2. mark said...

i wouldnt register don't like signing away my privacy

4. mark wadsworth said...

Ta :-)

Of course, to have the slightest chance of flying, politically, vaguely similar taxes like Council Tax, Business Rates and SDLT, and indeed CGT, IHT and the TV licence fee would have to be scrapped (and rightly so). Once we've done those, then we can work on phasing out income tax, VAT etc.

As to the inevitable "what about a Poor Widow In A Mansion?", we can invent no end of transitional measures, reliefs, deferment options and so on, but what it boils down to is
a) currently, an average pensioner household gets about £10k in taxpayer funded state pensions and pays £1,000 C Tax, so they're ahead of the game by £9,000.
b) however high the level of LVT on an average property, it is administratively dead easy to ensure that a sufficient amount of tax receipts are allocated to higher state pensions so that an average pensioner household is still £9,000 ahead of the game - in effect, there would be transfers from Poor Widows In Mansions to Poor Widows shivering in council flats.
c) I'm all in favour of a taxpayer funded Citizen's Pension (transfers from working age to retired), but there is a limit to the amount that can be transferred. Presumably all these Poor Widows In Mansions have children who are looking to inherit the house - seeing as these children will have higher post-tax incomes, can't she ask them to pay the tax for her in exchange for getting the house?

Here endeth.

6. growler said...

Hi Mark

I'm seeing your point on LVT...

But is it that you're just looking at the unimproved land for the tax calculation purposes?

I don't see how you can equate
And unlike property taxes, people who do up their homes would not be penalised

with his earlier statement
Taxing land values would be a fair way to help to plug the budget gap while stabilising — and even boosting — the economy. Land is routinely valued each year as property changes hands

But I do get the idea. Interesting.

8. Quicken said...

@7
I think the idea is that LVT penalises leaving property empty, or land undeveleloped, because you still have to pay in those circumstances. That would tend to increase housing supply in general.

10. easybetman said...

http://www.labourland.org/lvt/benefits_of_lvt.php
So..what are myth on the selling points for LVT:

(a) Claim: LVT would encourage new capital investment rather than sterile land speculation as it would encourage a shift of private investment from land speculation (which creates no extra land but only higher land prices) to productive enterprises.

#Heem..property bubble exist in countries that have LVT type of taxes like Australia, US, Taiwan...


(b) LVT would encourage the use of empty sites zoned for development, creating more job opportunities and wealth.
#Not in the UK as land is worth about £5k per acre. The rest of the value is in the planning permission. So abandoned site
worth very little and hence no problem paying 1% on 5k per acre while depriving everyone else from using the land.

(c) LVT would help avoid urban sprawl. As brown field sites would be developed within towns and cities it would be unnecessary to permit urban sprawl. Compact towns are also more efficient in their use of resources for transport and other services.

# But building taller / higher density building will attract higher LVT (as the planning permssion implied higher value), so higher LVT discourages
efficient land use, or have fairly limited impact on efficient land use.

LVT could not be avoided. (Unlike income tax and business taxes where tax avoidance experts are in great demand and the ‘shadow economy’ flourishes to evade taxes.) Every landowner would be required to register their land and to pay LVT on all their land holdings. With LVT any site with no registered owner would be sold by auction for the benefit of the Government.

#This is perhaps the real benefit of LVT, but so is the much hated poll tax...

LVT would provide automatic compensation for those sites which are disadvantaged by a new development. For example: with a new railway line most sites (especially those near stations) benefit from big increases in land values but some sites (maybe housing close to the track and suffering from its noise and vibration) would lose some value. These sites would pay a lower Land Value Tax, providing automatic compensation without any complicated appeals system.

#So one gonna to have a few houses on a lower land value/LVT than houses 10 meters from there. How about houses at 7,8,9 meters, do they get sliding scale reduction in land value? This isn't exactly going to be easy to calculate isn't it? The proposal of using a postcode sector would not distinguish the value of those houses.

Also, if LVT is introduced, the LVT paid by some of the victorian terrace lived in by an old lady will probably rise compared to council tax while the next door much improved house with golden door's and basement swimming pool will probably go down. And so are the corner shop next to a Tesco Express. Tesco Express bills (compared to business rate where permission is given for a supermarket use) probably go down while the corner shop bill goes up. Not sure if this acceptable by the eletorate.

The only way for LVT to work is change the planning system at the same time. Or, one can go for property taxes like those in US etc which is a lot easier to calculate (based on last sale price, adjusted for RPI etc if necessary). It is then up to the property owner to decide if he wants to improve his house and pay more tax or not.

12. growler said...

I can see abuse by "rotten boroughs" who might just abuse this aspect of applying for PP to force very political changes. For example, you could give PP for a private sports centre to be designated housing so that your council sports centre gets more customers due to cost increases at the other place. Same with hospitals...

There would need to be some checks and balances.

... needing more convincing on this

14. growler said...

with or without LVT

If you apply for PP for someone elses land (and get it) it won't increase their running costs under the present system. In an LVT environment, that increase will generate tax obligations.

I'm not convinced LVT will generate lots of lower cost rent options. I can see it lowering property values making housing affordable (possibly), but I don't see it generating good quality rented accomodation.

But one thing is for sure: there should be a commission to look at it all in the light of an evidently failed present system.

16. easybetman said...

Hi MarkW,

#It is an observable fact that when they scrapped (or reduced) discounts and exemptions for vacant business premises for Business Rates purposes (remembering that BR is very similar to LVT) occupancy rates went up (despite we were heading into a recession).

Sure - but not when it is £5k per acre and the landowner/property companies have vested interest to keep land supply restricted. £50 per year is a small price to pay to ensure the remaining property portfolio remain at inflated prices.


>Further, under existing land law, you can apply for permission for somebody else's site. So if people are sick and tired of a derelict building/site, >the council can just award the owner planning for a nice new block of flats or office block or whatever (and that's assuming that the original >planning permission expired in the first place), hey presto, free money for the council and the chances are that the block will then be built.

Yes, you can. But it would be interesting to see if LVT is introduced and the landowner will be able to get an injunction to prevent such a planning permission from being taken out when it suits him (or make a profit on the land and the guy who apply for the planning permission can pay all the planning/architect/suveyor fees)...


>As to the railway, if the tax is "too high" we would observe that the houses that back on to the railway would sell for less than rebuild cost. Withut the >tax it is easy to observe what the difference is between houses that back on to the railway and ones on the other side of the road. So the >council just adjusts the tax down on the railway-facing side until houses on either side sell for the same amount. It requires no clever maths skills >whatsoever and can be done by trial and error.

Right - so you basically have to value the land of many properties individually. Postcode sector approach won't work then. Add some appeals/dispute to that and it will be a rather bureaucratic exercise (so not exactly simple to collect, though I concur that it is doable.)


>Nice to see the Poor Widow In A Mansion getting her ten thousandth guest appearance, I dealt with that one above
Right - but you haven't deal (intentionally or otherwise) with the Tesco vs Local Shop few steps down.

18. mark wadsworth said...

EB, I ain't too bothered about land value tax or property tax; averaged values or individual; whether based on capital values or rental values or even how often it's updated. All of these are a bit rough and ready, but better to be roughly right than precisely wrong. They all boil down to the same thing.

As to the slightly dilapidated house next to a mansion, that's still not an issue provided you follow the golden rule: the tax is not 'too high' provided it does not depress selling prices below rebuild costs. So if the gold plated mansion is ever sold, we compare the selling price with the very high rebuild costs. Up until that stage, we only monitor the selling prices of the 'ordinary' houses. Either way, if both houses occupy the same sized plot, then they ought to be paying the same LVT, that's the whole point.

As to the railways, also, so what, really. My house was on the railway side and the ones one that side sold for approx. £20,000 less than across the road. But we both paid the same Council Tax. That never perturbed me in the slightest - I got my discount when I bought the property. Seeing as the families on my side got the same benefits from the area (library, police, playground, near the station, shops etc), I don't think the railway is that important. Even if the tax were the same on both sides, there's no great injustice, there'd still be a £20,000 price differential, so you gain when you move in and lose when you move out. Big deal, frankly.

What's the problem with Tesco vs local shop? If people don't want a Tesco, they won't shop there. In extremis, people can lobby the council to refuse to allow Tesco to open up. I am neither a Tesco fan nor a Tesco basher.

20. mark wadsworth said...

Inbreda, I do hang out with a lot of land value taxers and we have very enjoyable highly arcane disputes over matters which are of no interest to the outside world (the capital vs rental value debate; the total property vs land value only debate; how valuations might be carried out; which taxes we'd phase out first etc).

But as you may have noticed, it is far more important to try and deal with the objections or concerns of real normal people (seeing as the idea is completely counter-intuitive and I cheerfully admit that I thought it was a bit mad when I first read about it four years ago).

And yes, I stumble across yet another objection every day - you have to distinguish between those who want to understand and those who don't want to understand (and worst of all, those who think they can convert me to the merits of Home-Owner-Ism). As a fall back, I just turn the objection on its head and ask "How is that worse than income tax or VAT?" and so on.

22. mark wadsworth said...

"If this holds then the total LVT bill for a 10 stories flat occupying say 0.3 acres should be the same LVT as a semi house with a 0.3 acres plot size then?"

That's a highly artificial scenario (and 0.3 acres is a ludicrously big plot for a semi), but if the two plots are next door to each other, and the owners of the semis could easily get planning for a block of flats, then why not? The tax for each flat would be one-tenth of the tax for each semi.

However, the large number of people in the flat will consume more public services and those who live in 'houses' will be subsidising them will ensure that efficient land use (by going up) is prevented.

Crikey! Perhaps you fail to realise that people PROVIDE public and private services as well as consuming them? So the people in the flats are providing five times as many public and private services as the people in the two semis. Nobody is subsidising anybody, they are all just paying ground rent on the land they occupy. LVT is like rent. If five young people decide to rent a house together, then they are clearly only paying one-fifth as much in rent per person as somebody else you can afford to rent a house all for himself?

Plus you have a very static view of the world. Under current rules, if somebody in a flat wants to trade up to one of the semis, he has to take out a mortgage of another £100,000 which costs him £5,000 a year in mortgage repayments. So a newcomer to the area has a choice - pay £5,000 a year to buy a flat or £10,000 a year to buy a semi. Market forces are acting on him and he makes his decision.
Why is it not acceptable for the people in the semis to be subject to the same market forces and to be paying £5,000 more in LVT that somebody in a flat? That subjects everybody to the same market forces.

And yes, I agree that Council Tax might be a better place to start, let's have Bands A to Z, with Band A paying £100 a year and Band Z paying £10,000.

So the people in the flats have a simple choice: stay where they are and pay up (the same as anybody else would have to who moves there); sell the semis to a builder and move on; trade down into one of the flats.

Re your question to Inbreda, there is in fact no particular law against building anything you like anywhere you like in this country. What gets built where is entirely decided by local NIMBYs acting out of naked self-interest and putting pressure on the local council. If we had LVT, the problem would largely sort itself out - for homeowners this is now no longer a one-way bet... OT1H, they want to "preserve the character of the area" but OTOH, they know that if they allow more new stuff to be built, they will be paying a smaller relative share of the total LVT bill.

And the landlords on Oxford St are already charging you for buildings rent plus location rent. The LVT would be a large part of the location rent. The landlord cannot charge you for buildings rent plus nearly twice the location rent. He just can't. People won't pay it.

And so on. As to winners and losers, on a static, short term basis about 90% of people would be better off. On a dynamic, long term basis about 98% would be better off.

24. easybetman said...

Hi MarkW,
"same market forces" ? Tax is by definition distorting the market and favouring some and the expense of some other. A market force system might be perhaps for someone to bid for the right of residence in the area (to replace a government imposed tax) via auction and bid for the property separetely. But that is a seperate story.

So, the corner shop will probably pay 10x the LVT of the office block next door and it will close down (ok, then it could be resold to someone for very cheap prices etc but the transition will be very harsh - don't think this will be bought by the electrorate). To justify LVT merely based on space occupied, one will have to assume the value of all economic activities arise from land, but this is not true as human capital certainly have an important part in this.

It is true that human consumer and produce services, then so why are the talks about schools/hospital getting overcrowded when more people/immigrant comes in? Clearly not everyone can be a doctor/nurse/teacher and not everyone can be a barber, indian takeaway shop proprieter.

Oxford St - if the shop are being charged the full building and location rent, then I can conclude that the shops are charging the full location and goods price to their customers. So, there will be no problem putting up VAT to 30% as the price must then stay the same in Oxford Street otherwise people won't buy it ? (I don't think you will believe this either). I suspect the loser on LVT are not the big prime landlord that LVT proponents claim to be targetting, it would be the small timer in secondary locations who will get hit.

As for your claim on the redistribution effect on your blog, I think that is just a bit too many degrees off to make that a solid analysis in whether who are the winners of the LVT (the government could well decide to build another super NHS computer rather than giving those money to pensioners etc etc).

Anwyay - glad that we agree that property should be taxed more and let's disagree as to whether LVT or property tax are better way of doing it.

It would be useful for LVT proponents to produce a chart showing who win and who loose in various scenarious (LVT replaces all tax, or LVT replaces council tax/VAT only etc) secenarios - as with all tax, someone is going to win, and some are going to lose.

26. This comment has been removed as it was found to be in breach of our Blog Policies.