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andrewducker ([personal profile] andrewducker) wrote2012-05-14 12:00 pm
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Re: The IFS backs a land value tax

[identity profile] skington.livejournal.com 2012-05-14 02:21 pm (UTC)(link)
One of the main ideas behind a land tax is this: in general, you want to tax things that are either inherently bad (e.g. greenhouse gas emissions, smoking) or are an unavoidable byproduct of being perhaps too wealthy (e.g. the Edwardian/Victorian-era tax on carriages - you had to have your own as a status symbol, as only plebs rented carriages).

In the second category we also have things like income and inheritance. If people are earning comfortable to huge salaries we want to tax some of that, partly because they can afford it, partly out of a will to reduce disparities in salaries, and partly because where else are you going to get tax revenues? But that leaves you open to arguments from the rich and/or entrepreneurs that you're penalising hard work. You can decide to tax inheritance, on the basis that people are getting a windfall of cash and/or property purely because of who their parents were, but then you'll run up against edge cases (often manufactured) of farmers not being able to pass on the family business etc.

Also, wealth and inheritance are always going to be gameable somehow - e.g. do the hedge fund thing of claiming revenues as capital gains rather than income, or declare your residence in a tax haven to avoid paying tax in this country; assign your property to a trust fund, etc.

A third reason to tax something is the tax being easy to collect - levying a tax that brings in 1% of GDP when it costs you 0.3% of GDP to collect (made up numbers) isn't going to make you popular, and makes it easy for opponents of the tax to go on about costs. This is the main advantage of a VAT - it's a simple fee added on to everything. It has the disadvantage of being regressive, though, unless you lower- or zero-rate things that the poor are disproportionately likely to buy, and even that isn't usually enough.

A land tax has the two great advantages that it's impossible to game - it's a matter of (mostly - see below) public record how much land you earn - and there are no ill effects on taxing how much land anyone has. It's not like taxing land is going to stop people making land, after all.

The main reason no government has moved towards a land tax, as I understand, is that it would take so long to accurately survey how much land people actually own - which proprietors currently have no incentive to keep accurate, as pretty everyone's in Council Tax band D - that by the time the tax was ready to levy, it would be near the end of parliament, with every chance that a new government would come in and take advantage of the previous government's hard work (after complaining about all of the money the previous government had wasted on such a hare-brained scheme, of course).

Re: The IFS backs a land value tax

[identity profile] naath.livejournal.com 2012-05-14 03:44 pm (UTC)(link)
There are ill effects. Notably that if a person owns a large patch of land but has no income (or is spending all their income paying the mortgage on the land) then they are going to have trouble paying the tax. Depends I guess what level the tax is set at; I'm not going to cry about people being forced to sell half their 100acre country estate, but if it means people loosing their houses that'd suck.

Re: The IFS backs a land value tax

[identity profile] skington.livejournal.com 2012-05-14 08:01 pm (UTC)(link)
Assuming that taxes are set at a reasonable level, so for most people the tax is revenue-neutral, I'd argue that if someone, as a result, can't afford to live in their house, then that's a good thing - the tax has shown that they're living above their means, and they should really move somewhere cheaper and let someone whose revenues would better match the value of the land move in.

One thing you can do also is value the land, then announce that over (say) 5 years, council tax will be phased out and land tax phased in, on a pro-rata basis. That way, if you're currently paying £1000 per year on council tax, and it's going to go up to £2,500 in 5 years, you can work out whether you can still afford to stay there, or whether you should make plans to move out.

Re: The IFS backs a land value tax

[identity profile] naath.livejournal.com 2012-05-15 08:36 am (UTC)(link)
"the tax has shown that they're living above their means"> the tax has shown nothing; it has simply asserted that they are doing so. If the tax is simply to be the same amount as council tax but with a shiny new coat of paint then I don't see the point of it at all; other than being a bothersome exercise in bureaucracy.

Re: The IFS backs a land value tax

[identity profile] a-pawson.livejournal.com 2012-05-14 04:00 pm (UTC)(link)
The disadvantage though is surely that whilst land ownership is a matter of public record, someone has to decide the value of your particular piece of land. Nobody would dispute that a square foot of land in Canary Wharf is significantly more valuable than a square foot of land in the outer Hebrides, but how much more valuable? And if I put a huge skyscraper on my land it presumably has just become even more valuable yet?

Re: The IFS backs a land value tax

[identity profile] skington.livejournal.com 2012-05-14 07:56 pm (UTC)(link)
Ah yes, this is the bit I missed out - varying land values. That's one of the things that adds complexity to the process, and also requires some up-front decision-making.

But one of the appeals of a proper land tax is that no, plonking a sodding huge skyscraper on your bit of land doesn't make the land any more valuable. It should still be taxed at the same rate. (Of course, the resulting property is worth more than another, smaller property on the same land, but that's a separate issue.)

A corollary of this is that a land tax encourages building on brownfield sites - or, rather, discourages people holding onto brownfield sites without doing anything on them, because they're taxed at the same rate as they would be if they had something productive on the site.
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