Sunday, June 21, 2009

Land Value Tax, Let the Game Begin

Mark Wadsworth has turned his blog into a one-man platform in favour of a Land Value Tax to replace all other taxes, with the intention, I imagine, of making the world a better place. It's a regular hobby-horse of his, and he sells it well, though with a bit of handwaving here and there.

His latest series of long posts has been provoked by remarks made over at Samizdata (who are, incidentally, quite intelligent and genial chaps, as 'sinister and heavily-armed global illuminati' go) mainly by Ian B, who tried to point out why LVT was a bad idea. I got briefly involved in a similar argument a while back, before realizing I didn't know what I was talking about.

The obvious objections to LVT, which I made then, and which Ian B makes rather better, are that you have to find a large sum in cash every year and that the value put on your property is necessarily arbitrary, leaving it open to injustice and deliberate abuse, where councils order valuers to 'take'em heavy'. All of this is true of rates/council tax as well, of course, but we're talking here about much larger sums of money. These points are addressed at length by MW and dismissed, whether adequately or not I couldn't say, but he tries hard and seems to know what he's talking about.

One point I haven't seen mentioned (though it might be in there somewhere) is that an enormous amount of land and the properties built on it have been appropriated by one or other branch of government. In many towns it is quite staggering to see how many buildings and lots are council property. These would produce nothing, and so private owners would have to pay a lot more. It may not be an important point, it's just my attempt to contribute to the debate.

Anyway, if you have the slightest interest in tax reform get over there and have a read; it's very instructive.


Mark Wadsworth said...

Ta for link.

"you have to find a large sum in cash every year and that the value put on your property is necessarily arbitrary"

People with mortgages and tenants have to find 'large sums in cash' every year. Bearing in mind that LVT would reduce the amount of your mortgage £ for £, no purchaser would end up paying more (plus their other taxes would be cut).

It is not at all difficult to value properties with reasonable accuracy, if there's a ten or twenty per cent margin of error, then choose the bottom of the range of estimates. We have Business Rates in this country that are reasonably accurate and a flat 0.78% property tax in Northern Ireland.

People think that income tax and VAT are somehow more scientific, take it from me they are not - at the margin a lot of businesses or employees pay tax on income they never had or profits they never made.

Plus, anti-Georgists overlook the other half of the equation - probably two-thirds of the LVT would be divvied out as a Citizen's Dividend, so an median household would pay no net tax whatsoever (LVT minus CD).

As to this: "In many towns it is quite staggering to see how many buildings and lots are council property. These would produce nothing."

OK, let's divvy this up into

a) Council housing, where the council ought to be collecting as much rent as possible, that goes into the coffers (there's no point The State charging itself rent).

b) Schools and hospitals which would be sold off or rented to competing health or education providers (which in the interim would be subsidised via education or health vouchers, as elsewhere in Europe).

c) Non-core assets, like quango offices, sports centres etc which would be sold off or rented to private sector.

d) Proper council offices which they need to administer the 'core functions', like police, refuse collection, fire brigade, prisons etc - the cost of these is just part of the cost of having a civilised country.

CIngram said...

As I said, I'm not trying to get involved in the argument, because it's not a subject I know enough about to discuss at this level (I'm working on it). I just wanted to send you a few people who might be interested in it.

Having said that, I realize that some council properties will produce income even though they won't pay LVT, and that some buildings have a function that justifies their existence although they don't earn money, but many don't , and I'm not sure that your assumption that everything else would be sold or rented out isn't a little optimistic. Governments, local and national, like to accumulate property and they don't let it go easily. It represents a considerable drain on resources.

As to the rest, I'll follow the argument from a distance, and try to learn something.

AntiCitizenOne said...

For an LVT&CD combination to work effectively, I think a separation of Crown and State is required.


The Crown operates the LVT/CD but the state bills the CD for services.

Also there are ways to make the LVT amount less arbitrary i.e. more market orientated, see my blog on market geonomics.

CIngram said...

ACO- Have you said that at Samizdata? I clearly have a lot of homework to catch up on.

Just noticed you're not on my blogroll. Rectified.

AntiCitizenOne said...

I went off samizdata.