Good news and bad news

Under the proposals, the current income tax threshold would be raised to £10,000 which would mean four million low paid workers and pensioners would no longer have to pay any income tax.

That\’s the good news, although for both logical and moral reasons it should be linked to the minimum wage full time, full year earnings. Somewhere in the £11,500-£12,000 bracket.

The moral reason is that if we have a law stating that you cannot sell your time for less than this then it is immoral (in the limited sense that a taxation policy can be immoral) for the government to take a slice of this.

There\’s a logical part too: the Joseph Rowntree Trust has done a couple of surveys asking what people thought was a reasonable definition of poverty. The pre tax number was around £13,400: which equates very nicely to that £11,500 or so post tax. (Please note that JRT was asking the right, Smithian, question about poverty: a linen shirt is not a necessity for a working man but if the society assumes that a linen shirt is indeed such a necessity and a working man cannot afford one then by the standards of that society the working man who cannot afford one is indeed poor.)

This however is insane:

Mr Cable will detail a new 0.5 per cent levy on the value of properties over the £1 million threshold.

We have huge regional variations in house prices. This is thus more a tax on living in a certain region than it is upon being rich as stink.

Actually, that\’s true of our incomes and income tax system as well, but that\’s another matter.

12 comments on “Good news and bad news

  1. The proposed housing levy is flawed in many ways, but at least they want to tax the right thing, i.e. property rather than income or consumption. A LVT for everyone (or more appropriately, for everywhere) would be better, but this would at least be a step in the right direction.

  2. I see those LVT advocates never, ever give up, do they? There is nothing fair about it: there is no difference, morally, between my earning power rising due to circumstances partly out of my control, and being taxed for that, and my land rising in part due to reasons outside of my control, and being taxed on that. And the problem the LVT crowd have not answered to my satisfaction is how to work out the “unimproved” value of land.

    What these taxes all try to do is make us all tenants of the state. Nuts to that, frankly.

  3. “if the society assumes that a linen shirt is indeed such a necessity..”: who is this person “society” who is capable of such judgements?

  4. I see those LVT advocates never, ever give up, do they?

    Nope 🙂

    if the society assumes that a linen shirt is indeed such a necessity..

    Following on from dearieme, this sounds like a definition of relative poverty, which I thought we weren’t supposed to worry too much about, so long as absolute poverty has been prevented.

  5. “this sounds like a definition of relative poverty, which I thought we weren’t supposed to worry too much about, so long as absolute poverty has been prevented.”

    That’s not my view. While I think the Polly view of relative poverty (40% of the median wage, is it?) seems arbitrary and impossible to satisfy, I can certainly see that the definition of poverty has changed over the centuries, and by extension over decades.

    Someone with a telephone 60 or 70 years ago may have been considered well to do, whereas today living without one is to be poor. The same can be said for indoor toilets, central heating, three meals a day, some quantity of leisure time, and I expect, soon, an Internet connection.

  6. Ed, the trouble with the LVT folk like you is your blindness to the point that while land is different in a trivial and true sense, from labour, it is a difference of degree, not of kind. I fail to see why land should be singled out in the way you mention; while land is obviously not created by Man, the value of my own labour is something not entirely in my own control, either, since the value of my work in part will be affected by the preferences of others, etc. So presumably, for consistency, one should try to figure out the rise in the “unimproved” value of a person’s labour.

    I have long discovered that debating with Georgists soon brings out a latent, socialistic dislike of land ownership as such. The old Liberal Party, at the end of the 19th Century, allowed the Georgists land-hatred to help shape the budgets of the early 20th century and the Liberals, and now the LibDems, are continuing in this inglorious tradition.

    Should be a boon for the Tories contesting seats in the wealthy southeast, no doubt.

  7. Johnathan Pearce: “I fail to see why land should be singled out in the way you mention; while land is obviously not created by Man, the value of my own labour is something not entirely in my own control”

    But whatever you produce with your labour is created by you, irrespective of the value others place on it. You are confusing two separate concepts.

  8. Johnathan, I don’t have any socialistic dislike of land ownership, I would just like
    * to prevent the hugely damaging property bubbles that have regularly happened in the UK over the last 40 years
    * to challenge the NIMBYs that prevent development
    * to encourage government to add value to where we live
    * to expect those who have profited most from new public infrastructure (e.g. a new tube station in London) to pay back an appropriate share of their windfall.
    * to shift some of the burden of taxation from labour and consumption to property, which is comparatively undertaxed.
    * to stop the loss of competitiveness of UK industry resulting from the above.
    * I would like to reduce the overall tax burden as well, but that is a different debate.

    I don’t claim that LVT is perfect, but it would be better than the mess we have now.

    I also agree with you that this Lib Dem policy will benefit the Tories in the SE (not that I want the Lib Dems to win anyway), because too many people still believe we can get rich selling each other houses for ridiculous amounts of money. I am particularly amazed at the obsession with overpaying for property in the UK given how pathetically bad in design and build quality much of our housing stock is. One example was quoted in the Sunday Times a couple of years ago, where a retired couple spend over £1 million on a new build flat in London, and had to spend another £100k on sound-proofing it so they couldn’t hear their neighbour sneeze.

  9. this would at least be a step in the right direction

    Guess I should have read the full proposal. The new levy can be deferred until after death (i.e. it is an inheritance tax), and is temporary until they can introduce a local income tax. The Lib Dems are as daft as always. Good to know the universe is functioning correctly.

  10. Ed, well indeed. And as I have pointed out to other fans of land taxes, if you defer them to after a person has died, it introduces quite an additional amount of complexity into the system. Which is quite an issue when LVT is advocated by folk claiming how simple it is. Not quite, it appears.

    All taxes have their wrinkles. The best that can be said for land taxes is that they are not as bad as some others, but that is damning with faint praise.

    As for the ability of land taxes to curb land price bubbles, such bubbles are largely caused by things such as daft monetary policy. In Hong Kong, they have land taxes, and yet prices have swung around quite sharply.

  11. Johnathan, I would not allow any deferral of paying the LVT. There is no economic reason why it should be necessary.

    All taxes have their wrinkles. The best that can be said for land taxes is that they are not as bad as some others, but that is damning with faint praise.

    Maybe so, but assuming we are going to have to pay some tax, lets choose to do it by the least damaging system.

    Hong Kong: I don’t know enough about its economy to comment.

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