Killer Arguments Against LVT, Not (321)

The left wingers don't like LVT because, they argue, "the poor" would pay more. Tax higher earners, they scream.

The right wingers don't like LVT because, they argue, that "the wealthy" would pay more. Tax lower earners, they scream (not directly, but by implication: reduce benefits, have a poll tax or regressive taxes like NIC and VAT).

Clearly, they can't both be right as they have just contradicted each other and recommended opposing policies - they have both missed the point anyway - but they can maintain their delusions by picking diagonal comparisons and not comparing like-with-like, which is the only sensible basis to justify words such as "more".

The left wingers look at it this way: LVT would replace existing property taxes and income tax, let's say, and the LVT on each similar house in one street would be exactly the same. So the lowest earners on that street will have to pay more tax (unless they go and get themselves a job, duh) and the highest earners will pay less tax.

The right wingers look at it this way: LVT on homes in expensive areas would be more than LVT on homes in cheap areas, so rich people in expensive areas would pay more than people in cheap areas.

So they are using two definitions of "poor" and "wealthy". The left wingers look just at earnings (and ignore land values) and the right wingers look mainly at land values and have a slight disdain for people who actually work for a living.

And the left wingers are comparing current with future tax bills (the more sensible approach), and the right wingers are comparing expensive areas with cheap areas. It's two completely separate topics and different ways of looking at things.

The right wingers' approach is stupid because there is a very high correlation between average earnings in an area and average rental values (excepting possibly retirement areas like the South West or parts of Central London where nothing bears any relation to anything any more). So the government already collects more in income tax or just about any other tax from people who live in expensive areas, so by and large the tax paid by people in any particular area would stay pretty much the same under income tax or LVT.

On the whole, there would be far more winners than losers, whether among low earners or high earners, even in the short term, especially if you assume a roll-up and deferment option for pensioners*, and in the medium or long term, everybody will be better off (much larger cake shared slightly more equally).

*This whole "But I want to leave it to my children!" is a load of rubbish anyway. Every £1 more taken from the value of homes of deceased pensioners means £1 less taken out of earnings; and every £1 fall in house prices means that future homebuyers will save £2 in mortgage repayments.

So 99% of your children and grandchildren will end up much better off, especially those prepared to work hard. According to HMRC Table 12.4, the total (albeited inflated) value of residences inherited in the UK in 2010-11 was about £30 billion a year; which is 2% of GDP or 3% of total salaries, pensions and profits each year.

Even if the rolled up LVT payable on death wiped out every penny of that £30 billion a year (unlikely but possible); the saving to younger generations in income tax and other taxes and mortgage repayments each year would be much more than that. And don't people value things more if they've actually had to work and save to buy it, rather than having it fall into their laps later in life?