Saturday, 29 July 2017

Killer Arguments Against LVT, Not (418)

As soon as anybody mentions upping the take from taxes on land/buildings, the landowners in London and their cheerleaders squeal that this would be "a tax on London".

I'm not sure why it's a KLN in the first place - London is only about one-tenth of the population, and only half of those own their own home/business premises, meaning that for 95% of the UK population, this is an argument in favour. To quote Uncle Vince, the best kind of tax is one that somebody else pays.

Turns out, it's not an argument for or against anything in particular, being entirely without substance.

1. As BenJamin' calculated last week, the total value of land excl. buildings in London is about one-third of the total value of all UK land, so one-third of any flat rate national tax on the value of land would be on land in London, and paid by whoever chooses to own it.

2. As it happens, about one-third of taxes on land/buildings and other private wealth are from land in London ('not enough' Council Tax, cancelled out by 'too much' SDLT, Business Rates, Inheritance Tax and obscure stuff like ATED or non-dom levy). So a flat rate national tax which replaced the lot would make little difference to how the tax is shared geographically.

3. Ben later emailed me a link to an article by Centre for Cities saying that one-third of all UK taxes are from 'London' (payable by of people who work there and those who own land there; the two groups are fairly distinct).

The CFC draw this conclusion:

The report highlights the potential risk to the UK exchequer of relying heavily on one city to generate such a large portion of national tax revenues, warning in particular that a slowdown in London’s economy would pose major challenges to both the capital and other places across the country...

They have completely missed the point. If somebody relocates from a low wage/profit area to a higher wage/profit area, then - as depressing as it is for the emigration area - the overall tax take goes up. That's A Good Thing overall.

'London' is not magically or qualitatively different to the rest of the UK, it is part of it, and depends on/leeches off a massive hinterland, all national taxes (other than poll taxes) have the effect of returning some of that flow.


L fairfax said...

Wouldn't LVT and CI cause lots of unproductive people to leave London making it easier for others to come here?
Surely that would be a good thing for everyone in London(apart from those who leave)?
The flaw I can see is that surely LVT revenues would drop quickly.

Mark Wadsworth said...

LF, first and second statements, yes. Last sentence, clearly not - more higher earners = higher rents.

L fairfax said...

Surely this is "more higher earners = higher rents" is only true if there are no surplus homes? If a former pit village for example with 500 empty homes had 100 high earners moving there, rents would increase but not as much as one with 80 empty homes.
(I don't know how many unproductive people there are in London so I don't know if this is true or not, however if numbers leaving were greater than those coming to London -and don't forget housing benefit is not always that great at negotiating as private tenants - then rents could drop. I have known people "earning" less than me who "paid" more in rent (of course they were not really paying or earning it)

Bayard said...

LF, HB isn't the real world. People on HB are looking at a different rental market than people not on HB - we have done this before and it can be seen that the HB market is lower quality and more expensive that the non-HB market. If you think about it, it is fairly self-evident. HB claimants don't care about the cost; they aren't paying. The landlords know this so they wind the rents up to the maximum the LA will pay. At the same time there are lots of people on HB looking for accommodation, so the landlords know they don't have to try very hard WRT the quality of accommodation on offer.

Mark Wadsworth said...

LF, forget about surplus homes. Actually vacant homes in London is maybe only half a percent. But how many chronically under-occupied ones, a single person in a three or four bed home? A million? There is more or less infinite demand for housing in London, rents adjust to ensure that all available housing is used up (whereby under-occupied owner-occupied housing is not 'available' for these purposes).

And as B says, HB is a different topic, the half that is paid to private landlords is negative LVT, it would be daft to have LVT and HB, they are opposites.

L fairfax said...

@Mark Wadsworth. How many vacant homes would there be in London if we didn't pay people to live here. I know loads of people who got off planes and got free/cheap housing in the UK. If we didn't do that then probably would be vacant housing in London.
BTW I agree about HB with both of you, not sure about the lower quality bit though.