares and land) are not really capital at all, they are monopoly privileges. So most of SDLT, IHT and CGT is actually collected from transactions relating to share and land. Not good taxes, but only small amounts and not the worst taxes.

So it is not so much "taxes on capital" that should be abolished or reduced, it is taxes on income derived from and transactions in capital which should be abolished or reduced.

James James said...

"pro-tax outdoor" should read "pro-tax outfit"

Macrocompassion said...

Had Nick completed his reading of my essay about the most just kind of taxation, he would have found the answers to the objections which he claims to be significant.

There is a great deal which needs to be done to make our world a better place and the first one is to learn how to share the natural resources, in a morally just manner. So many people have not even reached the stage of understanding about our society and how it works, as to have sufficient thinking power to appreciate what these moral obligations are, and how they are needed by a sincere government.

Macrocompassion said...

Such people as I mention above might benefit from a better understanding about of what our society comprises and particularly about how it works. I have written a book about it called "Consequential Macroeconomics" . Sincere people can write to me and I will send them a free e-copy, when they tell me where their interest in this subject lays.

Mike W said...

Dear Macro,

I like where you are coming from and have read through your profile material. I will try to get to your 'CM'at some time in the future.

For now, you say:

'Briefly:Land Value Taxation (LVT) lowers production costs, raises demand and employment. Stops land speculation and associated corruption. Eliminates the need to keep land development plans secret. Only disadvantage is to the land owners, who don’t use their land.'

But is is not a disanvantage to us,the core claim of LVT is that over time they will use the land productively, because they will get a yearly site value bill for it, no matter where they are in the world and no matter how many shell companies they place it behind!

Graeme said...

The Corporation Taxes Act is the longest UK statute and most of it is trying to define that slippery concept of taxable profit. Business rates are defined in a couple of pages. On the basis of tax collected per page of legislation, it is very difficult to understand the objections to LVT. The only people who benefit are lawyers and accountants plus those professional complainers who fret about large multi-national companies not paying the amounts of tax that they would like them to pay. Shaxson and Murphy would have to find something else to do.

Derek said...

Mark, even if we ignore your excellent counter-argument, I'm still not sure what the problem with owning foreign land and getting the rent from it might be. After all the income from it will all come to the UK, thus reducing the trade deficit in the same way as exports do but without requiring all the imports that production for export currently needs.

So it would be great for the balance of trade and for the strength of sterling. As a result even people who didn't benefit from the foreign income directly, would benefit indirectly because their pounds would go further when used to buy imports or to holiday abroad.

Pablo said...

Slightly off topic:
On Exports and Imports