Debate Magazine

Killer Arguments Against LVT, Not (461)

Posted on the 14 June 2019 by Markwadsworth @Mark_Wadsworth

Via Labour Land Campaign, an article in Prospect from last year, which, despite the sub-heading, only touches briefly on LVT.
True to form, a drone at Conservative Central Office - who presumably have a member of staff on their online response team tasked with responding to the day's Google search results for 'Land Value Tax' - leaves the following sob story:
I [bought] my house for £100,000. I live in it for 20 years. It is big enough for my family, the transport links are OK for work, schools for the kids are accessible.
Because of things like 'Help To Buy' and ultra low interest rates, house values in my area mean my house is now worth £1m. In the meantime my pay has doubled, but because of inflation I am actually no better off than when I bought the house. A land value tax at say 1% would mean I would have to find an additional £10,000 a year, despite being no richer.
Yes, my house may be 'worth' £1m, but that doesn't mean I actually have £1m, or even an extra £10,000. I would have to sell. I might well not be able to afford anything else local, and have to move jobs, the kids move schools, and all as a distressed seller. This is politically unlikely, and economically crass.
If you want to tax houses on value, start whittling away at the exemption from CGT - but gradually.

A proposal to get rid of the capital gains tax exemption for main residences would meet with the same vitriolic response; and taxing long terms gains rather than imposing an annual service charge is a terrible idea anyway, so let's skip that last bit.
Why do I have zero sympathies with this person? Because that's basically my life story (and typical for millions of Londoners who bought more than 20 years ago, we're nothing special). Just replace '£1 million' with £800,000 (based on recent selling prices of larger and smaller homes on my street). I know how bloody lucky I am.
Both of our kids changed primary schools halfway through because of moving, it was no biggie, at that age, they adjust. They both always went to secondary school using public transport by themselves; if we moved, they wouldn't change schools, they'd just take a different route. Plenty of Londoners spend an hour commuting, you don't change jobs just because you move within London. We moved outwards (white flight) and we took the extra twenty minutes each way each day on the chin.
Like this person, I don't have actually have £800,000, nobody said I did. That is not, and never was, the point.
This person makes clear, that house prices/rental values are a trade-off for convenience (von Thünen's Law of Rent). They don't want to move to a cheaper area, which in London terms means 'further out on the Tube or rail network' because of the extra time/cost spent commuting, sure, why would they? But they claim they don't want to pay the extra £10,000 a year either.
So what will they choose? The inconvenience or paying the £10,000?
We know for a fact that this person is happy to be £10,000 a year worse off as a trade-off for the convenience. How? Because they could sell their 'big enough family home' in Islington (or wherever it is) and buy something that for half that in Barking, or Harlow, or Croydon or somewhere cheaper/less convenient, banking £400,000 tax free cash after SDLT, moving costs and new carpets, which would give them an extra £10,000 a year cash to spend for the rest of their lives.
So the chances are, they'd pay the additional £10,000 (even assuming there weren't corresponding reductions in other taxes which would make most working couples better off). I know that I would, because the alternative is me and Mrs W and both of our kids spending more on travel and wasting an extra X minutes a day each sitting on public transport. We might pay our £8,000 a year through gritted teeth, but we'd pay it.
Seriously though, what planet are these people on? There are plenty of people outside London/south east who bought homes for £50,000 - £100,000 twenty years ago which only have kept pace with inflation or less.
How much sympathy are they supposed to feel for those with an unearned windfall gain - made at the taxpayers' expense, as the drone admits - equivalent to an average lifetime's earnings who are asked to pay a little bit of extra tax?

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