Friday, 27 November 2015

Killer Arguments Against LVT, Not (380)

I don't hear this one often, and it's raised by LVT supporters as well as Home-Owner-Ists, but goes along the lines of "What about government owned buildings? To whom will the local council pay LVT on its own Town Hall?"

The simple answer is, it doesn't really matter. A government can't pay tax to itself.

The more subtle answer is that under existing rules, most branches of the UK government are already paying LVT to some other branch of government. It's not called LVT, of course, it's called "rent" but that's just "LVT plus amortisation of bricks and mortar".

The FT explains:

The chancellor is setting up a body to take over ownership of government properties and act as the landlord to Whitehall departments, charging the market rate. The Treasury said the move was aimed at encouraging ministers to become more efficient.

Expensive London districts around the Palace of Westminster, which have been home to generations of policymakers, could be abandoned by the government if departments shift staff to cheaper outlying areas of the capital such as Croydon or Stratford.

Iain Duncan Smith, work and pensions secretary, could pay a total £800m by 2021 to rent his department’s holdings, including its network of jobcentres.

The UK government in all its guises has always done this to a greater or lesser degree, this just extends the principle a bit further. It doesn't really matter which other branch of government collects the rent - it is not designed to raise revenue directly (how could it?), but to encourage each branch of government to use as little expensive space as possible, either by using less space, full stop, or by relocating to cheaper areas.

If a particular branch realises a 'saving', then for a given total budget it has more money to spend on actually doing what it is supposed to be doing (hooray). And the Government Property Unit now has some vacant space which it can let to proper paying tenants, which boosts government receipts which means that all things being equal, taxes on earnings and output will be lower (hooray).


Sean Vosper said...

Some novel Land Tax ideas from the always excellent Kristian Niemitz at the IEA:

Mark Wadsworth said...

SV, wonders never cease! BenJamin has been banging away at Niemitz for years and this is the first time he has said something sensible like…

"This means that 99.8% of the price of land is currently explained by a slip of paper which says ‘planning permit’. That slip of paper so expensive because we are hardly printing any of them, so the solution is to print more of them.

Now imagine local authorities had to finance all of their expenditure from their own tax revenue, and imagine a large chunk of that revenue came from, say, a local Land Value Tax (LVT). They would then have a strong incentive to grant planning permission more liberally, because this would be an easy way to broaden their tax base.

That's a good start.

Steven_L said...

Yes but you're missing the point - they'll probably use the debt they've racked up as an excuse to sell it all on the cheap to their mates / people with embarrassing photos of them.