From the OZ equivalent of our Taxpayers Alliance here, this version of the "it's a tax on aspiration" KLN, normally favoured by the likes of Boris Johnson.
"If we pay off our home completely we are in a more powerful position because we have greater freedom to choose whether we go to work 5 days a week or 2, whether we fill our days with activities or just reading books etc.
The proposal above (LVT) takes away that carrot.
The prospect of one day paying off your house and then being free to slow down and do more of what you want, even if that’s just because you have hit retirement age, is removed if you introduce a land tax to replace all other taxes.
The carrot is replaced with a stick.
Imagine if there was nothing you could do to ever get off the rat race?"
Our current system of funding government and paying for our housing is highly complex. No wonder David Collet and most people have difficulty in seeing the wood for the trees.
If we get rid of dead weight losses, transfers of wealth, and allocational inefficiencies this must all feed into higher disposable incomes and lower housing costs for 99% of the population.
It's this that gives people better choices that govern ALL aspects of their lives.
Including paying off your mortgage and leaving the rat race if that's your aim in life.
LVT takes "power" away from banks, landlords, bureaucrats and the top 1% and gives it back to us.
Carrots, sticks and trade-offs are what they want us to believe are the only options.
But LVT is win-win.
Thursday, 26 December 2013
sticks and carrots
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17 comments:
Imagine if there was nothing you could do to ever get off the rat race?
To rephrase - imagine if there was nothing you could do to force other people to fund state expenditure while still enjoying the benefit of it.
There is something entirely crazy about the whole complicated mess.
In theory, the whole of the land of England 'belongs' to the Queen, as the physical embodiment of the whole of the people. Thus, in theory, the Queen grants the use of a portion of land to an individual, whether a person or a company. In return, the lessee (?) pays rent to the nation.
But it was long ago found that it is very difficult to calculate the appropriate rent, which is why it was seen to be easier and more efficient to let people trade in land, and tax the proceeds. Unfortunately, as is almost always the case, corruption creeps in, which is why laws become more and more complex and messy. Eventually, something gives, and the old, messy system is replaced.
The 'Land Value Tax' is a great idea - provided that:
a) It replaces all the other messy rules.
b) It only applies when 'value' is realised from rents received.
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But there is a problem, which is what to do about organisations which are hoarding land.
In reality, the answer is simple - take the land off them. It is not theirs. But I admit that the situation is far more complex than that!
I think that it is important to go back to first principles - The People own the Land. Everyone who uses The People's land should pay for it. BUT, it is reasonable for The People to grant themselves some land to occupy without payment as a result of the fact that they exist and are alive. People do not float around in the air. They stand on the ground.
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Regardless of the complexities, the plain fact is that anyone who claims to own land is lying. No one, except The People can own the land.
What it comes down to, in the end, is that no one can OWN the land, not even the Queen.
Ah, the reference to the "golden years" of debt free existence that is promised us up there in later life, an old classic. And indeed a vanishing breed those debt-free middle-agers, wonder why.
Junican, I completely agree with your caveat "A", of course but I don't understand your caveat "B"
b) It only applies when 'value' is realised from rents received.
Rental values continually arise and are consumed by the occupier or left to go to waste if the land is unoccupied. That is what LVT is levied on, the annual rent arising and being consumed. It is entirely unnecessary for money to have changed hands.
Also there is a simple solution to this:
it is reasonable for The People to grant themselves some land to occupy without payment as a result of the fact that they exist and are alive.
Clearly, in a sensible LVT system, everybody would get a personal allowance or citizen's dividend, so you would end up paying net no LVT if you live in a low to median value home.
MW: even without a citizen´s dividend, most developed countries have fixed incomes for the groups that are outside the labour market, and land that is without any significant value to reside on.
Kj, yes of course, there is a grey area between personal allowances for working age healthy people, old age pensions for old people and welfare for certain groups like unemployed, children or disabled, but if you put them all in a pot and stir it round and average it out, you end up with a "Citizen's Dividend" or a personal allowance with an actual cash value.
MW: true that, but still not a precondition for LVT. If LVT is always "affordable" as it is charged on rents in the market, it is "affordable" without a CI. And the TP down under fails to mention that anyone with plans to go off grid can save up to pay LVT as much as they can pay down a mortgage.
Kj, yes of course, with or without a CI or a welfare system, nearly everybody would be able to find something to rent (or to pay the LVT on) within his budget. All he has to do is be prepared to pay as at least as much as anybody else. But I prefer it with the CI for lots of other reasons.
Isn't CI the redistributed premium that would otherwise go to landlords? If so then in theory you could reduce LVT so that no 'surplus' was generated.
That wouldn't work though as rents would simply rise, wouldn't they?
L, that is one of the many arguments for the CI.
It is clearly better to
a) collect 100% LVT and then dish half out again as CI, so that half of households pay net nothing, but are still encouraged to minimise their land use, than
b) collect 50% LVT and not have a CI.
But replacing the whole welfare state and tax-free personal allowances with CI is a good idea anyway, even without LVT at all.
"The proposal above (LVT) takes away that carrot."
No it doesn't. The present cost of a freehold is dictated by the money you will save by not paying any rent on the land. LVT will bring that cost down. I am sure the insurance companies would be only too pleased to sell you an annuity that would pay your LVT, which wouldn't be much more than the money you saved on buying the freehold in the first place.
B, yes of course (the personal allowance would cover the LVT on a median home anyway), and why the Homeys think it is a good idea to encourage unemployment I do not know.
I suppose they differentiate between The Undeserving Unemployed (council tenants) and The Deserving Unemployed (baby boomers who can live off MEWing).
The same as the distinction between "single mother" and "divorced housewife".
"If we get rid of dead weight losses, transfers of wealth, and allocational inefficiencies this must all feed into higher disposable incomes and lower housing costs for 99% of the population."
What dead weight losses, transfers of wealth and allocational inefficiencies are you referring to?
Any reduction in wasteful government spending can flow through to lower tax rates and, therefore, an increase in disposable income for workers. You don't need a LVT to achieve that.
"LVT takes "power" away from banks, landlords, bureaucrats and the top 1% and gives it back to us."
If you are concerned about the power of banks over the average worker, you would need to address that issue directly.
A LVT won't stop the ability of banks to create the money that circulates through our economies: https://www.taxpayersparty.com.au/open-letter/rba-full-reserve-banking/
Because a LVT won't stop the banks creating the money with its associated interest charge, the statement that a LVT will take back the power from the banks and give it to the general worker is incorrect.
DC,
1. Just Google "dead weight losses of current tax system", there are endless articles on this and various ways of measuring and defining them, but they are a huge amount of wealth not being created/consumed.
2. An increase in disposable income for workers and businesses largely feeds through into higher rents, so this does not achieve much.
3. Currently, 80% of bank lending is on inflated land prices. Get land prices down and banks can lend less on it. We have no problem with banks lending money to people to invest in capital (including buildings) or to help people smooth out earnings vs consumption. This is good lending/good saving. Go back a few decades to when land was cheap and you will see that banks were much smaller/more stable/less prone to boom and bust.
4. All this "full reserve banking" sounds lovely but on closer inspection it achieves little.
David Collett said:
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Hi Mark,
Thank you for the reply.
I am confused about what your position is.
You have stated, "If we get rid of dead weight losses, transfers of wealth, and allocational inefficiencies this must all feed into higher disposable incomes and lower housing costs for 99% of the population."
You then stated, "2. An increase in disposable income for workers and businesses largely feeds through into higher rents, so this does not achieve much."
Can you please expand on the above contradiction?
Regards,
David
It is not a contradiction.
I know that arguing tactic and once things get a bit nuanced, it is typical Home-Owner-Ist to just say "You contradict yourself" because they know it will waste our time, which is all they can do really, all Homey arguments are just a stalling tactic.
Items 1 and 2 are separate topics. Do you not understand that? And both are "all things being equal".
1. Shifting taxes from wages to land reduces deadweight losses and net wages go up by more than the tax cut. For that level of net wages, rents are lower than they would be that assuming that level of net wages but with no taxes on land.
2. Also observable that rents are largely a function of local average wages. If wages go up in Aberdeen, then rents go up. If wages go down in Aberdeen, then rents go down. This is regardless of what sort of tax system we have in place..
There is no contradiction.
To give you a folksy example:
1. If you have your car engine serviced, you can drive slightly faster.
2. If you drive faster you are more likely to be stopped for speeding.
The Homey would say "This is a contradiction! Does having your engine serviced make you get there quicker or slower?"
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