Emailed in by John D, from the BBC:
Wales should slash income tax rates to the lowest in the UK, according to one of the candidates challenging Leanne Wood for the Plaid Cymru leadership.
Adam Price said the basic, higher and additional rates could be cut by 9p and business rates and council tax ditched*. New land value taxes on residential, commercial and industrial residential land would fund the changes**, he said...
The Welsh Government is getting more tax powers next April, including partial control of income tax...
In proposals published on Friday, Mr Price said "introducing a National Land Value Tax on residential, commercial and industrial land (agricultural land would be excluded) could generate £6bn at a 3% rate on current values. This would enable us to abolish business rates, council taxes and lower income tax, at the basic, higher and additional rates, by 10p," he said.***
* His proposals don't mention ditching Land Transactions Tax as well, unfortunately.
** On a political level, it is better to say the Land Value Tax would fund those public services which increase land values, which is the fair way to fund them and which in turn would enable income tax to be reduced.
*** Something has got lost in translation here. Rhys ap Gwilym's original proposal worked on the basis of total council tax, business rates and income tax (basic and higher rate) revenues in Wales at £4 bn a year, so the LVT revenues required to replace council tax and business rates, and reduce income tax by 10% would be less than £4 bn, not £6 bn.
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Sobers of course runs with the messed up numbers in the comments, knowing full well that they are messed up. He also ignores the distinction between land value and total value including buildings.
Suffice to say, on a fiscally neutral swap, more than half of people would be better off, as wages are distributed more evenly than land ownership.
Total required revenues from LVT on housing (assuming revenues from LVT on commercial = same as revenues from Business Rates) = £2.7 bn.
£2.7 bn divided by 1.34 million households/homes is average £2,000 per household/home (up from current average just under £1,000), not Sober's wild overestimate of average £4,100 per household/home. So all tenants end up better off; a single earner who owns an average value home earning £22,000 or more; or a two-earner couple which owns an average value home earning £17,000 or more each.
A grim document
13 hours ago
15 comments:
3% eh?
He must read this blog.
The figures basically mean no one in Wales would be better off. A three bed semi in Swansea costs about £125k. So would generate an LVT bill of £4.1k. Minus council tax of £1.3k, so a net bill of £2.8k
So in order for a 10% income tax cut (Not NI one assumes) to save you £2.8k/yr, a single person would currently have to pay double that in income tax (ie cutting basic rate from 20% to 10%), so £5.6k. To pay that much income tax requires an income of £40k. Or a couple to be earning £26k each.
Average income per head in wales is £16k according to the ONS, so the average person pays about £800/yr in income tax. Halving that would save them £400. So with band A council tax saved of £750 (Band A tax £1k less 25%) thats a £1150 saving. That would be wiped out by the LVT on a property worth more than £38k. A couple could go up to a bit more than double that. The average house price in Wales is £150k (flats £110k, terraced £116k, semis £148k).
See the problem?
@ Sobers
With revenue neutral changes to the tax/benefit system, on average, no one is better/worse off (isn't that how averages are supposed to work?)
Other than if such changes help improve the economy. In which case, everyone is better off.
"With revenue neutral changes to the tax/benefit system, on average, no one is better/worse off (isn't that how averages are supposed to work?)"
Pretty much every private person in Wales is worse off under this proposal. Businesses would make out like bandits though, and a very few high income people (though even those would probably live in more expensive houses). Thats not a proposal thats going to be very popular is it?
I did make one mistake - 3% of 125k isn't 4.1k, its 3.75k, don't know how my calculator came up with that. But it doesn't make much difference, the income required for a 10% income tax cut saving to outweigh a 3% tax on residential property would be well above the UK average income, and probably double the Welsh average income. I would guess that anyone in paid employment who owns their own house in Wales would be worse off under these proposals.
And its no good having a go at me, I'm just taking the numbers in this proposal and showing they would mean just about everyone in wales who was a home owner would be worse off. Its not my fault if the proponents of LVT publish rubbish ideas.
BI, ta for back up.
S, you know perfectly well that your numbers are wrong, they prove nothing.
It's not just the numbers. One of the glories AFAIC is that the LVT / CI argument massively simplifies the whole tax and benefits system. This will enable us to release 80% of the bureaucrats pushing paper about under the current system to find more rewarding wealth creating jobs in private business. And accountants too will be released from being 'tax advisers' to do actual 'accounting'. Can't wait.
L, yes of course :-)
"One of the glories AFAIC is that the LVT / CI argument massively simplifies the whole tax and benefits system. This will enable us to release 80% of the bureaucrats pushing paper about under the current system to find more rewarding wealth creating jobs in private business. "
Regardless of the merits or not of LVT, you have to consider that the direction of travel of public policy in the UK (and Western Social Democracies in general) would have to do a fundamental 180 degree change for this to happen - I can see no likelihood of it, as we constantly see the direction of travel is in the other way, more taxation, more public spending, greater role for the State.
All campaigners for LVT will end up getting is LVT on top of all the existing taxes (ie its introduction will be used as a way of increasing the tax burden not just a straight revenue swap). We can see this even in this proposal with its 'penny on income tax for education' nonsense. LVT campaigner generally are smaller state people too, and have made the mistake of thinking that because they want a smaller state, and a properly implemented LVT would achieve that, any implementation of a LVT will result in a smaller State.
Whereas the reality is that people from other political perspectives will just see LVT as a way of getting their fundamental aims achieved, which may be higher taxation, more public spending, a bigger State and the destruction of private wealth. And would seek to implement a LVT in manner to achieve their aims, not yours.
Given smaller State politics are not that popular in the UK, there's no one advocating a smaller State in any of the major parties, the chances are that any implementation of LVT will be to enhance State taxing power and revenues and to increase State control over the economy.
S, so what? If we are to have more govt spending, let landowners pay for it.
The 'Small State' stuff from Faux Libs just created a 'Croney Large State' which for many, is far worse than the 1970s 'UK Corporatism' the 'free market' ideal sort to destroy. Georgism didn't create this failure of the 'small state' meme/ideology. It is the 2018 solution to the fairness/effeciency, economic problem we face since Blair and Thatcher's revolution: which merely involved shifting from a Left wing 'Croney state' to the Right wing, croney, Finacial and Banking Cartel. You cannot post outlining the concerns you have Sobers, and also argue as if 2007/8 crisis never happened.
But please keep posting. Because we 'Left' and 'Right' Georgists here do agree on the fundamentals. We all want the people to VOTE for political parties who will impliment the LVT. This does amount to your '180 degrees' I agree.
But here lies the answer to your/our problem. Georgism ulitimately changes the political frame (the social contract) as you suggest. But you Sobers, and the other 'Small Staters' will be at perfect liberty to join, and vote for any party seeking to halt or slow down the form of LVT implimented, whatever you wish. History will move on and the tax changes will work themselves through the Democtratic system. Nothing is set in stone for eternity.
Why not use your dislike for LVT, offer us here a 'medium' and 'long term' perspetive on Georgism. It is boring to keep posting/suggesting that folks here have not gone over your concern, time and time again. Why not pose you problem as; what are the short term risks of LVT and what are the long term gains?
In my view (not shared by evertbody here - for we are not a cult), much better a short period of some state 'involvement' if the long term prognosis is a flexible Georgist tax system, CI, even JG :) As such a Democtratic state - the state that resolves these risk issues first, makes this first Georgist move, may well blow its competitors out of the water over the long term.
"so what? If we are to have more govt spending, let landowners pay for it."
Fine. But don't pretend that an LVT will result in a smaller State because it won't. A LVT is just a tax like any other, its a tool that politicians can use to achieve their larger goals. And as such it can be used to shrink the State or to enlarge it. And given the way the political winds are blowing (and have been blowing since WW2, apart from a fairly short lived period under you know who) its not going to be used to shrink the State. Anyone who thinks that the introduction on a LVT is a step on the road to a reduction in State size and power needs their head examining.
S, LVT is not a tax like any other. It is a contribution towards the cost of those public services that increase land values. You pay for what you get.
S, you landowners LOVE and NEED public services. Defence, police, fire brigade, roads, public transport, schiols, these are the things that give your land value in the first place.
So please, pay a bit more towards them instead of funding all of this out of taxes on output and employment.
"Fine. But don't pretend that an LVT will result in a smaller State because it won't."
I have to agree with you on that, it won't by itself. However a large state is the result of the powerful arranging things so that the cost of that large state by and large falls proportionally on others than them. If we have LVT (and I'm not going to hold my breath), then the powerful will end up paying more towards the cost of a large state and may then start thinking about shrinking it. The state always taxes the maximum it thinks it can get away with. With the majority of the population, the state only finds out what this is at the ballot box. With the influential few, they find out in very short order indeed. (That's why it's called the Old Boy network: the feedback always starts with the words "Look here, old boy, we can't be having this....")
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