Killer Arguments Against LVT, Not (180)

The previous thread has got a bit messy, so I'll start again.

Sobers, who is a master at Home-Owner-Ist DoubleSpeak has come up with more superficially clever but factually incorrect and totally contradictory arguments against LVT, none of which stack up in fact or in logic, and even if they did wouldn't actually be arguments against, but are on the one-dimensional level which appeal to tabloid newspaper readers, they are roughly as follows:

1. LVT will clobber a lot of businesses, i.e. those that use a lot of land (primarily farming, large scale manufacturing), which is A Bad Thing, he singled out Honda in Swindon as an example.

This is simply not true, it's what you might call "an outright lie".

a) A known amount of income tax, corporation tax, PAYE is collected from farming. There is a known amount of farmland, some of which has a low rental value (forests, about £10 an acre) up to tip-top land suitable for growing vegetables (up to £300 according to a farmer I know). We happen to have very good records of this because CAP payments are (or were) paid out at different rates according to the value of the land (so the owner of a forest got much less in subsidies than the owner of tip-top farmland).

So we can deduct the total value of the subsidies from the total tax they pay averaged over the past few years (it's possible that this is a negative figure) and divide this by the total rental value of UK farmland to arrive at a percentage and hey presto, that's your starting figure. As long as LVT on farmland in year one is equal to or less than this, it can't possibly have a negative impact on farming. As it happens, that net tax minus subsidy figure is very low (might even be negative) and the total value of UK farmland is a tiny percentage of the rental value of privately owned urban land, so as far as I am concerned, we could just exempt farmland for the time being and just make farmers pay normal LVT on their housing.

b) I also reminded Sobers that the LVT on Honda's Swindon site would work out at an average of £225 per car (assuming full production of 200,000 cars a year), which is a tiny fraction of what they are paying now in VAT per car. And half of their site appears to be a car park i.e. storage space for finished cars not yet sold, I'm sure they could cut back on this if they were so minded.

c) We can go through business after business after business, and all we establish is that some will pay a bit less tax than now, some will pay a lot less than now, and some will pay barely anything compared to now. The fact that shifting to LVT will benefit some businesses more than others is a minor concern, it all levels out in the end.

d) Just to remind you (i.e. Shiney) of the basic calculation, there are about 2.1 million acres of privately owned residential land and 0.3 million acres of privately owned commercial land (a mere four per cent of the UK by surface area). If we want to replace all taxes apart from duties on fuel, booze, fags and gambling) we'd need to raise £300 billion a year. Now, to head off the Poor Widow In A Mansion nonsense, let's assume that pensioners' sole and main residences are exempt, so reduces the amount of taxable residential land down to 1.7 million (pensioners are one-fifth of the population, 2.1 million acres minus one fifth = 1.7 million).

£300 billion divided by [1.7 million + 0.3 million = 2.0 million acres] divided by 4,840 sq yds/acre = an average of £31 per sq yd per year. That's the average don't forget, and distributions being what they are, two-thirds of land would pay less than this and the median would be about £25 per sq yard, which happens to be Swindon.

e) Reality check: LVT on residential land would raise about £250 billion, about ten times as much as Council Tax currently does £25 billion. So the LVT on an average/median home would be about £10,000 - £12,000 per year. The cost of the core functions of the state is a laughable £60 billion a year so the average net tax per person must be around £1,000 a year. We know that the total Child Benefit/Citizen's income for a median household would be £8,000 - £10,000 per year, which neatly back to a net tax bill (LVT minus CI) of around £1,000 per person.

f) Reality check: Business Rates currently raises £25 billion a year from those 0.3 million acres and the LVT raised from commercial land would be £45 billion-odd, so the impact on business is easy to quantify - it would be like scrapping all other taxes and doubling Business Rates. Seeing as all other taxes on business activity are most of the £300 billion a year mentioned above, I think we'd struggle to find a business which ends up paying more in tax, wouldn't we?

So Sobers realised he was on a hiding to nothing with that one and did a volte face; he took my facts and then invented some more arguments against:

2. LVT will favour businesses owned by foreigners, so if we stop taxing their profits, they will remit all their profits overseas again.

No they won't. Why would people take money out of tax-free country like the UK?

3. LVT will favour businesses over households. Most businesses are owned by rich people. Therefore rich people will get even richer. This will be unpopular.

This is not actually true, most of most businesses are owned by small shareholders, usually indirectly via pension funds. Secondly, most of the people near the top of the Times Rich List are oligarchs, bankers, land owners, property developers, owners of patents and other monopolists - they live off government-protected unearned income. LVT (and related taxes) are taxes on monopolies, so the chances are, most people on that Rich List would end up slightly less obscenely wealthy. And I've never been particularly interested in inequalities between people's non-state protected earned incomes - brain surgeons and barristers will always earn more than brick layers or bus drivers - that's just one of those facts of life which we can't do very much about so there's no point worrying about it. The best we can do is allow people to keep all their earned income by scrapping income tax etc and give everybody a share of the unearned income which everybody generates and have done with it.

4. LVT will favour businesses which use hardly any land, such as banks. Sub-text: people hate banks and want to see them taxed more highly.

That's not true either and irrelevant anyway - because most of banks' income is interest on mortgages secured on land, i.e. they are collecting rents. Once the rents are collected by the government and redistributed, banks will only be able to earn money by lending for investment in productive stuff. They won't be able to blow asset price bubbles, so their income will fall. The fact that they will be paying little in corporation tax is irrelevant.

Having explained the impact on banks, we hereby neatly turn a full circle and go back to the more traditional Homey argument which is more or less the opposite of argument 4:

5. If we had LVT, then land prices would fall (yes, this is true) and so all the banks would go bankrupt. Sub-text: we like banks and want them to have more of our money.

If you can bothered to look at the distribution of loans to value and so on and crunch the numbers, we'd know that banks wouldn't go bankrupt, even if house prices halved and everybody in negative equity lost their job, defaulted and declared themselves bankrupt. That's a simple mathematical fact.
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That's why you can't win an argument with a Home-Owner-ist or Faux Libertarian, they have no respect for facts or logic and are quite willing to hold two diametrically opposed views at the same time and flip back and forth between them more or less at will, and if all else fails, they will concede on the facts half way through and then rehash the same old lies again later in the debate.

For them, there are no grey areas which the free markets will sort out, there is black (LVT will mean higher tax bills for some people - choose a few tear jerker categories, Widows In Mansions, the disabled, vulnerable children blah-di-blah, so is bad) and white (LVT will mean lower tax bills for some other people, if we choose a few hate figures who will end up better off, we can persuade the gullible population to stick with the present system).