Killer Arguments Against LVT, Not (159)

Roger Helmer stepped up to the oche at ConservativeHome:

I was encouraged to see Eric Pickles’ robust rejection of the Lib Dems’ Mansion Tax in Saturday’s Telegraph, but rather surprised to see our own Tim Montgomerie, usually the soundest Conservative around, appearing to support the idea of such a tax... his big idea is a wealth tax, in the form of a mansion tax on homes over £1 million, and there I suspect that many Conservatives, and not just Eric Pickles, will disagree. Let me list just of the few reasons that led me to think “over my dead body”.

First, as a Conservative, the phrase “No new taxes” is burned into my DNA...

Correct. So let's take the opportunity to dump a load of stupid taxes - like Council Tax, SDLT, Inheritance Tax, Insurance Premium Tax and the TV licence fee - and replace them with the oldest tax there is, a tax on land values, or just harmonise the taxation of residential land and buildings with the taxation of commercial land and buildings (Business Rates).

Second, any attempt to soak the rich and to punish success cuts across Osborne’s laudable objective of making Britain an attractive place to invest and to do business. There is an excellent economic case for a flat tax, and part of the philosophy of the flat tax is to avoid itsy-bitsy targeted hits on small segments of society, in favour of a single, clear, simple tax rate that we can all understand -- with zero exceptions and allowances...

I completely agree that all taxes on income or profits or output - income tax, National Insurance, VAT and corporation tax - could and should be merged into a single flat tax on incomes with zero exceptions and allowances (with tax breaks for pension savings being the most expensive and damaging), at least that way people would realise what the real rate of tax is (somewhere in the region of 50%). Can he now explain how such a tax on incomes does not "soak the rich and punish success"?

But how about a flat tax on residential land values as well to replace the mish-mash of "itsy-bisty targeted hits" listed above? That's clear and simple and we can all understand it. That doesn't discourage people from making money in the slightest, it just directs spending from land values to more productive stuff.

Third, an impost on wealth and property comes very close to breaching the right to property, enshrined in various charters of rights. OK, we have Council Tax, but that is (at least in theory) a payment for services, not plain confiscation...

This is the nub of the matter, isn't it?

i. As things stand, most taxes are on wealth creation. i.e. incomes. 'Wealth' is just a by-product of wealth-creation, it's what is left over after taxes have been taken away. And notwithstanding that land or rental values might be a measure of the wealth of an economy as a whole, they are not in themselves 'wealth', they are just a measure of how much money is transferred from wealth-creators to land 'owners' . It's no different to a welfare saying that as he is entitled to £X,000 in benefits every year, the capitalised value of that is £[20 x X],000 and that he is therefore wealthy.

ii. People in their capacity as land 'owners' play little or no part in wealth creation. The fact that most people who consider themselves land 'owners' also happen to have a job, run a business etc is a separate issue, they'd still be doing those jobs or running those businesses if they were tenants.

iii. The eternal conflation of 'land values' with 'property' is infuriating as well. Why is somebody's income not considered his 'property'? Sure, the politicians get away with justifying income tax using the 'ability to pay' argument, but your income is your property nonetheless.

iv. Worse than that, each £1 tax raised from wealth creation has dead weight costs; however efficiently the government spends or redistributes it (and they don't), society as a whole ends up £2 poorer, and the potential income of land 'owners' falls by £2. If they collected that £1 from land rental values instead, there'd be no dead weight costs and land 'owners' (collectively) would end up £1 better off (it's that a slightly different group of people would be occupying the land, i.e. those willing and able to pay for the nicest bits).

v. The final insult is that the Home-Owner-Ists decry Land Value Tax (or Mansion Tax, or Domestic Rates or Council Tax or whatever you want to call it) as "an attack on wealth" while simultaneously wailing about "ability to pay". The fact that some people don't have enough money to pay the Council Tax (or whatever) is surely a sign that these people do not have any true 'wealth' at all, isn't it?

vi. Think about it: who is wealthier, a Poor Widow In A Mansion or a high-earning household in the mansion next door? If the proverbial Poor Widow In A Mansion were asked to pay the same amount in tax as the high-earning household, who is more able to pay it - the PWIAM or the truly wealthy household? So it's not really a tax on wealth at all is it, or else the "ability to pay" argument falls flat on its face.

vii. His comment about Council Tax being payment for services is laughable, Council Tax raises far less than the cost of all the services people receive, most of which are local, and certainly a lot less than the value of services which a home-owner receives, or else land values would be negligible. And income tax etc. is a 'payment for services' as well, isn't it? It's just that it is used to pay for services which benefit just about everybody but the payer.