Debate Magazine

Killer Arguments Against LVT, Not (479)

Posted on the 18 February 2020 by Markwadsworth @Mark_Wadsworth

From the Evening Standard, the usual Homey bleatings re the mooted Mansion Tax:
Former Westminster council leader Nickie Aiken, now a London MP, summed up the mood in a tweet saying it would “hammer families and elderly people who’ve worked hard for years to pay their mortgages”.
The Vulcan, who somehow sees people who are sitting on massive, taxpayer-funded land price gains in the same light as proper risk-taking businessmen, who generated the tax revenues to subsidise those Homeys, weighs in:
Former Cabinet minister John Redwood said that instead of tax rises the Government should be drawing up a list of targeted tax cuts, including stamp duty, to stimulate growth.

Why the emphasis on stamp duty? I've never heard a client moan about it affecting their business, because it quite simply doesn't, it's a minor irritant at worst.
He said: “You cannot tax people into prosperity.."

This is a tried and tested right wing mantra, and as a matter of fact, it is bollocks, as we will see below

"You do not make the less well off rich by taxing entrepreneurs to take fewer risks and run fewer businesses.”
Nobody claimed you could, at best you could make the less well off a little bit better off, certainly not "rich", and this has got bugger all to do with a Mansion Tax anyway.
Returning to the mantra... governments, or organised societies, are there to provide "public goods", which I shall neatly restrict to the sub-set of "stuff that governments do where the benefit (to individual citizens, or the economy, or society as a whole) outweigh the cost". So the police, or state education, or the road network are public goods; things like HS2 or Help To Buy Sell are just a massive slush fund for ailing corporates who donate to whichever party is in government, and are not public goods.
The spending comes first, that's what helps a nation to prosperity (up to a point and bearing in mind diminishing returns to scale). Those things have to be paid for out of taxes (unless you are happy to risk currency collapse).
Taxes don't help a nation to prosperity (to any great extent), none but the most hardened Marxist would argue that. It's the spending that helps the nation to prosperity. Taxes are just the flip side of spending. The key is to collect as much as possible from taxes which don't damage the economy (fuel duty, Land Value Tax, possibly higher rate income tax, which is a tax on "rent") and as little as possible from those taxes which damage the economy most (VAT, NIC, basic rate income tax).
The UK, like most Western nations, collects most of its taxes in the worst possible way, so we are running to stand still; spending on public goods, as defined, above boosts the economy; it is financed with taxes which hold the economy back.
Starting where we are now, with spending on public goods giving diminishing returns, increasing the bad taxes to pay for more of the same is a hiding to nowhere (agreed on that point).
But what if you start with a clean sheet? The government does just the bare bones (defence, law and order and protecting land titles)?
As Hong Kong or Singapore so ably illustrate, if you can collect the surplus that would otherwise go into higher land prices and rents and recycle that into public goods, the economy can boot strap itself from nothing to developed world status within a few decades.
It's a virtuous circle. Spending on/providing the right kind of public goods, which private landowners would never have paid for, having no incentive to do so, increases land values, meaning more tax revenues to spend on more public goods, increasing land values [etc].

Back to Featured Articles on Logo Paperblog