Thursday, 28 September 2017

Killer Arguments Against LVT, Not (423)

Somewhere in this thread (BenJamin' and others on top form!) is the standard fare argument along the following lines:

Under the current system with high taxation of incomes and output and light taxation of land, you at least have the knowledge that once you've paid off the mortgage, then you won't lose your home even if you lose your job.

That's clearly a non-argument in real life:
- it ignores people paying rent or paying off a mortgage, who are expected to pay income tax for the unemployed home-owner;
- it is a dwindingly small number of people;
- it ignore the fact that although that person might be 'safe' in his home, he still has to eat and heat;
- we also have welfare systems that can deal with unemployment (like giving time limited LVT exemptions to people who've lost their job);
- the risk of losing your job is of course much higher under a system that taxes incomes and output;
- and so on.

But let's look at the more fundamental issue.

The point is, when people organise themselves and agree rules of behaviour, there is a Laffer Curve of Liberty, and we ought to organise our rules to maximise liberty (or minimise impositions thereon). With some things, it's a straight line 0% to 100% (like banning drugs or prostitution, that is a straight reduction in some people's liberty without enhancing anybody else's), but usually it is not a straight line from 0% to 100% and there are trade offs.

To give an extreme example, most would agree that banning slavery increases overall liberty; the flip side is that it reduces the liberty of people to own slaves. On a more mundane level, there are speed limits in residential areas, which reduce the liberty of motorists but protect the liberty of pedestrians and residents.

For sure, taxation reduces some people's liberty and increases others' liberty. A net transfer of liberty is a reduction in overall liberty (like transferring liberty from slaves to slave owners). The key is to reduce the net transfer/overall burden as far as possible in total e.g. by spreading it as equitably as possible.

Let's go back to the Faux Libertarians' parable about splitting the restaurant bill. If the total bill is split equally, regardless what anybody ate, that's a Poll Tax* (authoritarian hard right); if we split the bill so that higher earners pay more, regardless of how much they ate, that's income tax (socialist). Both of those encourage over-eating, are objectively unfair and reduce the liberty of those paying for more than the cost of their own meal.

(* Baffles me why so many Homeys think that a Poll Tax is somehow better than LVT. Try substituting Poll Tax for LVT in the original argument: "Under the current system with [a high Poll Tax], you at least have the knowledge that once you've paid off the mortgage, then you won't lose your home even if you lose your job." That's clearly bollocks.)

What's wrong with everybody just paying for their own meal (Georgist)? That's land value tax, and doesn't impose on anybody's liberty. The greedy people will complain that they are worse off than they were under a Poll Tax; the low earners will complain that they are worse off than under income tax. Tough, past wrongs don't justify future wrongs.

It gets worse, of course. With a restaurant, it is the owner and his employees doing the cooking, so they expect to be paid (or else they wouldn't do it), however the bill is split. Land values are created by everybody and nobody, so by default ought to be shared between everybody equally (unlike earned income, which ought be retained by the earners), but under current rules, a minority own most of the land value (Pareto's 80/20 split).

So basically, income tax payers (residents) are paying for the meals to be cooked (obeying common rules and restrictions and thereby creating the land value in the first place) instead of being paid to do so. This does not even entitle them to a meal (land), they have to pay extra (rent or mortgage) if they want some food (somewhere to live).

And land owners (collectively) on the on the other hand are charging people for the cost of the meals, even though they did not provide ingredients or cook them. For sure, most people 'paid for' their land, but that is a transfer between past and present landowners, and is no consolation to the landless (considerably more than half of people alive and most of those not yet born).

This looks like a massive transfer of liberty from the landless to landowners, and as such is a reduction in overall liberty.

Getting back to the topic, that small loss of liberty for a few middle-aged homeowners who've paid off the mortgage and then lose their jobs would be but a drop in the ocean compared to the massive increase in liberty for most other people.


mombers said...

And in other news, record numbers of pensioners still paying off mortgages. So more and more of a moot point. Although the taxpayer is stuck with the bill through SMI. Which has mercifully been transformed into a loan instead of another handout to the banks.

Ben Jamin' said...

LVT is economically the same as paying rent ie like paying market based compensation for any other good or service.

People get all confused because they lump all sources of state revenues into the "tax" pile.

If we consider that the LVT is the state collecting rent on our behalf, to spend on services/dish out as a Citizens Income, then this has some very different and important benefits that a mere tax collector doesn't.

It means that as estate manager/rent collector, it is competing directly in the market against the providers of alternative goods and services for our custom. Its aim would be to maximise aggregate land rents. A very good thing indeed.

This should, in theory, be the free market, capitalist, libertarians biggest wet dream*. But strangely, it isn't.

* I am and this is the main benefit LVT would produce, IMHO.

Bayard said...

"that small loss of liberty for a few middle-aged homeowners.......would be but a drop in the ocean compared to the massive increase in liberty for most other people."

That sounds familiar: elderly poeple losing out as a KLN - ah, yes, the PWIM.

Mark Wadsworth said...

M, yes, the pool of such people is steadily shrinking.

BJ, good point re competition. The only thing which governments are any good at (or least bad at) is land management, let them stick to that.

B, it's the PWIMs nieces and nephews.