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How A Levy Based On Location Values Could Be The Perfect Tax

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There's a new article from Merryn Somerset Webb in a certain pink newspaper that has some good arguments for a Land Value Tax.

Very interesting article. Thanks for pointing it out. And the link via Google works.

This Danish policy is brilliant:

"In Denmark citizens pay 1 per cent of the value of their property to the state for the first DKK3.04m (£343,000) of its value and 3 per cent for anything over that. There is also a municipal tax based on land values."
Edited by Tired of Waiting

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"Fans of the LVT will be irritated to note that it [edit: i.e. Denmark] has suffered something of a property price crash over the past few years"

Seems a little confused there.

Edited by erat_forte

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"Fans of the LVT will be irritated to note that it [edit: i.e. Denmark] has suffered something of a property price crash over the past few years"

Seems a little confused there.

Yes.

And she is treating LTV and property (incl. buildings) taxes as if they were almost the same thing.

Besides, why the need to be the "only" tax? I think it should be the only tax on property (no more taxing improvements on the land, such as buildings), but the gov could keep taxing income, VAT, fuel/alcohol duties, etc. Why not?

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It seems to me that LVT offers too many perverse incentives to work in its pure form. Assuming it's the only tax of any kind, as MSW is suggesting as a model, then it would obviously have to be pretty damn high on average. There would be a huge incentive for people to game it by moving into cheap areas or into buildings that don't use much land per unit of accommodation. Of course, once that happened, the value of the land in those areas would go through the roof and people would then want to move on. Seems like there would be a constant cat and mouse game whereby rich people moved ever couple of years to keep one step ahead of the tax man. If you earned anywhere above the median you could reduce tax as a percentage of your total income to something way smaller than under the current system of income tax simply by not owning property other than your main home and then moving every year.

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It seems to me that LVT offers too many perverse incentives to work in its pure form. Assuming it's the only tax of any kind, as MSW is suggesting as a model, then it would obviously have to be pretty damn high on average. There would be a huge incentive for people to game it by moving into cheap areas or into buildings that don't use much land per unit of accommodation. Of course, once that happened, the value of the land in those areas would go through the roof and people would then want to move on. Seems like there would be a constant cat and mouse game whereby rich people moved ever couple of years to keep one step ahead of the tax man. If you earned anywhere above the median you could reduce tax as a percentage of your total income to something way smaller than under the current system of income tax simply by not owning property other than your main home and then moving every year.

It depends how you think about LVT.

If you think it is just a way of raising tax to spend on arbitrary stuff, then sure, 'the rich' are going to be able to squirrel money away. However, if you think it is a way to discourage rent seekers from profiting from land monopoly, then it doesn't matter what else 'the rich' do with their money.

TBH though, I think politicians will think of it as the former. Any way to get money from 'the rich' is seen as fair game. There is no logic, no consistent ideology etc - it's just about how much they can take from some, in order to win votes from others. It's a shame, really.

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A Land Value Tax is a bad idea. A Land AREA Tax is a good idea. Just tax based on the square footage. People argue about value and value goes up and down, but area is a constant. The LAT should be area times usage, eg

Residential - expensive

Business - slightly cheaper

Agriculture - very cheap

Unused land - quite cheap and cheaper if open to the public

Land banking by the big building companies would cease sharpish if they got taxed on unbuilt land as if it had a house on it.

Note that the LAT is the same whether the land has a shack or a mansion on it. It is purely a tax on the area of the land. Land is the finite resource; actual buildings are cheap.

Edited by Nationalist

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It seems to me that LVT offers too many perverse incentives to work in its pure form. Assuming it's the only tax of any kind, as MSW is suggesting as a model, then it would obviously have to be pretty damn high on average. There would be a huge incentive for people to game it by moving into cheap areas or into buildings that don't use much land per unit of accommodation. Of course, once that happened, the value of the land in those areas would go through the roof and people would then want to move on. Seems like there would be a constant cat and mouse game whereby rich people moved ever couple of years to keep one step ahead of the tax man. If you earned anywhere above the median you could reduce tax as a percentage of your total income to something way smaller than under the current system of income tax simply by not owning property other than your main home and then moving every year.

We know exactly how a LVT would work, because we already have one. It is called rent.

The argument is not about the introduction of a LVT, it's about how that tax money should be spent.

Should it be spent by the unelected local governor - the 'landlord' - or should it be spent by the democratically elected central government?

What you describe does happen. Areas gentrify, rents rise, poor people are priced out and move on. LVT won't change that.

It will, however, allow the job killing taxes - income tax, corporation tax, VAT - to be reduced. That is what improves the economy and makes us all richer.

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A Land Value Tax is a bad idea. A Land AREA Tax is a good idea. Just tax based on the square footage. People argue about value and value goes up and down, but area is a constant. The LAT should be area times usage, eg

Residential - expensive

Business - slightly cheaper

Agriculture - very cheap

Unused land - quite cheap and cheaper if open to the public

Land banking by the big building companies would cease sharpish if they got taxed on unbuilt land as if it had a house on it.

Note that the LAT is the same whether the land has a shack or a mansion on it. It is purely a tax on the area of the land. Land is the finite resource; actual buildings are cheap.

An area tax doesn't prevent people hoarding the best areas, so the LVT must reflect the land rent or it won't be any better than the stupid taxes we have now.

We know that there's no major difficulty in setting the correct value for a LVT, because we already have a LVT. The government can just do what landlords do. Whack up the rent until you have nobody willing to pay it, and then charge a just little bit less.

Edited by (Blizzard)

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