Debate Magazine

Georgism Without Land Value Tax (2 Or Possibly 3)

Posted on the 18 April 2014 by Markwadsworth @Mark_Wadsworth

Two commonly used KLNs are that "there will be too many losers in the short term" and "LVT will never raise enough money to replace all other taxes."
I'm not sure that the second one is true and it's certainly not relevant to anything, even our 'biggest' tax, income tax, barely raises a fifth of what the government spends each year; tobacco duty (which lots of people think is great) only raises one or two percent.
But hey.
So here's a thought experiment at least:
We work out how much each household or business is currently paying in total tax, things like VAT will have to be apportioned somehow between suppliers and consumers; occasional taxes like Inheritance Tax can be annualised etc.
Then we abolish all these other taxes, and the tax bill for each home, plot of land, farm, shop, office etc is simply set at whatever the occupant's current total tax bill is.
So in the short term, there are no winners or losers at all, everybody's disposable income is worth exactly the same as before and there is no disincentive to getting a (better) job, making higher profits, increasing your turnover or realising capital gains etc.
For sure, people's incomes and business' profits change. If it goes up, households will move somewhere nicer, and businesses will move into larger/better premises; if it goes down, the reverse applies.
By and large, movers will be competing against people with similar gross incomes, so whoever has the highest gross income out of that small group of similar bidders will be the new owner or tenant of each particular building/plot. The tax on that plot is then simply re-set at whatever the business' or household's total tax bill would have been under the old rules (however estimated). That might be lower or higher than the previous occupant's, that doesn't matter. By and large people will be swapping places, trading up and trading down.
Over time it will all level out, and some bright spark will point out that the total tax bill on similar homes in the same street, or shops on the same High Street is pretty much the same etc, at which stage you simply average out all the tax bills for similar premises in the same area.

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