Tuesday, 30 April 2019

Killer Arguments Against LVT, Not (455)

KJP trotted out half a dozen traditional KLNs on #454, including:

In the long term, over 2 or 3 generations, LVT could be introduced... Overall it could be equal but what for those individuals who had recently purchased properties and the banks that lent them money?

He claims it will be a problem for recent purchasers with large mortgages. Why? They will be the people who save the most tax in future, as the homes which recent purchasers bought are relatively small multiples of their income.

Pension funds have shares in financial institutions not just rich people.

Counter-argument: "Pension funds have shares in productive businesses, which will benefit enormously from a shift to LVT."

What do 'rich people' have to do with this? High earners will pay less tax; people who own valuable land will pay more tax. This is not about rich v poor or young v old.

The special pleading for banks is (I assume) based on the assumption that selling prices will fall. Seeing as selling prices are ultimately dictated by younger people's disposable incomes, it is quite possible that under a 50/50 tax shift, selling prices would go up (whether that is desirable or not is a separate issue). So it's a flawed argument based on a flawed assumption.

Fairness and the productive sector? There are no taxes on turnover...

Value Added Tax, a tax on net turnover or gross profits, take your pick.

... Taxes on wages, yes; PAYE and NI; profits, corporation tax and consumption, VAT.

But it does seem to shift the goalposts. In the past you paid income tax and bought your house; now no income tax so you have to pay LVT to cover the shortfall. Retired, not much income, tough.

Let's imagine we'd always had LVT. In the past, people would have paid LVT and bought their house. Why is different to having paid income tax and bought their house?. Those who now have to pay LVT are not necessarily better or worse off than if it had been introduced "2 or 3 generations ago" and they'd always had to pay LVT.

Either way, all mainstream LVT-ers agree that pensioners would be able to roll up and defer their LVT bills, so it's not their problem, it's their heirs' problem.

Note also the sneaky diagonal comparison:

KJP highlights:
a) recent purchasers (younger, higher earnings, lower value housing) and
b) pensioners (older, lower earnings, higher value housing) and claims they will both be worse off under LVT.

They are diametric opposites!

Recent purchasers will be massively better off; pensioners will break even (roll up and defer) and their heirs might be worse off (if they were basing their life plans on a juicy inheritance) or better off (if they are working and earning, and their parents' homes aren't worth that much anyway).


benj said...

Current situation is that we have one group in society privileged to harm another, by not compensating them for being excluded from a valuable natural resource.

That leads to a net transfer of incomes between those groups.

Justice served means that transfer is ended, one group benefiting at the expense of the other in an equal and opposite way.

That's what happens to all changes to our economic and tax/benefits system.

Yet the argument appears to be that because there is an expectation to benefit from injustice, its unjust when those expectations no long hold true.

Chattel slavery, which ended up compensating the slave owners is a good example where that argument won. What to opponents of LVT think at that?

Mark Wadsworth said...

B: "Yet the argument appears to be that because there is an expectation to benefit from injustice, it's unjust when those expectations no long hold true."

Nailed it.

ThomasBHall said...

They invested in that land in good faith! And out of taxed income too...

Mark Wadsworth said...

TBH, but if they hadn't had to pay income tax, they would have had to pay LVT, so what's the difference?