Friday, 12 January 2018

What is the tax base under a LVT + Citizens Income?

One objection against LVT I recently stumbled over was that as a single tax it violated the principle that everyone should contribute to state spending.

Saint of Bacon who recorded a video on Youtube critiquing the LVT said "My argument is the idea of a single tax isn't going to fly in the US because we've adopted the view that everyone should pay into the government. Meaning having some segment of the population be tax exempt by choice isn't how America likes to function. Efficiency only gets so far and that is my point, quoting philosophy that I don't subscribe to isn't going to convince me. You're literally in the position of a Christian quoting Bible courses to an atheist."

Let's assume for arguments sake the LVT could indeed cover all of state spending is Bacon correct?

Say a country spends £250bn on services and £250bn on benefits.  As the rental value of land is £500bn pa, for reasons of efficiency and justice it decides to shift to a LVT and Citizens Income , negating the need to tax incomes, capital or transactions.

The principle behind the LVT is that it is a compensatory payment to those excluded from valuable natural resources. That it is collected and redistributed/spent by the state is a separate issue.  As we are all equally excluded we are therefore all entitled to an equal share of the rents, so this hypothetical country does this by paying out the £500bn pa as a Citizens Income.

This country still has to finance £250bn of spending on defence, schools, hospitals etc, which it does by imposing a Poll Tax on each citizen.

For accounting purposes this makes no sense. So instead of collecting the Poll Tax, it's less bureaucratic just to deduct £250bn of the LVT at source, and pay the other £250bn out as a Citizens Income.

This is viewed by Bacon that only those that pay the LVT pay into state coffers, but that's not correct because that's not what is happening in principle.

The correct view is that the LVT  doesn't belong to the state as tax. The state is merely its collector and redistributor. Therefore any citizen that does not receive their full amount of compensation with no deduction is paying a defacto Poll Tax.

And as all taxes on income, capital and transactions are to some degree incident upon land, that's also true of all current tax systems around the world.  That is, we pay into state coffers simply by not receiving our full share of  land rent.


Mark Wadsworth said...

Exactly. Under this system, "state spending" is funded by a poll tax. You could make it explicit and send people a UBI statement saying "You entitlement is £10,000 a year minus £5,000 poll tax, net pay out £5,000".

MikeW said...

BJ - Good points. Do you still have the link so we can have a look at MR Bacon's YouTube?

benj said...

@ Mike W

Lola said...

"The correct view is that the LVT doesn't belong to the state as tax. And that will really piss off the HMRC etc. Good.

Mark Wadsworth said...

L, it's all taxpayers' money if you ask me, however collected.

Mark Wadsworth said...

BJ, the other counter argument is that everybody but people who sleep on the street will pay it via their rent.

benj said...


Yes, I often make that point, but as there will always be those occupying marginal locations(in theory) then they wont pay LVT or land rent. I'm now only going to use the defacto Poll Tax angle as I think that's the correct view.

At the risk of sounding like a scratched record, I don't think it's correct or helpful to see the LVT as a "tax". We don't charge a tax when we asked to be paid for our labour, or the goods or services.

I've always maintained that after we've all been fairly compensated, the returns to land, labour and capital will be equitably distributed. Thus the only fair or necessary actual tax we need or should pay is a Poll Tax.

I'm sort of the opinion now that by campaigning a Land Fee, Citizens Dividend and Poll Tax this might separate and thus clarify what these issues are really about.

Way too much conflation going on that confuses everyone IMHO.

MikeW said...

BJ Thanks for link. I like that you clarify your thinking here and open it up.

I think you know Mr Bacon poses no serious new questions. The main problem raised; getting folks to vote for our project, we may never win, as rentier apologists always remind us.

It is interesting though that he uses the theological/moral principle metaphor you quote above. In practice, outside this discussion, I am not moved: we will never be simple 'single taxers', so he does not know in advance that his principle will ever actually be tested/violated in a 'Georgist' state.

How about: Land Value Tax to Land Usage Charge. And then; Universal Citizens Income to Land Usage Dividend? Not sure where this gets us though. If and when we get started, rentier critics will simply assert its not a fecking 'Usage charge it's a Tax'! Your clarification may be exploited as 'shifty' no matter how well intentioned.

So finally, to whom are you offering clarification? I find MW's 'Rents are privately collected tax'. Changes the whole conversation, even with a DM reader. I do not want to reformulate that one!

benj said...

@ Mike W

"So finally, to whom are you offering clarification?" In a nutshell, everyone. Especially LVT advocates who are as confused as everyone else.

How about LVT isn't collected and redistributed by the State, but by some other body set up to do so. The State only legislates that it is everyone's right to be compensated for the opportunity loss they suffer when excluded from valuable natural resources.

Rentiers might say, "why should we pay compensation?" but slave owners said the same. The state collects taxes to spend on state services. They wouldn't get a penny of LVT, so it couldn't be a "tax".

I believe the Carbon Fee and Dividend movement has come to similar conclusions. The result of which, some Republicans are at least willing to look at it.

Mark Wadsworth said...

BJ, agreed.

MikeW said...

Thanks BJ,

I will have a look at Carbon Fee and Dividend Movement so will not comment, but seems very interesting.

I dont have an argument with you as such. But pragmatically, I don't see the pressing 'Political Issue' to 'rebrand' LVT, if I can express it that way. I should say, I do note that there is a long standing discusssion here that says: we can drop (1)History/Georgism/Henry George and just focus on (2), a pure LVT tax policy with no other past baggage. Your concern moves the dabate to (3), now drop the term 'LVT'(TAX)and move to a 'compensation' model of some design.I am open to the idea.I find that we do indeed say, 'don't think of it as a tax as such' - so your concern for logical consistency is fine :)
But again, going back to 'clarification'.Are you detecting that the last 5 years of Georgism/LVT political battles have been a particular failure compared to 5/10/15 years before? Is there some external event that leads you to conclude, in deep dispair, that we need to rebrand in the manner you suggest to move forward? This is not challenging the substance of your argument, but attempting to put it into a political context, which is also our concern here.

Mark Wadsworth said...

MW, although Georgism has been going backwards for decades, and Home-Owner-ism becomes ever more deep rooted.

However, in terms of more mainstream attention, in particular the favourable kind, I would say we have been making some progress on the 'raising awareness' front recently.

I'm also all in favour of the fee and dividend model.

So let's take taxes on petrol (about £40 bn a year), knock off £10 bn for roads and pay everybody a £500 a year 'fuel dividend'. The hard core Greenies will refuse to bank their cheques, of course, non-car owners can put it towards their bus fares, occasional/weekend motorists like me and Mrs W will find that our four lots of £500 just about cover what we spend on petrol each year.

benj said...

@ Mike W

Do you think Bacon, or anyone else in their right mind would argue against the payment to wages? Yet the payment of wages and the LVT are exactly the same thing from a moral and economic POV. People just haven't thought things through to that level.

There's been a failure to get fundamental principles right, resulting in the arguments for and against going off into all sorts of irrelevant and misleading tangents.

I don't think a political re-brand is necessary because YPPUK policy is perfect. We could do the "accounting" in a different way just to make things crystal clear, but if people understand the fundamentals that should be unnecessary anyway.

To be honest I think I'm suggesting "Georgism" be ditched in favour of a new narrative that's more honed and less wishy-washy.

What "libertarian" could possibility argue against the fact that so long as we are all paid what we are owed, a Poll Tax is the only tax we need.

Maybe we should start the "Poll Tax Party" to sucker punch everyone onto a "LVT" right hook? :)

Mark Wadsworth said...

BJ, payment of LVT is different to paying for wages, but is exactly the same as paying rent.

benj said...

@ MW

The value of land is the opportunity cost of not putting it to its highest use. As we are all equally excluded from that opportunity, we should all be equally compensated for our loss ie LVT is a compensatory payment for opportunity loss.

So is the payment of wages, or when we pay for goods and services. Including when we rent something from its owner.

They are all compensation for losses we suffer.

In my view, as long as we all get what we are owed, everything else takes care of itself.

Taxing peoples incomes, capital and transactions is a pretty poor effort to sort out the losses people suffer from land exclusion.

Mark Wadsworth said...

BJ, agreed to all that.

But LVT is just rent in the ordinary meaning of the word - if you want exclusive and sole occupation of somewhere, you have to pay a tiny fraction of a penny to each and every person in the rest of the country in exchange for allowing you to have that exclusive occupation.

But simplest is, everybody pays the full rental value into a big pot and then divvy it up equally (or agree that we will first spend some of the pot on priority stuff like police or roads or whatever).

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

@ MW

The only trouble with the word "rent" is it implies ownership of that good/service to the receiver(s) of said rent. That's not what is really going on with LVT, though I understand by the language Georgists/LVTers use, they think it is ie Socially/Community/State created land values

Of course, LVT and rent are set at the same rate, but that doesn't mean they are exactly the same thing.

Yes, whenever we pay market based compensation for anything, we are doing fundamentally the same thing. In which case there is nothing special/different about LVT, wages, rents etc, etc

Most people think LVT is different because they consider it a property tax and not much else. Albeit "the least bad" variety perhaps.

Not paying the LVT is as fundamentally unjust as not paying wages for exactly the same reason. That's the thing people will need to get a grip on if LVT is to stick, let alone get implemented.