Via Carol Wilcox, from the FT readers' letters:
Mr Wolf suggests raising “green” taxes and taxes on economic rents (mainly land). These may be efficient or worthy in themselves, but by their very nature they are not particularly “elastic” to economic activity: in rate of revenue increase they are less than proportional to gross domestic product. In this regard they suffer from the same vice as the tax and benefit changes that cut reservation wages, generated the compositional change in employment, and held back revenue growth.
Michael Kuczynski, Pembroke College, Cambridge.
WTF. Rents are actually more than elastic to economic activity, in the absence of government measures to reduce or increase the amounts going to rent, the natural tendency is for rents to increase as a share of GDP when the economy grows and vice versa.
LVT and other taxes on rents do not cut reservation wages by one penny; by stimulating the economy, however slightly, they increase them.
Taxes on output and earnings distort the composition of employment, not LVT which is entirely neutral.
And given that only 10% or 15% of the UK's total tax revenues are taxes on rents (Council Tax, Business Rates, Fuel Duty) collecting maybe a quarter of economic rents, there is plenty of scope to increase them, with a double-plus increase if taxes on output and employment are reduced in step.
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