Debate Magazine

Fun Online Polls: LVT Vs Wealth Tax; the North South Divide

Posted on the 17 October 2017 by Markwadsworth @Mark_Wadsworth

The results to last week's Fun Online Poll were as follows:
3% of £80 is more than 0.5% of £100. So what would raise more revenue - Land Value Tax or a general Wealth Tax?
Land Value Tax - 94%
A general Wealth Tax - 6%

Thanks to all 33 who took part, a low turnout but an arcane topic.
I would have thought the maths was obvious, but I got some real grief from two acadamics/communists/Homeys (their stand point was not clear) on Twitter who demanded that I refer them to a 'study'. I asked them what they thought the figures were and they refused point blank to even give a hint as to what they thought the numbers might be. They just insisted I was wrong.
For sure, my numbers are rough and ready, but the principle stands.
1. Land and buildings are at least two-thirds of total household 'wealth'. The net cash is negligible (one man's mortgage is another man's deposit) and the rest is largely shares/pension funds.
2. We know from the French that there approx. 1% wealth tax rate was driving wealthy people abroad, which is why Macron wanted to exempt everything except land and buildings. By exempting non-land 'wealth', he reasonably expected to increase overall tax receipts (to howls of outrage from Homeys and Socialists alike).
3. Politically of course, you can only apply a wealth tax to the 'wealthy' so there is an arbitrary threshold of EUR 1 million or something, pushing potential receipts down much further. Imagine the outcry if they had abolished the threshold and made everybody pay on everything.
4. Applying a wealth tax to cash is madness anyway, there's already income tax on interest income from cash savings (ha!) and a stealth tax on cash savings called 'inflation'. Applying wealth tax to shares is also madness, as dividends are gains are usually taxed. The more cash and shares you have, the more tax (income tax, inflation tax and capital gains tax) you pay. That's quite enough tax.
5. Unlike the critics, I have at least prepared one wealth tax return, back in Germany in the 1990s. Their wealth tax was about 1% p.a. with a high threshold, at the last count it raised about EUR 5 billion a year whereas their very modest Domestic Rates (Grundsteuer) raises EUR 20 billion a year, which is a small fraction of one per cent of what houses are worth.
6. In the UK, the closest thing we have to Land Value Tax is Business Rates, which works out, coincidentally, to about 2% - 3% of what the land and buildings would sell for. Council Tax/the TV license fee are a distant poor cousin of LVT (being very regressive) and those two between them raise £30 billion a year, less than 0.5% of what houses are worth.
7. The closest thing we have to 'wealth tax' is Inheritance Tax which raises a modest £4 billion a year, assuming a death/inheritance every 40 years that implies an annual rate of about 1% on the value of 'wealth' over a relatively low threshold (£325,000). Those above the threshold own a disportionate amount of 'wealth' (probably at least half of all of it) so an annual wealth tax of 1% on all 'wealth' would raise maybe £10 billion a year.
8. The real world also tells us that most countries have some sort of tax on land and buildings; very few have 'wealth taxes' in the narrow sense, which gives us more clues. Not that academics/communists/Homeys have ever put much thought into this.
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A recent article in The Daily Mail on the North-South divide said that it started when the Vikings invaded in the north east; they got as far as a line from London to Chester, with our greatest King ever (Alfred) holding the line to the south-west. The modern A5 road, which in turn runs along an old Roman road between their two major outposts (pushing the origin back even further) is the modern border. From south-east to north-west, in other words.
That's all news to me. As a born Northerner who's lived in London half his life, I always assumed that that the true north-south divide runs diagonally in the opposite direction, from Bristol to Norwich, from south-west to (slightly more) north-east.
(Watford Gap is pretty much where the two lines cross, giving it extra significance.)
In the south there are more Tory MPs, higher house prices, smug Home-Owner-Ists and rent seekers*, drier and sunnier weather, lovely country lanes for driving on, more arsehole drivers on the motorways, flat countryside with no lakes or mountains, containing London and a few little towns.
The north is the opposite; more Labour/SNP/Plaid Cymru MPs, cheaper houses*, more people with proper jobs, terrible weather, fewer good driving roads (A66 excepted), courteous drivers who stick to speed limits, dramatic valleys and mountains, rivers and lakes, dotted with medium sized towns.
* The BBC published some good stats on inflation-adjusted house prices since 2007 today, the line between 'winners' and 'losers' is pretty much Bristol to Norwich.
So that's this week's Fun Online Poll.
The UK's North-South divide runs from... Bristol to Norwich or London to Chester.
Vote here or use the widget in the sidebar.


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