Thursday, 17 January 2013

C. Land doesn't generate income

These arguments are usually presented in conjunction with the Poor Widow Bogey, but let's treat them as a separate category:

• There's no cash to pay the tax; you can't pay tax in slices of land (skip to article)
• Taxes on land are "dry taxes"(skip to article)
• People will be forced to sell or rent out their land (skip to article)
• People will be forced to try and generate income from their land, even if that is a sub-optimal use (skip to article)
• It would be OK to make landlords to pay more but why should I pay tax on my own home? (skip to article)
• If they tax us on land, they might as well tax us on fresh air! (skip to article)

1. "There's no cash to pay the tax; you can't collect/pay tax in slices of land"

People only say this because they have become used to the socialist idea that taxes are primarily assessed on earned income. But there are two different types of "tax" (i.e. sources of revenue to fund government):
- taxes calculated as a percentage of cash or near-cash income (whether called income tax, corporation tax, National Insurance or VAT, a tax on turnover/gross profits), and
- user charges (Business Rates, council tax, fuel, tobacco and alcohol duty).

LVT is actually a user charge for the benefits (net of dis-benefits) accruing to each plot of land and collected or enjoyed by the owner (or the bank in the form of mortgage interest), it is conceptually no different to any other duty. You can't argue against fuel duty on the basis that "my petrol doesn't generate income for me, I can't pay petrol duty in pints of petrol", it is there because otherwise roads would be even more hopelessly over-crowded.

As to "slices of land", taxes (and rent or mortgage interest) are supposed to be paid in cash, but if a tax evader (or a rent or mortgage defaulter) runs up a large enough debt then his property (whether that is cash, physical assets or land and buildings) will be seized and sold off to pay the tax (or rent or mortgage arrears).

A 90% - 100% LVT on current site premium (definition see here) would be approximately 3% of the current total selling price of each home. Even if house prices were to halve because of the LVT, that still means that any homeowner could run up 17 year's worth of arrears before there was a shortfall in collection.

And just because land itself does not spew out coins and notes, that does not mean that the tax can't be collected. Very briefly, on an administrative level, everybody will fall into one or more of the following categories, and all the collection methods would be administratively easy:

- Pensioners - tax can be deducted from state, occupational and private pensions (just like PAYE) with any deferred amounts being collected from proceeds of sale of house on death.
- Social tenants - tax can be collected as part of the rent (the rent includes LVT, by definition)
- Private tenants - tax would be collected from landlord (or withheld from Housing Benefit Payments)
- Households in lower-value homes - tax would fall below personal allowances/Citizen's Income entitlements.
- Households with mortgages - any tax exceeding personal allowances could be added to mortgage payments or collected via PAYE/Self Assessment returns.
- Public sector workers - as above, can be deducted directly from wages.
- Mortgage-free households - any tax exceeding personal allowances could be collected via PAYE/Self Assessment returns.
- Owner-occupier farmers and small holders - tax would probably fall below personal allowances, balance collected via Direct Debit/Self Assessment.
- Vacant premises and unregistered land. If the owner does not pay, a charge to cover arrears is taken over the land and if he does not come forward within twelve years, his title is void anyway under normal English land law (different in Scotland).
- Land owned by offshore trust etc. - if tenanted, then tax is collected from tenant. If vacant, see above.

2. The Taxpayers' Alliance, which is funded by large landowners and the financial services industry coined the term "dry taxes" recently, it adds nothing new to the debate.

3. "People will be forced to sell or rent out their land".

This is arrant nonsense of course and even if one alternative is correct then the other isn't. Nobody would be forced to sell anything, if you own land and buildings, then under LVT, even under 100% LVT, you will still be able to make a profit by renting it out, as the LVT only taxes the site premium and not the income which is derived from the buildings and improvements or other services provided.

The next question is, to whom would land and buildings be sold or rented, and where would they get the cash from? If a tenant can rustle up the cash to pay the rent on where he lives inclusive of the tax, then why not the current owner, who only has to pay the tax but nothing extra for use of the buildings and improvements?

4. "People will be forced to try and generate income from their land, even if that is a sub-optimal use"

The bulk of UK land and buildings by value is housing and by and large, people are paying for the enjoyment value, they do not derive cash income from their home any more than they derive cash income from any other goods they buy or the services they pay for.

So that's like arguing, "If supermarkets start charging me for the food I need, then I'd have to re-sell the food at a higher price to be able to pay for it."

Of course, one of the main determinants of rental values is the level of local earnings. Study after study (see e.g. The Daily Mail, May 2012) has shown that although there is a large wage differential between different regions of the UK, there is a similar rent differential and the higher rents (site premiums) in higher wage regions soaks up, on average, the entire amount of the extra wages (wage premium).

The higher rents in higher wage regions are the entry fee which landlords charge, and which tenants are willing to pay, for the right to earn more money. Those tenants are already putting their homes to their optimal use by using them as a base from which to earn the higher wages.

And these tenants go out to work, earn £20,000 net salary after tax and pay £10,000 in rent. From their point of view, this is just as good as living in a low wage area, earning £14,000 after tax and paying £4,000 in rent. Very few of them are going to move to a high wage/high rent area and then decide to start working from home on the basis that they have to generate income from the asset for which they are paying rent.

So this argument is about as facile as saying "If we have a road fund licence, fuel duty and VAT on car use, then instead of using their cars to commute for work or for leisure activities, everybody will be forced to become a courier or mini-cab driver to generate the income to pay the taxes."

5. "It would be OK to make landlords to pay more but why should I pay tax on my own home?"

To which the rhetorical counter-question is: why should a tenant pay anything to have a roof over his head?

Answer: because he's getting something of value to him, or else he wouldn't pay it.

The total rent which any tenant pays can be split into two things: [the rental value of the bricks and mortar] and [the site premium]. With LVT, the landlord keeps all the rent from the bricks and mortar and passes on the site premium to the government as tax. However the tax bill is split between them (the tax can only be paid out of the total rent collected), the landlord and tenant taken together are enjoying the benefit of exclusive occupation of that site. So far so good.

Good taxation involves taxing substance rather than legal form, because taxing legal form makes avoidance and evasion far too easy and erodes any underlying principles.

What if, for example, the landlord decides to get out of the rental business and sells a home to the sitting tenant? It would be the same person enjoying the same exclusive occupation; all that has happened is that they have swapped cash for bricks and mortar. To the outside world, nothing has changed. Why should the tax now fall to £nil merely because of a change in legal form?

6. "If they tax us on land, they might as well tax us on fresh air!"

I have seen this one seriously advanced on several occasions, but that's the whole point isn't it?

i. Air is a natural resource, provided for free by nature (in which the Clean Air Acts help) and nobody has to pay for the act of actually breathing. Not even the most powerful government or landlord can make people pay for the act of breathing (although a Poll Tax comes close).

ii. Land (or location) is another natural resource provided for free by nature, but we have been conditioned to accept it as normal that landlords (or banks) charge us for the right to occupy it or acquire it, which includes the right to breathe the air from any particular site.

iii. Luckily, nobody can claim exclusive possession of the air: however much we breathe there will always be plenty left for everybody else, so while fresh air is of almost infinite value (without it we'd suffocate within minutes) nobody can privatise it and charge us for breathing it, so fresh air has no market value.

iv. But everybody needs exclusive possession of small patches of land to have their homes (or businesses) on, and there's a limited supply of good patches, which gives land its market value. Once all the land is registered as belonging to somebody, ever future individual in all eternity is forced to pay large amounts of money for the simple right to have a reasonable lifestyle (the only alternative is sleeping rough). What the Normans took by force in a few months or years is still paying their distant descendants handsome dividends.

v. For sure, most households only own tiny patches of land, but in doing so, they are each placing a tiny burden on 'everybody else' who then has to use a less favourable plot. The sum total of all these tiny burdens is, mathematically and logically, equal to the rental value of any plot. And in turn, everybody (landowner or not) has a tiny burden placed on him by everybody who occupies a more favourable plot and so on.

vi. Imagine that there was a limited amount of air, and I'm a big fat bloke who burns through 6,000 calories a day, goes jogging and plays rugby; I drive a massive car and I love to have a roaring fire in the hearth. As a result of this, some other citizens are suffocating because I've used up more than my fair share of air. In that case, would it not be fair to levy a tax on fresh air to encourage me to use a bit less and use the fund to compensate people who are suffocating or whose cars won't start in the morning?

vii. So the only fair way of dealing with land rents is for all that land rental value (or site premiums) to be paid into a single pot and for the money in the pot to be dished out again to, or spent for the benefit of, everybody equally. So again, it's basic maths that the average household occupying the average plot would pay as much in as it receives back out again (in cash or in kind) and would thus be effectively occupying land 'for free' in the same way as they can breathe air for free.

49 comments:

  1. Karinska Mysjkin @kmysjkin5 February 2013 at 13:29

    I grew up at a small farm outside Stockholm Sweden which was taxed on a percentage of the market value. Under social democratic rule the policy was: Let's get the rich estate holders money. My family had no money, and the increase in market prices of course increased the tax. Bad luck? Sell and move on? Lease it to someone? This was our home, but we shifted from traditional farming and leased what we could. The land wasn't worth anything because it was too small for farming and couldn't be exploited to new builds or anything because of planning permission. My father calculated that three years wages was needed to pay the tax. Then we needed money to live as well. So my dad worked 80 hours per week and my mum got a second job. My dad didn't want to sell the family farm. The rich however, the ones with big incomes could afford to live in areas where the prices suddenly boomed. The poor sold their houses, because they couldn't adjust to the fast movements of rising taxes. Sure they got a lot of money for their houses but believe it or not, money isn't everything to all people. We sold our house, payed a lot of accumulated tax and my parents bought a smaller house. Some people just want to keep their house. Even if some people think people of less income aren't worthy to live in a nice place just because they inherited it. (Which by the way also was heavily taxed) Some people managed to make their properties into lucrative leasing business. All traditional farms stopped in their tracks whithin 5-10 years and those who could exploited the mostly untouched nature with huge summer housing complexes. And as usual nature suffers.

    So to conclude; My experience of Swedish LVT, either lead to housing segregation or exploitation of beautiful nature. The finance minister of Sweden at the time (Feldt) was of the opinion that owning land or your own home wasn't any business of poor people. Because there were always somebody else with more money that could buy your house that could afford to pay the tax. So they wanted ONLY rich people in attractive areas so they could tax them. It doesn't make the rich less rich, it just makes the difference between rich and poor even bigger.

    I understand what you want to accomplish but taxing land is not going to make your society more equal. LVT and other taxes in Sweden has been reformed heavily since my childhood, but the segregation is still there and so is the ruined nature. If you want to comment you find me @KMysjkin at twitter

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  2. KM, I explained all that here.

    It sounds to me as if your land was at the edge of a town, so it makes more sense to use it for residential land.

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  3. The land in question was never exploited because of planning laws, we were taxed on our house because it was considered attractive by the market. The reason we stopped farming was that we had to make more money to pay tax on the house not the unexploitable land. Maybe the regulations are too different to campare, but you should consider the results of regulations not only the ideology behind it.

    Besides I don't believe that the means justify the ends, even if the numbers are "dwindingly" small. Thats the argument of the oppressor. If anything, 'the end' needs to be justified. The Social democratic party happily crushed the average person for the political point of getting the rich.

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  4. KM: "we were taxed on our house because it was considered attractive by the market"

    Good. That is one of the underlying justifications for LVT. So you could have sold the house to a richer person, who pays all the tax and built yourselves another one and paid much less tax.

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  5. If you had read my first comment you would've learnt thats what we did.

    My point is that the taxation leads to housing segregation. Rich people over here, poor over there. I don't believe in segregation, we have a lot of it in Sweden and it creates problems as I would expect that you already know.

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  6. KM, yes I did read it. What you are alluding to is the Poor Widow Bogey. Separate topic.

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  7. I was referencing "So you could have sold the house to a richer person..." Which is the exact effect of the tax, but if everyone in the attractive areas sell their houses to richer people the more segregation you get. We've had the LVT and we now see the long term results. 1. Segregation or 2. exploitation of nature. Do you think these are acceptable results?

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  8. KM, simple fact is, even without the tax, in the long run, houses in nicer areas will be bought by rich people. So we get segregation anyway. I will add a section on why this is a silly argument against LVT.

    Under LVT, there will be fewer "poor" people - and if there are, they will be getting money from rich people in nice areas paying all the tax.

    And "exploitation of nature" is to do with planning laws. If you think that building a house for people to live in is "exploitation of nature", then tell me, where are we all going to live.

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  9. Segregation is only inevitable if you reinforce it. Taxing land is counterproductive. If you want to lessen differences in wealth there are other ways to tax progressively.

    The exploitation is not always housing, it can be any commercial activity to which there is enough profit to be made. I find the argument that land always can and even should make profit silly.

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  10. KM, I'm not interested in "should".

    The point is that (nearly all) land gives benefits. That is a simple fact. And those benefits (whether it is SKR 1 per hectare or SKR 1,000,000 per hectare) only arise and/or can only be enjoyed because of and within a stable nation-state.

    And LVT is always very "progressive" indeed. The biggest differences in "wealth" are differences in the amount of land which people claim to own.

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  11. So making it more expensive to own land helps equality how? Poorer people getting benefits instead of land makes poor people dependent on those who own land. Landowner get richer and richer by the segragation effect and they get oligopoly on all produce/rent and can set the prices. The poor people are left with monetary benefits so the can be happy customers of the rich. It fits the recipe of vulture capitalism pretty well.

    LTV reinforces differences and leads to exploitation with ecological disaster such as huge monoculture farms, fracking, mining and so on.

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  12. MK, you are commenting on the wrong article, please don't waste time by inventing killer arguments which I have already dealt with for example

    LVT will NOT hurt the poor or benefit the rich:

    http://kaalvtn.blogspot.co.uk/2013/01/g-lvt-would-benefit-rich-and-hurt-poor.html#2

    LVT does NOT make it more expensive to buy land:

    http://kaalvtn.blogspot.co.uk/2013/01/e-lvt-is-tax-on-aspiration.html#3

    Please try and read the index first and think up some NEW arguments, not boring old ones :-)

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  13. I never claimed LTV would make it more expensive to BUY land, the opposite rather, I simply said it would make it more expensive to OWN land.

    On your second point, I don't fully know the regulations of the UK but I guess the principle is the same, however you assume that capitalism and feudalism is driven by logic and long term values. I would argue the contrary. The interest of capitalism is very short-sighted. The feudal system was based on the few very rich collecting tax/rents from its tennants to pay the monarch and keeping the difference for themselves. Roof or no roof landowners of today still collects the value of other peoples labour without having to work themselves. Accumulating new profits every year which leads to the inevitable fall of capitalism. It's self consuming.

    If I have wasted your time and bored you I do apologize, it was not my intention. I mistook you for a thinker, I realise now you are more of a professor. If you care for something NEW it is not legal for a company to own land in Sweden.

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    1. If I have wasted your time and bored you I do apologize, it was not my intention. I mistook you for a thinker, I realise now you are more of a professor. If you care for something NEW it is not legal for a company to own land in Sweden.

      That's simply not true. Both forestry, farmland and urban land is in fact owned by companies. Where does it say so? And what does it matter anyway? It doesn't change any power relationships whether land rents are collected by some Count, your father, or a huge international conglomerate, the power-relationship inherent in land is the exact same. The solution ofcourse is collecting the rents, but I'm open to suggestions of schemes that could copy a LVT/CI-scheme in making landownership an equal right, defined right down to the Kr.

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    2. Addendum to the above: I base the above facts on that I've reviewed several prospects on swedish properties (farms/forestry land), and have seen very often that it's owned, or at least structured as ABs. I have indeed seen also that some farms are only able to be purchased by a person/persons, but this seems to be a property-specific limitation, not universal. AFAIK, most of the private land in area in Sweden is owned by forestry companies. So I'm curious to this claim, and would be interested in more info.

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    3. Jordförvärvslagen (1979:230) JFL (Land Acquisition Act)

      This is for scarcely populated areas, in densely populated areas the rules differ a little bit.

      You can as a company acquire land if the company is owned by:

      The state (sveaskog is a 100% state owned forestry company owning 3,3 million hectares of forest)

      The county

      Or if the company is:

      a credit institute/bank/lending institute

      Or if the company gets a permission from the state, which is given on (on all of) these premises:
      The company can provide workplaces that benefits the local population
      The land is necessary to provide these workplaces
      The workplaces are considered important enough in quantity and value for the local community
      The company renounces a portion of the land which approximately corresponds to the acquired estate in ability of production. The land is to be renounced to a private person or the state to use as the state see fit (usually for nature reservation purposes)

      Or the seller also is a corporate body.

      There are of course exceptions usually granted the fideikomiss (aristocracy) in shape of foundations. And these can be sold to other corporate bodies. I'm sure there are more, but the state grants new permissions so scarcely it is considered legally impossible.

      So, my mistake, it is not illegal, just about practically impossible to make more land corporate. Are you very interested in Swedish law of the land?

      Read more here: http://www.government.se/sb/d/3288/

      The reason of me writing this was that the author of this page asked me for something NEW and I (wrongly) assumed he was interested in hearing about other ways and regulations.

      I do have an idea however, if you are interested. It has got to do with equality, perhaps not down to every single SEK, and frankly you are in no position to demand it either even if you are offended by me, my opinions and, it seems, my father.

      If you were to divide the amount of acres of the country with the collected value of these acres and then divide that number with the number of inhabitants of the country and get a estimated figure of acres/value/citizen and base a tax on that. If your household own more acres/value, you are taxed on the exceeding amount, and if you own less or none you are not taxed.
      This is an alternative; you would get at the people who own more than a "fair share" of the cake and the people who own less aren't taxed so they can keep what they have and the people who own none get the benefits from the taxation and have a better chance to acquire land.





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    4. Thanks.

      Funny about the last idea of yours, that's exactly the idea that is proposed here... If you collect LVT, and hand back, say half of it as a citizen dividend, that's exactly what you get isn't it?

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    5. and frankly you are in no position to demand it either even if you are offended by me, my opinions and, it seems, my father.

      How on earth do you figure this...?

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    6. By the company you put him in,

      "...by some Count, your father, or a huge international conglomerate"

      And the very specific claim of an idea of mine defined so precisely

      "defined right down to the Kr."

      Sorry if I misinterpreted it, Swedes speak volumes between the lines, perhaps not so in the UK.

      My reference is the Swedish system, which appears to be have been different, and the effect it had was that the rich got away with it and the low income holders payed the price. Because it was based on the market selling value, and the dividends didn't get to the low income holders with properties in attractive areas because they were rich 'on paper'. It widened the differences. But the social democratic party in Sweden favoured aristocracy, big companies and other powerful institutions with tax subsidies, no tax on land and easier regulations on, for example, land acquisition. It was easier to crush the middle class.

      Sweden has a long history of land owning farmers (smallholders) who throughout history together has been able to challenge the power of the king and aristocracy in the past and the state and the big companies in more modern times. Not anymore because of this taxation so forgive me but taxation that only rich people can pay and making the rest dependent on state hand-outs I will never accept, we have already fallen in that trap once.

      As a curiousity; Sweden had an independent farmers republic in the north for quite some time in the early middle ages.

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  14. KM: "Roof or no roof landowners of today still collects the value of other peoples labour without having to work themselves."

    Correct. Which is why LVT is a good idea. What you wanted was for your father to collect or enjoy land rents at other people's expense.

    Consider this: a lot of poor people own no land. Your father claims to be poor but owns lots of valuable land. How do we best share out that land?

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  15. My father wanted to continue farming. Point being he made profits from his own labour. It is NOT correct that he wanted to collect or enjoy land rents at other people's expense. That was one of the choices he was left with. The other one was to sell. He choose to sell. I think this is the third time I've told you.

    I have never claimed my father to be poor, he was just poor enough to not afford to own land. That is my point. Your precious LVT makes it more difficult to share the land. Because all landowners then must make more income, hence reserving it for people who have well paid jobs or other assets.

    The best way to share land is to make it affordable to ALL, not allowing companies to be land owners and try to find ways to redistribute wealth through progressive taxation monetary movements such as purchase and income.

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  16. "You crush the middle class between inflation and taxation" Guess who said that?

    With your perseverance you should look into the effect and policies of inflation if you really wanted to make society more equal.

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  17. KM: " It is NOT correct that he wanted to collect or enjoy land rents at other people's expense."

    You have contradicted yourself. You said he owned a house with a high rental value. The only reason the rental value was high was because there were not enough of them. So he was enjoying a benefit from land which he was denying others.

    "The best way to share land is to make it affordable to ALL"

    The best way to share land is to tax the rental value and distribute the tax as universal cash benefits That way everybody can afford an equal share.

    "try to find ways to redistribute wealth through progressive taxation monetary movements such as purchase and income"

    I have already covered that here

    http://kaalvtn.blogspot.co.uk/2013/01/d-local-taxation-and-only-fair-tax-is.html
    and here

    http://kaalvtn.blogspot.co.uk/2013/01/i-lvt-would-not-raise-enough-revenue.html#5

    "you should look into the effect and policies of inflation"

    I have already done that here:

    http://kaalvtn.blogspot.co.uk/2013/01/w-i-want-to-have-my-cake-and-eat-it.html#6

    You obviously have not.

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  18. "The only reason the rental value was high was because there were not enough of them. So he was enjoying a benefit from land which he was denying others."

    First of all we didn't have the same system of tax on rental value. The system was based on the selling price of the market value.

    Second, the price of something should only be interesting if you sell/buy something. You could compare LVT with taxing the value of a company or a company's assets annually. Is that reasonable?

    Sure, he occupied a house that other people wanted, thats how he found a buyer. Do you suggest we should socialize all housing, making private property illegal? Or build houses for everyone exactly where they want?

    "So he was enjoying a benefit from land which he was denying others."
    The same could be said of a worker with a job. He paid taxes on what he produced as a farmer. on the salary he paid himself and of the profit.

    As far as the quote goes; the effects of inflation are AS harmful like taxation. The expression goes "crushing between inflation and taxation". If you both inflate the prices and tax according to the prices the first victims of such a policy are the ones with the lowest income and the people whose wages are inflated last.

    The people whose wages are inflated first will reap the benefits when consuming and paying all expenses, including paying taxes, with that inflated wage. If you really think segregation is inevitable the quote is Stalins recipe to speed up the process.

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  19. KM: "You could compare LVT with taxing the value of a company or a company's assets annually. Is that reasonable?"

    No you cannot compare the two. I covered that here:

    http://kaalvtn.blogspot.co.uk/2013/01/p-lvt-is-wealth-tax.html#1

    "Do you suggest we should socialize all housing, making private property illegal? "

    Don't be stupid. LVT only works if you assume that land is privately owned. If I wanted to nationalise housing (which I don't) then I would say so.

    "The same could be said of a worker with a job. He paid taxes on what he produced as a farmer. on the salary he paid himself and of the profit."

    Earned income from working and the rental value of land are fundamentally different. If you don't realise that then there is no hope for you.

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  20. "Earned income from working and the rental value of land are fundamentally different. If you don't realise that then there is no hope for you."

    The difference is if you work the land and enjoy the profit from your own labour or if someone leases the land and enjoy the profits of another ones labour. The solution is not to tax landowners, it is to make sure you have as many landowners as possible. To divide the cake. Personally I believe in incitement rather than punishment to create a desired behaviour and perhaps it there we differ.

    With LVT if you can't afford to own land, you should rent it from someone who profits on your labour and to make seem ok the landowner is taxed accordingly so the poor get benefits so he can afford to pay the rent so the landowner still can make profits. It is not making it equal. It is only making it look better.

    Let's say the landowner make 5% profit of the land rental value every year, where does that 5% come from? It's like fractional reserve banking, it needs infinite growth to work and the landowner still makes his profits on other peoples labour enriching himself without producing anything. LVT doesn't change the system, it's still feudalism, if can't understand that, there is no hope for you.

    I thank you for a good discussion, I believe it is a good thing to be challenged on my opinions, I hope you feel the same way.

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  21. KM: "The solution is not to tax landowners, it is to make sure you have as many landowners as possible. To divide the cake."

    Correct. Notwithstanding that agriculture is only one per cent of European GDP and thus almost irrelevant, the easiest way to "divide the cake" is to tax the rental value of land and to divide it up as a cash payment to each adult. So each adult is an indirect landowner of an equal share.

    "With LVT if you can't afford to own land..."

    There is no "if". Its basic maths and logic that with a 100% LVT and everything paid out as flat rate cash to each adult, then each adult can afford to rent an equal share (i.e. pay the LVT on his own home or on his own farm).

    "the landowner still makes his profits on other peoples labour"

    With LVT, the landowner doesn't receive a share of the value of other people's labour. he pays for what he wants to occupy or use, whether that is home, business or farm.

    "I thank you for a good discussion,"

    And you too. Your English is very good, I must say.

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    1. "Your English is very good, I must say."

      Let's have the discussion in Swedish next time, so I can enjoy having the upper hand on language comprehension.


      Delete
  22. Kmysjkin:First of all we didn't have the same system of tax on rental value. The system was based on the selling price of the market value.

    This is one of these cases where the difference between rental value and capital value is clear, but then again, it might not have turned out much different. The capital value of the farm as a whole was increasing beyond your father's means, even though it couldn't be developed beyond what the current regulations allowed. So obviously the rental value of the farmland itself should have been at what could be rented as a farming business. OTOH the rental value of the house/farmstead, would probably still be out of reach because it was attractive to townies. Still, what this means, is that the actual business of farming, would under a system of planning regulations, still be viable anywhere, assuming correct valuation according to rental value.

    The economic efficiency argument is ofcourse also clear from this example; your father started working outside the farm, earning more money, because he wanted to keep the farm. It was worth more to him to work 80 hours than to loose the farm.

    Look, I can relate, I am a "farm-heir" myself. And I imagine I'm going to come in the situation myself some time (except there won't be any LVT a long shot). This all comes down to sentimentality. LVT or not, should I keep the farm away from other people's use (new innovative farmers, rich people, whatever), effectively raising the scarcity of available land, to indulge in my sentimentality, or should I allow someone to make better use of it?

    As it happens, I am very sentimental about my hard-earned, being that I sacrificed time away from my family to earn it, and would much rather like to keep that, other than something that I am not the best user of.

    And when it comes to segregation. That's what the current situation is, and that's not going to change without LVT. If you have social housing (which Sweden does), it's probably better to build it in a variety of locations than in one satelite community outside of town. That's about what you can do about it bar idiot schemes that just hand out privileges willy nilly.

    With LVT if you can't afford to own land, you should rent it from someone who profits on your labour and to make seem ok the landowner is taxed accordingly so the poor get benefits so he can afford to pay the rent so the landowner still can make profits. It is not making it equal. It is only making it look better.

    Obviously, with LVT, there is little point in having someone richer rent it to you because you can't afford it, since you obviously can. This doesn't make much sense. But that's also covered on this site.

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  23. Well the sentimental value is on an individual level and shouldn't perhaps be so neglected considering things like the cultural value of the "knowledge" of the land and the cultural history.

    However, my objection isn't so much sentimental, it is

    1. Letting income solely control who has the ability to own lots of land has it's flaws and taxing according to LVT doesn't fix it, it is just cosmetics.

    2. The point that land is seen as only profitable the most efficient farmers. Especially "innovative farming" has lead ecological disasters such as huge monoculture fields, the use of artificial fertilizers, factory cattle farming. I don't approve of that.

    And I am a believer of creating equality in other ways, like having sound money, consumption tax and more. Getting at the middle class in a country gets you nowhere.

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    1. You really should read the KLNs, they adress most of the things you say.

      As to your point 2. Whatever your opinions on farming practices, these have developed largely without LVT being collected haven't they? And who is to say that per-area efficiency is the current model of large monoculture fields? It clearly isn't. Large monocultures are not necessarily area-efficient, it's done mostly out of capital and labour efficiencies. Making the most out of each area in either yield or economic output (high-value crops), is the exact opposite of large-scale monocultures. And who is to say that LVT excludes placing limitations on cultural practices that have negative externalities...?

      How on earth you can create equality with consumption taxes, I've got no idea. But if you mean by that: redistribution funded by a consumption tax, why would you interfere with product costs, which negatively affects both consumers and producers, when you have a source to redistribute that doesn't have the negative effect, i.e. LVT?

      As far as the middle class (and those who occupy the average value land), why would they be negatively affected, when they get a citizen dividend to pay their LVT-liability, and are taxed nothing of their income, they seem to me to be the winners here.

      You really should read the KLNs in here.

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    2. That the segregation manifests in amount of land owned doesn't mean taxing land itself fixes it. Land tax is 'small potatoes' (swedish expression, surely originates from the farming culture =)) and a distraction from the real problems as I see it.

      The biggest reasons we have inequality are:

      Globalisation, the poor countries are exploited by the rich with the help of IMF and the WB

      The destruction of our environment

      Banks/Corporations corrupting states/heavy lobbying (Corporatism)

      Inflation and fractional reserve banking and QE

      Centralisation (USA, EU) which leads to stagnation and collapse

      Income differences

      The cult of self

      The media control of the public mind

      The absence of democracy


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    3. That the segregation manifests in amount of land owned doesn't mean taxing land itself fixes it.
      Land tax is 'small potatoes' (swedish expression, surely originates from the farming culture =)) and a distraction from the real problems as I see it.


      It doesn't necessarily fix "segregation", but it solves a host of other problems. In fact, you proposed a "new" model, that is exactly the same as the author herein proposes, namely taxing land, and giving out a per capita dividend, which will ensure that people get access to an equivalent of an equal share of land / compensation for not having so when renting.

      As for the other problems, there is nothing about LVT that excludes adressing the other issues. In fact, if you delve deeper into it, a lot of the larger issues, except maybe the socialist idea of equality, is very much linked to the problems of private collection of land rents.

      Delete
  24. I have read it and found arguments like these:

    ”The "ability to pay" argument highlights that Home-Owner-Ism is Blue Socialism. In a free market capitalist system, everybody has to pay the same for the same services; ”

    Capitalism in Laissez-faire = (source wikipedia "laissez faire") "...is an economic environment in which transactions between private parties are free from tariffs, government subsidies and enforced monopolies, with only enough government regulations sufficient to protect property rights against theft and aggression."

    "we can't have a system where the government decides that favoured groups get certain things for free and that others have to pay through the nose"

    And quoting:

    "That all leaves income tax as the only serious challenger to LVT. A flat income tax is the second least-bad tax, per Milton Friedman (guess what he said the least-bad tax was?)"

    Well, If Milton Friedman is the ideal economist of the author I can see why I don't agree. His school of economics has put the world in the mess we are in today.

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  25. Let's agree to disagree, and I take the opportunity to thank you for your time and I sincerely want to wish you good luck with your farm.

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    1. Allright then. Thank you, and good luck with your endeavours as well.

      Delete
    2. Hi having just read this intelligent and civil discussion, i just wanted to add or emphasize something that has been perhaps overlooked.

      The OP's fathers farm was taxed on the currently assessed market value of the property as a whole, which included a desirable farmhouse.

      LVT would instead have been assessed on the rental value of the site itself, minus the (fashionable) improvements and so would much more accurately represent the current use and zoning of the property.

      This amount should have been much more within the ability of the farmer to pay out of the proceeds of the production capacity of the farm itself.

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    3. Agreed, deducting for improvements may have lowered the bill slightly, without knowing the details of that specific application of tax. OTOH, the farmhouse may have just been a small part of it, and the desirability might very well been because of the location with an opportunity to build a house on top of the teardown, I don't know.

      Delete
  26. Land doesn't generate income. So what? Neither does eating bananas, yet I'm still expected to pay for them at Waitrose (they do those nice small Caribbean ones).

    Occupying a valuable location is an on going consumption as surely as is the eating of food. Do we expect a special opt out for privileged groups so they don't have to pay for their groceries?

    No. We should all pay just compensation for what we consume. Happily the market doesn't just tell us about the price of bananas. It also places an exact price on the amount of commonly created wealth we consume and enjoy too.

    Unlike Income Tax which doesn't.

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    1. TBJ, the Homeys do clever DoubleThink here - they say that they do not consume PHYSICAL land, the same amount of land is there before and after.

      So, you ask, what if squatters take over your house and it takes you a year to boot them out. You receive the same land back as you had before but surely you have lost something and they have gained something?

      Ah, but that's a crime, and an affront to my property etc, they squeal.

      The refuse to accept that rent = land area x time. It is not really a physical thing.

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    2. Consumption doesn't have to be a physical item. I can pay for entry to a gallery, or music concert.

      Yes, just like the consumption of land values it requires you are in a certain location, but the benefits you receive are not physical by nature i.e you don't get to keep a physical object. If you want an on going enjoyment of this experience, you'll just have to keep shelling out for more tickets.

      Stick that in your Homey pipe and smoke it;)

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  27. Mark, If squatters occupy your house for a year, they have also occupied your capital, the house, the bricks. This is like someone occupying your car (a capital item). Occupying unused land is not a moral offense. Occupying a used capital item is an offense, like using my car.

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    1. JB, not clear to me what point you are making.

      You state that they have "also" occupied, i.e. deprived you of use of your capital (which they clearly have) but in this, there is the tacit admission that they have also occupied something (the location) which is NOT capital, and certainly not capital from your point of view.

      For example, what happens if somebody 'squats' on Jocasta's pony paddock, unused land, which is just a field as nature (or ancient history) provided? Does the fact that Jocasta's parents have "punched the tree" by placing a pony on that field make it "used"?

      Either way, under a full-on LVT system, from the day that squatters move in, they would become liable for the LVT (to the Crown) as well as owing the building owner for use, damage etc.

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    2. Mark,

      "Either way, under a full-on LVT system, from the day that squatters move in, they would become liable for the LVT (to the Crown) as well as owing the building owner for use, damage etc."

      That answered it. :)

      John

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  28. What KM should really be complaining about is the Swedish system of taxation on selling prices. If the tax was based on current rental values, the problem referred to would not arise. If there is no consent for development, then the valuation remains as farmland until such time as the consent is granted and the development can take place.

    However, if one enjoys living in a rural location not too far from a city, one should expect to have to move if the city expands, as the rural attractions of the location are no more. There is always the option of moving a short distance away where the location is properly rural instead of rural-on-the-way-to-becoming-suburban.

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    1. Phys, yup, good riposte, albeit several months too late and i don't think KM is coming back, or even whether he or she would traps the logic :-)

      Delete
  29. it have very useful Land doesn't generate income. really most important info to be aware with.

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    ReplyDelete
  30. 90% - 100% LVT on current site premium (definition see here) would be approximately 3% of the current total selling price of each home. Even if house prices were to halve because of the LVT, that still means that any homeowner could run up 17 year's worth of arrears before there was a shortfall in collection.


    wouldn't this vary and be only 17 years worth in the average (by value) location?

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  31. JT, yes it is a generalisation. In very cheap areas the LVT would be £nil; in very expensive areas the remaining value might only be enough to cover five or ten years of LVT.

    But nobody actually knows what would happen. A 3% LVT would have the same effect as a 3% increase in interest rates - but what if everybody's post-tax wages went up by half as well? What is the net effect?

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