Sunday 24 May 2015

Killer Arguments Against LVT, Not (359)

Ian B, in the comments a few years ago here:

… and then Mr Georgist Tax Assessor comes along, slaps a massive tax bill on the nature reserve or the rose garden, and it has to close. For the Greater Good, you see.

That is why I’m a Libertarian. And more than that, a Propertarian Lbertarian. In so many crucial respects, liberty stems from property. Without property, liberty tends to be in rather short supply. For the Greater Good, of course.


All right, let's row back a bit.

In an ideal world, having a secular, democratic and free-trade capitalist society enables total freedom to be maximised - freedom from religious oppression, despotism, hunger and want; the freedom to choose what sort of job you want to do; an equal say in who gets the keys to Number 10 Downing Street; and of course the state-protected right to occupy certain bits of land undisturbed by others.

That last 'property liberty' is only one of many mutually-supporting freedoms, it is not the be-all and end-all; the notion that a person is entitled to have exclusive, state-guaranteed occupation of land without having to pay anything for the privilege is not on the list.

The minute you start restricting some people's individual, subjective freedom in order to increase other people's individual, subjective freedom then the sum total of freedom has gone down, not up. If one man's liberty comes at a cost to others, that is not true liberty.

(NB - these generalisations do not not apply to some one-sided restrictions of course - if they allow gay marriage, that increases the freedom of gay people without restricting the freedom of heterosexual people; if they legalise soft drugs, then that enhances the liberty of people who wish to trade in or consume them without in any way restricting the liberty of the majority who wouldn't touch the stuff.

Neither do they apply to trade-offs like speed limits in residential areas. A 5 mph hour speed limit is a huge benefit to residents but a huge burden on people who want to get from A to B. A 70 mph speed limit is the opposite, so there has to be a liberty maximising speed limit of 20 mph or 30 mph).

For example, let's look at the right to vote, which is given for free and as of right to (nearly) every adult over 18 in this country. We have decided that this maximises our total freedom. We could turn the clock back a century and only allow men to vote; this clearly reduces women's liberty a heck of a lot but only increases the liberty of men by a smaller amount. The sum-total of all liberty has gone down.

A more extreme case is slave-ownership. If you allow it, then those who own slaves are clearly more free than those who don;t; and those who don't are more free than the slaves. But the sum total of all freedom is increased when slave-ownership is abolished - slaves gain the most; they are now more productive (as they work for pay) so those who didn't own slaves end up better off (more output to go round more equally) and former slave-owners end up worse off. This is why the Union states beat the Confederate states - they had industrial might on their side.

So overall, there is an increase in total liberty when slaves are freed, given the vote and put on an equal footing with everybody else.
----------------------
OK, if you hadn't grasped the analogies yet:

- any form of taxation other than taxation of land and monopolies reduces total freedom, business and job opportunities and reduces total output i.e. wealth.

- 'Land ownership' and 'the nation state' are synonymous, you cannot have one without the other. Land only has value because the cost of defending title is minimal - society as a whole is conditioned to respect it and the state will (or should) enforce exclusive occupation the owner's behalf in case of trespass and burglary etc.

- The rental value of any plot of land is equal and opposite to the total burden placed on others who are excluded. That's extra 'liberty' for the owner but reduces the liberty of 'everybody else'. Unlike income tax, having to pay for the value of land you occupy is a break-even on the liberty front.

- There are currently four classes of citizen.

1. Those at the top are landlords or bankers who are basically extracting ransom from tenants and mortgage payers. The income tax they pay is roughly equal to the cash subsidies they receive. These are akin to slave owners.

2. There are welfare claimants and pensioners, whose income is funded out of the burden placed on the next two classes (income tax, NIC, VAT etc).

3. There are owner-occupiers, most of whom are working. By and large, the income tax they have to pay exceeds the rental value of the land they own/occupy. These are like non-slave owning citizens in a slave owning society.

4. There are working tenant households who suffer two huge impositions - income tax paid for the benefit of the first two classes and land rent paid for the benefit of first.

If extending the vote to women or abolishing slavery increases overall, total freedom or liberty (or indeed wealth), then so does taxing land values instead of earned income. The total tax payable by the last two classes will plummet and the wealth extracted by the first class will plummet by the same amount and the people in the second class would probably more or less break even.

- Two wrongs don't make a right.

1. The slave-owners said they should be compensated for giving up their slaves, but wouldn't slaves be entitled to compensation for having been kept slaves? The same applies with votes for women, men could have said they should be compensated for sharing the right to vote, but women could have counter-sued for all the years that they weren't allowed to. All you can do in these circumstances is call it quits and everybody gets on with their lives.

2. The sob story trotted out is somebody who "paid taxes all his life, bought his house out of taxed income and wants to be left in peace". Well sorry, that's the way the cookie crumbles. It is highly regrettable that people had to pay income tax in the past; that's no excuse for imposing the same injustice on all future generations.
-----------------------
Being more prosaic about this, I am a working age owner-occupier and if we had full on LVT the selling price of our house might fall by hundreds of thousands of pounds but my wife and I would pay tens of thousands of pounds a year less in tax; after ten or fifteen years or so, our total 'wealth' will be the same, it's just that more of it will be spendable, encashable wealth (unless she spends it all on shoes and handbags) and less will be a paper capital gain.

More importantly, my children would grow up in a society with more and better paid jobs and will have a fighting chance of being able to afford to buy a house within five or ten miles of where they grew up. Increasing my personal subjective 'liberty' to be able to retire a few years earlier is naught compared to all the extra years it will take for my children to pay off their mortgages etc.

And, in a very real sense, if we stick with the current nonsense, it will restrict my personal freedom when my children are in their 20s and 30s and they are constantly tugging our sleeves and trying to persuade the Bank of Mum & Dad to remortgage to provide them with a deposit so that they can "get on the property ladder". Maybe we'll give in and plunge not just them but ourselves into debt fro the rest of our lives; maybe we'll hold firm and have them resent us for ever more/move abroad in protest. I don't really think that either of those options increases our 'freedom' as parents.

7 comments:

Lola said...

Nicely argued.

Tim Almond said...

Rose gardens and nature reserves? Wouldn't councils just give them free LVT on the basis that they're a facility and as a result, they raise land prices nearby?

We already do this in various ways. Councils support theatre because it bring visitors to town who are going to eat and drink. Possibly by too much, but there's a logic to it. And with that they're doing the same thing as when a shopping mall gives Apple stores a peppercorn rent. I'm sure that in an LVT world, a private business like the model village at Bourton-on-the Water would get a deal because they bring visitors into the teashops rather than the other way around.

Random said...

http://bleedingheartlibertarians.com/2015/05/three-problems-for-libertarian-supporters-of-a-basic-income/#disqus_thread
KLN in the comments:
"but, from here on, we first must embrace the proposition that now matter how unjust another's acquisition of property may have been, the use of force to acquire and / or redistribute it is absolutely unacceptable.
As Ryan Long noted in his comment to David Friedman's linked article, peaceful and voluntary trade is the best means of ensuring a more equitable distribution of property."

Random said...

http://heteconomist.com/taxes-demand-and-the-importance-or-otherwise-of-incentive-effects/
The importance of LVT from an MMT perspective.

Mark Wadsworth said...

L, thanks.

TS, exactly!

R, the first link is the usual Faux Libertarian "two wrongs make a right" gibberish.

R, second link doesn't mention LVT.

Random said...

MW, it is about taxes such as LVT more generally vs income taxes.

Random said...

"One distinction relevant to the incentives issue is between endogenous and exogenous taxes. "
Which is the important bit from the 2nd article.