As the Guardian reported yesterday:
Official figures showed that the UK's net worth rose by £492bn between 2016 and 2017 to £10.2tn, with the lion's share of the increase accounted for by a £450bn jump in the value of land.
The overwhelming case for taxing land and wealth, in general, has to be repeated time and again.
This gain is more than 60% of total UK government spending last year, and the vast majority will never be effectively taxed.
This has to change.
Land Value Tax is part of this. But it is not alone. We need capital gains tax on housing, including that used as homes (even if only on final disposal by the survivor of those in a relationship) and we need effective wealth taxation. Inheritance tax is so far from that it needs to be abolished and a fresh start made.
I wrote about this in The Joy of Tax. Now we need delivery. The obsceneness of the social and tax injustice of not taxing wealth has to end.
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
Buy me a coffee!
I disagree. LVT will sort it all. See my recommendation: http://www.labourland.org/wp-content/uploads/2018/08/Proposal-for-Introducing-LVT-2018.pdf, which the Labour Land Campaign will debate, along with others on 15 September.
I think we need to introduce LVT incrementally over many years, starting at a very low rate. The political hot potato is council tax- a scandalous tax on the poor. Almost any tax is better. I’d scrap council tax & introduce a national residential LVT that raises half the revenue, with the rest raised by abolishing the ceiling on employee National Insurance. Maybe even transferring some of this employee contribution to a higher employer rate to make it politically easier. Then over the years, gradually reduce payroll taxes & up LVT. As for businesses, probably needs to be a similar incremental approach, but I’m not sure of the details.
Please read my paper. It is not possible to introduce at a single low rate on all land because Business Rates already collect at least 50% of land value. Unless, of course, you keep all the current property taxes, including Council Tax. What’s the good of that?
Good luck Carol.
You will need it. And it should not be the case.
John McDonnell is a long-term member of our campaign as is the probably new leader of Welsh Assembly, so luck is with us.
Carol. I have read your paper, but sorry I don’t understand some of it and I don’t follow your point here either.
How can an LVT stop the scrapping of council tax? Surely we could raise the total £30bn of CT from extra payroll taxes if we like and scrap council tax regardless of what we do with an LVT. We could introduce LVT at as low a rate as we like. The point is; politically we have to get an LVT into existence, and the upheaval as you seem to acknowledge in your paper, is extreme if we raise large amounts with an LVT immediately.
As for business rates, the same applies, we could phase it out. Sorry I don’t get your point on it affecting land values.
Neil, surely MMT shows us that we don’t have to worry about raising extra from any other source. CT needs to be scrapped fullstop. It’s the most regressive tax we have and is doing immense damage. But recurrent taxes on immobile property are the most efficient way to tax, as all economists agree.
Hi Carol
LVT seems a proposal with lots of advantages.
Some questions/concerns from someone interested but ignorant:
Won’t the valuation exercise be very complicated and costly?
Presumably there would be the opportunity to appeal a valuation – isn’t there the potential for the new system to be bogged down in controversy before it gets going?
I don’t believe the ownership of all land in England is registered yet – won’t that be required? And won’t that itself be a huge and costly exercise? (Although leading to an outcome with advantages for more than just LVT purposes)
There are likely to be some complex points of valuation, such as recognising the ransom value a small piece of land might have (which the owner might not even be aware of) – how’s that dealt with?
It may be the potential of a fall in house prices that would motivate opposition to LVT, but opposition would also produce martyr stories about little old ladies with large houses but little income. This would give the opposition a moral fervour – how would that be blunted?
If the initial LVT rate is low, won’t this look to an incoming government like a mountain of trouble that will deliver a mouse in terms of revenue, initially at least?
Valuation really is not an issue. Many states value land separately and the experience in the US is that the land valuations take less time than budinkgs and there are less appeals. The VOA will easily manage and there are modern tools to enable continuous update, which is essential for LVT.
It is only the residential rate which will be low in high value locations to start but they would have to bite the bullet and revalue for Council Tax eventually. It’s far easier to just do a complete land valuation.
The commercially available Land Registry data shows that 42,000 pieces of land are owned by 11 of the UK largest housebuilders, much of which hasn’t even been built on yet. I’m quite sure the land value of their holdings has increased considerably, while house prices are kept high by this immoral practice.
LVT will force them to develop quickly or sell to someone who will. Either way the price goes down as there’s more land on the market. The biggest sellers will be amateur landlords who are just after capital gain, but also the vultures screwing the poor.
Perhaps we should review membership of an organisation whose number budget item is to grant subsidies to owners of qualifying land, and then design a zollverein whose number one feature is to protect those very same recipients from competition.
You may need to unpack that a bit
LVT (which I infer would be based on bare site value) is part but not all of the answer. A market value land tax (MVLT?) based on the current value of all interests in UK land could also be applied. It would be wonderfully easy to administer on a self-assessment basis. Non or late filing or payment could simply be dealt with by freezing the interest in land (i.e. taking an interest in possession) until tax compliance is brought up to date. Undervaluing could be discouraged by granting the state the right to purchase the interest in land for some function (e.g. 105%) of the value stated in the tax return.
It’s a technical detail but we should consider whether relief should be given for such taxes against the tax on income and gains derived from letting, occupying, trading in or otherwise disposing of the interest in land and if so, should this be by deduction or credit.
Please do not infer from my focus on land that I am suggesting we refrain from also taxing other forms of wealth.
I wholeheartedly approve of interests in possession for all wealth taxes – and the right of the state to acquire at self-declared valuations
Richard, you say:
“I wholeheartedly approve of interests in possession for all wealth taxes — and the right of the state to acquire at self-declared valuations”
I like the idea of self declared valuation. It has about it the Solomonesque wisdom of ‘You cut -I’ll pick’
What’s wrong, IMO with your approval, here, Richard is acceptance of the underlying principle implied by the one word ‘acquire’. Properly the word should be ‘reclaim’.
All the resources of the nation should be held in common as a matter of basic principle, and administered by the state in the name of the people. Persons, (be they individuals or corporations defined by law as ‘persons’ – as I believe they are) should be entitled to effectively rent resources at a fair rate. If that self assessed rate is below the acceptable rate then ownership title would simply revert to the State and ‘ownership’ be granted to some other person willing to pay an acceptable rate – or be managed by the state’s representative body.
At some stage in history it became deemed acceptable to seize land and resources and say “this is mine”.
I say, No it isn’t. Is this what Marx meant by the expression, “Property is Theft”: Seizure of collective assets by an individual or group against the collective interest ?
The market mechanism would reasonably quickly establish acceptable valuations on resources. And who would cry foul first and loudest? The proponents of the efficiency of markets; because currently they have the market rigged firmly in their favour by property law which legitimises their theft, and protects their privilege.
They get to cut the Mars bar into very unequal ‘halves’ and then choose the big piece for themselves.
Why is it not obvious to all that this is clearly unfair ?
You are literally a Commonwealth man
I think we are some way from there
I put it in my ‘beyond pragmatically’ possible box.
But suggest all the right wingers read Acts Chapter 2 (if I recall correctly)
A wealth tax, which I find preferable to a tax based solely on land wealth, will only ever be politically viable if it can be brought in without disrupting existing wealth holdings. I mean disrupt in two ways:
First, loss aversion is so strong that the resistance to taxing existing wealth, as opposed to new income or capital gains, that any wealth tax will need to be so small as to be merely equivalent to a few points of income tax on income generated by that wealth. If an asset is generating income returns of 5%, even a 10% rate rise on the tax on that income would only be equivalent to 0.5% tax on the underlying wealth, but would still face massive political opposition. The wealth tax would need to be small enough to avoid endless stories of ‘struggling’ middle class families having their buy-to-let income largely eliminated.
Second, it must be structured in a way which is not destructive economically, either by being flexible in when it is paid, or by enabling owners of wealth to perhaps “pay in kind” (for example by giving the state non-transferable interests in a business instead of a cash payment). This would avoid disruption of valuable, but perhaps not regularly income producing, assets such as new businesses, or intellectual property.
Any wealth tax proposal which did not have these two features would be dead on arrival, and have some very credible arguments in its way.
Conversely, I believe inheritance tax might be much more ripe for reform and expansion. By definition, inheritance tax hits assets before they are transferred to new owners, so there is less of a sense of loss to be resisted. Eliminating BPR and other overly generous exemptions, restricting or eliminating PETs, and (as you suggest) restricting CGT PPR relief are good starting points for reform.
Inheritance Tax is one of the least understood taxes by the general public, in that most people do not understand the long term public policy benefits of an effective IHT regime. People seem to accept income tax and CGT, even though they might resent paying, but have no similar instinctive understanding of IHT. As a solicitor advising on IHT, I am always intrigued by the basic lack of understanding of why IHT exists. Part of this may be due to the fact that it is so easily manipulated, and therefore perceived as arbitrary and unjust, but there needs to be a broader conversation about why it even exists, setting out the argument that generational wealth redistribution is essential to long term prosperity of a society.
If the idea of a wealth tax is true redistribution (as opposed to mere redistribution of new income and capital gains), then IHT may be the only way to do it.
I am not disputing that creating and educating people about such a tax would take time
But with time I think it could be accepted
Here’s perhaps why these sort of taxes are seen by the general populace as a ‘bad thing’
– I don’t think anyone disputes LVT vs Council Tax etc unless it all gets too greedy. For example in this debate people are quoting the scandal of building companies owning lots of land not built on. However, there is another view than builders have to own land at least 5 years in front of building as planning permission takes forever. Maybe planning restrictions being ‘loosened’ would help with this.
– Where is the line for ‘wealth’ to be taxed. The public knows ( from history) that once a tax starts at a large enough figure to not involve most people it won’t be long until the limits are reduced to affect many more. You have to say what the start point will be.
– For example, if someone has accumulated a substantial amount of capital, all done through their own efforts (no inheritance, no property value increases) and after all taxes paid correctly, why would the government take some of their wealth?
– You do have to be careful that this is not seen as an ‘envy tax’ rather than a ‘social justice’ issue.
Just an alternative view for the debate.
Envy appears to be solely preserved for the wealthy
And it appears that you have no idea of the role of tax
So I suggest all your premises are wrong
JARank posits:
“.. someone [who] has accumulated a substantial amount of capital, all done through their own efforts ”
Yeah right.
Who’s that then? When did that ever happen?
Never…
LVT is simple. Other wealth taxes less so. But they are essential because not all wealth vests in land, as some georgists appear to believe. I would apply an additional tax on houses over twice average size – a real mansion tax, self-declaratory with dimensions.
Just to be clear – you would have an LVT system based on land value (of which size is a relevant factor) and additionally if I have a house 2x the average size on this land you would tax me more? Because?
Land Value Tax is what it says on the tin. Most of the value of any house in the UK at the moment is derived from the local public goods and services, as well as the statutory permitted use granted by the local authority. So, yes, J A Rank.
tax everything
What you need to wake up to is that tax is unpopular and always will be. How many people choose to voluntary pay more tax? The perception is that it funds public services – to go down any different path is akin to signing your own death warrant (in the electoral sense) – could you imagine the public’s reaction in an inflationary environment increasing tax rates as the mechanism to bring it under control? Inflation is akin to a tax anyway so it will be a double whammy on an individuals purchasing power…. the other key point is that there is a mistrust of politicians to spend effectively. I remember at the height of the Blair years the jobs section of the papers almost entirely filled with public sector jobs with the word coordinator or liaison in the title..try telling a bricklayer that’s great value for increasing his tax bill… I think Labour have a decent chance of getting elected but they diminish the more tax is mentioned. To promote themselves on the MMT doctrine sends them into oblivion.
You are spinning a tale
It may be a popular tale but it is what is technically called an ‘imaginary’ – a perception of the relationship between the person and state
There are many such narratives
They compete
You think yours is true
But they are all imaginaries and none ever wins for all people
We all need to remember that
But your suggestion that you are the holder of a truth is simply not true
You have ceased to have an imaginary. You are imagining
Richard I haven’t the foggiest idea what you are talking about. I neither make no apologies for matching your “intellect”.. what your last post confirms however is your detachment from the electorate.
No it does not
It shows I recognise their diversity and am not arrogant enough to think they all think like I do
My point is that tax increases are unpopular for the vast majority of the electorate..and that the majority of the electorate don’t trust politicians with their money., you disagree, fair enough.
I do
Because they clearly do trust politicians
Look at their dislike of cuts
“the majority of the electorate don’t trust politicians with their money”
Actually, they do. They take the state’s currency in payment. They pay their taxes (for the most part, and the State is not stupid enough to give them much option over VAT, NI or PAYE). If the tax payers have sufficient resources they also pay an accountant and a lawyer to perform a ritual dance in order not to pay certain taxes which need not be paid if you have the resources to pay an accountant and a lawyer…. because the State is not stupid, but it is happy to allow wholesale avoidance on an industrial scale: you could work this fact out, but most people trust politicians to do it for them…..
At the same time, it is true that the electorate do not trust politicians, but that makes virtually no difference to behaviour. Politicians’ pronouncements are riddled in unsustainable self-contradictions. So are the electorate’s beliefs; as I have just observed. Cognitive dissonance is one neat explanation (but does not illuminate much). More generally, human beings are not rational.
I am surprised you state the public trust politicians, particularly as you have wrote extensively about how useless our leaders (across all parties) have been..
I can expect better
But I do not think we have a failed system
“I am surprised you state the public trust politicians,”
I do not know why. If you had read the full comment to the end I actually wrote that people both do, and later that they also do not, trust politicians, because both are true: I deliberately made the point and committed the solecism, because people very often believe contradictory things, especially when it is important to them; or they do not inspect sufficiently closely the consistency of their actions with their beliefs (the illustration I used). This was the central point of the comment. I invite you to think about it. If that fails, all you need do is review (not even with great care) the statements of ‘leading’ politicians over any given period of time chosen: then list the unresolved contradictions to which they are committed. I am not ‘picking on’ politicians, they just very conveniently contradict themselves in public more than the rest of us.
Oh, the response was to Richard not me. Apologies for the misunderstanding. Nevertheless, if the cap fits …..
This all makes a lot of sense. I would add on the subject of housing taxes that properties bought purely for use as glorified safety deposit boxes, with no intention that anyone should live in them, should be subject to a punitively high rate of taxation, giving their owners a choice between paying regular huge amounts of tax or getting rid of them, probably for a lot less than they bought them for, to people who will live in them.
I once proposed five times council tax. It could be more.
I do not like the term LVT, and prefer AGR (annual ground rent), because that describes better its real nature. Claiming state rents or duties from land implies sovereignty but not ownership. Unless, of course you think the Normans were operating a socialist state in England. I make this point because as a matter of political fact people in Britain are committed to the idea of owning their property, be it ever so humble, be it ever so tenuous. “An Englishman’s home is his castle” is the old saying; but if you think it is so much hogwash, try disabusing the electorate of its resonance, on his or her doorstep.
Bring back Schedule A
Imputed rent. There’s very little info on how or if Schedule A worked, but it’s rather difficult to tax land which has no commensurate income stream. It must be tackled however cautiously.
John S Warren says:
” people in Britain are committed to the idea of owning their property,”
Title need not imply ownership. Certainly not in perpetuity.
Richard says:
Five times council tax rates for unoccupied dog-in-the-manger property banking.
If it was rated properly and fairly, twice the rate would almost certainly be enough I think. It would be interesting to see. But first we need a government prepared to consider property taxes at all. We’re still in Heselteeny fantasy land.
https://www.ipsos.com/ipsos-mori/en-uk/politicians-remain-least-trusted-profession-britain
Anyway we move on