Monday, 18 January 2021

Killer Arguments Against LVT, Not (487)

As we come up to the big part 500 anniversary episode, here is an article which TBH spotted in The Daily Mail.

It is an absolute classic of the Home-Owner-Ist genre and highly recommended reading. See how many lies, contradictions, self-delusions and diagonal comparisons you can spot.

It would take me days to debunk them all, but this diagonal comparison is worth a mention:

Older people who bought houses years ago, and who are living on a small income, could struggle to pay their tax bill and be forced to sell a cherished family home.

And not every owner-occupier in the South has benefited from huge windfall gains. Young people with huge mortgages on recently purchased tiny flats in the capital would be hammered too, with a chilling effect on their aspirations.

Poor Widows in Mansions (low income, massive unearned gain, no mortgage) and recent purchasers (high income, no unearned gain yet, large mortgage) are at absolute opposite ends of the spectrum! If one deserves sympathy, then the other doesn't. Even if you ignore the extremes, how does that translate to sympathy for the vast majority in the middle (medium income, modest unearned gain, small/cheap mortgage)??

As it happens, these problems melt away on closer inspection:

1. Fairer Share said that clearly there would be a 'defer and pay on death' option for the former.

2. For the latter in a "tiny flat in the capital" which cost them (say) £500,000, this tax would be like a small % increase in mortgage interest rates. Instead of paying 0.2% Council Tax each year (£1,000), they'd be paying 0.48% Proportional Property Tax each year (£2,400), which is only £117 a month more (hardly 'hammered') and no worse than a 0.28% increase in mortgage rates, which purchasers should have budgeted for. The government can ease the strain by just dropping interest rates, although the chances are that interest rates have fallen by 0.28% since they took on a mortgage, so they are no worse off than they originally expected.

If they are in a "tiny flat" then no doubt they 'aspire' to 'move up the property ladder' some time in the next ten years, at which stage they will save at least £15,000 SDLT (we don't need to worry about whether SDLT is borne by buyer or seller - when you trade up you are both). So when they achieve their 'aspiration', they will get all their money back and it will make 'moving up the property ladder' a lot cheaper and easier.


mombers said...

"Since most people have the majority of their personal assets tied up in their homes, a property charge amounts to a wealth tax in disguise."
Any evidence? Fewer than half of adults are homeowners so that's a start. Then there a millions sitting equity that's likely not bigger than their pensions. And what about the asset poor, cash rich? Are they to forget about aspiring to be homeowners as they have to fund the state for homeowners?

Bayard said...

M, I think "people" here means Daily Mail readers. Those who don't read the DM and subscribe to its values aren't really "people".

Piotr Wasik said...

people = homeowners in DM newspeak

btw, I signed this Fair Share petition and the number of signatures is > 100k; does it mean it will be debated in the House of Commons?

Mark Wadsworth said...

M, the actual statement is true. For "most" people with any assets at all, the majority by value is housing. At least two-thirds of UK "wealth" is land and buildings, and most of that is housing.

But it's completely irrelevant. If land weren't so stupid expensive, land and buildings would only be one-half of much lower UK "wealth".

And think about it, let's rephrase as "Since most people have the majority of their income from wages, a tax on income amounts to a tax on wages in disguise."

So it is a bollocks stupid and irrelevant statement on any level.

B, yes.

PW, I believe that's the rule. "Debate" means a dozen MPs can be arsed to turn up, one mentions Poor Widows and the others nod sagely and dismiss it out of hand.

But I get the impression that FairerShare have at least one MP fully on board to put up a defence. Fingers crossed.

KJP said...

1 Allowing you to pay a tax after you are dead does not make it a fair tax.

2 You say this is an argument for LVT but what is proposed is a tax on built values not on land values.

3 The calculations are skewed by SLDLT: that is a bad tax and should be removed.

Bayard said...

"If land weren't so stupid expensive, land and buildings would only be one-half of much lower UK "wealth"."

and land, apart from agricultural land, has almost no intrinsic value at all, it's like a fiat currency. As an example of this, in Poole, there is a long spit of land that sticks out with the sea on one side of it and Poole Harbour on the other. It is mostly sand, so 120 years ago it was almost worthless. Now it is the most expensive land outside London. What has changed?

KJP, the best is the enemy of the good.

Mark Wadsworth said...

KJP, who are you trying to convince?

1. Without society and government, land would be worthless. Government costs money. It is very fair to make people who own land pay for the value of the services they receive. It is unfair for landowners to make 'everybody' else pay for those services twice over - once in tax and then again in rent.

2. So now you are an LVT purist are you? If they had proposed proper LVT, you would oppose it with equally ineffective venom.

3. Details, details.

B, ta.

James Higham said...

Are we stll only at 487, Mark? :)

Mark Wadsworth said...

JH, I've done one every week or two for thirteen years = 487.

mombers said...


"Allowing you to pay a tax after you are dead does not make it a fair tax."

Dead people don't need any money so a much fairer tax than taking the private property of alive people, especially those on low incomes and who are in poverty. The heirs of dead people can get a job like anyone else who would like a higher standard of living

Mark Wadsworth said...

M, don't dignify the "fairness". The underlying objection is not about "fairness" but merely points out that PWIMs can't pay it every month. Which is true but easily fixed.

Implicit in the KLN is the acknowledgement that if a Rich Widow in a Mansion can afford to pay LVT, then that's fine.