Debate Magazine

Killer Arguments Against LVT, Not (464)

Posted on the 17 July 2019 by Markwadsworth @Mark_Wadsworth

From Bristol Live, a fairly favourable write up about a local Green councillor's proposal to replace Council Tax with LVT.
He is top man and makes some good points:
As a result, said Mr Stevens, tenants will end up with more money in their pockets, which could improve the local economy as people visit shops more frequently. Describing the overall impact, Mr Stevens said: “The tenant is better off and the landowner is worse off and the shopkeeper is better off and the owner-occupier is about the same.”
Another advantage that LVT enjoys over council tax, according to Mr Stevens, is that it takes into account ‘unfair enrichment’ - which is when a property’s values are affected by state spending. An example, said Mr Stevens, was the establishment of Redland Green School in north Bristol.
“Local property values jumped because it meant you didn’t need to send your children to private school and that enrichment is caused by the state investment - but the taxpayer bears the cost and people living nearby get the benefit,” said the councillor. If LVT were implemented, public investment which raises the value of a site would end up benefiting the community through higher tax receipts, proponents of the tax argue.
In a further endorsement of LVT, Mr Stevens emphasised how easy it is to collect. He said: “Wealth tax is very easy to avoid, as has been proven in a number of countries, but land tax you can’t avoid because the land is here - you can’t tow the land offshore. So even if your company is offshore you still need to pay Land Value Tax.”

There's a rather bizarre KLN in the comments:
Stevens says that council tax is regressive and should be replaced by the 'progressive' LVT. Whilst it is true that council tax is regressive it is by no means clear that LVT is progressive, as half the population (those who own land) will pay all of the tax and tenants (council and private) will, by very definition, be exempt. Progressive taxation means everyone pays something (however small) towards services and facilities. It's an important principle.

That's pretty much the opposite of 'progressive' means!!
'Progressive', in a tax technical sense, simply means that people with more [of something] pay a higher rate of tax than people who have less [of that thing]. So income tax is 'progressive' (20% then 40% then 45%) and Employer's Employee's NIC is 'regressive' (12% then 2%). The ultimate in regressive taxes is a Poll Tax, which is what he is alluding to.
(Actually, LVT based on land values could be designed to be progressive or regressive (i.e. with higher rates or lower rates on land over a certain value). IMHO, a flat rate of LVT is best, but this would still be 'progressive' in the wider sense.)
The fact that only half the population would be legally liable to pay the tax (those who own all the land) makes it a 'progressive' tax in the wider sense.
Householders who own their home and garden could, under this system, end up paying three times the amount they are now paying in council tax.
Sure, if it were a £ for £ replacement for Council Tax and applied at a flat rate, the tiny minority own homes worth three times as much as the average will be paying three times as much as they did under Council Tax. And more than half of owner-occupiers will pay less. So what? Those are the rules and this is neither an argument against or in favour.
Tenants will still pay the tax of course, it is included in their rent. Their landlord will collect the rent, pass on the LVT element to the council and keep the rest.
It's also nice to see the "tenants won't pay anything" KLN, I'm sure if I scroll through the comments, there'll be the "landlords will just pass on the tax" KLN, which is equal and opposite bollocks.
And then there's the tired old classic:
And how do they intend to tax the estimated 25% of land in England and Wales which the Land Registry say isn't actually registered? Because if it's not registered, they won't know where to send the bill...

Which is ably batted away by...
Send it to the new owners after that 25% of land has been publicly auctioned.

Although the actual answer is a bit more mundane.
The mythical 25% of land that is not registered is mainly low value farmland (not worth taxing), 99% of which is registered on a separate list for for landowner subsidies (if it were worth taxing - easiest is just get rid of the subsidies and busk it from there).
99% of urban land (which is 99% of all land by value) is very much registered. And that's never been a problem for Business Rates or Council Tax, why is it suddenly a problem now?
If tenants'occupants don't want to pay, they just have to tell the council who and where their landlord/the owner is. That covers 99% of the 1% of cases where the owner of urban land and buildings is not registered. So only a handful of cases will fall through all these cracks and have to be auctioned off.

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