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the_dork

Monbiot On Land Value Tax

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http://www.theguardian.com/commentisfree/2014/jun/02/housing-tax-property-help-to-buy-government-schemes

Are we getting closer to a breakthrough? In many ways it's a shame this was by Monbiot in the Guardian as he's tainted (for some, not me) by his views on other things, but it's a very sensible article and there's some good stuff in the comments.

The day we get similar written on Conservative Home or even the Daily Mail (I live in hope) is the day this will be seriously talked about by potential governments

EDIT: He is advocating capital gains on property, not land value tax as such, I mean the idea is getting closer

Edited by the_dork

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Nowhere in the article does it talk about REPLACING other taxes with a LVT. Regrettably therefore this is just another left-wing "tax the rich more" article which will be duly dismissed. It isn't a breakthrough, it is flawed and irrelevant.

(Oh, and it talks b****cks about the equivalence of higher property taxes for unused bedrooms to the "bedroom tax" which is also dodgy left wing thinking).

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Excellent article.

Unfortunately it contains the word 'tax' which will attract the dog whistle ukippers and bullers like a moth to a flame.

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The Scottish government seems to be moving in the direction of LVT:

http://www.bbc.co.uk/news/uk-scotland-scotland-politics-27555854

Summary:


A mapping project to work out who owns every part of Scotland is to be completed within 10 years.

He said he agreed "a fundamental step on this journey must be having a clear understanding" of who owns land in Scotland.

However, Scottish Land & Estates warned the timescale was "very ambitious".

Registers of Scotland has been asked to finish the register in a decade, with all public land registered within five years.

Among the suggestions, it called for a new law to limit how much land any single person can own in Scotland.

The review group also said local government taxation needed to be modernised and that serious consideration should be given to introducing a system of land value taxation, which could be an alternative to the council tax.

Experts said there was no clear public interest in keeping a universal exemption of agriculture, forestry and other land-based businesses from non-domestic rates.

The government stated: "We can confirm there are no plans to make changes to the position of agricultural business rates relief."

"To register just one estate can take many years and so if dozens of estates started applying to the register at the same time the system would struggle to cope. It is also a highly costly process to prepare all the information required to register on the Land Register."

I am not sure why it is such a difficult process to register an estate!

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Monbiot and Toynbee have been bleating in the Guardian for decades now and at every turn the government comprehensively ignores them.

I think Monbiot's support is a kiss of death for LVT - in many people's minds it will now be a crazy lefty idea unworthy of further consideration.

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Wake me up when they're talking about replacing income tax with LVT.

Well, the obvious low hanging fruit here are council tax, SDLT and business rates. Ultimately I think a sensible aim might be to raise roughly the same amount from LVT and income tax (with national insurance rolled into income tax).

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http://www.theguardian.com/commentisfree/2014/jun/02/housing-tax-property-help-to-buy-government-schemes

Are we getting closer to a breakthrough? In many ways it's a shame this was by Monbiot in the Guardian as he's tainted (for some, not me) by his views on other things, but it's a very sensible article and there's some good stuff in the comments.

The day we get similar written on Conservative Home or even the Daily Mail (I live in hope) is the day this will be seriously talked about by potential governments

EDIT: He is advocating capital gains on property, not land value tax as such, I mean the idea is getting closer

The first time I ever read about LVT was on Conservative Home, written by an HPC regular: http://www.conservativehome.com/platform/2008/03/mark-wadsworth-2.html

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some things occur to me (correct me if I am wrong)

if the LVT was applied to let out property ( the portfolio) and replaced council tax - the tenants would pay

if it was applied to second/holiday homes/ boltholes and replaced council tax - this is already paid by the owner

if it was applied to land - how would the acreage be assessed as some is worth more by reason of it's position

if the LVT was applied to one's only home - this cannot be in addition to council tax unless the local services were paid for by a 'local tax'

to me the likelihood of any change to the status quo is zero or none.

a fairer way would be to scrap cgt exemption of BTL properties and none of this 'renting relief' mallarky which means that massive profits on property escape almost all tax. :angry:

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Monbiot and Toynbee have been bleating in the Guardian for decades now and at every turn the government comprehensively ignores them.

I think Monbiot's support is a kiss of death for LVT - in many people's minds it will now be a crazy lefty idea unworthy of further consideration.

Mr Monbiot is certainly a person I agree with only rarely!

!

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The Scottish government seems to be moving in the direction of LVT:

http://www.bbc.co.uk/news/uk-scotland-scotland-politics-27555854

Summary:

I am not sure why it is such a difficult process to register an estate!

If I was in charge I'd give the landowners 1 year to ensure their land was properly registered. Any unregistered land after the deadline would be seized by the taxpayer. That would focus minds a little.

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I've been thinking about how much a Land Value Tax would have to be in order to totally replace income tax, NI, VAT, corporation tax, business rates and council tax (I haven't included fuel duty because it seems to me that crude oil is just as much of a finite resource as land - more so as it is destroyed in the process of use) which were predicted to have been £451bn over 2013/2014 http://charts-datawrapper.s3.amazonaws.com/HQNDG/index.html?rev=97#embed (btw how depressing is the relative proportion of taxes that we all pay compared to corporation tax?)

The UK is about 24 million hectares, from memory I think about 75% of which is agricultural and would need to be taxed at a lower level in order for food production to remain viable (agricultural rents are only about £200 per hectare per year so there is clearly quite a jump in the value of land between an agricultural and urban setting). We'd also probably want to not charge an LVT on some specific areas in order to maintain them as wild (such as sites of special scientific interest, ancient woodland, etc), possibly only suspending the LVT so that it is due backdated and in full if the site is ever developed in order to discourage people from using the wildlife exemption as a loophole.

Other threads have put the amount of urban land (including villages and urban greenspace) somewhere around 6.8% of the total UK landmass: http://www.housepricecrash.co.uk/forum/index.php?showtopic=198365&hl= http://www.housepricecrash.co.uk/forum/index.php?showtopic=198883&hl= . This includes roads, parks and other publicly owned spaces which would also be tax null (we could tax them in order to encourage efficient land use by the local council but that taxation would then be paid out of funds derived from taxation). It doesn't include land immediately adjacent to urban areas which clearly benefits from urban facilities and has the potential for urban development, so we can pehaps assume that adjacent land marked for development evens this out a little. Clearly this urban land would need to be subdivided as there is a big difference between the value of land in a rural village or the heart of suburbia and that of land in Mayfair or the City of London. For the pruposes of making a rough calculation I've divided these areas along the lines of 5% (of the total UK landmass) standard urban, 1 % prime and 0.1% super prime, assuming the remaining 0.7% is public land not matched by an equal amount of urban adjacent development land. In practice I'm sure there would need to be much more of a spectrum than just these three categories.

As a rough calculation of our 24 million hectares we could annually tax:

18m hectares (75%) at agricultural rates of £100 per hectare totalling £1.8bn

1.2m hectares (5%) at standard urban rates of £100,000 per hectare totalling £120bn

240k hectares (1%) at prime urban rates of £1,000,000 per hectare totalling £240bn

12k hectares (0.1%) at super prime urban rates of £10,000,000 per hectare totalling £120bn

At these rates a property in the standard urban area would be charged at £10 per sq m of land or £5,000 annually for a 500 sq m plot; in prime and super prime the annual rates would be £100 per square metre and £1,000 per square metre respectively (remember this is sq m of land so the higher we build in these areas the less LVT per sq m of floor space).

The total tax take is £481bn on these figures, so easily enough to replace income tax, NI, VAT, corporation tax, business rates and council tax; represent a tax break for the average family and up the tax take from those large multi nationals that currently seem to avoid paying anything at all despite having retail outlets throughout the country.

I'm aware that a full on LVT system is highly unlikely to happen but I just thought it would be interesting to workout whether it could deliver if it was implemented. I'm also aware that there are quite a few people on HPC who are more intelligent than I am so any thoughts/criticisms would be welcome!

Edited by Lo-fi

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erm ...... £5000 for a family home in any town/village would be disastrous for people who have a average family income of £25k - and represent 20% of their gross income - on top of which they have all the 'other' bills - currently they get personal tax allowances (if a couple of 20K) so only pay tax on £5K if no kids. Even if vat and the rest were included they would be worse off and therefore 'need' benefits.

and renters - who pays?

sound good and I admire your exhaustive research but

vat is on consumption - so fair in that respect

NI is to cover benefit entitlements (allegedly)

income tax is to pay for those who cannot/will not work by those who can/will work

a tax on BTL empires and a removal of their 'perks' would be my favoured option.

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It is obvious that LVT could work. We currently have a regressive and unfair system of collecting tax through income tax and consumption tax and monopoly taxes.

If they were all scrapped and LVT introduced like-for-like we would collect the same amount of money.

The only change is how the collection is distributed around the population.

2 points: one is, an idea of LVT is to make the distribution more equitable, by charging those who use resources proportional to the value of the resource they use.

The second idea is that there is positive feedback in that people will change their behavior to minimise the land resources they use, thus freeing up resources for others, thus boosting the productivity of the economy. So you can get the same nominal tax take from a smaller percentage tax take.

Unlike the present system which taxes production and consumption, thus incentivising people to produce less and consume less, shrinking the economy and requiring a larger tax percentage for the same nominal take.

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It is obvious that LVT could work. We currently have a regressive and unfair system of collecting tax through income tax and consumption tax and monopoly taxes.

If they were all scrapped and LVT introduced like-for-like we would collect the same amount of money.

The only change is how the collection is distributed around the population.

2 points: one is, an idea of LVT is to make the distribution more equitable, by charging those who use resources proportional to the value of the resource they use.

The second idea is that there is positive feedback in that people will change their behavior to minimise the land resources they use, thus freeing up resources for others, thus boosting the productivity of the economy. So you can get the same nominal tax take from a smaller percentage tax take.

Unlike the present system which taxes production and consumption, thus incentivising people to produce less and consume less, shrinking the economy and requiring a larger tax percentage for the same nominal take.

but who decides the value of the resource that people are using - there would be so many loopholes, appeals and counter-appeals - it would be horrendous. I am sure 'human rights' would come into it somewhere.

perhaps a form of LVT on businesses, large landowners, BTLers - would work while retaining other taxes and reforming council tax

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Excellent article.

Unfortunately it contains the word 'tax' which will attract the dog whistle ukippers and bullers like a moth to a flame.

You like tax?

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erm ...... £5000 for a family home in any town/village would be disastrous for people who have a average family income of £25k - and represent 20% of their gross income - on top of which they have all the 'other' bills - currently they get personal tax allowances (if a couple of 20K) so only pay tax on £5K if no kids. Even if vat and the rest were included they would be worse off and therefore 'need' benefits.

Thanks for the feedback! I was going on the average direct tax take (so not including VAT) per household from the ONS, which is circa £7,400 per year:

On average, households paid £7,400 per year in direct taxes, equivalent to 20% of their gross income. (p.6)

http://www.ons.gov.uk/ons/rel/household-income/the-effects-of-taxes-and-benefits-on-household-income/2011-2012/etb-stats-bulletin-2011-12.html

The LVT I described would therefore produce an average decrease of over £2,400 per household (because VAT would also be scrapped). The three subdivisions of urban land I gave were definitely simplified, the important point would be that as long as the average across that division was equal to the figure stated then those numbers would still work (for instance if we subdivided standard urban so that we had a cheaper standard-, regular standard, and a more expensive standard+, then that would offer a cheaper option but work out the same in terms of tax take as long as the rates charged for standard- and standard+ averaged out to the overall standard charge). The whole point of an LVT is that it's optional, noone has to live on a 500 sq m plot they can live on a smaller one (quite likely inside a village or town center, the 500 sq m was really an example of a suburban plot with a decent garden size), or they can choose to share the LVT costs by living in blocks of flats as the LVT would be divided between all of the storeys (so an above average 150 sq m flat in a 5 storey block would only incur a £300 tax rate per year, for instance), and I would suggest that isolated farm labourers cottages with no surrounding facilities should maybe be charged at or close to the agricultural rate (so more like £5 a year rather than £5,000).

Also, because this rate of LVT would more than cover the current tax take from income tax, NI, VAT, corporation tax, business rates and council tax the funds would remain available for tax credits, child benefit, etc (some of which I suspect your example couple might qualify for currently?) although my personal preference would be for a universal citizen's income. Essentially LVT is a payment from a landowner to the state for the reification of land and resource ownership brought about by the state and the benefits they incurr from surrounding communal facilities, while a CI would be a payment from the state to citizens to make up for their lack of free access to naturally occurring resources because of the reification of land and resource ownership brought about by the state.

and renters - who pays?

The owner of the land always pays, no voids, no discounts. They can pass the cost on to the renter if the market allows them to do that, but renters would be just as free to shop around as they are now (and should clearly have more rights than they do now, no matter what happens with the tax system).

sound good and I admire your exhaustive research but

vat is on consumption - so fair in that respect

NI is to cover benefit entitlements (allegedly)

income tax is to pay for those who cannot/will not work by those who can/will work

a tax on BTL empires and a removal of their 'perks' would be my favoured option.

NI is being changed into earnings tax anyway so that's gone, but in any case while I can see why a national insurance scheme might be a good thing it doesn't seem right that people who take their entire earnings in capital gains and therefore don't pay NI can still access supposedly NI funded services like the NHS. Perhaps NI could be kept as a voluntary charge, ie. every individual could opt to have insurance or not, and services could be paid for at the point of use by anyone who didn't choose to make those payments? Or we could just accept that what we are aiming to do is provide a free service for the entire population in which case it makes more sense to pay for it out of general taxation that is drawn from the entire population rather than a tax that it only levied at PAYE workers.

Similarly I don't see why only PAYE workers have to cover the costs of those who don't work, these costs should be covered by the entire population and work should be incentivised rather than disincentivised. In general I think it's harmful to the economy to tax people's effort rather than their use of resources when what we actually need is greater effort and more efficient use of resources.

I agree that it would be good to tax BTL (an LVT would do this anyway) but one of the biggest problems are current system of taxation has is that there are already far too many opportunities for loopholes because the system is already overly complicated and adding more complication would only make this worse, and targetting one particular section of society might encourage them to try to avoid a BTL classification and create a shadow rental system where tenants have no rights at all. Scrapping most taxes for one single clearly defined tax on an immovable asset with no exemptions would, on the other hand, greatly simplify the whole system and remove such opportunities for tax avoidance. An LVT would destroy tax loopholes instead of creating more.

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It is obvious that LVT could work. We currently have a regressive and unfair system of collecting tax through income tax and consumption tax and monopoly taxes.

If they were all scrapped and LVT introduced like-for-like we would collect the same amount of money.

The only change is how the collection is distributed around the population.

2 points: one is, an idea of LVT is to make the distribution more equitable, by charging those who use resources proportional to the value of the resource they use.

The second idea is that there is positive feedback in that people will change their behavior to minimise the land resources they use, thus freeing up resources for others, thus boosting the productivity of the economy. So you can get the same nominal tax take from a smaller percentage tax take.

Unlike the present system which taxes production and consumption, thus incentivising people to produce less and consume less, shrinking the economy and requiring a larger tax percentage for the same nominal take.

Totally agree, the current tax system is a daft way to run an economy. I think it's been going so long people think of it as "the natural order of things" without realising that taxing income instead of resources is a choice and an intervention, and not necessarily the best one.

Edited by Lo-fi

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but who decides the value of the resource that people are using - there would be so many loopholes, appeals and counter-appeals - it would be horrendous. I am sure 'human rights' would come into it somewhere.

perhaps a form of LVT on businesses, large landowners, BTLers - would work while retaining other taxes and reforming council tax

It is not hard to estimate the current market value of a piece of land.

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