Thursday, 8 September 2016

Killer Arguments Against LVT, Not (405)

Googling around for raw material to this epic series, I stumbled a good recent summary at Another Angry Voice (as did Bayard and BenJamin', it's a small world).

The first KLN was a half hearted "But the government will just have LVT on top of existing taxes" which was batted away.

The second KLN was:

Lydia Conwell

I'm not convinced it would work. Taxing land ownership would give people the incentive to own no land and instead rent. Wouldn't the tax the landlords have to pay be then transferred to the tenant through increases in rent?

Also you may not be able to move vast amounts of land to tax havens but you can position a company in a tax haven and that company can own the land, can't it?

The first one is clearly circular logic. In real life, most people choose whatever is probably going to be cheaper over their chosen time frame - 'buying/paying a large mortgage' or 'renting'. So by and large, the cost difference is negligible. What usually swings it is how long people intend to stay in that home/that area.

It will be exactly the same when people have to choose between 'buying/paying LVT/paying a smaller mortgage' or 'renting'. The two will end up costing much the same over a foreseeable medium term.

Further, if there the incentive to own no land and instead rent, doesn't the same apply to landlords? What they will own is the buildings, so spend £100,000 on the building and collect £5,000 a year rent net of LVT. It's the same for a new entrant; pay £100,000 up front, have the simple pleasure of decorating the home the way you like it and save yourself the £5,000 rent.

But I couldn't be bothered with that and dealt with the easy one:

Mark Wadsworth @ Lydia Conwell

Lydia, the UK has quasi LVT on commercial land (Business Rates), much of it owned by foreigners and the collection rate is still 98%, higher than any other tax.

Lydia Conwell @ Mark Wadsworth

That's a good point.

Which was a bit of a disappointment, I was expecting "Yes... but that is because the occupant is liable for Business Rates not the owner", which I would have countered with "In the event of non-payment, the council will take control of the building and collect the rent until the arrears are paid off", fully expecting "But what about vacant buildings?" and so on.

Where's the fun if people just read and understand what you have written?


Ben Jamin' said...

"I'm not convinced it would work. Taxing land ownership would give people the incentive to own no land and instead rent. "

LVT is rent that everyone pays, not just as renters do now. Owner occupiers simply pay is as a tax to the State, which becomes collector of rents for the whole nation.

Which levels the playing field for all participants, allowing the market to allocate resources more efficiently.

Mark Wadsworth said...

BJ, yes but that is a bit sophisticated. I was trying to explain in as few words as possible why the assumption is nonsense.