I am co-signatory of a letter in the Independent this morning that says:
The compulsory purchase of land banks proposed by Ed Miliband puts Labour's housing policy in line with the supporters of land value tax (LVT). We believe that the present taxation system is flawed and unfair. When the value of UK land increases due to increased demand, the owners, including UK and international speculators, have done nothing to increase their personal wealth.
Renters gain nothing while their rents increase. The issue is how to make some of the increase in land value available to all. LVT taxes some of that increase in land value.
It should result in the abolition of the regressive council tax and business rates. It should cover all land, used and unused, so bringing land banks and empty homes into use, making investors look for income from renting, building and creating jobs to cover the tax. HMRC would spend less chasing tax-free money parked in overseas accounts; banks have yet to find a way of moving land into their vaults.
John Lipetz Coalition for Economic Justice
Richard Murphy Tax Research UK
Dr Stephen Battersby Pro-Housing Alliance
Rev Paul Nicolson Taxpayers Against Poverty, London N17
There is no doubt LVT has to be a part of any reasonable taxation policy in the future. That future should start now.
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We should bear in mind Her Majesty the Queen is the superior owner of all land here and of a whole lot in other countries too. As such, an LVT is a direct blow against the parasitic British Establishment. I’m all for it myself 🙂
For clarity, are you suggesting that Council Tax AND Business Rates are presently regressive? Or just Council Tax?
Hopefully, the latter – as Business Rates are currently one of the best taxes we have, and (non-coincidentally) closer to LVT than any other tax we have. I’d also like to see, in time, LVT replace basic rate income tax.
If LVT is to get anywhere then it does need to be, as the letter states, something levied on all land – not a PR-friendly ‘mansion’ tax that just nibbles at the rich. Poorer people landed with an LVT bill should be more than compensated by lowering of other taxes and, if we’re really going to utopia, their Citizens Income.
Business rates are regressive – hitting marginal land hardest
So yes, I’d replace both – definitely
And I would not replace income tax – it’s a progressive tax
NIC would be a better tax to replace first
But business rates *are*, a de facto LVT. So of course we’d scrap them if we had proper LVT. There’d be no point to them. But other than maybe changing the amounts involved you’re left with roughly the same tax and if you think business rates are regressive then you think that LVT is regressive too.
Business rates are reflected in the rental value of land. If they cause an issue then it’s the price of the land that’s the problem, not the tax.
The beauty of LVT is that it collects a portion of what people are willing to pay to occupy land and diverts it to the people (aka all of us) who make that land worth occupying. Currently it’s the banks and the landowners who carve that up amongst themselves. I’m surprised that you don’t see that this is a function that business rates already perform fairly well. There are quite a few people (interestingly, on both the economic left and economic right) arguing that the time for LVT is here, but most of them are saying that business rates are evidence of why it’s a good idea.
The potential revenue stream would cover all current property taxes with lots to spare. The idea of including income tax replacement at the lower end was originally to do with fully funding local authority expenditure. After speaking to Andy Burnham, in particular recently – he is an LVT supporter, I realise that we have to leave the spending side to the politicians. Burnham said he needed extra funding for his combined health and social care agenda. And in order to introduce LVT at a rate to make a real difference we would need to reserve a signicant amount for transitional relief for those badly affected.
Can we properly have a Citizens Income when we’re actually Subjects (of Her Maj), not Citizens at all? If we’re trying to decide where we go from here we should first decide just where here actually is.
Yes
See my Class paper
Clearly this needs to happen. Harissburg in the U.S is an oft cited case of how LVT can regenerate a broken economic life – why aren’t more people fighting for this, it is pure common sense.
http://blogs.ubc.ca/rosonluo/2013/04/08/land-value-tax-policy-in-harrisburg-pa-u-s-densification-policy/
I am sure you all high and mighty people will understand the problems affect with Business rates. This tax has increased significantly over the past 13 years. In 2000 it was a reasonable rate, allowing business to take risks and develop. Then Labour saw it only as a tax and a money maker, for themselves. This has reduced the risk that people would take to start companies. We are now seeing the results of this in the economy. Remove the tax on business, reduce public expenditure and allow business to help the UK progress. Without the jobs, we will be no where.
I am afraid almost all that is wrong
Business has lost of money
It is not creating work
I think you have misunderstood the sentence, or you aren’t really up to the job.
Many, most business in the UK are small or medium business. You don’t appear to understand them, or how they operate. Business rates affects small and medium companies. It doesn’t affect large companies as much.
Small or medium companies don’t have lots and lots of money. Instead they are trying to run their company so it stays afloat.
I fail to understand why you cant see it, or even think it a possibility. Its really upset me.
I have some understanding of the issue
I was senior partner of a firm of accountants servicing 800 clients for well over a decade
My suggestion would help them
This isn’t about holding down unearned capital gains though. It’s about ending unearned incomes, ie monopoly rents.
Shouldn’t all Governments be trying to eliminate the capitalised value of any monopoly, let alone one valued at near 5 trillion pounds?
Monopolies are economic enslavement. It’s that simple.
You can add on a nice chunk of market distortion and deadweight cost to that too.
Monopolies, good or bad, is question we can all understand without even having to argue the toss about the remedy.
Excellent.
“Business rates are regressive — hitting marginal land hardest So yes, I’d replace both — definitely. And I would not replace income tax — it’s a progressive tax NIC would be a better tax to replace first.”
Also excellent.
Actually, VAT is even worse than NIC, it’s not actually regressive if you look at who pays how much, but it is economically damaging – there are plenty of unemployed who would not be unemployed if VAT were lower (the EU would allow us to reduce it to 15% and maybe have lower rates for pubs and restaurants like in other countries).
@ Lee T, yes, Business Rates are the closest thing we have to LVT, but not quite as good (ignoring the stupid empty property reliefs etc) because they tax bricks and mortar as well as location.
So in theory, even a site with zero location value has quite a significant BR bill (so BR is greater than what LVT would be), but an ordinary building in a high value area has a BR bill which is less than what LVT would be.
So having BR exacerbates things, it exaggerates the difference in selling price between land in undesirable areas and land in desirable areas, i.e. it is regressive.
Richard, I don’t get this part: “HMRC would spend less chasing tax-free money parked in overseas accounts; banks have yet to find a way of moving land into their vaults.” Why would the money that’s already in the said bank vaults now be taxed under LVT? Surely they are currently in cash and not in land and I can’t see that LVT would encourage those individuals to start spending on land rather than leaving it exactly where it is. Or, are you saving LVT replaces income tax on savings?
It wouldn’t
But land can’t be moved and if it becomes a tax base, and a bigger one, there’s less issue offshore
All that money in so-called tax havens* etc is merely the flip side of UK mortgage debts. 80% of “money” is secured on land and they collect the interest on it etc.
(OK, not all, but most of it. Some of it is simple proceeds of crime)
So if you collect land rents for the public purse, there is less for “money” to be secured on and less interest flows to the holders of “money”, whether they have their money in legit UK bank accounts or anywhere else.
* As a thought experiment, I open a bank on The Moon and run the server from there, controlled by remote from Planet Earth. How much money is really on The Moon? A few thousand quid for the server and the solar panels, is all.
Mark, even if that is correct, the owners of the land (those borrowing to buy a house) will be different to the owners of the cash savings that can afford to put the sums in overseas bank accounts (presumably the waelthy). Why then haven’t you moved the tax burdern (under your analysis) away from cash rich savers to people who need to borrow to buy a house? (I accept that those savers will also propobably have property but that doesn’t effect the switch in burden from righ surplus savings to house owners woth mortgages).