A journalist (who shall remain nameless as I do not disclose my sources:-) rang me this morning to chat about Land Value Tax, so we met at lunchtime to go through an implementation proposal I had drafted, I can't find the spreadsheet we were looking at, but apparently it's on the Labour Land Campaign website somewhere.
To summarise, including the stuff I didn't say, but wish I had...
1. I am a simplification campaigner as much as a pro-LVT campaigner. Even the worst taxes or subsidies can be made a bit less bad if they are at least simple and netted off as far as possible - there is no point subsidising something and taxing that same thing. Either pay a small net subsidy (and don't tax it at all) or tax it at a lower rate (and scrap the subsidy). At least that is the honest thing to do.
2. LVT is clearly the least bad kind of tax, compared to horrors like National Insurance or Value Added Tax. Endless articles have been written about why LVT is good and other taxes are bad, and either you understand them or you don't. I can explain stuff, but I can't make people understand stuff which they don't want to understand. (I can hear and I understand how sound waves and the inner ear works, but I can't give deaf people their hearing back).
3. The only real 'problem' with Land Value Tax is political. In the UK, we have a weird slavish worship of house prices. The last half century has shown, if house prices are rising, the party in government will be re-elected; if they are falling, the opposition party will win. So the politicians, of whatever party, don't like to utter the words "Land Value Tax" because - it is widely believed - this tax would push down house prices.
4. The UK already has a dozen fairly minor taxes (which between them only raise about one-tenth of total taxes) on housing, land values and private wealth generally. If we - in the interests of simplification if nothing else - replaced all these with a flat-rate LVT, there would be little impact on house prices and most households would pay the same total amount of tax over a lifetime as they do now. So this should be politically acceptable, assuming a rational electorate. (Business Rates just needs a few tweaks and it's LVT, that's a minor issue).
5. Annual revenues from the specific taxes in that spreadsheet (figures two or three years out of date) were as follows:
Council Tax - England - £24 bn
Council Tax - Scotland - £2 bn
Council Tax - Wales - £1 bn
Domestic Rates - N Ireland - £1 bn
Less Council Tax benefit, rebates etc - £(5 bn)
Stamp Duty Land Tax on housing - £8 bn
Capital Gains Tax - £6 bn
Inheritance Tax - £4 bn
TV license - £4 bn
Stamp Duty on shares - £3 bn
Insurance Premium Tax - £3 bn
Let's call it £50 bn all in.
Maybe we could scrap Housing Benefit for private landlords and exempt private landlords from income tax as a quid pro quo, in which case, the required revenues are only £45 bn. And scrap Help To Sell Buy, in which case, required revenues are only £44 bn and so on.
6. The purists are quite correct to say that LVT should be based on site premiums i.e. the potential rental value of land and buildings, minus the cost/value of the actual physical building. For a low level LVT, it is quite sufficient to base it on potential selling prices. Either way, there has to be some system of valuations, so I explained how we can adapt the Council Tax system very easily to get 80% - 90% of the way there. Is this the best way of doing it? For an expert valuer, clearly not; for administrative simplicity, I think yes, until somebody can think of something simpler and better, then I'll support that.
7. To summarise this summary - the UK already has LVT!! It is just diced and sliced and heavily disguised - the little people pay Council Tax and the TV license fee; buyers/sellers pay Stamp Duty Land Tax; the really wealthy pay Inheritance Tax when they die; etc. Each of these taxes is a minor tax, raises relatively little revenue and is a bad tax in itself.
If you replace them with LVT, you have one slightly bigger tax (which would still raise less than half as much as VAT, for example) which is a good tax; most households would pay much the same over a lifetime; and the impact on house prices would be negligible (might push them up a bit, might push them down).
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