Wednesday 16 January 2019

Killer Arguments Against LVT, Not (451)

Sobers, arch-Home-Owner-Ist and a reliable source of flaky KLNs on KLN#448

"... giving the State the power to determine who occupies a piece of land (which is what LVT does, it makes the State the effective landowner and the nominal owner the tenant) means that if it wants to the State may remove any or all owners from their land by the simple expediency of increasing the 'rent' until it can not longer be paid.

The proponents of LVT should be open and honest about what they want - all private landowners to become tenants of the State, liable to eviction if they don't pay the rent."


Ignoring the facts that a) he assumes democracy will be suspended and reversed, against all historical trends, and b) land and building owners are expected to pay for their own utilities, repairs and insurance, so it seems perfectly reasonable to expect them to pay for the public services they receive...

... tax and spend is about numbers and logic, so let's do a simplified example and compare and contrast.

In an average area, public spending costs £10,000 per home per year and generates a site premium of £10,000 per home per year. Let's look at two tenants and one non-taxpaying/non-working owner-occupier* in Sobers' perfect vision of society. The tenants are paying £10,000 site rent and the owner-occupier is paying none. The cost of public services for all three households is £30,000, so each tenant has to pay £15,000 in income tax on top of £10,000 rent each.

The two tenants are paying £50,000 in income tax and rent and are enjoying public services/location value of £20,000 so they are down by £30,000.

Where does the £30,000 go?

Their landlord is collecting £20,000 in rent, on which he pays very little tax, and the non-taxpaying owner-occupier is enjoying public services/location value of £10,000 which the tenants have paid for.

In Sobers' Utopia, the landlords "have the power to determine who occupies a piece land, which they can remove by the simple expediency of increasing the rent until it can no longer be paid"**. The Home-Owner-Ists are "open and honest about what they want [for all wealth creators and taxpayers] to become tenants, liable to eviction if they don't [hand over half their output and earnings in tax and] rent". Two strivers are expected to expected to support one big and one small sponger.

Even in Sobers' imagined non-democratic dystopia, the evil State would be charging 250% LVT before the wealth-creating tenants are noticeably worse off. The landlord is serving no useful purpose, so let's not shed a tear there.

If Sobers wants to argue that the two working tenants/recent FTBs should pay £5,000 income tax each to pay for the non-working owner-occupier's public services (on top of £10,000 LVT each), well fair enough, but that would still be a massive improvement on paying £15,000 income tax each (on top of £10,000 privately collected LVT).

* Quite where the non-taxpaying/non-working owner-occupier gets the money from to pay for food and utilities and so on is never clear in his examples. Let's ignore the majority significant minority of taxpaying, owner-occupier households who are being taxed stupid on their output and earnings but receiving a large chunk of that back in public services/location value.

** Quite why rational landlords - or a rational, democratically elected government - would do this is never made clear.

9 comments:

benj said...

"The proponents of LVT should be open and honest about what they want - all private landowners to become tenants of the State, liable to eviction if they don't pay the rent"


All employers are mandated to pay market wages. If they cannot pay them because they don't run a very good business, its hardly the fault of the state. They go bust. According to Sobers logic, the fact employers have to pay wages makes them the slaves of the state/their employees.

What Sobers doesn't want to address is that excluding others from valuable natural resources is as harmful as excluding others from the product of their labour. Wages are compensation for the latter and LVT is compensation for the former. In principle, the same thing.

If Sobers has a pathological hatred of the state, that's fair enough. However, that shouldn't mean he also agrees that we should all be allowed to go around harming each other, at least not without compensation where unavoidable.

Instead of the state collecting "LVT", let a non-governmental body do it on our behalf and redistribute as equal shares.

He couldn't possibly object to that unless he is a greedy landowner himself and doesn;t really care about whats good for the majority of others.

Sobers said...

Its weird that in the entire sweep of human history there's not been one society that has been predicated on the taxation of property rather than income (or production which is the same thing). What LVTers are proposing is something they can point to no example of, not even through history, let alone in the world today and say 'Look it works! See how happy and wealthy this society is!'

And its equally strange that property taxes are the most hated of all taxes, because they are taxes on existence really. Everyone exists, everyone has to exist in some space, lets tax that space. Not exactly going to be very popular, and isn't. Property taxes are hated the world over. Income taxes are disliked but put up with a necessary evil, but property taxes are despised.

LVTers should think about that and try and work out why.

Lola said...

S. All taxes pre what might be called the modern era were taxes on land rents. It's what pissed off the Barons, and why Robin Hood got a bit narkey with the Sheriff of Nottingham about. In the Sheriff's case he loaded the local yeomen and tenant farmers with high levels of 'rent' aka taxes, that it consumed the profit form their labour. The Barons just did not want to pay land taxes to a weak and over demanding Crown. It's been downhill ever since.
Land taxes, or rather taxes on location premiums work well as they are taxes on economic rents. And a modern successful example is Hong Kong.

mombers said...

Fewer than half of UK adults are landowners - many of the 62% odd 'owner occupied' homes are also occupied by adult children and lodgers. In London it's even more than that as fewer than half of homes are owner occupied at all. It's only in London really that really eye catching LVT bills would come up, and many of those affected would get an equal or bigger cut in taxes on their non-land private property.

@Sobers you do have a point about property taxes having a bad reputation in recent times. But that happened in a climate of increasing home ownership off base house prices / rents that were a lot more manageable than they are now. Many people were mis-sold the dream that they too would end up having the first world problem of not being able to afford the domestic rates on their mansion, instead of having their adult children living with them into their 30s and/or having a mortgage into retirement or renting until death. The political mood has changed dramatically of late though. The most homeownerist party does not have majority support of anyone under 47 at the last count. They've at least figured out that landlords are a sitting duck for damage free taxation. Damage free to the economy and their votes - I bet you can count the number of Tory landlords who have switched to Corbyn on one hand.

Who'd have thought that the abolition of rent controls. domestic rates, privatisation of housing welfare via Right to Buy, etc, etc would have had the entirely predictable result of falling home ownership rates and the giant sucking sound of a large portion of most people's private property going down the black hole of idle private land owners' pockets.

We're in a really bad position of our own making in the UK now that so much land has been sold off. If the state owns land it can simply charge market rates for it or distribute it more fairly - witness Hong Kong and Singapore. How to solve the problem of collecting revenue on land that you don't own is tricky. Landowners are going to become a smaller and smaller minority and it will be interesting (and possibly terrifying) to see what political solutions are offered to people.I'm hedging my bets with more than half of my assets in (mostly non-UK) equities and bonds as opposed to home equity. Wish me luck!

Mark Wadsworth said...

S, you are flat out lying. Lvt has been quite common in many countries, it has always 'worked'. Problem is, people like being able to make a quick buck by buying with LVT, having LVT removed and selling high. It's a Ponzi scheme.

L, M, thanks for back up, agreed.

Mark Wadsworth said...

BJ, agreed, but your argument is a bit esoteric. I'm into dumbing down nowadays.

M, fair point, I have updated re majority/minority.

Lola said...

I think that you have to differentiate between homeowners and productive landowners like factories, and landlords. That is it is important to make the point that all LVT supporters also support peoples aspiration to own their own home. All sorts of good things flow from that. And that wealth creating businesses that own their own premises are also Good Things. LVTers are NOT getting at them. Au contraire, 'our' policies will help them get out from under the thrall of (economic) rent seeking landlords. If you also point out that taxes on production - aka labour and saved labour (i.e. capital) will be scrapped so that they will keep the fruits of their productive labour, how can they object. You'd've thought they'd be on the barricades with us.

Oh, and Sobers, whilst I think of it all UK land is already owned by the state - the Crown actually. Freehold land is just a perpetual lease with no rent (which is the problem). As a landowner if you die with no beneficiaries the title to 'your' land will revert to the Crown.

Piotr Wasik said...

@Lola, is Hong Kong really a LVT success story? E.g. in this recent article https://markets.businessinsider.com/news/stocks/china-slowing-economy-hurting-hong-kongs-housing-market-2019-1-1027874442 they write "Hong Kong was ranked the most expensive housing market in the world for eight consecutive years." and long time ago I learned about "cage homes" in HK: https://allthatsinteresting.com/cage-homes-hong-kong

Lola said...

PW. Very small, very successful place. Lot's of wealth creation. You'd expect high land prices. LVT does not necessarily get you low prices. (I might have overstated HK's application of real estate taxes - ageing brane faid..)