Realist, not conformist analysis of the latest financial, business and political news

John McDonnell Wants More Tax, Not A Land Value Tax

John McDonnell, the Shadow Chancellor, has indicated that he’s interested in a land value tax. Georgists everywhere celebrate and dance in the – publicly funded – streets. Except that’s not really what he’s saying at all. For the point about LVT is that it’s a more efficient method of raising the necessary revenue, not a method of raising more revenue. This is an important distinction:

A land tax, where a percentage of the value of the land is levied annually, is popular with some economists, who say it is a logical approach to taxing individual wealth.

No, that’s not the point at all – the point actually is that no one’s making land any more. Thus a tax upon land values is not distortionary. We don’t get less land because we tax it – unlike everything else, where the moment you tax incomes you get less incomes being made, tax wealth there’s less wealth, tax economic activity there will be less economic activity. That is, the act of taxing everything other than land makes us poorer in general as well as making those actually taxed poorer. Thus, if we tax land values, instead of taxing those other things, we’ll be richer in general and it will only be those coughing up the tax, rather than all, who are poorer.

Yes, obviously, at least some of the things taxes are spent upon also make us richer. The LVT argument is not, at least not necessarily, an anarchist or minarchist one. It’s one about the efficiency of revenue raising.

But that’s not what McDonnell is saying at all:

But McDonnell told the audience at the event organised by the Resolution Foundation, where he set out Labour’s plans to boost household incomes, that the crisis in the funding of local services may have opened a window of opportunity.

“I think we are at a stage where the decline in terms of funding to local government and the consequential effect on local services – many of them are in crisis – means, I think, that people are now willing to consider more radical solutions than they have in the past.”

He’s talking about raising more tax revenue from the economy by having a new tax. This is not the same thing at all.

An LVT is a good idea but it should be matched by a reduction in other more damaging forms of tax. Which isn’t what is being suggested now, is it?

But then who is surprised at John McDonnell arguing for “Moar Tax!” He does know Richard Murphy after all.

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Francis Turner
6 years ago

Embrace the power of AND. He wants more tax AND that includes a land value tax

Randolph
Randolph
6 years ago

“Thus, if we tax land values, instead of taxing those other things, we’ll be richer in general”

How does successfully generating more tax make us richer (in aggregate)? Given that we know the public sector, £ for £, tends to spend money far less efficiently than the private sector?

(Where is the preview button?)

Gamecock
Gamecock
6 years ago

Higher taxes on land are a liability. I do not believe that they will not affect the value of land.

LVT is a tax on wealth, not a tax on income. While it may have some advantages, it requires liquidity on the part of the wealthy (sic). A threat to some, especially pensioners.

It will especially appeal to cultural Marxists who despise the wealthy (sic).

Spike
Spike
6 years ago
Reply to  Gamecock

And, since wealth accumulates exponentially, any tax on wealth, over a sufficient number of years, EXTINGUISHES more money than it collects.

Jim
Jim
6 years ago
Reply to  Gamecock

LVT is a tax on income, as only income can (in the long run) pay the LVT. All an LVT does is redistribute property among the people in a way such that their individual income is sufficient to pay the LVT. Its still a tax on income – you can’t sell 3% (or whatever rate it might be) of your house every year, nor would it be desirable to do so. So you’d end up living in a house that you could afford the ‘rent’ on. LVT is basically the State being your landlord and charging you rent to live… Read more »

Alastair McGowan
Alastair McGowan
6 years ago
Reply to  Gamecock

LVT is not a tax on wealth. Yes at present wealth tends to be stashed into bricks and mortar because land is a safe and prosperous ‘place’ and LVT advocates are equivocal about how to introduce it without penalising those who have until now benefitted from and placed their assets in land. However, land is safe and prosperous for the very reason that it should be taxed: Land value is a result of public spending over generations, it is not the product of anything the landowner contributes to the economy, it is not public wealth and a 100% tax on… Read more »

Alastair McGowan
Alastair McGowan
6 years ago

A serious error in the above, I perhaps made a Freudian slip when I typed ‘it is not public wealth’ when I think I should have said ‘it is not private wealth but public’. Such is the strain of trying to edit text in a small text field on an antiquated blackberry.

benjamin weenen
benjamin weenen
6 years ago
Reply to  Gamecock

If the immovable property of the wealthiest person in the UK, with the highest income didn’t occupy a valuable location, then their LVT bill would be zero.

So not a tax on wealth, or anything to do with being envious of high incomes or high ownership of produced wealth.

MC
MC
6 years ago

The pic you’re using of Semtex is not hi-res enough to use as a large image, which is how it appears on the home page…

Rhoda Klapp
Rhoda Klapp
6 years ago

Oh, it’s a tax on income all right. How else are you going to pay it, tear off a piece of land and send that in?

Gamecock
Gamecock
6 years ago
Reply to  Rhoda Klapp

You could already have the money. Or sell other assets, such as stock. You could be forced to take a loss on stock to come up with the cash. Taking a loss on stock is hardly income.

Jim
Jim
6 years ago
Reply to  Gamecock

Thats only a short term solution. In the long run only income can pay a land value tax, because income is repeatable, year on year, wealth (especially when taxed annually) is finite. If you live in an expensive house that attracts a high LVT bill, but don’t have an income to match,then initially you might be able to pay it for a year or two out of savings, but thats not going to last too long, and who wants to see their savings disappearing into the taxman’s maw anyway? So you’ll sell the house, downsize to one that your actual… Read more »

Gamecock
Gamecock
6 years ago
Reply to  Jim

“Thats only a short term solution. In the long run only income can pay a land value tax”

Bullshit. You pay it with what you have.

Rhoda Klapp
Rhoda Klapp
6 years ago
Reply to  Gamecock

If you have a two million pound house and a pension how do you pay? Or do old widows get a pass? If we are happy that they are obliged to sell a house they love to pay a tax, or borrow on it, or defer the tax until the estate can pay it, fine. Otherwise income is required. In most cases income will be required so it is not bullshit to point it out.

Alastair McGowan
Alastair McGowan
6 years ago
Reply to  Rhoda Klapp

Rent the land, for the tax will be directly proportionate to the rental value, and you get to keep all of the rent for the supply of buildings and anything else on the land. The land is ‘real’ estate. It is the very State itself. It is only in the hands of a freeholder through state license and so paying rent to the state (LVT) is the price to pay for the benefits that the state provides to service that land with a variety of basic functions that enables the landowner to profit from its use.

jgh
jgh
6 years ago

Local government is *already* funded by a land value tax. Ok, a crippled bastardised version of a land value tax, but it’s horrifying how many national politicians who propose local government be funded by a tax on land and/or property values are completely oblivious to the fact that 12% of local government income is *already* funded by a tax on land and/or property values.

Alastair McGowan
Alastair McGowan
6 years ago
Reply to  jgh

This cuts close to the real argument here: between at one end of the scale poll taxing which is regressive and lets the wealthy get a free run at capital investment and at the other end highly progressive non distortionary sources of revenue such as LVT. Capitalism (the basic principle of easy wealth accruel not the free market aspect) is propped up to a greater extent by regressive taxation and that is the corner from where LVT gets a hard time and from where progressive taxation such as LVT is resisted

Van_Patten
Van_Patten
6 years ago

But Tim Lest we forget he and Murphy are bitter enemies following Murphy’s refusal of an advisory role in his team because he wanted to be the Chief economic advisor, not one among many….

Diogenes
Diogenes
6 years ago

Just wait till August, then we can see how he and Jezza celebrate the 50th anniversary of the Prague Spring

Rhoda Klapp
Rhoda Klapp
6 years ago

” Thus a tax upon land values is not distortionary.” Are you sure it won’t drive land value down? If so, is that not a distortion? It’s not a panacea, or a good idea, it’s just a tax. Just another bloody tax. They all come out of the same pockets however derived.

benjamin weenen
benjamin weenen
6 years ago
Reply to  Rhoda Klapp

Something is distortionary because it distorts market allocation of goods and services.

Finding a better way to make a widget drives down the prices of widgets. That’s obviously a good thing.

Also the LVT isn’t technically a “tax”, because it is based on market compensation of benefits received. So economically and morally it is exactly the same as paying wages or for goods and services. Which is why it is non distortionary.

Taxes, are a payment for benefits the payer may or may not receive ie income, capital and transaction taxes.

Rhoda Klapp
Rhoda Klapp
6 years ago

That’s the kind of hair-splitting jargon and nomenclature that gets economists a bad name.

Randolph
Randolph
6 years ago

“Also the LVT isn’t technically a “tax”, because it is based on market compensation of benefits received.”

“Taxes, are a payment for benefits the payer may or may not receive ie income, capital and transaction taxes.”

I clearly missed something far too subtle there..

How is LVT or PAYE not a tax. Of course it’s a bloody tax. In LVT’s case, not even necessarily based on any (useful or practical) ability to pay.

Tomothy, i nknow other stuff is more important, but “please” give us a preview (the eye sight isn;t what it was).

benjamin weenen
benjamin weenen
6 years ago
Reply to  Randolph

It the State set up a chain of restaurants, you’d simply be paying for a meal, rather than a tax if you chose to eat there. So not every source of revenue the state receives is necessary a “tax” is it?

LVT and rent are economically the same thing. The only difference is who collects. If paying rent isn’t a “tax” then neither can a LVT be. Despite the name.

Alastair McGowan
Alastair McGowan
6 years ago
Reply to  Rhoda Klapp

Land value tax comes from the value of public services that gives the land its value in the first place. The land title holder is merely a conduit for that value that they gather through rents yet never create. The scottish campaign is called Annual Gound Rent which is to my mind a far better way to describe what LVT is: the State is the ultimate landlord the the land owner is in fact subletting it. If there where a 100% tax all that would mean is the landowner paying a yearly ground rent to the state, it is not… Read more »

DocBud
DocBud
6 years ago

Houses with much, much lower land value benefit from greater public services than we do, e.g. pavements alongside roads, more frequent street lighting, more reliable power supply, etc. We pay five times the average rate, twice what the people over the road pay, simply because we overlook the Coral Sea and Cumberland Islands Group. It is utter garbage to suggest that difference in land values is determined by the level of public services in proximity to that land. And what the hell as that to do with national public expenditure such as defence? The fairest tax is people paying for… Read more »

benjamin weenen
benjamin weenen
6 years ago

The LVT is only non-distortionary in a perfect market.

Where markets are not perfect, because owner occupiers can impute their rent, the LVT corrects those distortions and thus better than neutral.

So, even if a LVT were on top of existing taxes, it would be a good thing for the economy and would reduce excessive inequality, of which housing issues are symptomatic.

The LVT would end the housing crisis instantly. One good reason to get on with it, irrespective of the context of reducing other taxes (which of course would also be a good thing, but a separate issue).

Randolph
Randolph
6 years ago

“The LVT would end the housing crisis instantly.”

That depends on your definition of housing crisis…. (we are not exactly starting from an impartial position)

benjamin weenen
benjamin weenen
6 years ago
Reply to  Randolph

Where housing is unaffordable for the majority of typical working household
Where their is misallocation of existing and future immovable property.

Rhoda Klapp
Rhoda Klapp
6 years ago

Will it stop the growth on the demand side caused by immigration? Do places that have LVT or a close equivalent not have housing crises?

Southerner
6 years ago

All land is not created equal. Some of it is used for housing and office development, which makes it more valuable. Some land is only good as a home for endangered species. The in-between land is upwardly mobile. It has the potential of becoming more valuable. Surely a Land Value Tax (which will naturally be introduced at a moderate rate, and inevitably rise to pip-squeaking levels) will deter development?

Alastair McGowan
Alastair McGowan
6 years ago
Reply to  Southerner

LVT is non-distortionary. If development is a public good then the market will enable it, and LVT will make that process more efficient. That is why Adam Smith saw it as an enabler of the market dynamic. Economic rent that goes into the pocket of the landlord works against the market by driving speculation and withholding from market forces.

Alastair McGowan
Alastair McGowan
6 years ago

Thus a 100% LVT or AGR would be the most efficient for the economy and would drive the most appropriate land use and development. It is worth following this argument to its conclusion because it explains why current freehold land is so inefficient market wise. If this drove down the value of land to minimal levels it would drive up the value of economic activity (buildings and everything else) on the land to the most efficient levels. At present the cost of holding land is so negligible that ‘land sitters’ obstruct the market as they sit there with hands held… Read more »

Rhoda Klapp
Rhoda Klapp
6 years ago

OK, show me this working in some other land. Then tell me how it’s not going to reach high rates as politicians learn they now own us all.

( I know that freehold is not ownership, but most people don’t. They won’t like it when they find out that the state really owns them in their entirety.)

PF
PF
6 years ago

@ Alastair McGowan “If there where a 100% tax all that would mean is the landowner paying a yearly ground rent to the state, it is not a tax at all but a ticket paid to a location in the economy from which activity on the land can then proceed. At present the landowner gets all that activity for free.” It’s not for free! We don’t start from your marxist utopia whereby the state owns everything. People have paid money for the land / property that they believe they now own. A 100% tax (or rent) substantially writes off the… Read more »

benjamin weenen
benjamin weenen
6 years ago
Reply to  PF

Yep. I believe we had to compensate the owners of slaves, rather than those who suffered from the injustice of slavery in order to get it abolished.

A shameful argument then as yours is now.

There is nothing Marxists about people paying and getting paid what they owe. That’s exactly what the LVT is and does.

PF
PF
6 years ago

You compare slaves to land. And then you want the state to take control of and own all of the land. And there is nothing marxist whatsoever…

You’re as bad as the Murf!

ScottR
ScottR
6 years ago

LVT A couple of years ago I did some calculations based on a news item that Savills had valued UK residential property at £5trillion. A 1% LVT would raise £50bn. On checking some (I think) IFS stats, the amount exceeded the tax take in 2016 from: Council tax Stamp duty (whatever it’s now called) Inheritance tax Capital gains tax (on residential property – estimated) TV license That’s not bad, I thought. One tax to replace them all! Could probably release some trapped bureaucrats into the wild as well, ie more savings. If a property owner didn’t/couldn’t pay, the council involved… Read more »

DocBud
DocBud
6 years ago
Reply to  ScottR

Simple question, though, ScottR, does it result in a fairer distribution of the tax burden or do some, who are no bigger consumers of taxpayer funds than others, find themselves paying a disproportionate amount of that burden?

Jim
Jim
6 years ago
Reply to  DocBud

The thing is, no one who proposes an LVT has a clue what the effects would be, because they assume the revenue would accrue based on current values, yet the the current values only exist because the system is set up the way it is. Change the whole basis of land ownership and taxation, and guess what? Land values would alter significantly. Its a dynamic system – change the input parameters, the output changes. Yet they assume ‘Property is worth £Xtn, therefore we tax it at Y% to get £Zbn in revenues. And the expensive property pays most of it’.… Read more »

Rhoda Klapp
Rhoda Klapp
6 years ago

ScottR, most LVT enthusiasts do not propose the simultaneous removal of five taxes (well, four and a charge backed by the power of the state). Guarantee that and we can think about it. But not on the assumption that the state owns me and everything I own.

Fred Z
Fred Z
6 years ago

“the point actually is that no one’s making land any more. Thus a tax upon land values is not distortionary” But Tim, you always write that UK housing is expensive because of a land shortage, by which I mean there is land comes in various forms, and we are constantly making and destroying ‘buildable’ land, mostly destroying it The catastrophe I see coming is LVT coupled with ever increasing restrictions on the uses of land, because without rights to use, land ain’t land. Plus comrade, the state will tell you what the value is and it will have nothing to… Read more »

benjamin weenen
benjamin weenen
6 years ago
Reply to  Fred Z

If the State got its revenues from LVT, then presumably it would want to maximise its revenues by increasing aggregated land values. As land values arise from putting labour/capital to where they are most in demand ie agglomeration effects, it would be counter productive for the state to put onerous restrictions on what land can and cannot be used for. In fact, with a LVT the state would have to compete, as does a landlord or property developer, for our spending against other goods and services in the market place. It is thus the ultimate expression of market ideology ie… Read more »

Diogenes
Diogenes
6 years ago

According to wiki

Land value taxation is currently implemented throughout Denmark, Estonia, Lithuania, Russia, Hong Kong, Singapore, and Taiwan; it has also been applied to smaller extents in subregions of Australia, Mexico (Mexicali), and the United States (e.g., Pennsylvania).

JerryC
JerryC
6 years ago
Reply to  Diogenes

Property taxes are the primary means of taxation for many US state and local governments, primarily because property doesn’t move so they don’t have to worry about it getting up and moving to another jurisdiction.

Gamecock
Gamecock
6 years ago

Higher taxes on land are a liability. I do not believe that they will not affect the value of land.

LVT is a tax on wealth, not a tax on income. While it may have some advantages, it requires liquidity on the part of the wealthy (sic). A threat to some, especially pensioners.

It will especially appeal to cultural Marxists who despise the wealthy (sic).

Alastair McGowan
Alastair McGowan
6 years ago
Reply to  Gamecock

LVT is not a tax on wealth. Yes at present wealth tends to be stashed into bricks and mortar because land is a safe and prosperous ‘place’ and LVT advocates are equivocal about how to introduce it without penalising those who have until now benefitted from and placed their assets in land. However, land is safe and prosperous for the very reason that it should be taxed: Land value is a result of public spending over generations, it is not the product of anything the landowner contributes to the economy, it is not public wealth and a 100% tax on… Read more »

Alastair McGowan
Alastair McGowan
6 years ago

A serious error in the above, I perhaps made a Freudian slip when I typed ‘it is not public wealth’ when I think I should have said ‘it is not private wealth but public’. Such is the strain of trying to edit text in a small text field on an antiquated blackberry.

benjamin weenen
benjamin weenen
6 years ago
Reply to  Gamecock

If the immovable property of the wealthiest person in the UK, with the highest income didn’t occupy a valuable location, then their LVT bill would be zero.

So not a tax on wealth, or anything to do with being envious of high incomes or high ownership of produced wealth.

Jim
Jim
6 years ago
Reply to  Gamecock

LVT is a tax on income, as only income can (in the long run) pay the LVT. All an LVT does is redistribute property among the people in a way such that their individual income is sufficient to pay the LVT. Its still a tax on income – you can’t sell 3% (or whatever rate it might be) of your house every year, nor would it be desirable to do so. So you’d end up living in a house that you could afford the ‘rent’ on. LVT is basically the State being your landlord and charging you rent to live… Read more »

Spike
Spike
6 years ago
Reply to  Gamecock

And, since wealth accumulates exponentially, any tax on wealth, over a sufficient number of years, EXTINGUISHES more money than it collects.

Francis Turner
6 years ago

Embrace the power of AND. He wants more tax AND that includes a land value tax

Rhoda Klapp
Rhoda Klapp
6 years ago

Oh, it’s a tax on income all right. How else are you going to pay it, tear off a piece of land and send that in?

Alastair McGowan
Alastair McGowan
6 years ago
Reply to  Rhoda Klapp

Rent the land, for the tax will be directly proportionate to the rental value, and you get to keep all of the rent for the supply of buildings and anything else on the land. The land is ‘real’ estate. It is the very State itself. It is only in the hands of a freeholder through state license and so paying rent to the state (LVT) is the price to pay for the benefits that the state provides to service that land with a variety of basic functions that enables the landowner to profit from its use.

Gamecock
Gamecock
6 years ago
Reply to  Rhoda Klapp

You could already have the money. Or sell other assets, such as stock. You could be forced to take a loss on stock to come up with the cash. Taking a loss on stock is hardly income.

Jim
Jim
6 years ago
Reply to  Gamecock

Thats only a short term solution. In the long run only income can pay a land value tax, because income is repeatable, year on year, wealth (especially when taxed annually) is finite. If you live in an expensive house that attracts a high LVT bill, but don’t have an income to match,then initially you might be able to pay it for a year or two out of savings, but thats not going to last too long, and who wants to see their savings disappearing into the taxman’s maw anyway? So you’ll sell the house, downsize to one that your actual… Read more »

Gamecock
Gamecock
6 years ago
Reply to  Jim

“Thats only a short term solution. In the long run only income can pay a land value tax”

Bullshit. You pay it with what you have.

Rhoda Klapp
Rhoda Klapp
6 years ago
Reply to  Gamecock

If you have a two million pound house and a pension how do you pay? Or do old widows get a pass? If we are happy that they are obliged to sell a house they love to pay a tax, or borrow on it, or defer the tax until the estate can pay it, fine. Otherwise income is required. In most cases income will be required so it is not bullshit to point it out.

jgh
jgh
6 years ago

Local government is *already* funded by a land value tax. Ok, a crippled bastardised version of a land value tax, but it’s horrifying how many national politicians who propose local government be funded by a tax on land and/or property values are completely oblivious to the fact that 12% of local government income is *already* funded by a tax on land and/or property values.

Alastair McGowan
Alastair McGowan
6 years ago
Reply to  jgh

This cuts close to the real argument here: between at one end of the scale poll taxing which is regressive and lets the wealthy get a free run at capital investment and at the other end highly progressive non distortionary sources of revenue such as LVT. Capitalism (the basic principle of easy wealth accruel not the free market aspect) is propped up to a greater extent by regressive taxation and that is the corner from where LVT gets a hard time and from where progressive taxation such as LVT is resisted

Randolph
Randolph
6 years ago

“Thus, if we tax land values, instead of taxing those other things, we’ll be richer in general”

How does successfully generating more tax make us richer (in aggregate)? Given that we know the public sector, £ for £, tends to spend money far less efficiently than the private sector?

(Where is the preview button?)

Van_Patten
Van_Patten
6 years ago

But Tim Lest we forget he and Murphy are bitter enemies following Murphy’s refusal of an advisory role in his team because he wanted to be the Chief economic advisor, not one among many….

Southerner
6 years ago

All land is not created equal. Some of it is used for housing and office development, which makes it more valuable. Some land is only good as a home for endangered species. The in-between land is upwardly mobile. It has the potential of becoming more valuable. Surely a Land Value Tax (which will naturally be introduced at a moderate rate, and inevitably rise to pip-squeaking levels) will deter development?

Alastair McGowan
Alastair McGowan
6 years ago
Reply to  Southerner

LVT is non-distortionary. If development is a public good then the market will enable it, and LVT will make that process more efficient. That is why Adam Smith saw it as an enabler of the market dynamic. Economic rent that goes into the pocket of the landlord works against the market by driving speculation and withholding from market forces.

Alastair McGowan
Alastair McGowan
6 years ago

Thus a 100% LVT or AGR would be the most efficient for the economy and would drive the most appropriate land use and development. It is worth following this argument to its conclusion because it explains why current freehold land is so inefficient market wise. If this drove down the value of land to minimal levels it would drive up the value of economic activity (buildings and everything else) on the land to the most efficient levels. At present the cost of holding land is so negligible that ‘land sitters’ obstruct the market as they sit there with hands held… Read more »

Rhoda Klapp
Rhoda Klapp
6 years ago

OK, show me this working in some other land. Then tell me how it’s not going to reach high rates as politicians learn they now own us all.

( I know that freehold is not ownership, but most people don’t. They won’t like it when they find out that the state really owns them in their entirety.)

Rhoda Klapp
Rhoda Klapp
6 years ago

” Thus a tax upon land values is not distortionary.” Are you sure it won’t drive land value down? If so, is that not a distortion? It’s not a panacea, or a good idea, it’s just a tax. Just another bloody tax. They all come out of the same pockets however derived.

Alastair McGowan
Alastair McGowan
6 years ago
Reply to  Rhoda Klapp

Land value tax comes from the value of public services that gives the land its value in the first place. The land title holder is merely a conduit for that value that they gather through rents yet never create. The scottish campaign is called Annual Gound Rent which is to my mind a far better way to describe what LVT is: the State is the ultimate landlord the the land owner is in fact subletting it. If there where a 100% tax all that would mean is the landowner paying a yearly ground rent to the state, it is not… Read more »

DocBud
DocBud
6 years ago

Houses with much, much lower land value benefit from greater public services than we do, e.g. pavements alongside roads, more frequent street lighting, more reliable power supply, etc. We pay five times the average rate, twice what the people over the road pay, simply because we overlook the Coral Sea and Cumberland Islands Group. It is utter garbage to suggest that difference in land values is determined by the level of public services in proximity to that land. And what the hell as that to do with national public expenditure such as defence? The fairest tax is people paying for… Read more »

benjamin weenen
benjamin weenen
6 years ago
Reply to  Rhoda Klapp

Something is distortionary because it distorts market allocation of goods and services.

Finding a better way to make a widget drives down the prices of widgets. That’s obviously a good thing.

Also the LVT isn’t technically a “tax”, because it is based on market compensation of benefits received. So economically and morally it is exactly the same as paying wages or for goods and services. Which is why it is non distortionary.

Taxes, are a payment for benefits the payer may or may not receive ie income, capital and transaction taxes.

Rhoda Klapp
Rhoda Klapp
6 years ago

That’s the kind of hair-splitting jargon and nomenclature that gets economists a bad name.

Randolph
Randolph
6 years ago

“Also the LVT isn’t technically a “tax”, because it is based on market compensation of benefits received.”

“Taxes, are a payment for benefits the payer may or may not receive ie income, capital and transaction taxes.”

I clearly missed something far too subtle there..

How is LVT or PAYE not a tax. Of course it’s a bloody tax. In LVT’s case, not even necessarily based on any (useful or practical) ability to pay.

Tomothy, i nknow other stuff is more important, but “please” give us a preview (the eye sight isn;t what it was).

benjamin weenen
benjamin weenen
6 years ago
Reply to  Randolph

It the State set up a chain of restaurants, you’d simply be paying for a meal, rather than a tax if you chose to eat there. So not every source of revenue the state receives is necessary a “tax” is it?

LVT and rent are economically the same thing. The only difference is who collects. If paying rent isn’t a “tax” then neither can a LVT be. Despite the name.

Diogenes
Diogenes
6 years ago

Just wait till August, then we can see how he and Jezza celebrate the 50th anniversary of the Prague Spring

benjamin weenen
benjamin weenen
6 years ago

The LVT is only non-distortionary in a perfect market.

Where markets are not perfect, because owner occupiers can impute their rent, the LVT corrects those distortions and thus better than neutral.

So, even if a LVT were on top of existing taxes, it would be a good thing for the economy and would reduce excessive inequality, of which housing issues are symptomatic.

The LVT would end the housing crisis instantly. One good reason to get on with it, irrespective of the context of reducing other taxes (which of course would also be a good thing, but a separate issue).

Rhoda Klapp
Rhoda Klapp
6 years ago

Will it stop the growth on the demand side caused by immigration? Do places that have LVT or a close equivalent not have housing crises?

Randolph
Randolph
6 years ago

“The LVT would end the housing crisis instantly.”

That depends on your definition of housing crisis…. (we are not exactly starting from an impartial position)

benjamin weenen
benjamin weenen
6 years ago
Reply to  Randolph

Where housing is unaffordable for the majority of typical working household
Where their is misallocation of existing and future immovable property.

MC
MC
6 years ago

The pic you’re using of Semtex is not hi-res enough to use as a large image, which is how it appears on the home page…

PF
PF
6 years ago

@ Alastair McGowan “If there where a 100% tax all that would mean is the landowner paying a yearly ground rent to the state, it is not a tax at all but a ticket paid to a location in the economy from which activity on the land can then proceed. At present the landowner gets all that activity for free.” It’s not for free! We don’t start from your marxist utopia whereby the state owns everything. People have paid money for the land / property that they believe they now own. A 100% tax (or rent) substantially writes off the… Read more »

benjamin weenen
benjamin weenen
6 years ago
Reply to  PF

Yep. I believe we had to compensate the owners of slaves, rather than those who suffered from the injustice of slavery in order to get it abolished.

A shameful argument then as yours is now.

There is nothing Marxists about people paying and getting paid what they owe. That’s exactly what the LVT is and does.

PF
PF
6 years ago

You compare slaves to land. And then you want the state to take control of and own all of the land. And there is nothing marxist whatsoever…

You’re as bad as the Murf!

Fred Z
Fred Z
6 years ago

“the point actually is that no one’s making land any more. Thus a tax upon land values is not distortionary” But Tim, you always write that UK housing is expensive because of a land shortage, by which I mean there is land comes in various forms, and we are constantly making and destroying ‘buildable’ land, mostly destroying it The catastrophe I see coming is LVT coupled with ever increasing restrictions on the uses of land, because without rights to use, land ain’t land. Plus comrade, the state will tell you what the value is and it will have nothing to… Read more »

benjamin weenen
benjamin weenen
6 years ago
Reply to  Fred Z

If the State got its revenues from LVT, then presumably it would want to maximise its revenues by increasing aggregated land values. As land values arise from putting labour/capital to where they are most in demand ie agglomeration effects, it would be counter productive for the state to put onerous restrictions on what land can and cannot be used for. In fact, with a LVT the state would have to compete, as does a landlord or property developer, for our spending against other goods and services in the market place. It is thus the ultimate expression of market ideology ie… Read more »

Diogenes
Diogenes
6 years ago

According to wiki

Land value taxation is currently implemented throughout Denmark, Estonia, Lithuania, Russia, Hong Kong, Singapore, and Taiwan; it has also been applied to smaller extents in subregions of Australia, Mexico (Mexicali), and the United States (e.g., Pennsylvania).

JerryC
JerryC
6 years ago
Reply to  Diogenes

Property taxes are the primary means of taxation for many US state and local governments, primarily because property doesn’t move so they don’t have to worry about it getting up and moving to another jurisdiction.

ScottR
ScottR
6 years ago

LVT A couple of years ago I did some calculations based on a news item that Savills had valued UK residential property at £5trillion. A 1% LVT would raise £50bn. On checking some (I think) IFS stats, the amount exceeded the tax take in 2016 from: Council tax Stamp duty (whatever it’s now called) Inheritance tax Capital gains tax (on residential property – estimated) TV license That’s not bad, I thought. One tax to replace them all! Could probably release some trapped bureaucrats into the wild as well, ie more savings. If a property owner didn’t/couldn’t pay, the council involved… Read more »

DocBud
DocBud
6 years ago
Reply to  ScottR

Simple question, though, ScottR, does it result in a fairer distribution of the tax burden or do some, who are no bigger consumers of taxpayer funds than others, find themselves paying a disproportionate amount of that burden?

Jim
Jim
6 years ago
Reply to  DocBud

The thing is, no one who proposes an LVT has a clue what the effects would be, because they assume the revenue would accrue based on current values, yet the the current values only exist because the system is set up the way it is. Change the whole basis of land ownership and taxation, and guess what? Land values would alter significantly. Its a dynamic system – change the input parameters, the output changes. Yet they assume ‘Property is worth £Xtn, therefore we tax it at Y% to get £Zbn in revenues. And the expensive property pays most of it’.… Read more »

Rhoda Klapp
Rhoda Klapp
6 years ago

ScottR, most LVT enthusiasts do not propose the simultaneous removal of five taxes (well, four and a charge backed by the power of the state). Guarantee that and we can think about it. But not on the assumption that the state owns me and everything I own.

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