Debate Magazine

Killer Arguments Against LVT, Not (485)

Posted on the 24 September 2020 by Markwadsworth @Mark_Wadsworth

One of the main KLN's is that "Landlords will pass on the tax to their tenants, so tenants will be worse off".
I've done this one many times before, you have to explain about elasticity of supply and demand and most people don't, or won't, accept this logic (based as it is on observation), so that's a waste of time and energy.
The shorter rebuttal is, "OK, if the government increases income tax or NIC rates, can all employees just ask their employer for a pay rise to compensate? Can the self-employed just put their prices up?"
Clearly, there will be isolated instances where this happens, but most will just have to accept lower net incomes.
We've seen what happens when powerful trade unions in the 1970s pushed through above-market pay rises. It worked short term, but after a few years, the factories just closed down. If landlords try the same, they will end up with a load of vacant homes, so they will have to drop rents again to get tenants back in (or else they will have LVT bills with no income to pay them), thus rent levels will fall back to where they were before.
The fall-back rebuttal is, "So what? The LVT increases would go hand in hand with NIC and VAT reductions, so even if landlords 'passed on' every penny of the LVT, working tenants would end up a lot better off, just the same as working owner-occupiers."

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