Someone\’s not been reading their Henry George

Let\’s have only one tax. What a great idea!

So if all taxes, including VAT, form part of the price of the stuff we buy, why do we bother to charge and collect them separately? What would happen if we were to lump everything together, phase out all taxes and just charge higher VAT? Well, several things.

Ah, no, not a great idea. While consumption taxes are indeed \”better\” than income or capital taxes, the very best tax of all is on the unimproved value of land. An LVT.

42 thoughts on “Someone\’s not been reading their Henry George”

  1. A matter of opinion, surely. I maintain that there’s no such thing as a good tax, and that LVT is particularly pernicious as it requires me to pay rent on land that I already own. VAT is bad because it’s progressive. The only moral option is a flat charge. That’s how we pay for bread, electricity and cinema tickets; why should it be different for state-provided services?

  2. LVT may be better in terms of impeding economic activity the least, but you’ll get a lot more people supporting a consumption tax. Certainly it comes across as fairer to the uninitiated: those who spend more, pay more – who could argue with that?

  3. “The only moral option is a flat charge. That’s how we pay for bread, electricity and cinema tickets”

    But not, say, insurance for a one-bed flat compared with a five-bed house.

  4. Brian, follower of Deornoth

    The very best tax would be one considerably lower than any tax now levied.

    Which isn’t quite a frivolous point. The main reason all these forms of taxation are so damaging is because they are levied at such high levels.

  5. “The only moral option is a flat charge. That’s how we pay for bread, electricity and cinema tickets; why should it be different for state-provided services?”

    We pay for us and our possessions to be protected. People with more possessions are getting more protection, so whilst a flat rate is OK, a flat charge is not.

  6. Matthew, you would pay the same to insure a one-bed flat (or a five-bed house) as would the Duke of Westminster.

  7. I agree with you on most things Ian, but I think you are wrong here. Why should people with fewer possessions – which cost less to protect – be subsidising those with more possessions which cost more to protect. If I own 3 homes, and 10 cars, the protection I receive is considerably more valuable than protection that someone with 1 home and no cars receives. Why the hell should I expect them to subsidise my protection?

  8. Depends on whether you can measure rises in the “unimproved” value of land, and in a way that does not also tax the actual entrpreneurial side of things. This is one of the reasons why I dislike LVT, even though, on a least-worst basis, it may be preferable to some other taxes, especially payroll taxes.

  9. ChrisM said: “We pay for us and our possessions to be protected. People with more possessions are getting more protection, so whilst a flat rate is OK, a flat charge is not.”

    Why? If that were true people with more children are getting more protection too.

    The value or number of possessions is imaterial to the protection said to be provided by the state. An assault, theft or whatever is a discrete incident – it either happens or it doesn’t. The State is paid to try and prevent them from ocurring, whether it is a break in to nick a £20 dvd player or a £500 telly.

  10. Well Gareth, I don’t really think children are possessions, I think of they are people – albeit small ones. When a child is getting protection, it is the child that is the beneficiary, not the parent (which is not to say the parent does not benefit – but that is not the same thing).

    “The value or number of possessions is imaterial to the protection said to be provided by the state. ”

    I disagree. If I have 1 million pounds of wealth, protecting that wealth is going to cost less than if I have 1 billion pounds of wealth. You want the billionaire to free load off the millionaire. I really can’t see the logic that says insurance of a million pound of assets is worth the same as insurance of a billion pounds.

    “An assault, theft or whatever is a discrete incident – it either happens or it doesn’t. ”

    I fail to see what bearing this obviously true point has. A fire is a discrete incident that can happen, or not happen. That doesn’t mean we insure a bedsit for the same as we insure the National Gallery.

    “The State is paid to try and prevent them from ocurring, whether it is a break in to nick a £20 dvd player or a £500 telly.”

    You’re telling me how things currently are; this discussion is about how we think things should be. I don’t think either of us can appeal to the status quo to back up our point of view.

    I don’t believe that those who can pay more should pay more, but I do believe that those who RECEIVE more should pay more.

  11. ChrisM: “If I have 1 million pounds of wealth, protecting that wealth is going to cost less than if I have 1 billion pounds of wealth.”

    That rather depends on the form of the wealth, but in any event, I fail to see how the charge for protection of it should be predicated on the value which someone else places on your land.

    Further, any assessment of one’s wealth is also dependent on the opinion of others.

  12. I’m sure there’s a standard answer to this- but how do you determine the unimproved value of a piece of land? For example consider the embankment which unimproved was part of a river, or Southwark, which was a tidal swamp, both of these have been improved out of recognition time out of mind.

  13. Ian that is a practical issue rather than a moral one. The principle that those who use more of something pay more seems fine to me. We apply it to every other thing that is bought and sold.

    Don’t misunderstand me, if you had suggested getting rid of taxation altogether I would think this a perfectly reasonable and moral position to hold. Let everyone voluntarily pay for the level of protection they wish to.

    However, if you wish to FORCE me to pay tax, I don’t see how you can call it moral to force me to pay the same flat charge to protect my average amount of assets as you would charge the Duke Of Westminster to protect his assets.

    “Further, any assessment of one’s wealth is also dependent on the opinion of others.”

    I guess you could pretend that it is only a matter of subjective opinion as to whether he is in fact richer than I, but I would find this deeply unconvincing.

  14. “I’m sure there’s a standard answer to this- but how do you determine the unimproved value of a piece of land”

    You could have the Landowner value it, on the condition that if anyone offers them more than they value it at, they have to sell it.

  15. “if you had suggested getting rid of taxation altogether I would think this a perfectly reasonable and moral position to hold.”

    That is, indeed, my position, implemented in the manner you suggest. As for my objection being practical rather than moral, what we’re buying is the protection. Do you pay more for a cinema ticket than I do simply because you derived more entertainment from the film? After all, you’re paying for entertainment.

    “You could have the Landowner value it, on the condition that if anyone offers them more than they value it at, they have to sell it.”

    How would you value your sentimental attachment to your property? And why should be taxed on that value?

  16. Valuing the land leaving off the improvements made by the current and previous owners is not all that difficult. Real estate brokers, and even most local folks, could arrive at a pretty good consensus if they sat down together for a little while. Every teardown gives conclusive evidence of land value; the transaction plus the cost to scrape the old building is the land value. A building that may have value in one place may be obsolete and a liability in another — e.g., a diner in the central business district of a small town may be worth something; while the same structure in the CDB of a big city would be a liability, something to be removed before the land could be put to a profitable use.

    LVT is a very efficient way to collect the revenue we need. No middlemen adding their own profit to what the treasury gets. And no one can hide a piece of land, or move it offshore, or claim someone else owns it. Everyone knows that everyone is paying — which is clearly not the case with the other taxes we employ. And it also would help to invigorate the economy, which none of us would complain about today. Check out wealthandwant and lvtfan for more information.

  17. I’m with you Ian on getting rid of taxation, I am not defending taxation as such. However, whilst we are stuck with it, I am not about to pretend that we all get the same benefit from those things that tax pays for.

    “How would you value your sentimental attachment to your property? And why should be taxed on that value?”

    Pat asked a practical question, I gave a practical answer. I didn’t say I supported such a thing, merely that it could be done. All taxes are evil, however some are worse than others. To argue for Tax A over Tax B does not mean one supports Tax B; merely that one considers it the lesser of two evils. If you want to argue the moral case for no tax, I am not one of those you will need to do much convincing on.

    “. Do you pay more for a cinema ticket than I do simply because you derived more entertainment from the film? After all, you’re paying for entertainment.”

    No, but taxation is far more like insurance than it is like a cinema ticket. The enjoyment one gets from the film is subjective. The amount one insures oneself for is not. I can chose to insure my house contents for 25K, or 100K (say). This is not something that is objectively the same but subjectively different. Protection to the tune of 25K is qualitatively different than protection to the tune of 100k. They are different products. I pay more for 6 cinema tickets than you do for 1.

  18. It costs more to insure expensive house contents than cheap ones because the replacement value is higher (obviously), so the insurer has greater risk, so he charges more. When you’re talking about funding state-provided services – even protection from burglary – that issue doesn’t arise so you can’t justify varying charges. If you did, how would you justify varying those same charges for protection from physical assault?

  19. If I have two houses, they could both be broken into; for that matter, they could both be broken into at the same time. If I have more assets, I have more things that need protecting. Protection costs; more protection costs more. I honestly cannot see how you can claim that there is no more cost in protecting 1 house, than there is in protecting 10. Do you suppose Securicor, Grooup 4 etc charge all customers the same regardless of the size of the premise to be protected?

    I am not justifying varying charges for protection from assault. I am justifying varying charges based on overall assets. People with more assets are getting more value from a system of protection of assets than people with fewer assets. That strikes me as self evident.
    Why should it cost Fred as much to protect a million pounds as it does Bert a billion? How on earth can they possibly be considered to be receiving the same service.

    Now, if you are prepared to let Fred (or Bert for that matter) opt out of such an arrangement, fair enough. We would soon see that the richer someone is, the more likely they are to pay that flat rate.

  20. I do like your uncompromising views and willingness to take them to their logical conclusion. I don’t think we disagree on a point of principle; we disagree on whether it does, or does not cost more to protect more; and on this we appear to have reached an impasse.

    I will say that if I agreed with you that it cost the same to protect assets regardless of the size of said assets, then I would also agree with you that a flat charge would be morally appropriate.

    I agree with your logic, but not your premise.

  21. To explain, rather than to argue: insurance isn’t what you pay to prevent burglary, it’s what you pay to get your property replaced after that event, so it must take account of their value. A levy to fund policing is what you pay to prevent burglary, so the value of your assets is irrelevant. Protecting a house full of valuables is no more expensive than protecting an empty one, although insuring the contents should be. If you’re arguing that charges should be based on the level of possible loss, why not make a higher charge for military funding for those living near (or on) army bases? After all, they are more likely to be targets for national enemies. Similarly for Londoners, who are more likely to be collateral victims of attacks on unpopular politicians. (Sorry for the redundancy there.)

    “I am not justifying varying charges for protection from assault. I am justifying varying charges based on overall assets.”

    So should someone wearing a Rolex pay more for the police to deter mugging than someone not? More assets, more likely to be mugged.

    “I agree with your logic, but not your premise.”

    OK; let’s leave it at that.

  22. I accept it isn’t the same as insurance; I just think it is a lot closer to insurance than it is to a cinema ticket or a loaf of bread, no?

    To compare it to something that it is closer to than either a loaf of bread, a cinema ticket, or even insurance; a private protection company will not charge a flat rate for protection because it does not cost the same to protect all things any more than it does to insure all things.

    “So should someone wearing a Rolex pay more for the police to deter mugging than someone not? More assets, more likely to be mugged.”

    If he/she is paying tax based on assets, they have already paid more.

    Better still would be to tax criminals extra based on the crime they cause, after all it isn’t really the rolex wearer that has imposed the cost; it is the scum bag who mugged them for it. The trouble is often times criminals don’t have much wealth to tax. Still, if a would be mugger knows that they may lose everything they own if caught, this may be a disincentive to be a low life.

  23. Woah, that’s some hardcore debatery going on up there. You can say many things aboug the artiicle, but at least the author understands tax incidence 🙂

  24. Is it any wonder that people don’t understand Henry George when they can’t follow a simple argument but go off on a meaningless side track about insurance?God almighty.
    BTW LVT is not really a tax: it is repayment of money that comes people’s way through no efforts of their own and which it would harm others to let them keep.

  25. ChrisM said: “We pay for us and our possessions to be protected. People with more possessions are getting more protection, so whilst a flat rate is OK, a flat charge is not.”

    I’m not sure that this is actually true. The majority of burglaries, muggings and the like are carried out in poor parts of town. It’s much more expensive to police a “sink” housing estate than to police a road full of million-pound houses.

    “Still, if a would be mugger knows that they may lose everything they own if caught, this may be a disincentive to be a low life.”

    No, it really wouldn’t. You see, actual muggers don’t have anything much. They live hand-to-mouth, mugging to mugging. People with assets don’t tend to become muggers.

  26. “BTW LVT is not really a tax: it is repayment of money … ”

    It would only be a repayment if it returned to its original owner. This is not the case with LVT, which, just like any other tax, is legalised theft of wealth from its creator by the state.

    “…that comes people’s way through no efforts of their own …”

    Not even their shrewd purchasing decisions?

    “…and which it would harm others to let them keep.”

    You are only harmed by my not paying tax if you rely on my tax to fund your lifestyle. Parasites are always harmed when their victim sheds them.

  27. “This is not the case with LVT, which, just like any other tax, is legalised theft of wealth from its creator by the state.”

    No. You own your house because (and solely because) you have a piece of paper endorsed by the government saying that you do. As a result of that government-backed piece of paper, when I come round with some armed men, a siege engine and a new set of high-power locks to try and kick you out, the end result will be that I end up shot or in jail.

    If that government-backed piece of paper didn’t exist, then I’d be the new “owner” of your house, but my “ownership” would only exist for as long as I had a better militia than someone who wanted to kick me out. In other words, there would be no property rights at all.

    So yes, the wealth you have may have been partly created by your efforts. But it couldn’t have been created at all without the state decreeing that you have certain property rights, and enforcing them (or more importantly in most cases, being ready to enforce them so that other people don’t even try to break them). You’d’ve been too busy either toadying to people with big militias or hiding in your front room with a shotgun to have done whatever you did to acquire your money…

  28. “But it couldn’t have been created at all without the state decreeing that you have certain property rights”

    That’s where we differ. I maintain that property rights are inherent in the human condition, and that the state exists to protect them, this being one of the very few legitimate functions of the state. A state that fails to protect them is abrogating its legitimacy. You, however, (on the basis of your comment), see property rights as an entitlement that the state allows us to have, and that it can thus retract.

    I own my house because it is, morally, mine. I created the wealth that I used to buy it. In the absence of government, it would still, morally, be mine, even though the legal protection afforded by the state would be absent.

    If the only reason that you refrain from taking my property by force is that the state will put you in jail, you obviously have an understanding of morals which is totally different from mine.

  29. This thread of alleged discussion pretty well bears out what our host put at the top.At best only about two people have been reading their Henry George.
    His version of LVT (there are a couple of variants) taxes the increases in land values that follow increases in the money supply,dampening down property-price increases so that entrepreneurs and workers can move to areas on the up.Of course if land values are rising because a new Tube line has been built,the tax recovered, or repayed, can pay for the building of the line.And you don’t have any Income Tax it being a Single Tax (George) or Impot unique (Physiocrats).
    Without this tax on land,you get property prices rising leaving workers without purchasing power and so businesses without customers.And you also have to pay Income Tax.All so you can protect the interests of people just sitting on land doing as little as possible,rewarding inertia ,penalising effort.Brilliant.

  30. “This thread of alleged discussion pretty well bears out what our host put at the top.At best only about two people have been reading their Henry George.”

    Actually it does nothing of the sort. It simply shows that a number of commenters, myself among them, are exploring an incidental issue. (I – and I suspect, the others involved – are grateful to Tim for opening his property to us.)

  31. The import of the above comment is that if Mr Worstall wishes to introduce a discussion of the best tax of all ,a tax on the unimproved value of land (to summarise roughly), people knowing nothing whatsoever about the subject can yabber on about something completely different and that is fine and dandy,it never occurring to them that they might need to know something about efficient but enterprise -enhancing taxes.

  32. Ian writes: “I fail to see how the charge for protection of it should be predicated on the value which someone else places on your land.”

    Exactly. The same applies, say, to the amount that a high-earning entrepreneur should be expected to pay for his own physical protection compared with that of someone who earns far less.

    A rise in the “unimproved value” of land is a bit akin to the rising earning power that a person has via environmental circumstances beyond his or her immediate control (ie, through luck). Socialists, after all, justify steeply progressive income taxes on the grounds that a lot of what entrepreneurs earn is not down to their risk-taking or hard work, but by being lucky, and hence, the socialists argues, such “lucky” money should be redistributed among the populace as a whole. It seems to me that there is precious little to choose between such an argument and the sort of arguments that are trotted out for LVT.

  33. @jp
    Its bad enough arguing by analogies.But this is arguing by near analogies.Socialist inclined land taxers ,in fact most land taxers, would not argue for the for the similarity of Lvt and Income Tax,rather that they are completely opposite: one taxing labour and entrepreneurialism; the other doing nothing,
    Dunno what luck’s got to do with it: investors choose to hedge money into land because it is a safer bet than investing it in people who provide goods and services. As IB says above it is not luck but “shrewd purchasing decisions”: very shrewd because not one political party will do anything deliberately to expose “homeowners” to the slightest risk in their investments which they can also live in should things go wrong.
    Also there is the ill-luck side of the same coin:all British citizens have to pay average 100k quid upfront for a plot of land to live on in this land of the free.Not to the Government.A private tax.And they have to pay Income tax on top.
    You LVT denialists have n’t got a leg to stand on .As our host said: you’re not reading your Henry George.

  34. I didn’t “choose to hedge money into land”, I chose to “buy a house”. It’s not an investment, it’s a place to live.

    “British citizens have to pay average 100k quid upfront for a plot of land to live on in this land of the free.Not to the Government.A private tax.”

    That’s not a tax, it’s a charge for goods, just like when I paid £5000 for my car, or £2.50 for a pint of beer. I paid it to the person who owned it so now I own it, but you still expect me to pay rent to the state.

  35. @IB
    If you just wanted a place to live,you’d rent. But the shrewd UK citizen weighs up the pros and cons and figures that buying a house is an investment which will pay him all his outlay back and may show him a bit of a profit. So the decision to buy (rather than rent) is entirely an investment decision.
    According to you if you pay the government for your plot of land it’s a tax: if you pay a private citizen its not .It’s a charge like the price of a pint (BTW you’re obviously not a Londoner).Except you can go without beer: you can’t live without touching the earth,so you have to pay it.It is not a freely entered contract. Charge/rent/tax / or repayment don’t you think a 100k quid compulsory charge on every young citizen is pretty extortionate? Bound to be: the market can charge what it likes (nobody’s making land any more).
    If you are worried about paying rent on your own freehold (why ,you presumably pay Council Tax?) there is Sentinel LVT system which works by pumping as much money as possible into an area ,if possible via the private sector, thenLVT is triggered when house prices start to go up as side effect to the desired aim of stimulating the local economy.This way you avoid any retrospective taxation.If people have any sense they will start moderating the prices they are willing to sell for,so prices don’t go up and nobody pays the tax at all much. All the new “Keynesian” money goes straight into wages and business profits.Its called the Sentinel Tax because it does n’t do much:just lurks in the background.

  36. I want a place to live which I could alter to my particular requirements, so the decision to buy was n no way an investment decision. If it had been, I would have sold at the top of the market.

    “According to you if you pay the government for your plot of land it’s a tax: if you pay a private citizen its not .”

    No; if I pay the owner, whomever that may be, and thereby gain title, it’s a charge for goods. If I pay the owner for use of something, without gaining title, it’s rent. If I have to pay the government on the basis of something which I already own, it’s tax.

    “It’s a charge like the price of a pint (BTW you’re obviously not a Londoner).”

    It’s not a charge because I’m not gaining anything. No, I’m not.

    “Except you can go without beer:”

    OK, use “food” in place of “beer”.

    “you can’t live without touching the earth,so you have to pay it.It is not a freely entered contract.”

    You think it’s acceptable to charge me for doing something that I cannot avoid doing? Should I charge you for breathing on the basis of your lung capacity?

    Where does your “100k quid compulsory charge on every young citizen” come from? According to you, renting is an option.

    Council Tax (or Domestic Rates, as it was called before) is basically the same as LVT – it’s based on the alleged value of my house – and is no more justifiable.

    What’s the source of this money that’s “pumped into an area”? Tax, perchance? And what, specifically, is the destination?

    “thenLVT is triggered when house prices start to go up”

    I thought is was based on the unimproved value of land, not on house prices.

    “If people have any sense they will start moderating the prices they are willing to sell for”

    I don’t intend to sell; as I said, it’s somewhere to live, not an investment. If “nobody pays the tax at all much”, where does your revenue come form?

    More holes than argument, I’m afraid.

  37. This is a compendium of entry-level errors: you should have done your prep and read some Henry George as the man said.

    I agree with you on one thing: the Sentinel LVt does n’t necessarily raise much revenue.This you imply is a demerit.But I thought you believed that al taxes were theft (with typical level-headedness).This tax (really repayment) should suit you down to the ground therefore.

    Taxes on the value of your house like the rates (still used in Northern Ireland where they just tax at0.63% of house value very successfully) are certainly justified if the public and private sectors build a lot of infrastructure and the banks push out a lot of cheap credit and this as a side effect raises property prices. It would be in the interests of the community to scalp these piggy back property price rises .Or more to the point have the power in reserve to do so with a Sentinel Tax. Once people realise that the old days of “market forces” as an excuse to gouge house prices are over ,we might return to an era of flat house prices like the 50’s and 60’s which ended when the Tories abolished Schedule A tax,
    a really ferocious levy on house values where rises in property prices (even from improvements!) were clawed back in Income Tax .If you think LVT is bad!

    Your point on a tax on air is exactly the point I’m making: it is the simplest pro-LVT proposition.

    If all “food” went up in a uniform/monopolistic manner the way land does,and if it were possible to keep it off the market till scarcity value put up prices,the way land-owners and so-called “developers” do,then there would be an equivalence.

    I fear nothing will convince you so tell you what: lets pack it in and not waste each other’s time.

  38. “This is a compendium of entry-level errors: you should have done your prep and read some Henry George as the man said.”

    Please don’t patronise me; reading Henry George is not the same as accepting the moral basis of his arguments. I’m not saying that LVT won’t work, I’m saying it’s immoral. The acceptability of a means of raising money is not that it works but that it is virtuous.

    Beyond that, let’s do as you suggest.

  39. DBC’s points have been nicely dealt with by Ian Bennett but here is something else that should not be allowed to pass without comment:

    ” not one political party will do anything deliberately to expose “homeowners” to the slightest risk in their investments which they can also live in should things go wrong”

    Well it is true that all political parties feel the need to pay lip service to the goal of encouraging wider homeownership; this is a feature of domestic political life during my lifetime and I am sure long before. In my view, governments should not have aided and abetted reckless borrowing that explains much of the housing bubble; they should also not have pandered to NIMBY sentiments through draconian planning laws (an issue that I am surprised Georgists don’t make more of), and governments have also tended to penalise renting vs buying in the past.

    As for whether we need to “read our Henry George”; I have read him enough to realise that he was a great man in certain respects – such as on free trade – but I am afraid that unlike Tim, whom I respect and like, I do not like the LVT agenda, which smells all too much of socialism hiding behind a supposedly friendly face. I am not fooled.

  40. @Ian Bennet: You may own the land, but you do not own the road it’s next to. You don’t own the schools in the vicinity, you don’t own the plumbing and power lines connecting to your plot, you don’t own the shops nearby, the park, you don’t own the police or fire-fighters, …

    Without all those services your plot of land would have about the same value as a plot in the middle of the sahara.

    That’s what you pay for under an LVT, the value that the community has added to your land for which you did nothing. You can improve your house as much as you like, that value belongs to you. But the improved value of the land, that’s repaying the community for services rendered in proportion to how you benefit from it.

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