Tuesday 20 September 2011

Reader's Letter Of The Day

On page 46 of today's Evening Standard (the original letter was edited slightly, here it is as published):

The more complicated the tax system is, the better for tax accountants like me, but no-one else benefits. There are large deadweight costs involved with the top rate of tax in terms of the numbers trying to avoid it; plus the important principle to outweigh any of those mentioned by Sam Leith (September 19), of not punishing people for working hard and being honest.

A mansion tax - or a land value tax, for all practical purposes very similar - would be far fairer in that property over a certain value is a luxury and council tax as currently levied is inconsequential for properties over £300,000-£400,000. If there are concerns about the impact on widows living in properties that have risen hugely in value, exemptions could be made for anyone over the over-65s, as currently happens with rateable value in Northern Ireland.

The ideal would be to replace inheritance tax, stamp duty, council tax, the TV licence fee and Insurance Premium Tax with a one per cent tax on the value of property: each of these current taxes weighs either disproportionately on the poor or on the rich.

Mark Wadsworth.

21 comments:

Anonymous said...

No exemptions. Just allow them to pre-sell it as happens in france.

chefdave said...

That bloke knows what he's on about.

Deniro said...

Mark if you think the price of property is high relative to everything else at the moment (the quantification of the size of a price is always relative to the price of other things) then inceasing the cost of owning a property relative to everything else by 2 1/2 in your version of lvt is not inline with the aims of the idea that you have stated.

Mark Wadsworth said...

CD, he does :-)

Den, fact: low taxation and heavy subsidies to land ownership concentrate ownership over time and reduce the number of owner-occupiers; shifting taxes from wages and profits to land ownership does the reverse. I could explain why or I could give you examples, your choice.

In any event, the cost would be less than 2 1/2, because all in all, we'd expect selling prices to go down a bit, so the 5% would be on a smaller figure, and you can knock off council tax, I think "twice as much" is closer to the mark.

And people's disposable income (or at least, for the working population) would slightly more than double so it's all perfectly affordable.

I'm not sure if you actually understand what "my aims" are, which is to shift taxation as much as possible from wages and profits to land ownership. That's the beginning, middle and end of it.

Mark Wadsworth said...

Den, seriously, I'm always on the lookout for raw material for my "Killer Arguments Against LVT, Not" series, if you think you can come up with something a bit original (not the tired old crap like poor widows in mansions, or supposed difficulty valuing homes, or claiming that land values = earned wealth) then by all means do so

If you genuinely believe that LVT would reduce the number of owner-occupiers, then please explain why, give me examples of countries which introduced LVT where the o-o rate declined and I will demolish your argument with glee.

Deniro said...

Is there no objective outcome you are aiming for. I thought from your posts that there was an aim to taxing land ownership. Tax unused grassland yes that fits in with what you have been saying about land use. But taxing residential property or other land that is being used in a useful way goes against a pro-utilisation concept. But of course if you tax according to use, or non-use, then you get into the value judgement problem.

Mark Wadsworth said...

Den, there are lots of aims to such a tax shift:

1. No dead weight costs, so economy does better, less unemployment

2. Low and stable house prices, so no credit bubbles and boom-busts

3. More efficient use of existing developed land and buildings (let's get people into all the vacant, derelict and second homes before we build new ones; let's persuade the widowed pensioner shivering in a three-bed semi to swap places with the young couple squidged into a one-bed flat

4. It's an in-your-face tax, so overall tax burden will be lower

5. More owner-occupation

6. No tax evasion because it's a simple system

7. Encourages government to focus spending on stuff that adds value, so more bobbies in the beat and fewer five-a-day advisors

I'll stop there, the list is more or less endless and it all overlaps.

Anonymous said...

"3. More efficient use of existing developed land and buildings (let's get people into all the vacant, derelict and second homes before we build new ones; let's persuade the widowed pensioner shivering in a three-bed semi to swap places with the young couple squidged into a one-bed flat"

Stalin would be proud of you.

Den,
The objective aim is the confiscation of all privately owned HOMES.
Except the ones occupied by THEM.
It's a communist thing.
Yours,
Fuckov

Mark Wadsworth said...

Comrade Fukov, thanks for reminding us how things used to work when people like you were in charge of an economic system.

The old guard like you had their penthouses and dachas and spent their whole time enslaving the young workers and the old people who weren't part of the ruling clique in the smallest crappiest little flats possible. That didn't work so well last time you tried it, so how much longer do you think you'll get away with it over here?

Mark Wadsworth said...

Comrade F, you do have another way of minimising your potential LVT bill without downsizing, and that's simply to scrap your Five Year Plan Target For Building No New Housing and allow said young couple to also have a nice house and a holiday home built

Basic maths says that your LVT bill would be halved, but that's not what you want is it? You want YOUR tax bill to be zero and for the young couple to pay a fortune in rent or mortgage interest.

Derek said...

Ah, yes, efficiency. That well known mark of Communism. Soviet Russia was famous for its efficiency as I recall. Mind you that was about the same time as Scotland last won the World Cup so I don't recall the details too clearly.

Anonymous said...

Actually, the ideal would be to replace inheritance tax, stamp duty, council tax, the TV licence fee and Insurance Premium Tax with ... nothing at all.

But still.

Mark Wadsworth said...

D, best allocation is leave it to the markets, but if different people pay wildly different prices (as under current rules) then the outcome can't be anywhere near optimum. LVT makes the land market more like a proper free market with price rationing.

AC, if we had £42.5 billion to spare (the total of all those taxes, about 7.6% of the total tax take), then we'd do better to reduce VAT to 10% or 5% than to further subsidise land values.

I'm all in favour of tax cuts on INCOMES because of the obvious benefits. That's not to say I don't mind hiking taxes on state-sponsored wealth transfers, i.e. reducing the magnitude of such transfers, preferably to £zero.

Anonymous said...

No, The ideal IS the LVT as it works against private taxation.

The current land-subsidy is against the interests of the vast majority.

Mark Wadsworth said...

Anon 23.03, when you say "private taxation" I assume you mean "private tax collection", i.e. when the government arranges things so that wealth flows from private pockets to other private wallets without ever touching a government bank account?

This may not look like a "tax" but it certainly is, every bit as much as money taken from taxpayers and paid out by the government to corporatists, quangocrats, pensioners and welfare claimants.

And that's on top of the wealth that flows from private pockets to government bank accounts and then gets spent on stuff which props up land values.

Further, it's not a subsidy to "land" as an abstract concept, it's a subsidy to "land owners" who are an identifiable body of people.

dearieme said...

The thing is to start with an experiment to prove to everyone that the idea can work. The obvious experiment to start with is to apply the tax to property that UK residents own abroad. Then Polly Toynbee can write about how relieved she is at being required to pay more tax.

I'll vote for that.

Mark Wadsworth said...

D, it's not an experiment, look at Business Rates, going strong since 1572. And I don't know why you're obsessed with her foreign mansion because she's got another one in London. Finally, it's not about MORE tax.

QP said...

we'd do better to reduce VAT to 10% or 5% than to further subsidise land values.

Not while we're in the EU! A highly damaging tax and they require a minimum 15% of it!

P.S. surely self-reference is an instant disqualification from RLotD
;-)

Robin Smith said...

Den

The only thing we are concerned with is the relation of land values(rent) to earned incomes(wages).

Unless you can suggest something more important or a deeper factor relating progress and poverty?

Rob said...

Hmmm, compulsory tax on property to fund socialist state broadcaster. Well, that's fair and equitable.

Mark Wadsworth said...

Rob, we've done this one to death. How much money the BBC are actually given is a completely separate issue. Do not ever, ever, conufse 'raising taxes' with 'government spending' they are two quite separate topics.