Tuesday, 6 June 2017

Testing my patience.

Dinero left a comment on Killer Arguments Against LVT, Not (415):

The land under gardens has a lower land value than the land under houses as it does not have planning permission and is to small to build a house on.

Me: Exactly. Two similar houses on the same street with different sized back gardens hardly differ in value.

Dinero: So there is an issue with existing houses where a tax on the land that is not big enough for housing and does not have planning permission for housing is at the same rate that land that does.

A terraced house with a strip of garden at the back would have three times the tax as next door with no garden.

Me: That would be a daft way of doing it.

Dinero: But don't you see that as a problem?

Me: If you have a stupid valuation system, of course it's a problem. So have one that reflects actual rental values. Duh.

Din: But that is the proposal , the proposal in the article is to tax the garden area at the same rate as the house area.

Me: That is NOT the proposal. The article is lies from start to finish.

Din: are you sure about that?

From the Labour Land Campaign website

"...First off, the value of every piece of land in this country should be assessed. By 'land' we mean the site alone, not counting any improvements on the site. Thus, the value of any buildings, crops, drainage or anything else which people have put on, or done to, the site would be ignored. Then, after the land has been valued, a tax should be fixed on the basis of that value..."

1. The LLC is not part of the Labour Party and does not dictate official Labour Party policy. That is just Tory propaganda, they thought, we can't criticise Labour's actual proposal (which was very timid) so we'll pretend that LLC's proposal is Labour's proposal and criticise that instead.

2. I am a member of the LLC committee, I help them do their policy proposals and so on and I know perfectly well what they mean. There's no point deliberately misunderstanding them and telling me we that proposed something else.

3. I trust we are agreed that "Two similar houses on the same street with different sized back gardens hardly differ in value." That is simply a true statement of fact.

If you went to the bother of assessing plots individually, then the LVT liabilities on these two houses would also "hardly differ".

Let's apply basic LLC principle to Dinero's hypothetical example of "A terraced house with a strip of garden at the back" vs "next door with no garden." First we would have to find out what the difference in rental value is.

At a guess, the one with the big garden can be rented for £10,000 a year and the one with no garden for £8,000 a year.

Knock off £4,000 bricks and mortar value, the site premium on the first is £6,000 a year and the site premium on the second is £4,000 a year. Whatever rate of LVT you set (nobody said it has to be 100% of assessed value), the LVT on the one with the big back garden would be one-and-a-half times as much as one the one with no garden. Clearly NOT three times as much.


Dinero said...

If the comment thread is testing your patience why did you post a link to a miss informing news paper article without clarifications, and then continue the comment thread to another post , and post an invitation to continue it here. Make your mind up . Oh well, that aside.

A couple of observations , its not true to the LVT principle, as it taxes the land more if the house is bigger, taxing "improvements on the site"
And a big irony is it could in some cases encourage bigger gardens and smaller houses , contrary to the complaint that it would cause gardens to shrink.

Thanks for the chat!

Mark Wadsworth said...

Din: "its not true to the LVT principle, as it taxes the land more if the house is bigger, taxing "improvements on the site" "

You have completely lost me. Neither I nor the LLC have ever recommended this.

Dinero said...

Lets define our terms of reference. Are you saying that the The labour tax proposal is a tax on the rental of the site that includes a house and a garden.

A site with a big house would get more rent than the same site with a small house. And so it follows that the site with the bigger house attracts more of the tax , and also that is not true to the LVT principle of not taxing improvement on the site.

Mark Wadsworth said...

"A site with a big house would get more rent than the same site with a small house."


"And so it follows that the site with the bigger house attracts more of the tax"

Wrong! You deduct the bricks and mortar value in arriving at site value!!

So all semi detached houses on one street pay the same (assuming similar plot size), whether they are in good condition or bad condition, whether they have extensions, loft conversions or a conservatory or none of those!!!

Bayard said...

Din, the principle of LVT which you are missing is that the value of the land which is taxed is the value of that land when put to the best permitted use. Thus a plot with planning for a three-bed house is worth more and attracts more LVT than an identical plot without PP. Similarly a plot with permission for a four-bed house (the "larger house" in your example) (for the avoidance of doubt that includes plots with a four-bed house already on them) is worth more than a plot with permission for a three-bed house (the "smaller house") . Thus it attracts more LVT, even if there are no improvements to it.

Dinero said...
This comment has been removed by the author.
Dinero said...

> Mark at 17:11

Yes that works, that is way a modifying a pure square foot of location tax to include its mixed use. That does not seem to be the labour policy in the news though " The campaign proposes a “standard rate” of 3 per cent of the value of land, which would be applied to 55 per cent of a home’s value (based on the assumption that land accounts for 55 per cent of a property’s value). The tax would be levied on 100 per cent of the value of vacant plots." http://www.telegraph.co.uk/news/2017/05/29/tax-homes-treble-labour-plans-land-value-tax/. I googled that , do you know what the labour policy idea is. Or is it the Labour land campaign policy with the details left out.

Bayard said...

Din, who, apart from you, is talking about levying the tax on an area basis?

Woodsy42 said...

It's a logistical nonsense and a circular argument. I have a largish but rural garden, the land value of the garden is relatively minimal as it's green belt and cannot be developed. It's not 'depriving' anyone as nobody can use it or develop it for any financial gain or other use. I make no gain from it except for the enjoyment of it being a haven for birds and a buffer from the traffic on the busy road at the front. In terms of rental value of the house it's a disadvantage as most renters would not want the maintenance involved (I have a tree across the lawn blown down by yesterday's storm as I write this).
You seem to be arguing that land value takes into account the 'desirability' of the site and the social disadvantage of that site being in private ownership. Yet Council tax is based on the old rates system and was originally based on the rental value of a property - which took account of exactly those things, 'advantages' such as location, transport links etc. So back to square 1.
I would strongly agree that something needs to be done where huge windfall gains are made by changes of use and permissions being given that drastically enhance land vaule, but in theory council tax and income tax should so this.

Mark Wadsworth said...

B, to be fair, I once suggested a £ per sq yard (with different rates in each area) but that was a long time ago and I've moved on from that.

W42, whatever the value of your plot is, its value is generated (or depressed) by the whole of society i.e. not down to your efforts, and the LVT would be set accordingly. Mathematically, the benefit to the owner is equal and opposite to the burden placed on everybody else. Either way, LVT is a far better way of raising tax than taxes on output (VAT) and earnings (NIC) both of which YPP opposes vehemently.

Council Tax is a poor distant cousin on LVT.

Bayard said...

I remember it well. You accused Lola and me of having "humungous" gardens (rightly in my case as mine is far too big, but like W42, there's very little I can do about it apart from letting it become a haven for wildlife).

Mark Wadsworth said...

B, I didn't "accuse" anybody of anything. You both told me you had big gardens.

Dinero said...

> Mark W

What is your proposal for tax linked to residential land and buildings.

Mark Wadsworth said...

Din, I just explained that.

Dinero said...

Hi Mark !

What is it

Mark Wadsworth said...

Din, I explained it at the end of the post in part 3. I have been saying this for years. There's no point asking to explain it again when it's in the post. Not sure what level of reality you are operating on.

Curtis said...

Commenters on Tim Worstall blog misunderstanding LVT again

Bayard said...

Mark, TIC fail again, sorry.

DBC Reed said...

@C Where are the numpties at it again? I would like to get straight onto it.They can't cope ,poor things, that their guru Tim Worstall is an eloquent supporter of LVT. (He's also started to admit that there is a Magic Money Tree: just that there's a problem with inflation is his only proviso. Carry on like this and he'll be out there with Martin Wolf supporting LVT and State Money Creation.)

Mark Wadsworth said...

B, what does "TIC" mean?

DBC, land values ARE the magic money tree.

Bayard said...

Tongue In Cheek

Bayard said...

"DBC, land values ARE the magic money tree."

and the housing ladder is what enables you to climb it.

Mark Wadsworth said...

I am a genius.

MMT could either mean "Modern Monetary Theory" or "Magic Money tree".

You read it here first.

Dinero said...

The YPP and LLC proposals are not land value taxes as a plot with a two story building would pay approx twice that of the same plot with a one story building. Thats not a Land value tax. Check the websites for cofirmation.

Mark Wadsworth said...

Din, LVT is a tax on the benefit which a landowner can derive from any plot, assuming put to best use (as a proxy for the burden placed on everybody else by virtue of them being excluded).

99 times out of 100, plots are being put to their best use, so actual use is a good proxy for hypothetical best use.

Clearly, not all plots are put to their best use. The restrictions are practical, sometimes they are political. It would be unfair to tax somebody on a hypothetical value which he cannot achieve because planning laws prevent him from doing so. So if optimum use is two storeys but planning laws restrict to one storey, a fair LVT is on one storey.

You can split hairs as much as you want. Is LVT 100% perfect? No of course not, but it is infinitely better than taxes on output and employment. That's the point.

Dinero said...


I konow what LVT is . the point is the YPP and LLC are not LVT.

What do you mean by a "fair tax is on one story"

The YPP ad LLC porposals are the oppositate of that. They tax a two story a aprrox twice that of a one story.

Dinero said...

Look at the website. What you call your propasal is not there, as the propasals there are a tax on the market value of the plot without a reduction for the dwellings effect on the market value, that is not LVT.