Custard Pie

This the second on LVT and related issues by Mark Wadsworth, the first being Houses of the Holy. My own interim comment on land, to which Mark responded, among others, was called Land.

OK, let’s go back to the drawing board and try and agree a few principles for the best, or at least the least-bad, kind of tax. Such a tax would encourage – or at least not discourage – effort and enterprise and investment in income producing assets, and it would prevent both poverty and privilege from becoming entrenched. If the tax fails these tests, it can be discarded.

1. It would be a tax on ‘consumption’ rather than on ‘income’. That rules out:

a) Income tax and corporation tax, obviously;

b) National Insurance, which is a super-tax on employment income at worst and a compulsory savings scheme at best;

c) Value Added Tax, which is a tax on production, and not a tax on ‘consumption’ in any meaningful sense.

So we have to look for something which has value to people, but which is not actually ‘produced’ by any identifiable individual private enterprise.

2. We can also rule out ‘transaction taxes’ like capital gains tax or stamp duty, as these discourage efficient allocation of resources and you can avoid these by simply hanging on to something you would otherwise sell. Import duties are a barrier to free trade and make us all poorer, and again, VAT is just like a colossal import duty that treats every place of business as a foreign territory.

3. We can rule out taxes on ‘wealth’ generally (such as Inheritance Tax) because they are usually disguised income tax, as they are a small percent charge on a value that is directly proportional to the income generated (like shares or bank deposits); they discourage saving; and there is an enormous amount of hassle with valuations, possibility for evasion or taking assets abroad.

4. We have to bear in mind ‘ability to pay’ so it has to be something from which e.g. pensioners can be exempted; and it would relate to something that is reasonably well correlated with income (a ‘normal’ good) and/or it must relate to a ‘luxury’ rather than a ‘necessity’, which can be achieved by introducing a ‘personal allowance’ or individual credits to offset against the liability so that no household is taxed on ‘necessities’. The tax would be broad based and nigh universal, so that everybody (unless exempted for political reasons) pays at least something.

5. Remember that there is an advantage to taxing scarce resources or those whose quantity is fixed, because price rationing is the best form of rationing (so increasing the cost to the user encourages efficient allocation of resources). Although as a general rule ‘if you tax something you get less of it’, if something is in fixed supply, that is not a worry.

6. User charges are better than taxes, i.e. where the payment is in return for specific benefits received, and even better, if the payment compensates other people on whom the state places restrictions on the taxpayer’s behalf. Where our economic system demands that the state protect certain quasi-monopolies or local monopolies (or even infinitely small shares in a larger monopoly), it is fair game to levy taxes on it.

7. The tax would be simple to assess and collect with clear penalties for non-payment; and would be impossible to evade so that the dishonest cannot steal a march on the honest, so it must relate to something that does not need to be separately declared each year and something, which cannot be taken abroad or hidden from the taxman.

8. Assuming we want to replace most existing ‘bad’ taxes (see 1, 2 and 3 above, I’ll exclude fuel, tobacco and alcohol duties from this debate) it must be possible for this single tax to raise similar amounts in revenue, but there would have to be as few winners and losers as possible from the transition, and it would have to be simple for the ‘losers’ to rearrange their affairs to bring their liability down to something they can afford.

9. The tax would be collected with monthly payments and not deducted from wages or embedded in the price of goods, so that people know exactly how much they are paying. Politicians find it harder to increase in-your-face taxes than stealth taxes, so people would also have reasonable certainty as to how much they will pay in future. By the same token, future revenues would be stable and predictable and ‘recession proof’. It would be even better if the tax itself helped to iron out or dampen booms and busts in the economic cycle, which are largely caused by credit bubbles.

10. The tax would have no dead weight costs (i.e. would not have a Laffer Curve or discourage effort and enterprise) and would not discourage investment in the UK economy. It would also ‘go with the grain of the markets’ and prevent privatised tax collection.

11. The tax would not force people to contribute to the cost of government activities that add no value; it would encourage the government to focus spending on things that add value; and there would be automatic compensation for people who lose out as the result of those government decisions that benefit the majority but harm a minority.

12. The tax would have been tried and tested and shown to work – not just in the UK throughout its long history but also in other countries, now and in the past. Finally, just to go on the safe side, let’s check what the small government free market libertarians from Adam Smith and David Ricardo – not to mention Edmund Burke, JS Mill, Tom Paine, Winston Churchill in his younger days – all the way up to Milton Friedman said.

I have worked as tax advisor for twenty years and have been thinking about this long and hard for five years. I think that there is a tax which ‘ticks all these boxes’, but before we argue about what that tax might or might not be, I’d like to know – are these the right principles? Have I missed something important?

33 comments for “Custard Pie

  1. October 1, 2010 at 10:09

    Just a couple of points.

    You start with the statement : “and it would prevent both poverty and privilege from becoming entrenched”, this is your first problem. Its not the job of the government or the tax department to mould society into the neo-liberal Shangri-la that you dream of. You need to dump this sort baggage if you are going to get anywhere.

    I would argue that current tax regimes have failed primarily because they have rewarded speculation over genuine labour and entrepreneurial activity. You need to focus on more down to earth goals like this.

    Secondly you argue that : “Import duties are a barrier to free trade and make us all poorer”. I disagree with this statement but it is common for western governments to misunderstand what trade tariffs should be used for. The crux of the current crisis is that the Chinese government manipulated its currency, subsidised its exports and maintained slave-like labour conditions causing hot investment and labour flows from west to east. Europe and America should have instigated punitive tariffs to stem these flows and restore a healthy trade balance immediately. This would have saved our economy and encouraged China to develop its local economy. In the end we will both be poor.

  2. October 1, 2010 at 10:11

    Thanks for extra formatting and links.

  3. dearieme
    October 1, 2010 at 11:58
  4. October 1, 2010 at 11:58

    Wolfie: “I would argue that current tax regimes have failed primarily because they have rewarded speculation over genuine labour and entrepreneurial activity. You need to focus on more down to earth goals like this.”

    That is exactly what I mean! Taxes on real effort and enterprise are far too high (and ideally they would be zero); but what have people been speculating in over the last ten years? What are the taxes on that? Very low, I would say.

  5. October 1, 2010 at 12:01

    Wolfie: “It’s not the job of the government or the tax department to mould society into the neo-liberal Shangri-la that you dream of. You need to dump this sort baggage if you are going to get anywhere.”

    No it’s not. But neither is it the job of government to have a system which entrenches both poverty and privilege – and scrapping all taxes entirely would in fact do both.

    And I don’t mean ‘poverty and privilege’ in any dramatic way – just think about a ‘hard working thirty year old’ who is trying to save up for a deposit to buy an overpriced house, and a hard working fifty year old on similar wages who bought his house cheap a decade or two ago and has more or less paid off the mortgage. Even though they are putting in the same effort and creating the same wealth, the current system has ensured that the former will have much lower disposable income over his lifetime than the latter.

  6. October 1, 2010 at 12:04

    As to China, we agree that their ‘success’ is based on slave labour. It’s the slave labourers who are the real losers in this – not us Westerners. Do you think that tariffs or trade barriers (see Cuba, Burma etc) would have helped those slaves or ground them even further into the dirt?

  7. October 1, 2010 at 12:08

    Tax is what the government needs to force the citizens to pay to fund its activities.

    You are starting from the assumption that we need a big list of activities and thus a new tax to cover all the different ways government gets its greedy claws into our cash.

    For a start the government should reduce its activities to the bear minimum which I’m sure we would argue about but most would agree to at least defence for the country and policing. Add in your own choices.

    That would mean we could pay a max of 2% on our income, set a starting base of 25K. The systems are already set up so no changes there except to data and these already change every few minutes anyway at the goverments whim.

    We can get rid of all these useless goverment tax people and most of the accountants which can only be a good thing for a start.

    This hits most of your tests.
    1) Not this one of course.
    2) Yes.
    3) Yes.
    4) Yes.
    5) Scarce resources are already covered by the market. They cost more. Try buying a pound of gold and a pound of rain water.
    6) User charges are taxes by another name. That is why there are so many hidden taxes in this mickey mouse country.
    7) This is simple. At 2% it is not worth the time and effort for most people to evade taxes. Although via PAYE most people don’t have the capability to avoid tax and those that can will always be able to avoid it via company payments. The costs of enforcement for those that can will outweigh the income. So we do minimal enforcement, maximum fines and randomly audit those that have the opportunity. But remember on income only there are no new ways to evade taxes. Currently there are a million ways to evade tax because we tax so much. Currently we can’t keep up with the evaders. Hell, some even do it without knowing due to the overly complicated tax system.
    8) No need for ‘sin taxes’ at all. I thought you wanted only one tax?
    9) We can ensure that the single tax is itemised on everyones wages slip. Tax can easily be seen.
    10) Everything has a Laffer curve. I would suspect that 2% through PAYE would see 99.99 compliance though and if it was 1% or 0.5% then even better returns would be realised.
    11) ROFL. That is most of the current government actions. But I feel 2% would meet your criteria here.
    12) Yes.

    The problem we have is that we are not working from a blank sheet nor will we ever be able to start from there. So most theorists start from there when it is not practical. The only way we will get LVT in the UK is as another tax added to the list of those we already have. Even if a tax is removed to enable LVT it would soon be added back by our theaving and greedy government.

  8. October 1, 2010 at 12:18

    Lord T: “The only way we will get LVT in the UK is as another tax added to the list of those we already have. Even if a tax is removed to enable LVT it would soon be added back by our theaving and greedy government.”

    To which I could reply: “If we rolled back government and had flat income tax of 2%, then in next to no time the government would have gradually hiked it up to 50% again”.

    “5) Scarce resources are already covered by the market. They cost more. Try buying a pound of gold and a pound of rain water.”

    Try land with planning permission – that’s a scarce resource that is deliberately rationed by the government and which has its price deliberately inflated by the government on behalf of vested interests (not quite clear to me who). And the overall effect of that is a government-sponsored transfer of wealth from some people (the wealth creators) to others (self same vested interests – bankers, politicians and landowners, mainly), which entrenches both poverty and privilege. So how is this system anything other than ‘privatised tax collection’??

  9. October 1, 2010 at 12:56

    Lord T, your 2% income tax/£25k personal allowance would not be enough to cover cost of policing, prisons, immigration control and defence, try 10% or something.

    Anyway, how much the government should be raising, spending or distributing is a separate topic (see 8), so let’s go with a flat 2% income tax and a £25k personal allowance just as a thought experiment.

    So the guy earning £100,000 at No. 17 pays £1,500 a year and the guy at No. 19 earns £20,000 so pays nothing, even though they both get the same benefit from society in general (they live next door).

    Why is that better or fairer or more conducive to efficient allocation of scarce resources or effort and enterprise than a flat tax of £2.50 per square yard of developed land so that they both pay £750 a year, regardless of income?

  10. October 1, 2010 at 12:58

    Mark,

    Well with my much reduced government. Your land is your land to do what you want. Land with or without planning permission is just land.

    And I don’t understand.

    So how is this system anything other than ‘privatised tax collection’??

    Unless of course you are talking about councils being the privatised tax collectors. In my reduced government they are gone. All I want is my bins collected and Plod. The bins would quickly be replaced by people coming round and offering to pick it up and without the £60 per ton EU tax we would save a fortune. Plod is paid from my flat rate tax and with no remit to expand government we would have no reason to increase taxes.

  11. October 1, 2010 at 13:07

    When have I ever had anything good to say about the EU or the EU-imposed ‘landfill tax’?

    Refuse collection is surprisingly cheap – the state spends about £100 per household per year on it. Feel free to put a consortium together to bid for the council’s contract next time it comes up if you think you can do it cheaper.

    BTW, if you made refuse collection entirely voluntary, then you might be a good citizen and arrange for this to be done, but what if your neighbours jsut chuck their stuff in the road or into your bin?

    Economics point: “Land with or without planning permission is just land.” No it is not! The planning permission is worth a hundred times as much as the land (if we compare urban land with agricultural land). I’m an economist, not a geologist.

    For the second time, how much the government should raise, what it should do and how much it should redistribute are entirely separate topics. I am thoroughly in favour of a teeny-tiny government, for example. That is quite different from wanting to have a political-economic system that entrenches both poverty and privilege etc.

    I’d find it helpful if you could answer my question:

    “Why is [a 2% flat income tax with a £25k personal allowance] better or fairer or more conducive to efficient allocation of scarce resources or effort and enterprise than a flat tax of £2.50 per square yard of developed land so that they both pay £750 a year, regardless of income?”

  12. October 1, 2010 at 13:11

    OK Mark – you don’t name the tax but rather the principles behind it but the other guys have assumed which tax you mean because you’re a known known, old son.

    I come to the table as a learner here, with just one prejudice – I’m against the dispossession of those who’ve earned their property and that is for both political and psychological reasons.

    The political reasons are clustered around the principle of dispossessing someone else and that is a Pandora’s Box. Once we start down that road, then there is very little chance to control or stem it. The principle is enshrined.

    User pays – fair and it is only a tax insofar as it is levied by the merchant offering the service.

    I feel you come close to the danger point with:

    [J]ust think about a ‘hard working thirty year old’ who is trying to save up for a deposit to buy an overpriced house, and a hard working fifty year old on similar wages who bought his house cheap a decade or two ago and has more or less paid off the mortgage. Even though they are putting in the same effort and creating the same wealth, the current system has ensured that the former will have much lower disposable income over his lifetime than the latter.

    This is the politics of envy which I’m so much against. I’m not saying that you yourself are envious – let’s leave personalities out of it – but this view is so prevalent and is so Generation X. Being a late Boomer with touches of Gen X, I don’t accept that envy for what another man gained under an earlier system is an acceptable basis for policy.

    Soon that gets into retrospectivity.

    Analogy. I went to Debenhams to buy a jacket which was £90. Two days later, they dropped the price to £45 in a sale. I took the jacket back and said that that had been dishonest and that they had known very well they were dropping the price in the sale.

    Now, I might have been right or I might have been wrong in my argument but they dropped the price and allowed me to buy another item or items gratis, up to that price. So they clearly accepted the principle.

    In fact, I’d say I was in the wrong – they had no obligation to discount that jacket because we were talking two different times, two different situations.

    A man who takes out a mortgage [and let’s leave that whole argument for now – about price hiking through credit and so on], then pays it out, has fulfilled all the conditions for title that he could reasonably be expected to fulfil and now he needs protection from future changes to the rules.

    To dispossess him of his land because of a future agreement, retrospectively applied, is plain wrong. He gained by buying twenty years ago and good luck to him. Good luck to all our grandparents and parents.

    We’re not in that situation now and need new rules – that’s fair. But leave the people who did the right thing [as far as they knew] alone.

    Transition

    The problem is in the transition phase because governments are greedy and never willingly give up taxing powers and so I fear Lord T is right here. Now, in principle, LVT might tick boxes and I quite like it, now it’s been clearly explained – as long as it’s the ONLY tax.

    There is obvious tweaking it would need but let’s leave that aside for now. The issue, of course, is in the transition phase because no one has the political will to say to the Treasury: “You’re getting 4.6 billion less this year because we’re cutting out all extraneous taxes, including VAT.”

    No leader is going to do that and apart from the obvious reasons, there is also that of the EU, which people refuse to accept is running us and bleeding us dry. They want the current tax regime.

    So there is a problem of practicality here. The very messiah who will lead us out of the EU might be the same one who gives us LVT. But until he/she arises, then LVT will just be another tax they’ll ostensibly replace income tax and VAT with but leave all the other stealth taxes in there.

  13. October 1, 2010 at 13:22

    “This is the politics of envy which I’m so much against.”

    ? Did I not just rule out income tax, capital gains tax, Stamp Duty and Inheritance Tax?

    And yes, people who have bought a house in the past five or ten years were mugged by the system. They were robbed. What am I meant to do about that?

    If we could go back in time and funded the Napoleonic Wars with increases in LVT (which raised the bulk of govt revenues at the time) and not not income tax; if we hadn’t scrapped Schedule A tax and replaced Dom Rates with Council Tax, then these people who have been mugged wouldn’t have been mugged, by definition. Anybody who bought more than ten years ago is quids in, whichever way we look at it.

    But those older people, let’s say over forty, are still going to be mugged in future with income tax, VAT, NIC, corporation tax, Inheritance Tax yadda yadda. It is not rocket science to design an LVT system (massive cuts in govt spending notwithstanding, separate topic) which means that they pay the same amount of tax, or indeed less, in future than they otherwise would have done.

    So to argue that we have to stick with the current system is to argue that future generations (i.e. in a literal sense, your children or granchildren, depending on how old you are) have to be mugged as well to compensate the people aged thirty to forty who clearly have been mugged. That’s what I call entrenching poverty and privilege.

    PS, as a late baby boomer, I did handsomely out of the property price bubble (all Land Value Taxers always knew that the bubble would pop and that we would have a recession some time between 2005 and 2010). And I am well paid for being a tax advisor, so the more complicated the system the better AFAIAC. I’m not motivated by envy at all, neither would I (personally) benefit from a shift to LVT.

    I’m an economist, not a politician.

  14. October 1, 2010 at 13:42

    I’m not motivated by envy at all, neither would I (personally) benefit from a shift to LVT.

    That’s why I was at pains not to personalize the issue because you’ve stated that before. There is the politics of envy out there though. I don’t think we’re at odds in principle – just coming at it from a different direction.

    So to argue that we have to stick with the current system is to argue that future generations (i.e. in a literal sense, your children or grandchildren, depending on how old you are) have to be mugged as well to compensate the people aged thirty to forty who clearly have been mugged …

    … is not a reason to mug previous generations out of principle, just to compensate for those in their 30s being mugged today.

    Would the LVT replace council tax and/or water rates?

  15. October 1, 2010 at 13:44

    “Would the LVT replace council tax and/or water rates?”

    Oh crikey, yes of course, they’d be the first taxes to go (i.e. all taxes that relate to land and buildings).

  16. dearieme
    October 1, 2010 at 14:17

    Water rates should be replaced by charging for use – metered in the dry parts of the country, estimated in the wet.

  17. October 1, 2010 at 14:17

    “… is not a reason to mug previous generations out of principle, just to compensate for those in their 30s being mugged today”

    Can you explain what is more akin to “mugging”? Older generations mugging subsequent generations via income tax and high house prices, or everybody just laying down their arms and paying LVT?

    Anyways, older generations will not be worse off under LVT (assuming exemption for pensioners) unless they happen to occupy a very large or expensive house relative to their income. But it’s up to everybody to decide how much of their household budget to spend on cars, housing, holidays, private education, savings etc.

    Nobody is forced to live in a very big house – and as I pointed out at 4., it is better to tax luxuries than necessities, I though that went without saying. How is having a particularly large or expensive house not a ‘luxury’?

  18. dearieme
    October 1, 2010 at 14:25

    “Have I missed something important?”
    You’ve missed the subtle comments-by-youtube-song-titles.

  19. October 1, 2010 at 14:26

    Shall go back and look, Dearieme.

  20. Andrew Duffin
    October 1, 2010 at 15:10

    James, please don’t become a monomaniac obsessive like, erm, someone I could name but won’t.

    It really would be too tedious.

    Let’s have more about boats and women!

  21. October 1, 2010 at 16:26

    Mark,

    My comment on land and land with planning permission was because imo land you own should not need planning permission to be developed.

    There are many ‘fair’ ways to collect tax. But as a society we see no problem with taxing one more than another if that person earnsmore. Where our sense of fair play gets lost is when we are funding that persons lifestyle with our extorted money.

    I’ll take your word for it that 2% wouldn’t fund the base systems I need, I don’t want immigration btw, just Plod, prisons and very black hole of Calcutta prisons if you don’tmind and defence. Obviously the more you add the more it costs. Even 10% flat rate income tax would be a relieve for every tax payer. So I’ll happily say use that for calculation purposes even if I suspect it would be much less. It is just for illustration.

    “Would the LVT replace council tax and/or water rates?”

    My tax wouldn’t. No need for council tax, Plod can be paid centrally, and water rates would be provided by private companies just like everywhere else on earth.

  22. October 1, 2010 at 16:28

    Lord T, I really would be interested in a straight answer to my simple question:

    ““Why is [a 2% flat income tax with a £25k personal allowance] better or fairer or more conducive to efficient allocation of scarce resources or effort and enterprise than a flat tax of £2.50 per square yard of developed land so that they both pay £750 a year, regardless of income?”

  23. October 1, 2010 at 21:17

    Mark,

    IMO it is paid by those who are earning enough to pay it. Rather than those who own something and may not have the means. You then force them to sell somewhere they may have lived all their lives.

    No tax is going to be fair to all. My tax is only paid by those that are earning and as it is a reasonable percentage imo it is ‘fairer’

  24. October 1, 2010 at 22:07

    Lord T, that’s a fair answer.

    Now let’s imagine a pensioner at one of your public meetings: “Lord T. You say you are going to restrict state spending to just police, jails and defence. Does that mean you are going to cancel the State Pension? My wife and I have worked hard and contributed all our lives and if you cancel the State Pension we’ll be forced to sell the house we wanted to spend the rest of our days in and live on the streets. Do you have any words of comfort for us?”

    And then the guy who earns £100,000 a year pipes up:
    “Lord T, do you mean that I have to bear the whole cost of police and defence, while that lazy sack who lives next door pays nothing? Why should I subsidise him with £750 a year of my own hard-earned money?”

    And then some youngster who is priced out of homeownership chimes in: “Lord T. I work hard and earn £40,000 a year, but because of your economic system, house prices have gone through the roof. I’m paying my landlord full whack in rent, as well as £300 in income tax, all to subsidise the lazy blighter who lives in a nice house that is now worth £500,000 but pays nothing in income tax because he got on the ladder just before you became PM. Do you think it’s right that hard working young people like me should not only pay full whack rent but have nothing to show for it?”

    NIMBY: “Lord T. While I welcome your moves to relieve me of any tax burden, while simultaneously doubling the price I can sell my house for, did I hear you correctly when you said you were going to abandon planning restrictions? Britain is a crowded island, you know, there are hardly any fields left, and the youngster who spoke before me now clearly doesn’t realise that we have issues with food security.”

  25. October 2, 2010 at 09:35

    Mark,

    As I said before we are not starting from a clean slate nor do I think we will achieve a Libertarian utopia and totally remove the state from our lives. So to try and answer your questions.

    Pensioner: We have built up a large number of people on the state payroll that do not have any pension provisions. They have lived off the taxpayers for years. We cannot just let them starve so we would have to pay them a pension to live on. This would comprise a house in a council estate unless they have their own and a weekly payment for food and utilities. No choice really but it would be only for those above 45 or something and reducing as they die. Its a problem we have been left with by 60 years of socialist policies.

    £100K: I doubt he would be complaining at such a tax reduction. Most people at that level have a bit of common sense and realise that there has to be a solution and with every solution there are winners and losers.

    Youngster: What is difference between now and then?Why would houses be so much more expensive. Removing planning permission should reduce house prices as people can build what is needed without government interference. This is always the cry of the young as they have not earned enough money. I would think that with LVT the cost of houses would go up as all the taxes would be paid by the landowner. Which will give a better return a house with a youngster in it or a factory?

    NIMBY: I don’t believe it will double his house but what if it does. The replacement will be double the cost as well. There are still plenty of fields and we actually pay farmers not to produce food in them so there is only an artificial shortage created by governments. Every system will adjust until it reaches equilibrium. So will this one.

    As I said before there is no single solution to our woes. The first time we gave someone money that they have not earned we had to steal that from someone else. Now we are well down the line and that society has adapted to realise that they don’t have to work. It is unsustainable.

    So what do you say to the people who ask:

    Pensioner: I’ve paid tax all my life to fund everything and retired a few years ago and now I’m again being hit by the tax burden of the state again so they can leech off my savings. Why am I paying again when I just hit the time I have paid for all my life.

    100K: I live in a shed atm thanks for reducing my tax bill. I’m saving up to retire on a yacht. Love your new LVT.

    Youngster: I can’t afford a house because as well as the landlord expecting his mortgage paid I have to pay the LVT as well.

    NIMBY: I’ll find sometime to whinge about. I always do. The LVT is too cheap and the bad ones are moving inor it is too expensive and only the drug lords, footballers and useless politicians are moving in.

  26. October 2, 2010 at 11:27

    Lord T “So what do you say to people who ask…”

    Pensioner – main residences of pensioners who own no other residential land and buildings will be exempt.

    Mr 100k – my pleasure, glad you appreciate it!

    Youngster – your rent hasn’t gone up, because you were already paying LVT before the change – only before the change, your landlord was pocketing the LVT and now it’s being collected on behalf of society in general. even better, you are now on a level playing field with other people on your level of income, so all things being equal, houses will become more affordable.

  27. Patrick Harris
    October 2, 2010 at 20:12

    Not one distinction made between home owner and house owner.
    Rising house prices are a result of supply and demand.
    Those that bought their home as a place to live and raise their children will not profit one penny. it is their home from which they will depart in a box carried by, if they can be found, six good mates or relations.
    It is presumptuous of people to conflate home owning with great wealth, on the contrary, being a home owner can be the cause of no wealth.
    Distinct from the house owner who hopes to make a profit on his/her purchase whilst still this side of styx.

  28. October 2, 2010 at 20:53

    Mark,

    LOL. Good answers. Should have thought that way myself. Although the last part on owner collecting and pocketing LVT is a bit OTT. Nobody collects it.

    In the end though it comes down to the fact we don’t have a blank sheet, we have a country destroyed by socialist experiments and it will cost plenty to get us out. And nobody in power cares what the people say. Hell, the unborn are not even considered when they are expected to pay. I don’t believe in the death penalty but the last labour government deserves a slow death for what they have done to us.

    As far as LVT. I still think it is yet another unfair tax, one we don’t want to add to our overburdened taxpayers as it simply adds another set of people who can be fleeced for money. It, as most things, come down to a matter of opinion. Also most things will work with different winners and losers for each. I have mine and you have yours on LVT.

  29. October 2, 2010 at 22:26

    Patrick, I did a checklist of 12 bullet points and feel free to quibble with any of those; or to point out that my suggestion (LVT) doesn’t meet one or other of those tests, but why distinguish between home owner and house owner? Are they not both using the same amount of a scarce resource? Why distinguish between home owner and tenant? Are they not both using the same amount of a scarce resource, etc.

    Who’s conflating ‘home owning’ with ‘great wealth’? Not me, when or where did I ever say that? I simply do not understand your point.

    Lord T: “Although the last part on owner collecting and pocketing LVT is a bit OTT. Nobody collects it.”

    Of course home owners collect it, albeit in a non-cash form or in terms of a notional cost saving (i.e. their cash outgoings are less then for a recent purchaser or a tenant). I’m an economist, cash income = notional income = cost saving.

    “As far as LVT. I still think it is yet another unfair tax”

    What does wailing about ‘fairness’ have to do with it? I can imagine about half the country would see your 2% income tax as wildly unfair, because pensioners, welfare claimants would starve, public sector workers would see fall in income etc etc.

    It’s difficult to have a sensible debate if you keep insisting that my preferred tax (LVT) would be an additional tax.

    Can we please try to compare like-with-like?

    You say that your preferred tax is 2% income tax – if I were to accuse you of wanting to increase income tax by 2%, you would tell me I had missed the point, that it was not an additional tax, it would be to the exclusion of all others.

    And so on.

  30. October 3, 2010 at 13:25

    Mark,

    What I meant by nobody collects LVT is that as LVT is not a tax nobody is collecting it. If you replaced income tax with LVT. The owner would simply add any additional costs, and there would be, onto the rent for the property. Plus probably a bit more for rounding errors.

    LVT is another unfair tax. There are no fair taxes. My tax is no different. Someone loses and someone wins with every one. Your point of view depends on if you think you will be a winner or a loser. I may even gain under LVT but I still prefer a straight income tax.

    I’m saying your tax would be an additional tax because that is how it would work out in reality. No government will ever replace a tax with another. It’s all additional taxes. They think they should have all the money and spread it about as they see fit.

    IMO. To make a flat rate tax using PAYE and replacing all other taxes at whatever rate would meet most of your criteria. To replace all taxes with LVT would gain no benefits and cause uproar that would make the poll tax riots look like a kids squabble.

    I think we are starting to go round in circles now. I don’t see any benefit from LVT and IMO it would cause simply one set on injustices to be replaced by another. Its all just down to a point of view. So to take it down to a simpler term. What is your favourite colour? Mine is the best.

  31. October 3, 2010 at 14:19

    Lord T: “LVT is not a tax nobody is collecting it.”

    That depends how you define ‘tax’.

    I would submit that ‘tax’ is ‘money that changes hands because of the action of the government’. Without the state, there can be no land ‘ownership’; so without the state there can be no ‘rent’ and no ‘mortgage repayments’. So these are privately collected taxes.

    It is quite different with most other things. The free exchange of most goods and services would happen with or without ‘the state’ so the money a supplier receives is not ‘tax’ and for the state, which plays little or no part in the creation of those goods and services, to muscle in and help itself is clearly ‘taxation’.

    At the extreme end, painters and decorators, drug dealers, prostitutes work quite happily completely outside and without the protection of the state and pay no income tax. But the price they charge is inflated by the fact that the government restricts supply, so to some extent they are ‘privatised tax collectors’

    Similarly, some towns restrict the number of taxi driver permits, thus restricting supply, thus pushing up prices the permit holders can charge. Therefore the extra bit that they can charge is also a sort of ‘privately collected tax’.

    Land ‘ownership’ is merely privatised tax collection. People are happy to pay for the value inherent in exclusive possession of land, but they are paying the wrong people – they are paying the state-protected monopoly owner, and not the people who created that value, i.e. society in general.

    “I don’t see any benefit from LVT.”

    Go through my checklist of 12 points and tell me if there are any boxes is does not tick. Income tax – even at 2% – is a tax on personal effort; LVT is a tax on consumption of services. It keeps property prices low and stable. it has no dead weight costs. It does not discourage investment or effort or enterprise. It is not ‘stealthy’. It is not even inherently redistributive.

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