Thursday, 22 September 2016

Politics of a Citizen's Income paid from a Land Value Tax

The following assumes no other changes to our tax and benefits system whatsoever.

According to Savills residential property values in the UK are £6,165bn. There are 28.2 million dwellings in the UK.

Let us assume that LVT is the equivalent to 3% tax on the current selling price of each home.

Total potential LVT revenues are £185bn.

UK population is 64.6 million.

A Citizen's Income from which we all get an equal share of LVT = £2,864 per person (including children).

Property value London/SE = £2,772 bn, LVT = £83 bn pa
Property value other regions = £3,393 bn, LVT = £102 bn pa

Population London/SE = 17.4m, Citizens Income = £50 bn pa
Population other regions = 47.2m, Citizens Income = £135 bn pa

Net flow of income to regions outside London/SE = £33 bn pa

Break even point for owner occupiers = £95,500 property value per person

So a household consisting of a couple with two children would be no better or worse off if they lived in a home worth £382,000.

Average UK house price £218,474.


Almost all constituencies outside London/SE would be better off under a LVT + CI.

Couples with two children living in a house worth £382,000 or less (176% of current average house prices) would be better off.

Over half of Londoners who now live in rented accommodation would be better off.

In short, only a small minority of UK constituencies, mainly in the SE of England would be worse off and vote against such a proposal.

As well as reducing both regional and individual inequality, LVT + CI would allow the market to allocate property at optimal efficiency, reducing vacancies and under-occupation.

It would also reduce the selling price of property to its capital only value. Saving future title holders £36bn per year in mortgage interest repayments. (assuming current outstanding mortgages total £971bn would be reduced to £324bn)

A win-win-win.

For the purposes of a clear illustration of distributional effects, no changes to our tax and benefits system take place. However, it would be better if as many bad taxes were replaced with an LVT as possible, and our benefits system largely replaced with a Citizen's Income. Reducing the deadweight losses associated with each.

A win-win-win-win.

All we need is some politicians who can make a good pitch...


Bayard said...

Is it possible to do the same exercise with a land-only value? This is to obviate the KLN "LVT is a tax on improvements".

Mark Wadsworth said...

B, the maths are such that on average, gross rental values are 4.5% and the site premium on average is two-thirds of that, so on average, purist LVT would end up as 3% of selling price.

The key is not to do individual valuations but to tax all homes on the average value of similar sized homes/plots in the area, so that if you make big improvements to your home/plot, it does not affect the average price until you sell, and even then, barely affects the average and so does not act as a disincentive to improve.

Curtis said...

"worth less than 176% of ____" doesn't mean anything

Mark Wadsworth said...

C, it means £382,000 i.e. the 82nd percentile of all UK homes by (current) value.

The break even points are as follows:
Single person £95.5k = 5th percentile.
Two people £191k = 44th percentile
Three people £286.5 = 70th percentile
Four people £382k = 82nd percentile

Shiney said...


Is there also a potential side effect?

If the population is 64.6 million how many are citizens?

Scrapping existing benefits and only paying to citizens stops all the wailing about "immigrants coming here and claiming benefits/taking our jobs/working tax credits" as they'd have to become citizens to get benefits. This would encourage them to become UK citizens and help to bind them to our culture - the "liberal secular democracy" thing. Assuming that is what we want.

Sobers said...

I think Shiney's comment above contains the biggest problem facing any Basic Income scheme - who qualifies? If its UK citizens only, that leaves a huge amount of people who wouldn't qualify, but would have to pay the tax. And a massive problem of how you identify who is and is not to receive a BI. And also weird situations whereby children born here would qualify but their foreign parents wouldn't. And if everyone qualifies that means an immigrant straight off the boat gets it, which I suspect would be kryptonite to the concept's chances of success.

Solve that question first before calculating tax and payment rates.

Ben Jamin' said...

@ Shiney

So you can knock 8-9 million off.

However, ex-pats total 5.5-6.5 million.

Ben Jamin' said...

@ Sobers

" If its UK citizens only, that leaves a huge amount of people who wouldn't qualify, but would have to pay the tax."

Many would say that's a feature rather than a problem.

Basically, if you get to vote in the UK, you are a UK citizen. You thus qualify for a Citizens Income.

Everyone else would either have to gain UK citizenship, or vote for a similar system in their own country of origin.

DBC Reed said...

With Shiney on this : payment to Citizens only should shut up the anti-immigrant minority who, for instance, have a veto on our remaining part of the European Single Market . There has to be some quid pro quo for giving up the imputed income that comes from property ownership (or has come their way since the Tory unspeakables abolished Schedule A in 1963).

Ben Jamin' said...


I agree. The problem that Citizen Income advocates are having is due to them trying to make up any revenue shortfall with higher income taxes.

Not only does this load on extra deadweight losses, it still leaves some households in the bottom decile worse off, due to withdrawal of tax credits. Typically single parent households.

What I've trying to show is that for a CI to be feasible, it must be in conjunction with an LVT/wholesale change to the way we tax immovable property.

But for some reason the Citizens Income Trust won't have it. Apparently it's not their problem to solve.

If Labour want to win some votes, LVT+CI is the way to do it. Even without any other changes to our tax/benefits system the majority of voters would be better off. And as I've outlined there are efficiency gain too. So the faux-Libs would have to suck it up.

It would also take the wind right out of the SNP too. Could you imagine an more unifying policy :)

Shiney said...


My view FWIW - citizens only (i.e. those who can vote) which is easy to define. As @BJ says its a feature not a bug.

If you want the CI... become a citizen and 'buy in' to our language/values/culture.

*** Off Topic Alert.... sorry ****
On that note I did read somewhere that one solution to the so called migrant 'crisis' might be to make people pay to come here - i.e. replace the the people traffickers fee with an access fee. Instead of paying some gangster $10,000 for the 'possibility' of getting to UK you pay the UK government $15,00 (or whatever is deemed appropriate) for guaranteed safe passage and a via/work permit. Wanna bring your family - cost goes up. Can't find a job/commit a crime - get sent home.

Kind of like LVT for (economic) migrants in someways. Obviously genuine refugees would be exempt from this.

Shiney said...

Ooops $15,000 obviously!!!!

Sobers said...

If you think that a BI scheme that is restricted to citizens only in the melting pot that is the UK today is politically viable you're nuts. The country is split 50/50 down the middle over the whole immigration yes/no debate as Brexit showed (and thats just the 45m or so who are were allowed to vote in it, you can add the remaining residents who are entitled to live here but would presumably be largely in favour of immigration, being foreign nationals of one sort or another). The moment such a scheme was introduced, or proposed the media would be full of sob stories about Polish spitfire pilot's widow who has lived here for 70 years and would get nothing, and some jihadi who had just come back from Syria who would. It just isn't politically viable. The pro immigration people would be up in arms at non-citizens exclusion, the anti-immigration people would be up in arms if anyone could get it.

In a more closed and ethnically homogenous country it could fly. In a country with so many different classes of people by nationality and race, some of whom would fall one side or the other of the line, its just not something any politician is going to want to touch with a barge pole. For one thing you'd have to have an identity register for the entire country, in order to decide who is and isn't to get the BI. Yes you could take the passport list as a start point, but anyone without a passport would have to prove themselves eligible. The identifying process would have to be secure in a way that the NI system isn't for example, so bio-metrics would probably have to be used. Its the back door to identity cards effectively, because without them it would be impossible to determine who got it and who didn't.

Ben Jamin' said...


I think all should be welcome into the UK. However, the value derived from natural resources should only be shared among UK citizens. At least until the World becomes a Geoist Utopia. So lets not hold our breaths for that.

I think a Citizens Income or any access to public services should only be offered to those who have worked full time in the UK for a certain number of years. In which case they should automatically be eligible for citizenship anyway.

On one hand that may sound harsh. But on the other, the economic welfare of another countries citizens lays mainly with that country.

At least by offering citizenship after a number of years of working here, they'd be a pathway to enjoy full rights I think we all could agree on and think fair.

Ben Jamin' said...

@ Sobers

It's UK voters that decide which party makes policy. Are all foreigners automatically entitled to a State Pension or Child Benefit just because they are here?

No they are not. Same principle would apply to those of working adult age.

I'd like to see the same applied to schools and the NHS.

Mark Wadsworth said...

S, any nation has to differentiate between own citizens and foreigners in many ways, the welfare system being one. Whether we are talking CI or existing system does not matter.

The Polish widow can apply for a uk passport and will get it no problem, the Isis fighter would have had his passport withdrawn in a sane world anyway.

Mark Wadsworth said...

S, why would we need ID cards?

What is difficult to understand about
On electoral register + uk passport (or child thereof) = gets CI?

Mark Wadsworth said...

In fact, I am all in favour of only paying CI to UK resident citizens who are on the electoral register (excluding postal voters unless they are disabled) - this will encourage people to register to vote and hence make them more likely to vote.

The point being that young people/tenants are much less likely to be registered to vote and hence their interests are under-represented.Obviously, if parents qualify, so do their children.

How easy or difficult it should be for foreigners to get a UK passport is a separate topic, but I think the rues are 'about right'.

The other point being that ID cards are no more necessary than under any welfare system or electoral system.

Mark Wadsworth said...

The other point being I don't like the whole postal voting thing (unless people really severely disabled). If you live abroad, why should you vote here* and if you are not disabled as we well know, postal votes are a massive great fraud.

* When I lived abroad, my mum used to send me postal voting slips and I though sod it, I don't live in the UK, I don;t pay tax in the UK, I am not affected by what goes in the UK, why should I vote there?

Sobers said...

The electoral register is wide open to fraud, and indeed we already have widespread electoral fraud, so imagining that we could just expect people to voluntarily not register for free cash is madness. Any system would have to ensure that the person claiming exists and is entitled to the payment, otherwise you'd have multiple people registered at Tower Hamlets addresses who mysteriously never seem to be seen coming and going............its also far more likely that children would qualify but not the parents, so who then would receive the money?

The point is we already are unable, or unwilling, to differentiate between who should and should not get State largesse from the NHS, despite large numbers not technically being eligible. I can't see a system that basically turns the UK into a sort of apartheid state, with mainly white natives on one side and mainly non-white foreigners on the other is ever going to get any political traction from either side of the political divide. Anything that divides the population up arbitrarily based on nationality (with massive correlation to race as well) is political kryptonite. It just won't happen.

Ben Jamin' said...


And yet we do have Child Benefit and the State Pension.

Bayard said...

Sobers @ 10.18 "a huge amount of people who wouldn't qualify, but would have to pay the tax."

The number of "immigrants" in the UK is roughly 8 million (13%), but half those are entitled to vote and therefore would qualify for the CI. Of the remaining 4 million, how many are likely to be landowners and therefore "pay the tax"? The Migration Observatory reckons that "Recent migrants (i.e. those who have been in the UK for five years or less) are almost twice as likely to be renters (74% were in the private rental sector in the first quarter of 2015), compared to all migrants." Therefore the number of people likely to be "paying the tax" is about one million or 1.5%. I don't call that a "huge number".

Shiney @ 12.34: good idea, HMG out-competing the people traffickers, but far too good to be ever implemented.

Sobers @ 20.38: I'm sorry, but that just looks to me like the old "it's not perfect, so we can't do it" tactic mixed with a bit of NIMBYism.

"The electoral register is wide open to fraud, and indeed we already have widespread electoral fraud,"

Nearly all allied to postal voting, which as MW says, should be abolished except for the severely disabled.

"Any system would have to ensure that the person claiming exists and is entitled to the payment, otherwise you'd have multiple people registered at Tower Hamlets addresses who mysteriously never seem to be seen"

Is a system where the potential voter has to turn up in person to register with ID really so hard to imagine or implement?

"its also far more likely that children would qualify but not the parents, so who then would receive the money?"

Well, duh, the parents, like they do at the moment with child benefit, a system that has worked for decades with no appreciable frauds.

"I can't see a system that basically turns the UK into a sort of apartheid state, with mainly white natives on one side and mainly non-white foreigners on the other"

You mean like we have at the moment? Having a system where 96% of the population, of all skin colours is getting "state largesse" and 4% of the population, also of all skin colours* isn't is not remotely comparable to apartheid South Africa where a white minority lorded it over a black majority.

*40% of UK immigrants come from "white" countries.

Mark Wadsworth said...

S, your last comment is a bizarre mixture of unpleasant left wing opinions and unpleasant right wing opinions. it is not clear whether you are stating your own opinion or reporting what you believe to be other people's opinions. It is factually and logically flawed, Therefore no sane person can be expected to actually respond to it (although Bayard has covered it pretty completely).

To any normal person who wonders what the solution to Sobers' non-problem is...

Different people will have different opinions as to how long arrivals can be expected to wait before they qualify for CI, there is a sliding scale between "immediately" and "never" and I did a Fun Online Poll on it a few years ago, I can't remember what the compromise was, I think something like 5 years, which is roughly the same a time as you have to live here legally to qualify for a UK passport (I think)..

The other upside of this is that arrivals who intend to stay and claim their CI one day would be incentivised to register officially on arrival, as that sets the start date fro getting CI in X years time, giving us a better idea of who's here. And during that period they would have to show they are supporting themselves here somehow, by filing in a tax return or having a bank which receives money from abroad etc..

Sobers said...

" it is not clear whether you are stating your own opinion or reporting what you believe to be other people's opinions."

The latter of course. Thats the entire point. Its no good proposing new idea X when both sides of the political divide have their own reasons (wrong or right) to be opposed to it. Certain ideas may make all manner of sense in theory, but political reality is very different to theory. No left leaning government is ever going to bring in a BI that omits a decent chunk of society, especially immigrants. But to include immigrants is political suicide. Conversely no right leaning government is ever going to bring in a BI that divides the nation into two camps so obviously, because the opposition from the Left would be massive (and possibly violent, think Poll Tax riots type response). So both sides have a vested interest in NOT introducing a BI, for equal but opposite reasons.

So the status quo will remain, because as much as any politician might look favourably on the concept in theory, once the practical reality of implementation is considered they'll run a mile.

Mark Wadsworth said...

S, more wild exaggeration "a decent chunk" and "divides the nation into two camps" etc.

All those topics you raise apply to any kind of welfare system anyway, and clearly there will always be some who think it is too generous and some who think it is not generous enough. It is no different with CI, I can see arguments for a CI anywhere between £0 per week and £150 per week, somewhere on that line is a figure acceptable to a majority, let's call it £75.

It is the same with "how long you have to have lived here until you get it", somewhere between "immediately" and "never" is a politically acceptable time period (like 5 years, let's say).

Bayard said...

"Conversely no right leaning government is ever going to bring in a BI that divides the nation into two camps so obviously,"

Unlike the right-leaning government that was quite happy to divide the nation into two camps with a referendum on the EU. The referendum may be over, but the two camps are going to be around for a long time to come.

When has any Tory government taken any notice of the left? The current one has quite happily alienated far more people than the few immigrants that CI would disadvantage and no-one has rioted. I suppose, if you are a Daily Mailexpressgraph reader, you believe that the sole aim of every immigrant to the UK is to be able to live the life of Reilly on benefits, however the most common reasons for immigrants to enter the UK is to study, to take up a definite job or to look for work. Yes the Daily Mailexpressgraph can produce hundreds of examples of immigrants on benefits, but the total number of immigrants is in the millions. So when most immigrants are expecting to not receive benefits when they arrive, why should they riot when they find out that they were right?

Shiney said...


Re - "HMRC out competing the people traffickers".... not my idea but I did like it. Can't find the bleedin' link..... oh well.