Wednesday, 16 October 2019

Killer Arguments Against LVT, Not (470)

I've seen this one a couple of times and it has been bugging me for years. I can't be bothered finding an example, so I'll paraphrase:

My wife and I are childless, semi-retired but still healthy and live alone in a nice house. There is a family across the road from us in an identical house. They have two kids at school and an older child who is sometimes in trouble with the police. A granny lives with them who constantly needs NHS care.

My wife and I place no pressure on 'local services' and cost the government next to nothing. With LVT, we would be paying the same as the family across the road. They place far more pressure on 'local services' and cost the government a lot of money. So they should be paying far more in tax than we do.

Such people have got the whole tax-spend cycle the wrong way round.

For good reasons (which I won't go into now), governments, on the whole and in general, just do certain things: police and law'n'order; roads; refuse collection; fire brigade; they provide universal education, free-at-point-of use or subsidised and regulated healthcare; welfare systems etc.

Every citizen has an equal entitlement to those things, so they have to be provided 'free-at-point-of-use'. For example, if the government tried to force parents who can't afford private school to send their kids to a state school and pay the full cost for each child, things would rapidly descend into chaos.

No government of a civilised country does this AFAIAA. And trying to make offenders pay for the cost of the criminal justice system is clearly insane. The police are there for the benefit of the law abiding, not for the benefit of criminals.

If the Tooth Fairy paid for all those things (or you had a small population and endless oil reserves), you wouldn't need to collect taxes, and I don't think governments particularly enjoy doing it.

But without a Tooth Fairy or oil reserves, spending without taxation would lead to hyper-inflation and regular collapse, so the money printed by spending has to be un-printed somehow, i.e. by taxation.

Having established that every citizen has an equal entitlement, it makes sense to collect taxes from those who benefit disproportionately. This leaves us with taxes on:

1. Those on really high incomes (annual income over £50,000 or £100,000 or whatever figure, there's no right or wrong answer). Higher earners need a pyramid of reasonably well educated employees under them; higher earners might have been to private school, but they benefit from the fact that their employees had a state education. (So basic rate tax, National Insurance and VAT are straight on the scrap heap of history).

2. Those who own land. In the absence of governments and civilised society (the two go in tandem, one is a symptom of the other), land would be worth precisely nothing.
- There wouldn't be anybody to say who owns which bit, and nobody to protect those rights;
- Some things benefit land values directly (near a good school, in a low crime areas, good transport links); and
- There are also secondary effects. If people only spend 6% of GDP on healthcare (as in the UK) rather than 18% (as in the US) for a similar level of coverage/quality of outcome, they have 12% more money to spend on everything else - goods and services or housing. And higher earners from category 1 bid up land prices.

So a tax on land values seems perfectly reasonable to me.

If our semi-retired complainant thinks he and his wife are being over-charged, he is perfectly entitled to sell up and move somewhere cheaper.

He and his wife will still be getting the same level of services from the government; they will of course be getting a lot less in spillover benefits from society in general, private enterprise etc in a cheaper area, which is why they don't (or wouldn't) move, and it is those spillover benefits that they will be paying for. And if they don't want to, somebody else will.


Bayard said...

This particular complaint is true for any type of taxation, even the Poll Tax (there would be only two Poll Tax payers in the "family across the road", assuming pensioners don't have to pay it). The polite answer is as you put it. The impolite answer is "F*ck off, you smug right-wing Tories, do you not understand the principal of progressive taxation?".

benj said...

Land has no cost of production, so when valuable and able to generate a rent, that becomes a source of "free money".

Those excluded from that source of money "free from human inputs" are therefore harmed by those that exclude them.

Who takes what from the system has no relevance to the compensation we owe each other, paid on the "harm done" principle. Be that payment of wages, for goods/services received, or a LVT.

mombers said...

The smug childless couple have both, in their childhoods, received the same state resources as the children next door. They also have a substantial, state enforced claim on the private property of their neighbours and their children. So in the interests of 'fairness', take the free money and services (pension, healthcare, etc.) and say thank you by either paying up or moving somewhere more suited to their income/contribution to society

Physiocrat said...

Your elderly couple could always do a bit of crime to get their money's worth and provide the police with some work.

L fairfax said...

The semi-retired couple might need a lot of health care in the future.
Their point about the Granny is an attack on the Government providing health care, how it is funded is not the problem, rather they are against the whole idea of the NHS. They should be honest and say that - although that would not be very politically popular.

"cost the government next to nothing. "
Is not true they benefit from police etc, which they have to pay for.

Mark Wadsworth said...

B, B, M, Ph and LF. Thanks and agreed!