Take the test: are you a Home-Owner-Ist or a free-market capitalist? (1)

October 31, 2011 64 Comments
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Jot down your answers (As and Bs) on a piece of paper, then click and highlight at the end to check your result.
—————————————
1. All other things being equal, when house prices increase we become…
A. Wealthier
B. Poorer

2. The rental value of any plot of land is roughly equal to the burden placed on the rest of society by virtue of them being excluded therefrom.
A. Don’t agree
B. Agree

3. The most important type of ‘private property’ is:
A. Land and buildings
B. The value we create by exercising our skills and labour and the things we obtain by free exchange.

4. The estate agent’s mantra “Location, location, location” is another way of saying that “Land values are created by the community”.
A. Don’t agree
B. Agree

5. Adam Smith, David Ricardo, Henry George and Milton Friedman all said that taxing land values was preferable to taxing labour and profits. They were:
A. Closet socialists.
B. Proper free market capitalists

————————————
Results:
Mainly As – Oh dear, you are a Home-Owner-Ist.
Mainly Bs – Congratulations, you are a free market capitalist.

64 Responses to Take the test: are you a Home-Owner-Ist or a free-market capitalist? (1)

  1. October 31, 2011 at 9:13 am

    I can’t answer question 1 because I don’t know who ‘we’ are. Do you mean people personally – in which case I own a house so yes I do become relatively wealthier – or ‘we’ as in society in general – which becomes poorer as more money is locked into property.

  2. October 31, 2011 at 9:42 am

    Five Bs – but I read your blog.

  3. October 31, 2011 at 10:33 am

    None of this stuff makes any sense to me. Value is subjective. I don’t know what the burden placed on the rest of society is by me living in my flat, and I wouldn’t know how to calculate it.

    Whatever the advantages, a Georgist tax would surely give rise to a vast army of tax assessors who would feed on the rest of us, and benefit themselves.

    I remain unconvinced.

  4. October 31, 2011 at 10:38 am

    Mark, have you stopped beating your wife yet?

    • October 31, 2011 at 10:43 am

      LR, you are a full-on Home-Owner-Ist, so I’m not going to waste your time or mine discussing tax or housing with you.

      • October 31, 2011 at 10:52 am

        When in doubt, have a hissy fit, eh?

        The whole “quiz” is a logical fallacy – look up the false dichotomy. This is an excellent example of the genre.

        And “home ownerist” is something you use a pejorative for anyone who doesn’t go along with your Georgist ideology. There is no such thing – it’s just made up nonsense. My shoulders are broad, I can live with it (and ignore it). Just so long as none of it ever becomes government policy. Then I will campaign with the same vigour I campaigned against the ID cards. I will never agree to any tax that is not based upon ability to pay. One that will tax a homeowner into moving out of their home is vile beyond comprehension. If it is not based solely on liquid assets, then it is unfair. It really is as simple as that.

        • October 31, 2011 at 11:18 am

          1. LVT is a tax on consumption, not a tax on income. The idea that things you consume generate income for you is nonsensical, because you could apply the same logic to VAT “Why should I pay VAT on expenditure x, y or z because x, y or z generate no income for me?”.

          Clearly LVT is not a tax on ‘wealth’ or else there would not be a problem with ‘ability to pay.

          2. “One that will tax a homeowner into moving out of their home is vile beyond comprehension.”

          Well, the whole Homey system is geared up to ensuring that young people pay for too much in unfair taxes (income tax etc) and then have to overpay to rent somewhere too small for them, but hey.

          Clearly, it wouldn’t take five minutes to work out a system where a household’s net LVT minus CI bill is capped at a certain % of their income. Current overall tax/benefit withdrawal rates for lower earners are over 80%, so anything less than that is a bonus, and it enables them to stay in their homes (if they so wish).

          • October 31, 2011 at 11:44 am

            ““Why should I pay VAT on expenditure x, y or z because x, y or z generate no income for me?”.”

            You must have the income in your pocket before you can spend it on x, y or z. Therefore you will never be forced to pay VAT when you don’t have the ability to do so.

            All these extra taxes would not be necessary if we did away with government waste. We could just have a basic income tax and nothing else. Nobody who didn’t have an income would have to pay and those on small incomes would only be paying a small amount if everyone paid the same percentage.

            • October 31, 2011 at 11:46 am

              To paraphrase:

              “You must have the income in your pocket before you can spend it on rent or mortgage payments. Therefore you will never be forced to pay rent or mortgage payments (or indeed LVT) when you don’t have the ability to do so.”

              • October 31, 2011 at 12:20 pm

                You lost me.
                Rent / mortgage is a long term comitment. Are you suggesting that circumstances never change over time?

              • October 31, 2011 at 12:28 pm

                Bucko: “Rent / mortgage is a long term comitment.”

                Agreed. Most people manage to plan ahead quite successfuly, so if you are paying LVT instead of income tax, this makes planning easier, or at worst, no harder.

                “Are you suggesting that circumstances never change over time?”

                No, where did I say that? There are clearly some people who overestimate their future income and end up trading down because they can’t afford the mortgage.

          • October 31, 2011 at 6:20 pm

            “household’s net LVT minus CI bill is capped at a certain % of their income.”

            So for low income families and people in high LVT rated properties LVT becomes simply an income tax at a ‘certain’ rate – that makes no sense.

            • October 31, 2011 at 7:48 pm

              W42, OK, I propose full-on LVT with no exemptions and people moan about “people being forced out of their homes” (I note that nobody has played the Poor Widow Bogey yet, give it time, give it time).

              So I then suggest a realistic relieving measure, that net LVT minus CI bill (remembering that this is nil or negative for half of households) is capped at a certain % of income for low income people who are determined to stay in high-value homes and you tell me it doesn’t makes sense.

              For sure, it doesn’t make economic sense, but it makes political sense. I’m not sure what you want.

              Surely far better for only a small minority who want extras (like the current welfare system) to have to report their income than making everybody, every business etc do so?

        • Thornavis.
          October 31, 2011 at 5:11 pm

          This is one of my real problems with LVT, its proponents seem to have a messianic devotion to the idea that leads them to define non believers according to slogans and made up categories, it’s repellent and a bit scary.

          • October 31, 2011 at 5:35 pm

            It’s not winning me as a convert, that’s for sure. In fact, it’s made me highly suspicious of the whole idea.

            Likely outcome if implemented: LVT + Council Tax. ‘Up, up and awaaaayy’ … in another tax balloon.

            • October 31, 2011 at 6:24 pm

              CM, that’s the beauty of LVT. It is an ‘in your face’ tax and so to be implemented with a minimum of backlash, the govt would have to demonstrably reduce other stealth taxes by £1.50 for every £1 collected.

              I trust you realise that the Lib Cons said “We’ll hike VAT from 17.5% to 20% that’ll bring in another £13 billion for us to waste and no bugger will notice” rather than saying “Let’s just hike Council Tax by half, that’ll rake in another £13 billion”.

              Ditto, and extra £10 billion by hiking national insurance by 1% + 1%.

              It’s because VAT is a stealth tax and nobody really knows how much they are paying, but everybody knows perfectly well how much Council Tax they are paying. So with LVT, the pol’s would have little choice but to trim their budgets a bit and justify every penny they collect.

              • October 31, 2011 at 8:34 pm

                Labour were planning on raising VAT to 20%, anyway, and would have done so. They were only waiting to see how the elections were going to go.

                Consider France: LVT + their version of council tax + VAT. Why would we be any different.

                Just out of interest, Mark — and this is meant in a friendly way — has a lobbying group got to you on this subject? All this rhetoric is just a bit gung-ho.

              • October 31, 2011 at 9:03 pm

                Church, French council tax, property rates is rather lower than English council tax, as it happens, and VAT is a supremely bad tax.

                What lobbying group? I’m merrily wasting my own time taking on the largest vested interest group of all, the Home-Owner-ists, the people who don’t seem to know what they stand for apart from screwing as much money out of young people as possible.

          • October 31, 2011 at 6:20 pm

            OK, let’s stick with income tax, VAT etc. which require vast efforts to collect, have massive dead weight costs and depress the size of the economy by a third or so.

            • October 31, 2011 at 9:35 pm

              “Home-Owner-ists,….don’t seem to know what they stand for apart from screwing as much money out of young people as possible.”

              But I do know what I stand for. I stand committed to using and retaining our very modest family wealth in order to pass on as much as possible to my children.
              My house is the size it is only because it was used to house those children – otherwise it could have been a life of fast cars and posh holidays.(OK my choice).
              But now I have the house (with offending spare bedroom), the kids are gone and the aim is to pass it on to them.
              If I sell/downsize and bank the (fiat) money now it’s devalued by inflation. If I downsize and spend the money it’s gone for ever, or give it to them and they can bank it and watch it dwindle.
              If however I wait until they are struggling with their own expensive teenage children I can actually enjoy my house with the luxury of a spare room for a few years (and in the community with friends and neighbours) then I can downsize or die and pass them a lump of money just when they most need it.
              Ironic isn’t it that my kids are exactly the same young people you accuse us of ‘screwing’. I can only assume you are either very young, very naive, or have not yet been a parent of spendthrift teenagers or you would recognise the difference between ‘screwing’ and supporting.

              • November 1, 2011 at 7:37 am

                Ah yes, that’s a time-honoured classic, isn’t it?

                As it happens, my oldest children are in their 20s, if I could choose between them being able to afford a house at (say) three times their income (which was perfectly normal until very recently) or them being forced to rent, I would certainly choose the former. That means by the time I die, I will own a house and my children will own houses.

                If we do it your way, by the time I die, I will own a house and my children won’t (and neither will yours, probably).

                The Homey non-logic is like this:

                “By making houses as unaffordable as possible for our children, we are maximising the amount that we can dangle under their noses as a possible inheritance. There again, we might MEW the lot – our hard earned house is our pension, after all!”

  5. October 31, 2011 at 10:41 am

    W42, you may feel ‘relatively wealthier’, you may even be ‘relatively wealthier’, but you might still be poorer on absolute terms.

    AKH, ta.

    TT, the current tax and welfare systems require hundreds of thousands of civil servants and an equal number of people in the private sector doing the payroll, filling in the forms, submitting the claims etc. Running a Georgist LVT-CI system requires hardly any civil servants at all, seeing as HM Land Reg already holds all the info required (i.e. market transactions) on a database, and the real life assessment and collection costs of Business Rates (which is pretty close to LVT) are about 0.1% of the tax collected, the cost of all the other taxes is more like 3%.

  6. October 31, 2011 at 10:50 am

    1) C. Buyers spend more, sellers make more and non movers remain the same.
    2) C. There is no burdon placed on society by someone owning a plot of land.
    3) C. Private property is important to different owners in different ways. All of the above.
    4) A. Don’t agree.
    5) C. They were incorrect. Land values do not generate disposeable income which can be taxed. Labour and profits do.

    • October 31, 2011 at 10:53 am

      As I said above – false dichotomy ;)

      Actually with (1) the “profit” is irrelevant to anyone not stepping off the end of the chain. It doesn’t matter in real terms whether your property has increased by £1 or £100,000 if you are simply transferring it to another property. What matters is the difference between the two and you don’t actually see any of this money. If you inherit and sell the property off, for example, then, yes, it’s real money. For people living in their homes it is entirely by the by. Apparently my home is worth £100,000 more than I paid for it. I can’t spend it and as I have no plans to sell, it doesn’t exist in the real world. And, importantly, that is not why I bought it. I bought it to live in and it does that just fine.

    • October 31, 2011 at 11:22 am

      “2) C. There is no burden placed on society by someone owning a plot of land.”

      If that plot has a positive rental value (and most plots do), then by definition is must place an equal and opposite burden on ‘everybody else’.

      For example, there’s space for twenty beach huts along a beach or cliff. Once those spaces are taken up, everybody else has to make do with second row, third row etc.

      For example, people in London pay extra to live near a train station. Once people have built their houses within ten minutes’ walk, the next lot have to make do with building further out and having a fifteen minute walk, and so on.

      It is quite unlike you buying a TV or a motorbike or a fridge, that places no burden on me as you obtain it by free exchange of goods and services and in no way does this prevent others from making the same free exchange and buying an identical TV, motorbike or dridge.

      • October 31, 2011 at 11:36 am

        “Once people have built their houses within ten minutes’ walk, the next lot have to make do with building further out and having a fifteen minute walk, and so on”

        Very true. As you cannot build everyone’s house on the same plot of land, the only alternative is to not build on the land that is five minutes away from the train station and make everyone who lives in the area walk further.
        By building on that land you create a net benefit to the people who are able to purchase houses there, not a burden on the people who can’t.
        Plus one for society if you look at it from the correct angle.

        • October 31, 2011 at 11:49 am

          Again, may I paraphrase:

          “By building on that land you create a net benefit to the people who are able to purchase houses there AND a corresponding burden on the people who can’t.”

          It’s basic maths. The difference in rental value of best and next best location is exactly = to the burden placed upon the next best location, all the way down to locations with zero rental value (parts of Wales or North East with high unemployment). Mathematically and logically, the rental value of any location of all = all the incremental rent reductions which those further down the chain have to accept.

          • October 31, 2011 at 12:18 pm

            You haven’t created a burden for those who can’t buy the closer properties. At most you have created less of a benefit.

            You can only call it a burden if it is possible for everyone to live in equally beneficial housing, then you prevent some from doing so.

            Property is a benefit to the owner. The desireablility of that property decides how much of a benefit.

            • October 31, 2011 at 12:24 pm

              A reduction in a benefit is a burden, it’s basic maths and logic.

              “You can only call it a burden if it is possible for everyone to live in equally beneficial housing, then you prevent some from doing so.”

              Clearly, on a practical level, that cannot be achieved (and would be undesirable anyway, as it could only be achieved by levelling down).

              However, if there were a tax on consumption of land, (instead of taxing income and output) and the proceeds dished out as a universal benefit, then the marginal advantage of owning or occupying one site rather than another will be largely cancelled out.

              And as luck would have it, people like Longrider who earn a fair whack and live in a cheaper than average house would pay a lot, lot less than they do now (more or less nothing, in fact).

              • October 31, 2011 at 12:40 pm

                I don’t earn a fair wack. I’m currently working three nights a week on little more than minimum wage. Those changing circumstances mean that my outgoings are currently close to crippling.

  7. October 31, 2011 at 3:32 pm

    “There are clearly some people who overestimate their future income and end up trading down because they can’t afford the mortgage.”

    Or those who lose thier jobs or find some circumstance that reduces their income. Would thier LVT burdon go down as thier income did or would they still be forced to pay as in council tax?

    “then the marginal advantage of owning or occupying one site rather than another will be largely cancelled out.”

    How can you cancel out your example of people having to walk further to the train station? It matters not what tax people pay, they still have to walk the same distance so the benefit / burdon is exactly the same.

    • October 31, 2011 at 3:41 pm

      Losing job = overestimating future income. That’s what I meant.

      May I paraphrase again: “Would their LVT burden go down as their income did or would they still be forced to pay as in rent, mortgage, food, clothing etc?”

      In any event, as I said before, it’s a doddle capping the LVT minus CI received at X% of people’s earned income. So high earner in small house is outright winner, most people are a bit better off and low earners can stay living where they are living. Next question.

      “How can you cancel out your example of people having to walk further to the train station? It matters not what tax people pay, they still have to walk the same distance so the benefit/burden is exactly the same.”

      Because the people who live further from the station pay less in LVT but get the same amount in CI as those who live nearer. It’s financial compensation to sort out the inevitable fact that some areas are nicer than others (remember what I said in the quiz about “location, location, location”!)

      • October 31, 2011 at 4:24 pm

        Oh

  8. Thornavis.
    October 31, 2011 at 5:14 pm

    Can you enlighten this deluded home-ownerist about something, how is the CI worked out and who would do the working out ?

    • October 31, 2011 at 6:15 pm

      Ci is basically the entire welfare, tax credits & pensions system plus the income/NIC tax-free personal allowance and various regressive tax breaks chucked into a pot and dished out as universal benefits of about £40 a week for kids, £75 for adults and £150 for pensioners.

      • Thornavis.
        November 1, 2011 at 2:37 pm

        So you’re taking all the present taxes abolishing them and returning the revenue to the people, OK now what happens when governments decide they haven’t got enough pocket money at some point and they always do, cut budgets and reduce the CI ? In other words why should the situation after LVT be any different to before ? Can you also give me some idea of the sort of LVT my 82 year old mother would be paying from her £150 per week CI and small widow’s occupational pension ? She lives in a house which is now worth about £275,000 I reckon but it has quite a large garden by modern standards which could almost certainly be developed is that included in the LVT ? I have seen someone suggest, can’t remember where, that LVT would be about 10% of land value, so my mother would be paying around £25,000 a year at least, is that right ?

        • Thornavis.
          November 1, 2011 at 2:41 pm

          Sorry I should have said ‘present benefits’ there rather than ‘present taxes’.

        • November 1, 2011 at 2:42 pm

          To replace all other taxes*, assuming full exemption for pensioners (because I can’t be bothered having that argument any more) the rate would be about 7% of what your house is currently worth. With no exemptions for pensioners, it would be about 5.5%, obviously, in which case surely the heirs can pay it? They want the house, don’t they?

          * Except petrol, booze and fags duty, plus normal income tax on existing state sector pensions.

          • Thornavis.
            November 1, 2011 at 2:54 pm

            Right so now we’re introducing exemptions and no doubt other special interest groups will soon be demanding the same, I thought LVT was supposed to be simpler. As for the heirs paying if there is no exemption, suppose there are none or they can’t afford it, another exemption ? I’ve just thought of something else, my mother’s house was built by my father and uncles shouldn’t there be a rebate for value added ?

            • November 1, 2011 at 3:03 pm

              It’s the Homeys who are begging or exemptions, not me. If it were up to me I’d charge the same rate across the board but then I get bombarded with the Poor Widow Bogey.

              As to ‘rebate for value added’ if truth be told, the actual tax will be about 75% of the annual site-only rental value, i.e. the rental value of the house minus rental value of the bricks and mortar, but that’s a bit complicated for people to calculate, so I just say 7% of current resale price which is a fairly good guide.

              • Thornavis.
                November 1, 2011 at 3:15 pm

                It isn’t up to you though is it, if it ever comes about it will be the usual suspects introducing it and that’s where the fun will start. BTW this ‘Homey’ isn’t begging for any exemptions and there’s another of your essentialist slogans. Home owners don’t have any more of a homogenous identity or commonality of interests than any other sub group you care to give a derogatory name to.

              • November 1, 2011 at 3:19 pm

                Thorn, no unfortunately it is not up to me, I am just explaining how I would do it. You can make up your own mind whether you’d rather have 5.5% on everything and heirs pay the LVT on the houses they’d like to inherit (or where they want their parents to stay living) or whether you’d prefer 7% on everything but exemptions for pensioners. I’m not too fussed either way, to be honest.

  9. October 31, 2011 at 5:54 pm

    I still don’t get any of this.

    If a house next to the station is worth £200K, and a house 10 minutes away is worth £200K-X, how is it that the person down the road is being burdened? They are paying less for their home (and getting some exercise walking to the station).

    The person next to the station is paying more. If they have a benefit, it is because they are paying more for than benefit.

    “By building on that land you create a net benefit to the people who are able to purchase houses there AND a corresponding burden on the people who can’t.”

    How is this different from saying ‘if I make an ashtray, I am creating a benefit (use of the ashtray) and an equal and opposite burden (non-use of the ashtray)’?

    It’s double entry book-keeping run amok!

    • October 31, 2011 at 6:18 pm

      “If a house next to the station is worth £200K, and a house 10 minutes away is worth £200K-X, how is it that the person down the road is being burdened?”

      Because if the houses nearer the station weren’t there, the people who have to live further away would be able to live nearer.

      Plus, if you make an ashtray, how on earth does that burden anybody else? You make it using your ‘private property’ (skill in ashtray making) and swap it for goods or services of similar value which somebody else has made (via the medium of money) and by and large both parties benefit from the deal because of specialisation.

      • October 31, 2011 at 7:13 pm

        “Because if the houses nearer the station weren’t there, the people who have to live further away would be able to live nearer.”

        What? In caravans? The people do not have to live further away. They can pay extra and live nearer. Besides, distance is measured in feet and inches (or time in this instance), not in houses. If I live 10 minutes away from the station, and someone builds a load of houses 2 minutes away from the station, I am still 10 minutes away. The only change in the value of my property is that which is caused by the increase in supply, and there’s no automatic reason why this would have a negative effect, as the new houses may indicate the area is becoming more popular or more vibrant.

        “Plus, if you make an ashtray, how on earth does that burden anybody else?”

        Well, exactly. I just don’t see any difference between the ashtray and the house. In both cases, those who are prepared to pay the higher price, get the better home or ashtray.

        • October 31, 2011 at 7:37 pm

          “The people do not have to live further away. They can pay extra and live nearer.”

          Indeed. LVT is a free market capitalist system where people who want to live in the nicest places (the precise monetary value of which is dictated by the markets) pay the most. But instead of paying it to a local monopolist, they pay it to ‘everybody else’.

          With an ashtray, the payment for the value goes to the person who has expended effort into making it (so there would be no VAT on ashtrays and no income tax or corp tax on the ashtray maker). With LVT, the payment for the value goes towards the people who created the “location, location. location” which is such a diffuse group that we might as well consider it to ‘everybody else’.

      • October 31, 2011 at 8:25 pm

        Ok. Let’s say I have a house nowhere near a station as I don’t use the train. Then someone builds a station 10 minutes away. Does my LVT increase because of the supposed improvement which I don’t care about?

        • Thornavis.
          November 1, 2011 at 2:59 pm

          Or any other form of ‘improvement’ for that matter, a subjective concept one man’s improvement being another man’s disadvantage.

  10. October 31, 2011 at 7:24 pm

    How does this work?

    Say there are two neighbours. One paying a mortgage of £6K a year, one renting for £5K a year. They both have jobs, earn £20K each, and pay income etc taxes of £8K. What happens to each person under your system?

    • October 31, 2011 at 7:36 pm

      The LVT on each house is the same. The bloke with the mortgage pays it directly and the landlord next door pays it out of the gross rent. Or indeed he adds it to the net rent. That’s between the landlord and the tenant to sort out (nobody is forcing the landlord to be a landlord), but clearly the bloke with the mortgage and the tenant are getting the same benefits from the location.

      In a full-on LVT world, there would be no £8k income tax, of course.

      • October 31, 2011 at 8:08 pm

        So it boils down to a massive increase in property tax, offset, hopefully, by a similar decrease in other forms of tax…

        The problem is that it creates a disincentive to improve land or housing, because as soon as anyone does, the tax-collectors come round and bleed me. Isn’t this why you see all those windows bricked up in old houses?

        Surely also there will be a massive increase in nimbyism for good stuff, which will lead to an inevitable tax hike, meanwhile everyone will be taking out their inside toilets and crapping into an open sewer, in order to reduce the tax?

        • October 31, 2011 at 9:00 pm

          TT, I can only explain how I would do it, it would clearly lead to a reduction in overall tax-to-GDP ratio, and as to your comment about ‘discouraging home improvements. we’ve done that one to death, the tax is per plot per location, you can let your house crumble to a ruin or keep it in tip top order, the tax is the same, further, with no VAT or income tax, the relative cost of improvements plummets, of course.

          As a student of English history, you will no doubt be aware that it was Queen Elizabeth 1 who introduced the first national LVT (called ‘Poor Rates’), this has nothing to do with the Window Tax. Window Tax = bad tax because it DISCOURAGES improvements, perhaps that’s not perfectly clear to all and sundry?

          You are using the emotive term ‘bleed me’, so I’ll ignore that bit. The whole banking-home-ownerist-quango-EU cartel is merrily bleeding the whole country dry, especially the young, especially the hard working and the wealth creating, if you hadn’t noticed.

          Of course, if you want to keep your tax bill down, you can move somewhere cheaper, or stay where you are and lobby for higher crime rates, fewer bus services, less litter collection and for local state schools to take on the most disruptive pupils, but that seems a bit daft to me.

  11. October 31, 2011 at 7:57 pm

    How to feel thick as a brick. It looks like socialism, it feels like socialism and yet we’re assured it’s free market capitalism. Hmmmm.

    • October 31, 2011 at 8:41 pm

      Yes, James, this does seem like a socialist thing. Combine this with the current Occupy movement, which moves few of us, and, erm, we are left with … collectivism on a grand scale.

      There is nothing free-market about LVT, especially if left-leaning countries have implemented it.

      Apologies, Mark, but the longer this debate goes on, the more suspicious it seems.

      • October 31, 2011 at 8:52 pm

        Churchie, whereas taxing people’s earned income at 50% and more and having Stalinist house-rationing is not socialist at all, is it?

        • October 31, 2011 at 9:09 pm

          Yes, that’s bad enough, Mark — let’s not add to it! :shock:

  12. November 1, 2011 at 5:44 pm

    I tend to look at tax very simply: if you can’t avoid it and wouldn’t volunteer it then taxation is no better than theft, besides which any tax which is impossible to avoid is a bad tax because there’s no disincentive for the state to continually ratchet it up and spunk away the proceeds. Since everyone has to live somewhere and so would either pay it directly or pay rent at a high enough rate for the landlord to pay it for them, LVT would seem to fall into this category. And that’s even before we get into whether introducing LVT would in reality be accompanied by a reduction in other taxes by the UK or any other government. Oh, on paper it’s got some things going for it but it still strikes me most as another self granted licence for state theft, no doubt accompanied by yet more wasteful profligacy.

    I feel the first priority is to get the state collecting less – much, much less – and learning to live within its vastly reduced means. Once that’s out the way then we can worry about how it collects what it collects but I’m not yet convinced that allowing it to tax every square inch of land rather than other consumption taxes is the best option, at least not at the national level where the beast most badly needs to be starved. On the other hand it might be a good form of local taxation, and it would be interesting to see what would happen if some council areas had a local income tax, others LVT, other stuck with the council tax and so on. It’s certainly used by some states here in Oz, but I’m not sure it’s all of them and since there are exceptions (your own home here in Vic, for instance, so effectively only renters pay the bloody thing) it’s not the simple LVT model you argue for.

    • November 1, 2011 at 6:26 pm

      “if you can’t avoid it and wouldn’t volunteer it then taxation is no better than theft”

      If you can’t avoid it, that’s good because it means that honest people don’t end up paying more because of dishonest people.

      And it is entirely voluntary, we know perfectly well that people are prepared to pay more to live somewhere ‘nice’ and we also know that what makes an area ‘nice’ has absolutely nothing to do with the efforts of the land owner from time to time but the efforts made by ‘society in general’.

      As to the state wasting vast amounts of money, I completely agree. So let’s assume that we have whittled the state down to the bare minimum – what’s the least bad kind of tax?

      PS, so called taxes on ‘consumption’ like VAT or sales taxes are of course just taxes on production or gross profits – “value added tax” the clue is in the name – and are by and large the worst taxes of all unless there is a policy decision to mildly punish some forms of consumption e.g. booze, fags, gambling which are ‘a bit naughty’ but not naughty enough to be worth making illegal.

      So if you like what ‘society in general’ has to offer and you can afford it, you live somewhere nice, and if you don’t or can’t you live somewhere grotty. There’d be plenty of places in the UK even today where the location rental value is £nil – i.e. places with high unemployment etc where houses sell for tens of thousands of pounds, i.e. rather less than their rebuild cost.

      • November 1, 2011 at 7:10 pm

        No, it is certainly not entirely voluntary. Quite the reverse, it’s absolutely mandatory, it’s just that the precise amount you’re unable to avoid paying is negotiable according to where you choose to live. Sorry, but you cannot persuade me that such a tax system could be described as voluntary without some involuntary twisting of arms at the OED. When you’ve got an LVT model that allows some people who choose to live a modest lifestyle in order to remain outside of tax altogether I’ll agree it’s voluntary… but then you said no exemptions for the Poor Widow Bogey and so I assume there would also be no exemption for a hypothetically frugal and modest living Exile who objects to so much that’s done in his name that he’d like a legal opportunity to withhold any contribution.

        By the way, I said ‘avoid’ rather than ‘evade’, and of course there is nothing at all dishonest about tax avoidance. No honest person has ever paid a cent of extra tax because someone else decided to pay only the minimum they were required to by law. If their taxes went up it’s because the state decided it wasn’t getting enough, and only the state deserves any blame for that.

        … so called taxes on ‘consumption’ like VAT or sales taxes are of course just taxes on production or gross profits…

        At the risk of getting into a semantic discussion, if I burn a litre of fuel in my car that fuel is consumed, right? On the other hand if I occupy a block of land for a period of time, even my whole life, that land – ignoring the possibility of reduction or loss through natural processes – remains there for someone else to use afterwards. True, many other things are also not literally consumed and can be used again. Perhaps we should just accept that that the term consumption tax is often a misnomer but the point is we know what we’re talking about when we refer to consumption taxes. I’d certainly agree that GST as it is here is a better description of what it actually is than VAT.

        So, the question then is what’s worse? A tax on production of goods and services which are non-essential but desirable to a greater or lesser extent, or a tax on land which is also desirable to a greater or lesser extent but, and this is the big difference, is always essential since everyone has to live somewhere? Granted there are places so undesirable as to be effectively valueless, but as you point out there are reasons for this and if I were to move to one mightn’t I find little or no market for goods or services I produce? If my labour is to have value surely I need to go where it is valued by other people, and that would mean living somewhere that I’m going to have to pay some LVT on. That being so isn’t LVT also a tax on production, even if just by proxy?

        • November 1, 2011 at 8:20 pm

          As to ‘consumption’, how is occupying land not ‘consumption’? Or does a tenant or a hotel guest have the right to refuse payment on the grounds he has consumed nothing?

          For sure, everybody has to live somewhere. In the real world, if you can be bothered with the maths, about half of all households would pay net nothing in taxes every year, because their Citizen’s Income (their share of national rental income) is higher than their LVT bill (their share of national tax).

          “If my labour is to have value surely I need to go where it is valued by other people, and that would mean living somewhere that I’m going to have to pay some LVT on. That being so isn’t LVT also a tax on production, even if just by proxy?”

          Yup, exactly. But it’s a tax which would otherwise be collected privately and not money which would flow to the producers:

          Look at it from the point of view of outsiders (young people) rather than from the point of view of a landowner (old people). If you want to live somewhere with higher wages, you get clobbered thrice over:
          1. You pay tax on your income for the privilege of being allowed to cash in on the most private of private property (your skills and labour).
          2. You pay privately collected tax (rent) out of what’s left for the privilege etc.
          3. A large chunk of your income tax goes into paying for stuff which pushes up rents (i.e. you are paying via income tax for state schools, and if they are good, you pay over again for the privilege of wanting to live within the catchment area of a good one) so you are paying additional rent for the privilege of getting back what you paid for anyway.

          It is easy to imagine a completely tax-free world -rents would still flow to non-producers. Even with zero income or corporation tax, producers still have to pay rent, and by definition, these are paid to landowners not producers.

          • November 2, 2011 at 5:03 am

            As to ‘consumption’, how is occupying land not ‘consumption’?

            As I said, this is a bit semantic. Unless it’s on a cliff and falls into the sea or an occupant deliberately makes it unusable in some way land is never literally consumed in the way that a lump of coal or a quantity of fuel is. We could, and I’m guessing you would, say that ownership of land is consumption of its usage for the time you’re there, but then the same can be said of anything else which is not literally consumed. Looking round me now I paid VAT on my watch and one or two things I brought with me from the UK, GST on the computer I’m typing this on and on the chair I’m sitting on and the desk I’m sitting at. I consume the current use of them but none of these items are literally consumed and all could be transferred to someone else if I don’t want them any more, just as it would be for a parcel of land. The way I see it either all are consumption taxes or none are. That sales taxes are also effectively taxing production doesn’t seem all that relevant since LVT effectively does so too, and since a lot of a block’s initial value may come from someone making it liveable – clearing scrub, surveying, removing large rocks, levelling the site and so on – can also be a direct tax on production as well.

            In the real world, if you can be bothered with the maths, about half of all households would pay net nothing in taxes every year, because their Citizen’s Income (their share of national rental income) is higher than their LVT bill (their share of national tax).

            I hadn’t got onto Citizen’s Income but I have to say that as with all money the state ‘gives’ people I find the idea of taking money away from people in order to give it back to them a bit strange. We’ve got this down here with Gingery Dullard’s carbon tax and the promises being made that households won’t really feel the pinch of higher prices since the tax will be used to increase handouts. My first question was why not leave the bloody money where it is and not have the tax (and that’s ignoring the inevitable admin costs)? I’d ask the same of LVT where it ends up being less than or equal to this Citizen’s Income. The only reason I can think of for it is that you can put your hand on your heart and say that there are no exemptions and everyone’s being treated the same, which is attractively egalitarian but practically still means robbing Peter to just to pay Peter back again. As someone else has already said, I thought LVT was supposed to simplify, not carry on circulating money for the sake of it.

            Look at it from the point of view of outsiders [snip] 1,2,3

            Yes, understood, and fine by me as far as ditching income tax goes since I believe it’s about the most iniquitous and immoral tax there is, particularly as thresholds are so low as to include many people who could really do with hanging on to what the government forcefully takes from them. If I had to describe it in two words they’d be ‘fucking evil’. And it should go without saying that I’d agree that LVT is better than income tax. What I’m not convinced by is the argument that it’s fundamentally different from other ‘consumption’-with-quote-marks taxes, or that it’s better than a sales tax on non-essentials. I guess that depends on whether you feel the state should have a guaranteed source of tax revenue or that each individual should have the ability to lead a zero tax life if they so choose. My preference is that if the state should exist at all then it should do so under permanent threat of having its income streams cut off should it alienate all its citizens enough that they all choose zero tax living to punish it. LVT seems to exclude that option so for now I remain unconvinced that it really is the least worst tax.

  13. Mike O
    November 1, 2011 at 10:00 pm

    Mark,

    Many of these comments concern “rent” and the LVT on “each house”. Am I not correct that Henry George excluded the value of buildings when setting LVT ?

    He was writing of America over 100 years ago when “free land” was still available, calling it marginal land where the rent was zero but the land sufficient to support a man and his family at subsistence level. Rent, and therefore LVT, was only payable above subsistence level. It has nothing to do with income. How does this still apply in the calculation of 21st century rent ?

    I cannot remember LVT being used to drive people onto marginal land I do believe he wanted un-developed land above the margin to be brought into productive use by imposing LVT. Any personal gain on the rise in land value (after deducting development costs) would only be taxable on disposal of the land. Except for un-developed land, LVT should not be charged on an annual basis but only when land is sold ?

    Somewhat confused,

    Mike O.

    • November 1, 2011 at 10:32 pm

      Mike O, I finally got round to reading his book two weeks ago, what he said was to tax the annual site only rental value, payable in cash each year, and for this to be dished out as a Citizen’s Income. He did not propose something as clunky as capital gains tax payable only when land is sold.

      And his idea was certainly not to drive people onto marginal land, it was about encouraging efficient use of urban land*. All of his ideas apply just as much today as they did then or as they did in the 18th century.

      * Interestingly, he devoted a whole chapter to explaining why land price speculation i.e. house or land price bubbles i.e. credit bubbles inevitably lead to recessions, unemployment and general nastiness, and it seems that he was most concerned about using LVT to prevent these, the whole ‘natural justice’ stuff (which was Adam Smith’s argument) was secondary.

  14. Mike O
    November 1, 2011 at 11:43 pm

    It’s many years since I read “Progess and Poverty” and although I do not recall every detail, I was impressed with his theory. However I still do not understand how it would be applied in the 21st Century (apart from a tax on undeveloped land or property held for speculation – yes, tax land banks).

    If the rent or value of a residential property increases year-on-year is this a specultive increase or a reflection of the increase in earning capacity of the occupier. In either case to remain in the property an increase of income is required. In this instance, LVT is just the same as income tax (except, perhaps, paid by parents and not the working children).

    Although Henry James recognised the need for state functions such as law and order, defence, health, etc he did not anticipate the wide range of public services available today. He would expect most to be provided on a chargeable basis by the private sector. Is LVT to cover the cost of all state provided services ?

    As we are now discovering, state services are not entirely funded by taxation, but substabtially by government debt. How high will LVT need to be to repay this debt ?

    We have many finance problems in the UK but I cannot see how LVT will solve any. Unfortunately Henry was not elected mayor of New York so we will never know whether he was right.

    Mike O.

United Kingdom Time

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