Emailed in by Ben W, from Prospect Magazine:
The title is This practical fix shows why the chancellor should introduce a land value tax seems promising, but they clearly aren't that enthusiastic at all:
All recent proponents of a residential LVT have started from the premise that it would replace Council Tax... But to replace the overall £33bn of Council Tax due for England in 2020-21 would require an LVT rate of around 0.9 per cent. While land values vary widely as a percentage of property market values across the country, 66 per cent is a reasonable guide.
At 0.9 per cent this would imply LVT on the Kensington house of around £180,000 a year (and approximately £3,000 a year on the house in Solihull). And at Local Authority level, Kensington and Chelsea could expect their annual receipts to rise from £106m to £787m, whereas Birmingham’s would fall from £362m to £115m. Such dramatic shifts are clearly unacceptable.
A sensible LVT would of course be a national tax, where all revenues go into one national pot (like it used to be for Business Rates) and local councils just get per capita grants. A 'local' LVT to replace Council Tax would be pointless as nothing much would change. At a very local level, Council Tax more or less is the same as LVT.
A further problem is that Council Tax is payable by the occupiers of a property (who may be tenants), whereas LVT is charged only to the owners.
Whether you have LVT or Council Tax, it makes much more sense for the bills to be sent to the owner, for administrative simplicity and improved collection rates.
Two accompanying tax reforms would make sense: reduce Stamp Duty Land Tax on purchases of principal primary residences (PPRs) to a flat 1 per cent, which studies have shown would significantly free up the housing market, at a cost to the Exchequer of around £320m pa. By comparison, LVT at a uniform rate of 0.05 per cent across England would raise approximately £1.6bn pa, and with the higher rates advocated above, total LVT receipts would be much greater. Secondly, introduce Capital Gains Tax at around 10 per cent on all PPR disposals.
Aargh! SDLT and CGT are both taxes on transactions! They're not as damaging as VAT, because they are taxes on land transactions rather than creation of new assets or services, but bad taxes nonetheless. Reducing one bad tax and introducing an equally bad tax is stupid.
One of LVT's many advantages is that it encourages "right-sizing", single people trade down and families trade up. That's a lot more efficient than building new homes. Taking away 11% of the selling price of somebody's home if they decide to down size discourages it.
Verdict: Fail.
Friday, 11 September 2020
Killer Arguments Against LVT, Not (484)
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4 comments:
"A sensible LVT would of course be a national tax, where all revenues go into one national pot (like it used to be for Business Rates) and local councils just get per capita grants."
I disagree. This would take all budgetary powers away from local authorities and give them to central government, who are no better at making those sort of decisions and probably worse.
"A 'local' LVT to replace Council Tax would be pointless as nothing much would change."
Au contraire, with the removal of the ridiculous "band H" cap on Council Tax, the rich would pay a lot more, especially in those areas with a very high number of "band H" homes.
"A further problem is that Council Tax is payable by the occupiers of a property (who may be tenants), whereas LVT is charged only to the owners."
Typically of KLNs, that this is a problem is stated as a fact and no justification is given. AFAICS it's a feature, not a bug.
B, what does raising a crappy tax that covers at most 10% of 'local' spending have to do with "budgetary powers"?
Re Band H, do you know how Council tax works, mathematically? It's only relative values *within an area* that matter.
So sure, a few people in Band H would see higher bills. In which case everybody else *in the same area* has lower bills.
So for most homes in London, bills would go down. There would be no benefit for people living lower value homes in lower value areas.
That's just shifting tax from wealthy to very wealthy, not shifting tax from poor to wealthy.
"B, what does raising a crappy tax that covers at most 10% of 'local' spending have to do with "budgetary powers"?"
If the totality of a local authority's income is decided by central government, they have no control over the size of their budget, only how it is spent. By and large, most people reckon that the resources of local authorities are infinite; any decision not to spend in particular areas is always taken to be a political one. Pleas that there isn't the budget for it fall on deaf ears: "there's always the money to do what they want to do", the people say. Where people really compare one LA with the next or the previous one under a different administration is in how much money they pay in local taxation.
"So sure, a few people in Band H would see higher bills. In which case everybody else *in the same area* has lower bills. So for most homes in London, bills would go down."
Is that not a good thing?
"There would be no benefit for people living (in) lower value homes in lower value areas."
I didn't say there would be. In any case what people want, second to themselves paying less, is for other people to pay more if they can afford it, for reasons of perceived fairness.
"That's just shifting tax from wealthy to very wealthy, not shifting tax from poor to wealthy."
The best is the enemy of the good.
Once again, all you have are facts.
And claiming truth in a world where facts no longer matter, us a firm of neurosis.
Is it time to start treating the disease, not the symptoms?
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