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Killer Arguments Against LVT, Not (491)

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Kester Pembroke emailed in the following, by a clueless wanker called Neil:

Or alternatively we can recover planning gain from developers and impose peppercorn leases on all land given planning permission. Then those leases are held by the local council and they create sufficient for all builders in the area to build as they see fit. We keep going until houses start to depreciate. If insufficient builders come forward we build council housing. It’s bizarre to believe that planning gain should continue and the entire country taxed instead.

The bit about ‘peppercorn leases’ is just waffle. Once the developers – who are always seen as The Bad Guys, as evidenced by endless cinema films – have sold the homes they build, who pays it? And the notion that granting lots of planning permission would lead to house prices is falling is nonsense – when prices start falling, developers stop developing.

The bit about “the entire country being taxed instead” is mathematical bollocks. You own one home? Pay tax on one home. You are a land banker with a hundred thousand sites with planning? You pay on a hundred thousand homes. That’s like saying ordinary motorists shouldn’t pay Fuel Duty because they don’t use as much as large transport companies.

Agreed on Council Housing – but the rent you pay on a council house is a combination of real costs (maintenance, insurance etc) and location rent. If you pay location rent to the government, that IS Land Value Tax.

Particularly one based upon subjective value and that has never worked – as every version of rates and council tax shows.

Business Rates were introduced over four centuries ago and are still going strong. Sure, the valuations are done in a sloppy manner and are a bit hit and miss, but it’s still the closest we have to LVT.

… yet council Tax is still on 1991 values, which shows that reality doesn’t coincide with the fantasy. The previous two rating systems suffered from the same issue.

The council tax on any home bears so little relation to its 1991 value as to be meaningless. In practice, an annual council tax bill can be anywhere between 0.1% and 25% of a home’s current site premium/location rent. Council Tax is made up numbers. So what? The only reason we have this stupid system is because of Home-Owner-ist resistance to a sensible valuation system, which was the same under Domestic Rates. And Northern Ireland shows that it is not too difficult to update valuations. They assessed market values in 2005 and the Domestic Rates is about 0.7% of each home’s 2005 value.

When taxing, it’s not about it being ‘about right’.

When taxing, the most important thing is taxing in the fairest possible way that is least damaging to the economy. Without a government or government spending, most homes would be nigh worthless. So you pay for what you get.

There has to be a system that is rigorous and seen to be fair. And that is why property taxes always fail. The value of them is subjective. Whereas wage taxes are always absolutely objective and unarguable. Ultimately unless things change hands rental values and property prices are a matter of opinion. That can never be a stable basis for taxation.

Of course Domestic Rates or LVT or ‘progressive property tax’ or whatever you want to call it can be applied in a “rigourous and fair” manner. The rental value of 99% of homes is not subjective in the slightest. It’s a simple question – how much could you rent it out for? Then knock off a bit for the bricks and mortar element, round it down, stick them in Bands and average it out. There’s your answer.

As long as you are paying the same amount as similar homes in your area, and people in bigger homes are paying more and people in smaller homes are paying less, what’s the problem?

And property taxes are a VERY stable basis for taxation, the money is just collected (preferably by direct deduction from wages or welfare/pension payments) without the need for tens of millions of annual tax returns, quarterly VAT returns, monthly or weekly payroll calculations etc. That’s a massive headache and cost with a huge amount of fraud and error.

Just because you think that some economic variable – like wages or turnover – are ‘objective’ does not automatically make them good subjects for taxation. You are paying for the privilege of working or running a business, providing goods and services etc (which are Good Things – if you tax them, you get less Good Things) for absolutely nothing in return (apart from a few contributory benefits, which are insane anyway). Why not get rid of that and ask people to pay some percentage of the value of what the government provides them? Not forcible payments towards the cost (that way lies Poll Tax) but voluntary payments for the value, just like in any free market transaction? Think you’re being overcharged? Move somewhere cheaper. Nobody’s forced to shop at Waitrose, they can shop at Aldi or Lidl instead.


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