Today's LVT round up

Five Six seven items worth a mention:

1. Samuel Brittan wrote one of his occasional articles in the FT:

... far from being an outrageous Bolshevik idea, the case for a land tax is one of the oldest and least disputed propositions in economic thought. The underlying theory was developed at the beginning of the 19th century by the highly respectable David Ricardo. Many chancellors have said that they would jump at a tax that had no disincentive effects on work or enterprise but had a strong redistributive element...

Doubtless some of the tabloids would present a land tax as a threat to the ordinary homeowner with a modest garden. We need to prepare for this in advance. Just as income tax is only levied above a threshold, there would have to be similar thresholds for a tax on land. If politicians really want to think about the unthinkable, as they sometimes claim, here is a place to start.

2. From the Tory Reform Group:

Properties of all shapes and sizes are already overtaxed by the likes of council tax, business rates, stamp duty land tax, planning charges, and landfill tax. If these taxes were to remain then LVT would be burdening people with further unwelcome costs. Instead, LVT should replace those property taxes - either entirely or at the very least mostly...

This would be simple to implement since land cannot be hidden in an offshore tax haven and calculating the tax bill would be made easier by the fact that land values are already measured by the market, therefore compliance costs could be reduced. The same bureaucratic processes for collecting business rates could readily be translated to the collection of LVT.

The LVT would not harm enterprise. It would boost productivity, discourage urban sprawl, could replace the plethora of punitive property taxes, and would be relatively simple to administer and collect.

The extra revenue raised would be enough to fund a radical package of tax cuts to “put fuel into the tank of the British economy”, as George Osborne promised last year, and would reconnect the link between effort and reward by making sure everyone pays their fair share. This is very much a policy that ought to be part of any modern, progressive Conservative agenda.

3. From yesterday's Evening Standard:

Today's proposal from Tim Montgomerie of the influential Conservative website, conservativehome, reflects rising Tory frustration over the lack of tax cuts. Mr Montgomerie proposes that we move towards taxing wealth rather than income, by introducing new council tax bands for homes worth over £500,000, £1 million and £2 million (in England, the highest band is currently H, for homes worth more than £320,000 in 1991).

He also wants a cut in tax relief on pension contributions. The money raised, he argues, could then be channelled into tax cuts, for example raising the income tax threshold and abolishing the 50p top rate. This could give new momentum to Lib-Dem calls for a similar "mansion tax".

Mr Montgomerie is right that the council tax system needs reform. The absurdity of a tax based on 1991 values - newer homes have to be assigned a nominal 1991 value - has been preserved only by the timidity of politicians on all sides in handling this hot potato. Yet however fair such higher bands might look in Exeter or Rotherham, they would amount to a tax on London, which is where the vast majority of such homes are.

Nor do London's £1 million-plus homes always indicate great wealth: they are just a sign of our inflated housing market. We do need to rethink local taxation. But piling more taxes on London to fund tax cuts for the rest of the nation is not the way to do it.

The ES is just the usual stupid Home-Owner-Ist nonsense - the 50p tax rate is of course a "tax on London" as well, so replacing it with a Mansion Tax is geographically neutral, I just wanted to give Tim M's article a favourable mention, but it was in The Times which is behind a pay wall.

4. Also in the FT (spotted by Derek), a fine article on barriers to entry and rent-seeking:

Ghaleb Ibrahim, a grizzled Jordanian immigrant with a mane of wavy grey hair, holds to a modest vision of the American dream. He wants to own and drive a taxicab in Milwaukee, Wisconsin, the city in which the television show Happy Days was set.
The trouble is that he does not have $150,000. That he says is what it would cost, over and above the price of the vehicle itself, to buy from its existing owner one of only 321 cab licences in issue by the city...

The creation of an economic rent – often by persuading the political system to grant some kind of a monopoly or privilege – means a one-off chance for someone to get rich and then a permanent barrier to newcomers entering a market. The Milwaukee cab licences are together worth $48m – and since 1991 more than half of them have migrated to companies owned by one family: the Sanfelippos. Even at their own more modest price estimate of $80,000 their permits are worth as much as $13m.

Is that $48 million real wealth? Is it capital, or an asset (as the incumbents argue in the article), or is it merely a measure of the burden placed on passengers (in terms of higher prices, worse service) or would-be taxi drivers who are prevented from earning a living - in other words a zero-sum game. Exactly the same zero-sum rule applies to land wealth as well, of course.

5. Finally, also from yesterday's Evening Standard, the sort of fight that would be far less common if we had LVT:

A seven-year row between neighbours over a narrow strip of courtyard in Peckham could reach the Supreme Court.

The dispute, which has cost up to £50,000 in legal fees so far, began in 2005 when Angela Boggiano, 45, and Craig Robertson, 43, put up a white picket fence. It ran along what they say is the boundary between the back of their terrace home and the front of Devon Cameron's mews house.

In 2007, they replaced the fence with a wall, and plant pots were put along a gravel strip measuring 10ft by 2ft which Mr Cameron, 48, contends is his...

You want the land? You get the LVT as well.

6. Late addition. Lib Dems ALTER member David Cooper appeals to the NIMBYs over at The Daily Mail:

This development is driven by a simple business proposition. Locally, an acre of productive farmland can be purchased for about £7000. Working a farm in West Berkshire turns a decent profit, and is a perfectly good business proposition. But land speculators bank on far richer rewards. If they can get planning permission to turn this acre into residential land, its value will shoot up to over £700,000...

The value of fields (called greenfield sites in the trade) close to towns rises by a factor of a hundred or more when planning permission is given to build on it. This value uplift happens once. An already built up (“brownfield”) industrial estate may be entirely suitable for new housing, but the owners have far weaker reason to push for the planning changes that would be needed to achieve this.

Taking Newbury as an example, there is a large, old and underused industrial estate near the town centre, which could go a long way to accommodating the needed houses. There has been far less push from its owners to make the necessary planning changes, and it is not included in the current housing strategy.

So he's got the NIMBYs onside, but he shies away from explaining which simple tax would take away the planning gain uplift (thus taking away the motive to build out in the green belt) as well as encouraging/forcing the owners of the industrial estate to bring it back into use.

7. Late, late addition. Spotted by Mombers in today's Evening Standard:

Councillor Stephen Greenhalgh, leader of Hammersmith & Fulham Council, hit out at Liberal Democrat plans for higher levies on more expensive homes... Alarmingly for many Londoners, influential Tories are also now backing proposals for higher council tax bands on homes worth more than £500,000, £1 million and £2 million. (a)

These levies would all disproportionately hit the capital. (b) Mr Greenhalgh told BBC radio: "We have the fourth highest property prices in the country. A lot of the houses that would fall into the £1 million or £2 million plus bracket are owned by ordinary people still. This is not a way to catch the wealthy. It's a way to clobber people often on relatively modest incomes that may have assets that are incredibly high but not necessarily incomes that match."

He stressed there were many "long-standing family homes" in areas such as the Peterborough Estate in Fulham, which were bought under the right-to-buy scheme and then shot up in price. (c) He also warned that new council tax bands or a "mansion tax" would be "hugely expensive" to introduce as it would require a property revaluation estimated to cost £200 million.(d)

a) See item 3 above.

b) Yes, because that's where land values are the highest. You could just as well say that the 50p tax 'disproportionately hits London' because that's where most high earners live.

c) Wot? These people were allowed to snap up council owned housing for rather less than £100,000 and have made a windfall gain of a million quid and they're whining about a few thousand quid additional Council Tax? They can always sell up, then they won't be 'ordinary people... relative modest incomes' any more, will they?

d) That was The Morbidly Obese One's estimate of the cost of a full revaluation of all homes in the UK for council tax purposes, that's less than £10 per home. As a matter of fact, HM Land Registry have enough info on their databases to do full and accurate land valuations for a tiny fraction of that, but even if it did cost £10 per home for updating valuations which are 21 years out of date, it's money well spent, its still only 1% of annual Council Tax receipts.