Land Value Taxation

There are a number of us who think that Land Value Tax should be implemented (Hey, even Polly T has been known to mumble about it) as a solution to at least some of the ills in our current taxation system. The imposition of such a system would include measures like this:

Tax inspectors have divided England into 10,000 new "localities" with each neighbourhood ranked on the socio-economic class of its residents and environmental factors such as crime and traffic levels.

The inspectors have even purchased demographic data disclosing how many company executives, pensioners or students live in particular streets, The Daily Telegraph has learned.

This has been collated on a secret database which is being used to assess the desirability of neighbourhoods to help determine council tax bills if Labour wins power again at the next election.

The Conservatives have branded the proposal "a nice neighbourhood tax" which will penalise middle class families struggling to cope with the economic downturn. It is feared the revaluation will quickly be implemented if Labour wins the next election to help fund the growing deficit in Britain\’s public finances.

LVT is of course designed to capture the value that society itself adds to a particular piece of land. A "nicer neighbourhood" is an excellent example of exactly that. So this would appear to be a step forward.

A revaluation was due to be conducted in 2007, but was postponed until after the next election over fears that millions of families would see a significant hike in their bills. The average annual council tax bill is already almost £1,400 a year and a recent study suggested most town hall leaders were expecting above inflation increases next year.

The information seen by The Daily Telegraph however, suggests middle class home owners could be facing even more punitive council tax rises if Labour wins a fourth term.

However, leacing aside the LVT aspects, I\’m not sure why a revlauation should raise council tax in general. It shouldredistribute it, for sure, as different areas have increased in value by different amounts, but there\’s no reason why a revaluation should lead to higher bills in general.

Although, of course, I submit to the obvious logic that any change in any tax system is going to be used to raise the general level oftax.


19 thoughts on “Land Value Taxation”

  1. It also has toss-all to do with Labour (except to the extent that, if they’re sufficiently spineless, they may cancel the obviously-needed revaluation, which has without a shadow of doubt been driven by civil servants rather than political concerns, for fear of bad publicity).

  2. If they really wanted LVT, they’d simultaneously scrap a shed load of other taxes (Council Tax, Business Rates, Stamp Duty Land Tax, Inheritance Tax, Capital Gains Tax) and base in actual selling prices of properties (suitably adjusted to arrive at underlying location values) so that it is clear what the tax is on.

    Actual selling prices as recorded by HM Land Registry are already recorded and freely available, as are addresses, ownership and plot sizes. There is no requirement for any further information above and beyond that.

    I suspect that they are doing it deliberately badly to bring the whole idea into disrepute from the start, to try and pit the ‘hard pressed home-owner’ class (the bulk of the electorate) against the Friedmanites who think it is the least bad tax. I guess they win this round. Bugger.

  3. Hang on a bit. What you say is very untrue. The value of property may well have increased in some areas of the country more than others – but that does not necessarily mean that the owners or tenants are rich.
    As the Infrastructure has improved and London become more accessible, so the values may have increased, but the ‘locals’ still live here, have the same homes and same jobs and the same salaries.
    You cannot suggest that everyone living in one area is rich and everyone living in another is poor.
    The problem with most people is that they insist on using band D as an average – you can’t do that.
    Stick my little house up in say, Durham and the council tax would fall by possibly by three bands. Pensions are the same across the country.
    If you must revalue, then it has to be done in a c0mpletely different way. Localised banding may be the answer.
    You cannot expect one section of the comumity to continually bail out another, there has to be a fairer system – a system fair for all.
    The treasurer of Hampshire County Council will tell you that if he received the same RSG as say Wandsworth or Westminster, the good people of Hampshire would not be expected to fund their county council at all.
    This year, many Shire and some Unitary authorities received grants well below the rate of inflation and are promised even lower terms next year.
    Can’t be fair to be expected to pay £1,700 on a modest two bedroomed home. True it has a good garden. So, under the LVT system we could expect to pay more.
    None of the major parties have come up with an answer to funding local government.
    This Government has it’s finger in about 94% of the running of LG. Let anything that the Government ordains be centrally funded, let everyone pay the same towards local government services – after all we all use them

  4. Actual selling prices as recorded by HM Land Registry are already recorded and freely available, as are addresses, ownership and plot sizes. There is no requirement for any further information above and beyond that

    But don’t these include the value of the buildings etc on top of them? And so wouldn’t an army of inspectors need to go around to estimate their value in order to remove it from the sale value?

  5. Matthew, for sure they include buildings. On a rough and ready basis, a sensible gummint would wait until the bottom of the house price cycle in a couple of years time, knock off a flat two-thirds for bricks and mortar value and then get on with it (click link above).

    Or two-fifths, or one-half, based on a sample of actual houses actually sold bearing in mind their rebuild costs for insurance purposes. A lower fraction = a higher % rate, is all. That’s just details.

    This whole “army of inspectors” idea is another myth put out by the anti-LVT brigade. Sure, all taxes need to be administered, but a simple LVT would a lot fewer administrators than are required to administer Council Tax, Council Tax Benefit, Business Rates, SDLT, Inheritance Tax etc etc.

  6. “However, leacing aside the LVT aspects, I’m not sure why a revlauation should raise council tax in general.”

    It shouldn’t. But it’ll create winners and losers, and the losers will be more angry than the winners are happy. Therefore revaluations are politically unpopular.

  7. ACO,

    What you say is

    a) Illogical
    b) Impossible
    c) Infunded

    Do some numbers PLEASE people. CBI, by that I mean a proper one where people do not have to still claim means tested benefits, is hugely expensive.

    p.s. I am not concerned about an army of prod-noses, just the inability for implementation of LVT because in the end, your neighbours improving the value of land will result in some getting a bigger bill and being unable to move the building on the land you own whilst unable to afford the tax upon that land.

    LVT – improve your environment and the State will tax you more for your pains. Nice.

  8. RO, AC1 never committed himself to any particular level of CBI – this might be £5 a week or it might be £100, we’ll just have to see what’s left over.

    RO, like most LVT opponents you focus on the few people who might end up worse off while ignoring the vast majority who would be better off.

    AC1 is a fundamentalist in these matters, and has said often enough he would scrap ALL taxes apart from LVT. What’s left over once he’s paid for core functions of the state goes on CBI.

    I am a moderate and would have a 5% tax on capital values in excess of bricks and mortar to replace council tax, stamp duty, inheritance tax etc. So if your house goes up £10k in value (without you putting in any effort), you pay an extra £500 a year. Similarly, I would sack three million quangista and scrap VAT, Employers NI, higher rate tax. Yer average household is thus £4,000 per year better off. But this plan is not good enough for you either.

    You might as well argue that under my plan three million quangista would be worse off and hence that it is a bad plan.

    You are starting to think like a politician, i.e. “Are there votes in this? Will this appeal to the average Mail reader?” rather than asking yourself “Is this a good way of financing those things that society in general does by making the tax proportional to the VALUE of what society does for you?”.

  9. Strange that there is a lot of discussion of LVT
    in the blogosphere but very little in the poisonous atmosphere of Planet Parliament: stranger still since people of different political hues tend to agree on it.
    Surely, apart from the local taxation replacement aspect, the primary function of LVT is to allow the Guv to revive the economy
    without the cheap credit going into housing.Since the whole world economy
    is realing from the effects of a bust in housing markets,the “plight” of people whose houses are rapidly going up in value while they are so economically inactive as to be unable to benefit in the improved local economy, is a risk worth taking.Most schemes of LVT allow for the deferment of payment with retired people until
    the Inheritance Tax settlement; there does not seem any reason why unemployed people cannot be treated the same with a lien put on the house for collection when it is sold (or changes hands).There are those who believe everybody should have the option of deferring payment in the same way, though this seems somewhat unfair because the people involved will benefit from reductions in other taxes ( as listed by Mark Wadsworth)

  10. Mark, you have hop-skip-jumped into presuming my thinking. Bad idea.

    Unless CBI replaces welfare it is yet more bureaucracy, more cost and just redistributive. If that is OK for you, then you are talking like a Socialist/Social Democrat. CBI only make some “sense” in Libertarian terms if it were universal and replaced welfare because it would treat each person the same (i.e. no special privs, so better in Rule of Law terms).

    As to LVT, you seem to think everyone will be better off. I am not convinced. At all.

    Why should the State get a piece of the value of my property if it goes up. Will they refund me if the value falls? I mean really refund, not just cut taxes. Doubt it. To think you can just demand cash from people because they and their neighbours or some other agency have improved their locale – this is the “society”, but you think the State should get it all – is outrageous.

    DBC Reed mentions a dimension I prefer to keep in the mix – the ability to defer payment until the property is sold.

    However, who do you think will be in a position to buy up said property, eh? Think about it – they will be mostly the rich, investors, property magnates and the State, those who can earn a margin for property – precisely the people you don’t want cornering the market.

    LVT is basically making everyone a State tenant and the State have first call on the very roof over your head (you cannot move the bricks and mortar). LVT is so preculiar that it is called a “tax” to make it sound BETTER. It is Land Value RENT, it is Nationalisation.

    p.s. I have no issues about withdrawing state funding to whole swathes of QANGOs, so don’t try and muddy that water, which also means your last paragraph is utter tosh.

    As for ending VAT, we have had that discussion and I still cannot understand why you cling to your irrational stance in light of the facts. Oh, forgot, you call a tax applied to all sales regardless of source (imported or domestic) as a “subsidy”. Riiiight. I want to tax UK companies less so they have an advantage over foreign producers.

  11. RT, you have not just ‘presumed my thinking’ you are quite clearly adopting the traditional Daily Mail/Guardian tactic of accusing me of saying exactly the opposite of what I have said.

    1. Of course CBI would be a complete replacement for Welfare. I’ve not met anybody who seriously proposes it would be in addition.

    2. I never said each individual household or business or landlord would be better off if we replaced Council Tax, Business Rates, SDLT and IHT with LVT. On the whole, most would end up paying the same in the long run. Some would clearly win out, some would clearly lose. That is a separate issue to the fact that LVT is the ‘least bad tax’ for an infinite number of reasons, none of which you have addressed.

    3. Your idea that people would be priced out of their own homes en masse, with wicked evil landlords snapping up those properties to rent them back to the dispossessed betrays an absence of understanding of economics.

    If people genuinely can’t even afford to pay the LVT to live somewhere (a tax which is 50% or so of the rental value of the location) then they certainly won’t be able to afford to rent the same places (which is of course 100% of the rental value of the location AND of the building).

    The point is that LVT, if designed properly, would keep house prices low and stable. By definition, it would be perfectly affordable for 99% of home-owners. Yes, 1% might lose out. Compare that with the millions of people, on average wages, in this country who simply can’t afford to buy. That’s 10% of the population who are losing out as things stand.

    I don’t see why you imagine that the interests of existing property owners always trumps the interests of society in general.

    4. I oppose VAT and sales taxes in general because it is the Most Distortionary Tax, but much loved by politicians. Anybody who proposes a sales tax is just going for votes.

    Again, you wildly misquote me. You are a protectionist, I believe in free trade. You proposed a tax system that favours domestic producers – the word for this is ‘a subsidy’. I think that this is counter productive. On that point we will have to agree to disagree.

  12. Also Mark, if I may say so ‘there you go again’, the same old magic wand technique of sacking 3m workers who you assume – against all evidence – have zero productivity.

    I’d also note that using terms such as ‘gummint’ is a bit like Tim’s old Zanulabour, almost guaranteed to make anything else you say superflous.

  13. OK, Matthew, you tell me what all the 6 million taxpayer funded workers who aren’t teachers, nurses, coppers etc do all day long (click link)?

    That’s two million more than in 1997 and we had far too many even then. Most will have zero productivity (climate change advisors, race relations industry) some might indeed have positive productivity, but nothing that the private sector can’t do a lot better or cheaper.

    Christine, I do believe in flat taxes. One flat tax on incomes; one flat tax on property values. All other taxes can go in the bin. Thus spake Milton Friedman.

  14. Pingback: Land Value Tax – an idea whose time has come | Flip Chart Fairy Tales

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