Killer Arguments Against LVT, Not (480)

Here's the draft of a lead article I have written for the LVTC website (which is being totally revamped).
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The transition

We live in the real world and accept that it would take a decade or more to phase in LVT and phase out most other taxes. This is not all-or-nothing and can be done in stages. Every small step in the right direction is a step in the right direction, even if we never “get there”.

We have explained the main stages and running order for the transition under the heading “How much will I pay?”

Replacing existing taxes on land and buildings, occupation and wealth generally (Business Rates, Council Tax, Stamp Duty Land Tax, Inheritance Tax, TV licence fee etc) with an annual LVT could be done fairly quickly (one or two years to get the basic valuations and administration in place and give people time to plan). These taxes are a mixture of the very regressive and very progressive so for most households at either end of the scale, the total tax payable over a lifetime would not change much, all that would change is the timing of payments. At the lower end, LVT would be much the same as the Council Tax (less Council Tax discounts) and the TV licence fee that they are currently paying; at the upper end there would be smaller annual LVT payments instead of large irregular payments of SDLT or Inheritance Tax at more or less random intervals. So this should not be too controversial.

Replacing the two most damaging taxes which raise significant revenues (VAT and National Insurance) would mean the LVT on a median value home increasing by about £5,000 per year. Households with two earners on average full-time salaries currently pay (or bear) over £15,000 in NIC and VAT per year and pay £1,000 Council Tax/TV licence fee, so they would see their net salaries and disposable income increase significantly.

But this need not be an all-or-nothing, Big Bang shift. We know that there are some (with only one main earner; on lower incomes; and/or in more valuable housing) who would be hit financially by an immediate shift.

We don’t know how quickly businesses will expand or how quickly employment rates and salaries will increase as a result of the shift (the Swedish experience with VAT cuts in 2009 suggest it can happen surprisingly quickly, within months rather than years).

Those who are hit (or think they will be hit) financially need time to trade down; to take in a lodger; and/or find better paying jobs. So VAT and National Insurance would be reduced by a few per cent each year for five to ten years until they are completely phased out, and in tandem, the median LVT bill would increase by £500 to £1,000 each year (or by £40 to £80 each month) for a transition period of five to ten years. Most of the households who think they will end up with significantly less disposable income at the end of this transition should be able to cope with this timetable.