What is the tax base under a LVT + Citizens Income?

One objection against LVT I recently stumbled over was that as a single tax it violated the principle that everyone should contribute to state spending.

Saint of Bacon who recorded a video on Youtube critiquing the LVT said "My argument is the idea of a single tax isn't going to fly in the US because we've adopted the view that everyone should pay into the government. Meaning having some segment of the population be tax exempt by choice isn't how America likes to function. Efficiency only gets so far and that is my point, quoting philosophy that I don't subscribe to isn't going to convince me. You're literally in the position of a Christian quoting Bible courses to an atheist."

Let's assume for arguments sake the LVT could indeed cover all of state spending is Bacon correct?

Say a country spends £250bn on services and £250bn on benefits.  As the rental value of land is £500bn pa, for reasons of efficiency and justice it decides to shift to a LVT and Citizens Income , negating the need to tax incomes, capital or transactions.

The principle behind the LVT is that it is a compensatory payment to those excluded from valuable natural resources. That it is collected and redistributed/spent by the state is a separate issue.  As we are all equally excluded we are therefore all entitled to an equal share of the rents, so this hypothetical country does this by paying out the £500bn pa as a Citizens Income.

This country still has to finance £250bn of spending on defence, schools, hospitals etc, which it does by imposing a Poll Tax on each citizen.

For accounting purposes this makes no sense. So instead of collecting the Poll Tax, it's less bureaucratic just to deduct £250bn of the LVT at source, and pay the other £250bn out as a Citizens Income.

This is viewed by Bacon that only those that pay the LVT pay into state coffers, but that's not correct because that's not what is happening in principle.

The correct view is that the LVT  doesn't belong to the state as tax. The state is merely its collector and redistributor. Therefore any citizen that does not receive their full amount of compensation with no deduction is paying a defacto Poll Tax.

And as all taxes on income, capital and transactions are to some degree incident upon land, that's also true of all current tax systems around the world.  That is, we pay into state coffers simply by not receiving our full share of  land rent.

ATCOR and tax incidence

ATCOR is an acronym for "all taxes come out of rent". This means that apart from a poll tax, all other taxes are incident to some degree or another on land rental incomes and thus selling prices. It doesn't mean that every penny of every tax is incident upon land.

To illustrate, consider the simplified example of a hypothetical country called SmallLand.

SmallLand has a population of 1 million. They all rent their immovable property from a landlord called Mr Monopoly. Total incomes are £15bn per year. Due to agglomeration effects there is a linear relation between the size of a locations population and its average income.   Average incomes are lowest in the smallest town (A) Poorville at £10,000 pa rising to £20,000pa in the biggest town (B) StreetsofgoldCity.

Ricardos Law of Rent tell us that Mr Monopoly can extract the difference between the averages. Leaving the average discretionary incomes in SmallLand before taxes are applied at £10,000 pa(C), while Mr Monopoly gets a yearly income of £5bn(D) from land (leaving out income from bricks and mortar)



SmallLand's government needs to raise £5bn a year in taxes. It can do so by either a poll tax, a flat income tax, or a land value tax. The graphs below show how each of the taxes effect the incomes of the population.



To raise £5bn from a poll tax(F), everyone would pay £5000 pounds each, leaving total discretionary incomes at £5bn(E) for all those paying rent. Mr Monopoly's income becomes £5bn -£5000(G)



To raise £5bn from a flat income tax, it would be set a 33.3...%. For that part of incomes at £10,000 pa and under it would raise £3.33..bn(I). As incomes rise over £10,000pa the amount raised goes up in proportion to incomes, totaling £1.66..bn(J). This leaves total discretionary incomes £6.66..bn(h), leaving £6,666.66 for each renter. Mr Monopoly's income falls from £5bn-£1.66...bn, totaling £3.33..bn pa(K).



To raise £5bn from a LVT it would be set at 100%, so that the total income of Mr Monopoly (D) is converted into tax revenue (M). Therefore, in essence, those living in SmallLand who all rent become tax free so their discretionary incomes (L) is the same as (C).  The rent they pay is in effect rebated aback to them as State spending.

In conclusion, the incidence of a LVT and Poll Tax on land are at the opposite ends of the spectrum. Because incomes are dependent upon location, taxes upon output share their incidence between land, labour and capital in proportion to their "progressiveness".

In my example above, a flat 33% income tax is shared 1/3 land to 2/3 incomes. As the UK tax system is only mildly progressive in total, this this probably a good guesstimate of how much revenue a tax shift to LVT would raise.

Life copies satire

Turns out, The Daily Mash was spot on accurate.

From the Evening Standard:

Lucy Pendleton, director of south-west London agents James Pendleton, said: “We had one person whose offer of £358,000 on a flat in Wandsworth was not acceptable at 12.30pm increasing it by £5,000 to £363,000 at 2.30pm.

"That was as a result of the stamp duty relief — the offer was accepted.”

However, there were fears that the change would stoke up the lower end of the property market, making it even harder for less affluent buyers.

"Fears"?