Saturday, 7 July 2018

Killer Arguments Against LVT, Not (443)

The KLN: "You will never be able to really own land if you have to pay 'rent' for it."

The 'rent' i.e. tax you would have to pay is merely your contribution towards the cost of stuff (defence, police, roads, education, NHS etc) that increases/maintains the use value of that location. The same as paying for repairs, utilities, service charges on a flat, home and contents insurance etc.

(For sure, you need the government to provide the basics AND the private sector economy to do everything else, one without the other is no good without the other and location values would be very low, but hey.)

Clearly, there are large swathes of the UK where the rental value is so low that it's not worth collecting the tax, i.e. most farmland and housing in the cheapest areas (the bottom ten per cent).

So if you are mad keen to 'own' land and not pay any 'rent', then just buy some farmland and pitch a caravan on it, or buy a house in a run down area with low employment rates. You don't get much in exchange, so you pay little or nothing.

If you want something nicer, then you have to pay for it, the future tax bill comes off the price anyway, so what's the difference.

12 comments:

Bayard said...

By that reckoning, you'll never really own a car, either (unless you want to keep it in a museum).

Mark Wadsworth said...

B, in which case the storage costs you money.

Lola said...

All taxes are 'rent'. They are the 'price' for living in a civilised society.
Why is this so difficult for people to grasp? All taxes are a more or less inefficient taxes on rent so why not just cut out the intermediate stages?

James Higham said...

My mate has done just that - bought farmland and he does have tents.

mombers said...

Given that fewer than half of adults are owner occupiers, and much less than that amongst the working age population, it seems morally wrong to grant such extraordinary private property rights to a minority of people. If you believe that land is genuinely private property anyway.

Ben Jamin' said...

As you said, the main point is that selling prices are merely capitalised rents. So with LVT, instead of them being collected by the usual suspects, producers get a reduction in their tax burden.

Unless you are a lender, landlord or a foreign property owner, what isn't to like about that? On top of which the economy gets optimised for growth, which is all that really matters from a policy POV.

It's a no-brainer.

Ben Jamin' said...

@ Lola

Agree. Current tax/benefits system is a quasi LVT/CI, albeit a crap one. Tradeoff being the security blanket of owning land vs the parasites and economic distortions.

However, if LVT and other Pigou Taxes, user fees etc were bundled up, and paid out as a Citizens Dividend, then you'd be left with a Poll Tax in order to fund state services. That wouldn't be rent. Hence my preferred option.

Curtis said...

Taken to the extreme from Lola's "They are the 'price' for living in a civilised society", since the ~1500s you never really own land unless you form your own sovereign state and are recognised as such by your neighbours.

Mark Wadsworth said...

JH, does he live in a tent or rent them out?

Everybody else ta for comments, I agree with all of them except maybe

"the main point is that selling prices are merely capitalised rents"

My new line of argument is that selling prices are the capitalised value of public services which benefit a site, all paid for with taxes on output and employment.

Lola said...

BJ. Yes. I see. LVT collects privatised taxes (aka location rents/economic rents)and pays them back out as CI. And Poll Tax is what you pay for 'state services'. That actually makes a lot of sense.

Ben Jamin' said...

@MW

You can't disagreed that selling prices are capitalised rents.

You can argue that its the value of public services that gives land all of its rental value. Arnott and Stiglitz agree (sort of). But it's not the right way of looking at things, though politically expedient perhaps.

State spending per capita in Hong Kong is a quarter of that of London. Yet it's land values per capita are probably higher?

Mark Wadsworth said...

BJ, I agree that site rental values are only partly due to govt spending. But underpinning them is existence of the state, without which there are no rental values.