Lib-Dems Developing A Land Value Tax

[matchmade]

There seems to be common agreement here that rent should be abolished on residential, and presumably commercial premises, because it is unearnt and "parasitical". Does this mean renting a property should be free, or that no-one is allowed to rent property, only own it? Presumably we should abolish interest on capital as well, because that is unlearnt as well - it is ursury. Therefore the only way to have the right to use property is to own it 100%, or find someone generous to lend you the mortgage capital at 0% interest, or let you live in the house without paying rent. This would include so-called affordable housing: if councils and housing associations were banned from charging rent, they would have to sell all their property or let deserving citizens live in it for free.

Sounds good to me.

Another good way to control property prices and raise money for the common treasury would be to tax capital gains on house price increases at 100%. Capital gains on principal private residences used to be taxed heavily until 1965 when the 100% exemption was introduced, arguably with disastrous results as someone's house suddenly became their principal tax-free asset. However no-one should be allowed to make capital gains simply by virtue of owning a house, and it should be the State's right to confiscate all capital gains. House price rises can only be justified if someone has improved the property and can demonstrate what they have paid for the labour and materials. if they do their own DIY and count their own labour at zero value, that's just tough: only invoiced expenditure would be deductible against capital gains.

This is a great proposal because it instantly kills off house price inflation: what would be the point of someone seeking a higher price on their property than they paid for it, when the whole gain goes to the Government?

[BalancedBear]

It is strange how extra taxes are deemed to solve problems on this forum. If LVT was introduced to replace another tax, there could be some merit in it. However, any new tax will be an additional tax, not a replacement.

How many people on this forum would actually like to pay LVT, council tax and all other taxes if and when they can afford a house?

[Mark Wadsworth]

It is strange how extra taxes are deemed to solve problems on this forum. If LVT was introduced to replace another tax, there could be some merit in it. However, any new tax will be an additional tax, not a replacement.

How many people on this forum would actually like to pay LVT, council tax and all other taxes if and when they can afford a house?

1. It would be a replacement tax, that's the only way to sell it politicially (cue heated debate on what the worst taxes are, by which the worst taxes are not necessarily the most hated ones). I've never met a land value taxer yet who didn't have a list of taxes he or she would like to reduce or replace.

2. As to your second question, why would duture purchasers care? If it's an additional tax, then that comes off the price of the house, so it's no loss. What you lose in LVT you save in mortgage repayments.

[19 year mortgage 8itch]

I thought that today the lib dems have come out in favour of taxing the rich.

And by rich I mean those earning just enough to buy a house (£50,000) rather than those who own assets that are actually worth something.

[Traktion]

There seems to be common agreement here that rent should be abolished on residential, and presumably commercial premises, because it is unearnt and "parasitical". Does this mean renting a property should be free, or that no-one is allowed to rent property, only own it? Presumably we should abolish interest on capital as well, because that is unlearnt as well - it is ursury. Therefore the only way to have the right to use property is to own it 100%, or find someone generous to lend you the mortgage capital at 0% interest, or let you live in the house without paying rent. This would include so-called affordable housing: if councils and housing associations were banned from charging rent, they would have to sell all their property or let deserving citizens live in it for free.

Sounds good to me.

...

The point is more nuanced than that. It comes down to how you define ownership.

If ownership implies that something has been created by someone (i.e. by them mixing their labour with natural resources), then how can this apply to a location? Land - as in the space it occupies, not the dirt or what is on it - was not created by anyone; it was here before mankind and will likely be still here afterwards. So, under what grounds can a location be 'owned'?

That doesn't mean that you can't own a house, a car, some gold, a pile of paper notes, even the ploughed/worked dirt at the surface of the land etc. It doesn't mean that you can't rent out any of these things either, because you own them. However, if you can't reasonably own land, then what gives you the right to charge others rent to occupy it?

It is more appropriate to suggest that locations are a natural resource which is currently monopolised, through threats of violence, to prevent access to others. Why should this be considered acceptable?

Ofc, it is difficult not to monopolise a location with a house, a ploughed field or a pile of your stuff. Physics dictates this to be the case. However, this doesn't prevent the monopoliser from compensating others when this is the case.

Do we need a LVT in order to compensation those displaced by land monopolists? No, not really - we can think up other ways to achieve the same thing.

As I've said, a LVT is the least worst tax, but taxes aren't based on contracts. They are based on the arbitrary whims of politicians in parliament. They don't need to bind themselves with the chains of legally disputable contracts - why would they when they can make vague promises and change the rules as they see fit (offering a cursory choice to voters, every 4 years)?

IMO, the danger is thinking that a LVT and CI will change the game, when in reality it just moves the goal posts. The game will change when we stop thinking about using threats to dictate how people behave. We are far, far away from that, unfortunately.

[pjw]

Wikipedia says about business rates:

Certain properties which would otherwise be rateable are in fact exempt from rating (that is, are not entered in any rating list). These properties are specified by the Local Government Finance Act 1988,[73] and include the following:

Agricultural land and buildings

Fish farms

Places of public religious worship

Lighthouses, buoys and beacons occupied by or belonging to Trinity House

Sewers and accessories belonging to a sewer

Certain property of drainage authorities

Parks

Property used for the disabled

Air raid protection works, provided the hereditament is not used or occupied for any other purpose

Swinging moorings

Roads crossing over or under watercourses

Hereditaments in Enterprise Zones

Visiting forces premises

So non-residential properties that are exempt from business rates would remain exempt from LVT - including farms. Properties with council tax and business rates levied on them would see those replaced by LVT.

[BalancedBear]

1. It would be a replacement tax, that's the only way to sell it politicially (cue heated debate on what the worst taxes are, by which the worst taxes are not necessarily the most hated ones). I've never met a land value taxer yet who didn't have a list of taxes he or she would like to reduce or replace.

2. As to your second question, why would duture purchasers care? If it's an additional tax, then that comes off the price of the house, so it's no loss. What you lose in LVT you save in mortgage repayments.

I'm sure you are right, but I'm not sure Vince Cable or any other politician has anything in mind about replacing taxes.

The LVT is an ongoing recurring tax which is not easy to factor into a purchase price.

[Tired of Waiting]

Yes.

And the key point here is land that is rented out or has property on it that is rented out would be put in a specific business tax band with a higher rate than any others. Another band would exist for residential land with unoccupied property (ie second homes and speculative purchases). I find this sort of system a little cleaner and more direct. However it would require a govt with a particular ideology to even consider implementing it.

The devil is always in the details with reforms of this scale. And there is more than one way to skin the rentier classes. It all depends on the intent behind new reforms. The intent on HPC is generally towards more of a meritocracy but we all have our own layers of ideology. Which is why I don't trust our morally bankrupt politicians with most policy choices. The current political structure encourages short term bribes and brown envelopes. It would ultimately be better to strip the govt down to the bare minimum, institute a basic moral constitution, and limit politicians scope to mostly administration. Something closer to the voluntary ideals of Traktion.

The best thing about a LVT:

I went to London a few months ago and, in very posh area, I saw derelict house, boarded up. If we had LVT the owner would be paying a fortune for that land, and would be hard pressed to use it, well, or sell it. Same thing across the whole country: use it, well, or sell it to someone who will use it properly. A LVT will reduces land waste to very low levels.

I can imagine the difficulties of evaluating all land in Britain, but someone mentioned here that other countries manage that. A first step would be to research how they do it.

.

Edited September 18, 2013 by Tired of Waiting

[Tired of Waiting]

It is strange how extra taxes are deemed to solve problems on this forum. If LVT was introduced to replace another tax, there could be some merit in it. However, any new tax will be an additional tax, not a replacement.

How many people on this forum would actually like to pay LVT, council tax and all other taxes if and when they can afford a house?

The only chance LVT would have political support would be if it was a replacement for Council Tax, and reducing the tax paid by the majority of the population, ideally over 2/3 benefiting.