Killer Arguments Against LVT, Not (414)

From The New Sratesman, it was published in 2010 but I’ve only just noticed this bit:

Before he went to work in Nick Clegg’s private office, Richard Reeves, biographer of John Stuart Mill and the then director of Demos, argued persuasively for the introduction of capital gains tax on the profits made from house sales.

“But surely it all depends on how much the land you own is worth. Even if you owned a huge bit of Scotland, it would depend on the value of that land – but if you owned a chunk of Knightsbridge (3), then the tax could have a powerful effect. Surely this tax would have most effect in the early years, because it would encourage divestment and changes in behaviour. The yield would go down.”(4)

1) The KLN she trots out at the end applies in spades to the tax she favours – capital gains tax on main residences. It has been observed over and over that the revenue-maximising rate of CGT is very low indeed as you can avoid it by simply never selling – this is the opposite of what LVT would encourage, the yield would be very low indeed and by gumming up sales and purchases, might push prices up rather than down.

2) Yes, the government of the day always buys off the opinion formers.

3) Well duh, that’s why it’s called Land VALUE Tax. An acre of Kinghtsbridge is worth as much as all the farmland in Aberdeenshire (give or take a bit).

4) That makes no sense whatsoever. As it happens, the Dukes who own central London probably wouldn’t change their behaviour, they’d accept a cut in net income from £10 billion a year to a mere £1 billion a year and bide their time until they can push tax policy back in their favour. If it did change behaviour and they sold off all their thousands of homes and business premises, then the purchasers (ex-tenants) would be paying the tax instead. The yield would be entirely unaffected by this change.
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From a recent article in the FT:

Sir Peter Rogers, chairman of the New West End Company, a lobby group that represents hundreds of businesses around Oxford Street, Bond Street and Regent Street (1), has called for a radical rethink.

“Our proposal is a more appropriate tax, possibly a sales tax or turnover tax, which is difficult to avoid, easy to collect (2) and reflects the economic performance of individual businesses.(3)”

1) Nope, look at the list of their members and supporters, it’s all big landowners and banks with a few token actual businesses as a fig leaf.

2) Is he having a laugh? Property taxes (Business Rates or LVT) are nigh impossible to avoid and easiest to collect. Turnover taxes are at the other end of the scale.

3) Business Rates reflects the rental value of buildings, which in London is largely location value so barely different from proper LVT. It is a tax on those rental values.

Funny how landowners always recommend the most Socialist of policies.