Killer Arguments Against LVT, Not (390)

From the comments to an article at Tim Worstall:

Jim: an LVT cannot by definition be paid out of the income generated by the land for the vast majority of people, because they are being taxed on their house, which generates no actual cash income because they live in it. Therefore an LVT is an income tax by proxy, because income from employment is all most people have

That’s a tired and tested KLN, debunked here. LVT is paid out of the earned income that would otherwise be collected in mortgage payments or ten, which are also paid out of earned income. The point is that ground rents would be collected and pooled publicly and not privately instead of earned income being collected and pooled publicly. So by definition, it is good for equality of disposable incomes after housing costs.

And ironically the very people who do generate income from land (businesses) would make out like bandits from an LVT because they already pay a fairly hefty one, plus lots of other taxes.

Yes, Business Rates is pretty close to LVT, but residential land is not (Council Tax is a pale, distant relic of LVT). Perhaps commercial landlords would end up paying less tax, perhaps they’d end up paying more. That can be fine tuned one way or another. But residential landlords would almost certainly be paying a higher share of their rental income in tax i.e. keeping less of the ground rent for themselves (can also be fine tuned one way or another).

Thus the actual effect of LVT in the long run would be that everyone ended up living in a house that they could afford the LVT on from the income they made, so everyone’s income would be taxed at roughly the same rate.

That’s a fair assumption.

People with more income would afford the nicer (and higher LVT) houses, poorer people would have to move to lower priced and lower LVT houses. They’d end up paying the same proportion of their income in LVT.

Perhaps they would. Having established that there would be more equality in disposable incomes (hooray), this is not necessarily levelling the playing field between low and high earners (why should it?), it is levelling the playing field in favour of the productive economy and away from landowners (hooray).

People who currently have a lot of their income taken in direct tax get nothing directly in return would be paying a similar amount in LVT, but the bonus is that they get to live in the nicer homes for a much smaller outlay (hooray). They end up better off. That’s good for the work ethic and for social cohesion (hooray). Win-win-win.

So its just an income tax via a very circuitous route.

He is seeing ‘income tax’ as something natural, it is not, it is highly artificial. I could just as well say that ‘income tax is LVT by a very circuitous route’, which it is – income tax is a crude, damaging and indirect tax on land values, whereas LVT is a sophisticated tax on incomes (earned income is taxed much more lightly than unearned income and to a large extent it is voluntary).