Just to round off the working week and because I haven't dipped my toe in the paddling pool of Home-Owner-Ist DoubleThink for a while.
From Yahoo! Finance:
Is the UK property market ready for a land value tax?
Yes of course it is, always has been.
Unless you are a moron:
Richard: So if a high-rise block of luxury flats with say 2000 flats in it is built on land valued at £200,000, then each flat owner would only have to pay £100 per year.. How does this help increase council revenue to provide the services that those residents would need - waste collection, health care, etc.
Seems like a good idea but when you think about it, doesn't it also mean that landowners in cities are going to build on previously green spaces? Will there be no gardens or parks in cities? Maybe I've missed something...
I don't think there is such a thing as a block of 2,000 flats outside the former Communist bloc, but hey. The KLN is ably batted back:
Henry Law: How could anyone build a high rise block of 2,000 luxury flats on a plot of land worth only £200,000. Say, £500k per flat, half of that is construction costs, the other half is land value. I make that half a billion for the plot.
Half a billion might be an understatement. A developer paid £959 million for the 12.8 acre Chelsea Barracks site in 2007. Henry is given some welcome covering fire:
Adrian: @Henry Law: Conversely, if the land is only worth £200k, it may be in an area that does not command £500k for a flat.
Value of land is tied to what it can produce. If that is a whole bunch of £500k flats then, as you rightly point out, the value of the land would be a lot higher than if it were reserved for agricultural use, for example.
Mark: You've missed a lot. Planning rules will still prevent building on gardens, parks etc. Any new building would still need to be in keeping with surrounding area so you can't suddenly build a 20 condo block of flats in the middle of a suburban street.
LTV could replace council tax and business rates (as a starting point) and would be at a lower rate because ALL property would be taxed (at different rates depending on type of area).
LVT cannot be offshored or avoided, no accountant can wriggle you out of paying it. When everybody pays their fair share (foreign investors/royal estates/land banking etc.) the cost for the average person will be less.
Friday, 17 July 2020
Killer Arguments Against LVT, Not (479)
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6 comments:
You have to laugh at Richard. in round numbers 60 GBP of your council tax bill goes towards waste collection, including the running of HWRCs and any onward costs. So if £100 GBP/household collected then there isn't a problem. The other example he cites of health care, even the 'Public Health' bit, comes from central government.
Richard, if he is indeed a real person, is ignorant of the two biggest budget items that his current council tax goes to fund. Look them up if you don't know.
AC, I have looked at the booklet that my local council sends out with the council tax bill. Most of their income is earmarked grants from central government (health, education). A tiny part is council tax. 99% of their spending is on stuff that they have to do by law.
I know that there are merits to LVT but I am unconvinced that they are not outweighed by the disadvantages. I guess that makes me a moron.
Are you advocating LVT as a replacement for all other taxes or just as a different method of calculating property taxes?
What is meant by maximum permitted use? That is not the same as its current permitted use is it?
It is often said LVT would be fiscally neutral, raising no more taxes than currently. Even if LVT were restricted to just replacing other property taxes it could cause a lot of unfairness. A, B and C each currently pay 2,000 in property taxes. With LVT it could be 500, 500 and 5,000 on properties of the same current value.
I think that the big problem with LVT is that whilst it has a lot of positives it is changing the regime too radically after people have made decisions.
KJP "Are you advocating LVT as a replacement for all other taxes or just as a different method of calculating property taxes?"
For a start, and as a tidying up exercise, let's replace all taxes that relate to housing, occupation, wealth etc.
"What is meant by maximum permitted use? That is not the same as its current permitted use is it?"
For 99 homes out of 100, they are the same. Most plots with homes on them are at their current maximum permitted use.
"Even if LVT were restricted to just replacing other property taxes it could cause a lot of unfairness."
Says who?
"A, B and C each currently pay 2,000 in property taxes. With LVT it could be 500, 500 and 5,000 on properties of the same current value."
You are making up numbers. Some taxes in the 'vaguely related' category are very regressive (TV licence, Council Tax) and some are very progressive (SDLT, IHT, CGT) and some are flattish (insurance premium tax). If these were replaced with a flat % tax, most people would pay much the same in the long run.
"I think that the big problem with LVT is that whilst it has a lot of positives it is changing the regime too radically after people have made decisions."
OK, then make modest, step by step changes. Interest rates are at all time lows. See next post - a 0.5% property value tax would replace Council Tax and SDLT. That is no worse than a 0.5% interest rate hike and a 100% Council Tax exemption.
So people with mortgages and FTBs can afford it.
So people who've paid off the mortgage can easily afford it.
Tenants can afford to pay 3% - 6% of the value of the home they occupy, plus another 0.5% Council tax. So their landlords can afford it.
Pensioner households have on average the same income as FTBs, so if FTBs can afford it, so can pensioners. And if not, they can roll up and defer until death.
Thank you for your reply.
OK, so it is just a different method of calculating property taxes. That is not so radical. But you mentioned wealth. For many in the middle class 60-80% of their wealth will be in the value of their homes; for the really wealthy it will be far less.
You say that for 99 homes out of 100 maximum permitted use is the same as current permitted use. That does not answer the question and implies LVT will only apply to residential properties.
Unfairness. This is an extreme, but real, example and would apply, to a lesser extent between London and Essex. A small eot house in Kensington is on sale for £1.95m; at its narrowest it is 7 feet wide. In Wales there is a 13 bedroom house on sale for £1.8m, meaning the land has no real value. That would put all the combined LVT on the London house. If you use a percentage of the total property value it is not an LVT at all.
Interest rates are at an all time low but long term policy decisions should not be made on the basis of current conditions.
[A] 0.5% property value tax would replace Council Tax and SDLT. This is where we agree and disagree. What you are proposing is not an LVT at all, a tax based on the value of land, ignoring what is built on it, but the same as now recalculated.
If I extend my house its value goes up and so do my property taxes. Under a proper LVT they would not.
Not sure who can afford what but an unfair tax does not become fair just because it is not payable immediately.
KJP, you are wasting your time and mine by saying that the way it will work is wrong on a detailed level. Firstly all taxes are somewhat arbitrary when you get down to the details.
Secondly you are completely missing the point
1. Government activity costs money
2. Government activity creates and maintains land values.
3. Therefore it is fair and reasonable, not to mention economically efficient, for government activity to be funded out of fees and charges on land values.
4. It is also fair and reasonable, not to mention economically efficient. so reduce taxes on output, employment and business profits.
As long as taxes follow these principles, we are on the right track. I'd prefer it if the Welsh castle owner paid a lot less LVT than the London home owner, but if they end up paying the same Proportional Property Tax, then so be it, that still follows the basic principles.
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