Friday 27 August 2010

Killer arguments against LVT, not (63)

Uncle Tom, dismissing LVT over at HousePriceCrash:

The socialist solution to land issues, though attractive in theory, has been tried many times, and has always failed. Never forget that in the 20th century, more people starved to death as a consequence of socialist land reforms, than died in all the wars put together.

The second sentence is almost certainly correct, but irrelevant. I responded to the first as follows:

1. [Evidence shows that] the state should not take control of means of productions (whether through ownership or, in a Western European context, through regulation or INCOME TAX).

2. The collective farms failed because they were badly run and no incentive to individuals working on them to increase production.

3. What Russia & China did, in limited fashion, was rent off small holdings to individuals, who were allowed to sell their crops. Surprise, surprise, these small holdings were infinitely more productive than the collective farms.

4. What the quasi-socialist EU does is dish out subsidies simply for owning land, these do not increase food production one iota (if anything they push it down), they merely reward land ownership and push up rents and prices.

5. There is no economic difference between a small holder renting a field from the state [or from a landlord, for that matter] or paying land tax (which would be considerably less than £50 per acre per annum for UK farmland) in exchange for the state guaranteeing exclusive possession.

6. From the point of view of somebody who wants to go into farming, he will be a lot more motivated to do it properly if he just pays £50/acre per year LVT and has no income tax on his profits than if he has to borrow a lot of money from the bank to pay mortgage interest of rather more than £50/acre [or pay rent to a private landlord] AND has to pay INCOME TAX on top of that.

18 comments:

Lola said...

The more one thinks about LVT/Citizens income etc the more one realises that the biggest argument for, and against it, is that it totally undermines the power of the political class. The p[olitical class being against it.

If you do LVT/Citizens income and then do free (vouchers?) schools and resurrect stuff like friendly societies the less there will be for central government to do.

MW, old son, it's going to be a long hard road.....

John B said...

You have to wonder about the sanity of someone who's so attached to having their land rather than their work taxed that they equate the former to fecking Stalin.

I'm not sure I agree with Lola though. The problem(/obvious advantage) of LVT and CBI in the way the libertarian-right advocate them is that they cut the size of the state. Understandably, right-libertarians view that as a good thing.

But you could keep the current state % of GDP whilst also replacing income tax with LVT and benefits with CBI, and that would *still* be an improvement from everyone's perspective, because *both of them cause less stupid and pointless deadweight economic loss*.

I mean, I'm a redistributive left-libertarian, but I don't believe in wasting pointless money on 200,000 complicated-tax-assessing-workers and 50,000 highly paid accountants to subvert them, or on people who'd rather work 20 hours a week and look after their kids the rest of the time sitting around watching telly because it'd cost them more to go to work. Nor does anyone sane, irrespective of their political leanings, that I've ever spoken to.

Maybe, in the context of the New Politics or whatever the current lot are supposed to be, some kind of alliance to promote non-stupid policies is the way forward...

James Higham said...

The collective farms failed because they were badly run and no incentive to individuals working on them to increase production.

... because they were collectivized. they tried it in Russia, they tried it elsewhere - it always fails.

People respond to the ability to make their own money and own their own property - that's where the incentive is.

Tim Almond said...

Lola,

The more one thinks about LVT/Citizens income etc the more one realises that the biggest argument for, and against it, is that it totally undermines the power of the political class. The p[olitical class being against it.

If you do LVT/Citizens income and then do free (vouchers?) schools and resurrect stuff like friendly societies the less there will be for central government to do.

MW, old son, it's going to be a long hard road.....


The thing is that it really shouldn't be. The political class, and those that gain from their existence are a minority.

What I think really scares the political class is voting reform. A reformed voting system can deliver someone like Berlusconi who's popular with the people but not part of the system.

Dick Puddlecote said...

Have you seen who is on your side? Crikey!

Mark Wadsworth said...

L, JB, JT, that's what puzzles me. Land ownership is privatised tax collection and this inherently redistributive. Under current rules, it distributes upwards; we could use LVT to cut income tax etc and it would redistribute from land 'owners' to wealth creators (whether they are shelf stackers or Premiership footballers). Whatever you do with land 'ownership', it is always redistributive.

JH, that's why I mentioned the 'free market experiments' in Russia and China. It wasn't the legal 'ownership' that made the difference - it was the right to exclusive possession (which has enormous value) and the right to benefit from your own efforts that made all the difference with these smallholders.

It's the same with tenant farmers in the UK - they pay a certain amount for the right to exclusive possession and just get on with it. There is no evidence to show that owner-occupier farmers are more productive than tenant farmers (in fact, the reverse must be true, or else there would be no agricultural landlords).

DP, nice to see a fourth member of my Bloggers' Cabinet drop in. Yes I have seen that, and no, he doesn't get it - he also proposes hiking Employer's NIC (the second worst tax).

Derek said...

That's the thing about LVT. It has so many advantages that it appeals to people from everywhere across the political spectrum once they actually look into it properly. Those on the Left like it for its advantages for Morality; those on the Right for its advantages for Liberty. And everyone, Left, Right or Centre, who actually understands it fully, appreciates its economic advantages. The only people who don't like it are those who are doing quite nicely from the current set up, thank you. Unfortunately they form quite a powerful opposition...

Mark Wadsworth said...

D, may I amend that slightly:

"MOST people who don't like it are those who THINK THAT THEY are doing quite nicely from the current set up, thank you. Unfortunately they form quite a powerful opposition..."?

Seeing as the vast majority of the UK electorate are both homeowners and income tax payers, it wouldn't make the slightest difference to them if we shifted from taxes on incomes to taxes on land values (ignoring the economic advantages etc).

Lola said...

JOhn B. Intriguing. Left libertarian? I know that there are all sorts of arguemnts about Left and Right Libertarian, but personally I have never had any hold with them. Left and right Libertarians seem to both have Freedom and Responsibility at their core and after that it's, well, what exactly?

Derek said...

That's a reasonable amendment. I must admit that I was thinking of the bigger fish when I wrote the original comment. I tend to think of the average home owner as either misinformed or more likely uninformed on LVT's advantages. Which is sad, given the benefits that he or she would reap. Heyho, just have to keep spreading the word I suppose but after thirty years doing that it gets a bit depressing to see so little progress.

Mark Wadsworth said...

L, I await his answer!

D, keep spreading the word. We've only been doing it for two centuries, it'll all come good one day :-)

Physiocrat said...

I was in Latvia last month. Much of the food production and distribution appears to be in the hands of smallholders and market traders. Supermarkets have hardly got a look-in. The food is inexpensive with a good variety of fresh locally grown produce.

This is presumably the Soviet legacy of breaking its own rules to avoid starvation.

Bayard said...

Mark, I think it would be helpful if you did a "who pays what" analysis of LVT. The "killer argument" is see most often advanced is "What if I own my house and have no income? With income tax I'm OK, with LVT, I'm fscked."
Setting aside points like Council Tax, CI and others, if income, corporation and value added taxes were replaced by LVT, what proportion would be paid by private homeowners, who are not making any money out of their property, and what proportion by every other property owner, who are? AFAICS the latter group benefit hugely by LVT, as their tax base is fixed and the more money they can make from their bit of land, the more money they earn, full stop.

Mark Wadsworth said...

Ph, godo anecdotal.

B, i did a more detailed answer to that question here (which includes discounts for pensioners).

As to the working age population it is quite simple - ignoring changes in behaviour, it depends on the ratio of the value of the property you own to your income.

If your house is worth more than six times your annual household gross income, you will end up a bit worse off. If it's five times or less, you end better off. If you are a tenant you will almost certainly be better off.

So over time, low income people in expensive houses would trade down and high income people in small homes in less desirable areas would trade up, and in the medium term, nobody ends up worse off than now.

Bayard said...

MW, in that post, you refer to "trebling business rates", but don't say what proportion of the total tax take that would be, nor what the effective LVT% would be on commercial property values.
There is an argument for taxing commercial and residential property at the same rate (ending arguments about what constitutes "commercial" use).

Mark Wadsworth said...

B, Business Rates is not too far off being LVT, and currently raises about £25 billion, let's treble that to £75 billion, which is an effective rate of about 7% on total privately owned non-residential property values (incl radio spectrum, airport landing slots, mining right, licences for special use like pubs, betting shops etc), which is the same rate as I recommended for residential.

I agree ideally all land and buildings taxed at same rate (farming, commercial, residential). I know that the purists say that LVT should be on annual rental values of land only, but on a rough and ready basis we can use capital value of land and buildings.

Remember that about £400 billion of taxes are paid by "busines" (income tax, NIC, VAT, corp tax etc). So the tax burden on "business" would be a heck of a lot less (£75 billion rather than £400 billion) whatever figures or assumptions you use.

Bayard said...

MW, do those figures assume no LVT on farmland?

In your post, I reckon £50/acre is equivalent to 2% - not much less than what you'd pay a private landlord in rent, AFAIK.

Mark Wadsworth said...

B, potential LVT from farmland is somewhere in the region of £2 billion per annum, so neither here nor there.