As we drift towards the tricentennial instalment, let's just look at this nonsense idea that "Taxation of the rental value of land is state appropriation of private property! So landowners deserve compensation!".
There's a long list of reasons why this is nonsense, and here are the main ones:
1. If the government had to compensate people for the amount of tax they pay, then it would never raise a penny. If you pay £10,000 income tax a year, the government would have to send you a refund of £10,000, which seems pretty pointless. Why is the situation with taxes on the annual rental value of land any different? It would also make a mockery of the whole thing, it would be like compensating criminals for loss of immoral earnings while in prison.
2. All occupier of land are getting compensation because they are enjoying/consuming rental value of land worth at least as much as the tax. If they think that the tax is too high, that just means that somebody else is prepared to pay more than them and they can move elsewhere (just like tenants do). If your local library stops providing books for free and starts charging £1 for each book you take out, well either use the library and pay or don't. That's your choice.
3. LVT is in itself the compensation that a land owner has to pay "everybody else" for the state-protected right to exclude them and hence place a burden on them. A bit like the "polluter pays" principle.
4. Similarly, every land owner is also being excluded from all the bits of land he doesn't own, so is entitled to his share of the tax paid by all the other land owners. That's your compensation. Whether the LVT pot is spent on core functions of the state, "free" public services, earmarked vouchers, flat rate exemptions or a straight Citizen's Pension/Dividend in cash is a separate debate.
5. Proper LVT'ers are as united in their loathing of taxes on output, earnings and profits as they are united in favour of taxes on land (and other government protected monopolies or cartels). So another way in which people will be compensated is that for every £1 LVT they pay, their other taxes go down by £1.
6. For sure, older homeowners will see the unearned paper capital gains they have accumulated over the years disappear, but was that a real gain anyway? The good news is that their children's and grandchildren's gain (much smaller purchase mortgage) will more than make up for this; overall, the family is richer because their total mortgage interest bill will be a fraction of what it is now.
7. There are some freebies as well: with taxes on productive activity reduced or phased out, the economy can grow by at least ten percent. LVT encourages more efficient ways of doing things, adding another five per cent (dampens boom busts etc). Instead of that extra value going via higher rents/interest into landlords' and bankers' pockets, LVT will constantly recycle this extra wealth (as well as the five or ten per cent of GDP which already goes into landlords' and bankers' pockets) back into the economy (at its simplest, via the Citizen's Dividend), so even lower earners and pensioners will benefit.
8. In practical terms, all these old people who wail about having "bought their houses out of taxed income" effectively got their houses for free; they paid off a tuppence ha'penny mortgage donkey's years ago and have lived rent free for decades. Recent purchasers only paid small deposits, and it is only that small deposit which was paid out of taxed income; and these recent purchasers will be able to pay off their mortgages twice as quickly (even in the absence of a radical debt jubilee) because the LVT they pay in future will be only half what their current tax bill is (basic maths).
9. The only people deserving in any way of compensation are recent first time buyers who were tricked into taking out large mortgages in the last ten years. As it happens, those recent purchasers, with very low house price-to-income multiples will be paying at least £10,000 a year less tax in future, so it would not take them long to get back out of negative equity and only half as long to pay off the rest of the mortgage. But in crude political terms, it seems fair enough to write down their outstanding mortgages to the new, lower selling price of their homes, and the banks will just have to accept a ten or twenty per cent reduction in the value of their residential mortgage assets. The maths of this is tortuous, but take it from me, it can be done without the world coming to an end.
10. I'm sure there are plenty more items which belong on this list, I'll add to it as we go along.
Two Headlines
6 hours ago
