Friday 25 July 2014

Killer Arguments Against LVT, Not (332)

From the comments at Landlord-Law Blog:

just saying says:

It’s simple really. Bring in a Land Value Tax.

Jamie says:

Hardly simple!

We’re already committed to a different tax system and there could be massive implications that would dwarf the current problem of a proportion of the 9 million private renters struggling to pay the rent.

How would you deal with the repercussions of potentially wiping trillions off the housing market?


I mean, where do you start with a sweeping moronic comment like that?

Fact is, just about any form of organised society creates land values in the first place, however directly or indirectly, and just about any tax system taxes land values, however directly or indirectly. So "income tax" is in fact a crude and damaging way of taxing land values; land value tax is a sophisticated way of taxing incomes.

It's just a question of replacing the more direct taxes on land and buildings first* and then shifting taxes from the productive economy to land values £ for £.

And those trillions he mentions don't really exist; it's the annual rental values which are real and they would be largely unaffected. If anything, reducing taxes on the productive economy would increase them.

So if you were too timid about the tax shift, selling prices might well go up. There'd be plenty of ill-founded grumbling every year, but by and large, most people wouldn't really notice, they'd just notice that everything is getting a bit better every year.
------------------------------------------------------------
* We could get rid of Council Tax, SDLT, CGT, IHT, Insurance Premium Tax, Stamp Duty and the TV licence fee, as well as income tax on rental income and the non-dom charge (and AFAIC, additional rate income tax) and instead raise/pay the same amount of revenues with annual tax of just under 1% of current selling prices.

[Please note that the UK's private residential landlords pay about £5 billion in income tax but receive about £10 billion a year in housing benefit.]

Three-quarters of households would end up paying much the same as now each year.

The top quarter would pay more on a year-by-year basis but would no longer have to worry about the large one-off hits like SDLT, IHT or CGT (with all the associated complications, expensive tax planning exercises and sub-optimal decision making). Over a lifetime, the total tax they paid would be much the same as well. It's just a smoothing exercise which makes everything much easier to plan for; it's like the difference between the TV licence fee and Inheritance Tax (both of which raise about £3 billion a year).

5 comments:

Bayard said...

As you pointed out earlier, Jamie is probably simply a tentacle of Big Land and not a real live moron.

Mark Wadsworth said...

B, but that makes it worse.

Lola said...

And those trillions he mentions don't really exist; it's the annual rental values which are real and they would be largely unaffected. If anything, reducing taxes on the productive economy would increase them. Or, the current looney tunes yields of say 4% on BtL would climb to say 8%. In other words LVT would kill the land price speculation and force 'investors' to consider real yield spreads over financing costs.

Lola said...

I made an informed comment / response on the landlord/law blog c/w links - and they deleted it....

Bayard said...

Lola, stop confusing them with facts, their minds are made up.