Killer Arguments Against LVT, Not (367)

By Samuel Bowman. There are some excellent rebuttals by the usual suspects in the comments below, but it's basically half baked waffle from the very beginning. Here's my tuppence worth:

1.LVT supporters say that an LVT would encourage more productive use of land. But is this desirable?

No, the point is that LVT encourages more efficient use of land (and existing buildings). I fail to see how that is not desirable. Even if total output initially stays the same, if land and existing buildings are used more efficiently then other costs - for example transport and commuting costs, or the costs of building a new building in a less favourable location while another building in a more favourable location stands empty - decrease, so we are then also making more efficient use of cars, lorries, trains and roads; or building materials and labour. So these resources can be released to grow the economy in other ways.

Land owners already have an incentive to do something with the land – opportunity cost. In other words, if I have an acre of land that I’m doing nothing with, but that I could profitably let a bunch of houses be built on, the cost to me of doing nothing is that house profit. An LVT would just add to this.

But the lucky land owner, under current rules, also has notional income which more than covers the opportunity cost. If money in the bank is earning 2% a year (after tax) and land prices are going up by more than 2% (tax free), then there is no net opportunity cost.

If you look at the financial statements of Persimmon, Bovis Homes and so on, they boast openly that they have land banks with actual or potential planning sufficient to cover ten to twenty times annual output. Fact. If his assertion were correct, then they would not hold onto these land banks.

The value of the one-off uplift when planning is obtained and houses are built is always there and is also drifting quietly upwards without the need for any action, effort or expense whatsoever. What the LVT would do is soak up the notional income and not add to the opportunity cost.

Making every resource we have produce as much as possible isn’t necessarily efficient or desirable... We could tax gold ownership so that it was only used in industrial processes, but that would be crap for people who like looking at gold!

If people are prepared to pay as much for the gold in their jewellery as manufacturers are prepared to pay for gold in electronic components, then both uses are equally efficient for these purposes.

It's the same with land, it would be fatuous to say that only land used for commercial purposes is adding to the economy and that land used for residential is somehow wasted; all the workers and customers have to live somewhere, and the closer they live, the better things work. And as a matter of fact, the enjoyment people get from their homes and gardens has value, just the same as the stuff they can buy in shops.

His point 2 is just garbage.

His point 3 is actually slightly interesting, concluding:

We haven’t increased the supply of land. We’ve just redistributed from current land-holders to future land-users. Maybe that’s good, maybe that’s bad, I don’t know.

The 'redistribution' is from today's landowners to tomorrow's workers and businesses, I fail to see how that can be anything other than a resoundingly good thing, especially as most of today's landowners will still be workers or business-owners for the foreseeable future.