Jock's Place - Story - Comments

Thanks both - I've been out

Jock — Sat, 26 Jul 2008 23:01:22 +0100

Thanks both - I've been out and meant to respond to some of DK's points but I think Paul has covered everything I was going to say. Except I did some digging around about valuations and so on...

The Land Registry deals withsomewhere north of 5 million transactions per year that involve a valuation with which both principals must be at least happy enough to do a deal - either a mortgage or a purchase. So that's about 20% of the housing stock. Then there are the 30% of households who are rented anyway and therefore know exactly year to year what their landlord thinks the property is worth. So something like 50% of the residential sector is valued every year by the market.

Given that the Oxfordshire study showed that a satisfactory result for occupiers could be achieved by valuing about on in ten properties, the market data already seems substantially better than that.

But, DK, one other thing - part of the problem at the moment with our strange relationship with land is precisely that owners aren't more aware of the "passing rent" value of what they occupy. The level of location rent on a site is a financial expression of how much one's occupancy of a particular site is breaching "Locke's Proviso" (from Robert Nozick) and therefore harming other possible users of that location.

Surely it is a fine libertarian principle that people should compensate others for the harm they do them?

Good stuff, keep going

Mark Wadsworth — Sat, 26 Jul 2008 20:55:44 +0100

DK said the same things to me recently.

It would be fairly easy to dissect them logically step by step and rebut them with graphs and calculations. But it would a) be laborious and b) it would never overcome the whole 'Victorian land owning aristocracy' mentality that has been drummed into people over the years. So I don't see why I should bother (although I will one day).

As to this 'difficulty with valuations', crikey, establishing average land values for each e.g. postcode sector on the basis of actual selling values minus rebuild costs per insurance quote divided by plot size is surely the easiest thing in the world.

This whole argument that if a plot of land is used for a block of flats, they should pay 200 times as much as the same plot of land with a bungalow on it, what a load of crap. Those 200 people are contributing 200 times as much to the overall wealth of society* and hence 200 times as much towards land values. So the bungalow owner is sitting on a massive unearned windfall gain. And, seeing as land values tend to rise with average wages over time, an LVT set at (6%) of CAPITAL values (rather than 100% of rental value) would merely skim off the capital gain element.

* Assuming they are working or living off proper investment income (shares and interest).

Response to Devil's Kitchen

Paul Lockett — Sat, 26 Jul 2008 19:41:59 +0100

Devil's Kitchen, I think that you have a reasonable point about it not being possible for the government to calculate land value with complete accuracy all of the time, but I think there is enough data to produce a valuation with a good degree of accuracy. One very simple valuation tool in a 100% land rent system is that identical houses should sell for the same amount wherever they are and whatever size plot they are on, which provides a good benchmark. The key for me is that the system should be transparent and open to scrutiny.

To address some of your other points:

"I severely dislike the idea that the state owns the very land upon which I walk."

I dislike the idea of the state owning the land too, but to me, land rent wouldn't reflect the fact that the state owns the land, but that nobody does. I believe that the nobody can rightfully claim the air, sea or land, as their private property, as nobody produced them. On that basis, if somebody wants to make exclusive use of a plot of land, it is reasonable to expect them to compensate everybody else for excluding them from that plot.

It's probably easier to explain the principle using the other example of broadcasting licences. None of us created the electromagnetic spectrum, so we all have an equal right to broadcast on any given frequency, just as we all have an equal right to talk or sing at a given frequency. However, for the broadcast spectrum to be useful, each frequency has to be used exclusively by one broadcaster at once. The fairest way to ensure that would seem to me to be to charge the broadcaster the market rate for a licence to make exclusive use a certain section of the spectrum and pay everybody else the revenue to compensate them for the fact that they are being denied the right to use that part of the spectrum.

In a completely anarcho-capitalist society, I believe you would end up with much the same result. If you accept that we all have an equal right to broadcast on any frequency, the only way anybody could gain exclusive rights to use a frequency would be to get everybody else to agree to freely enter a contract not to broadcast on that frequency. Broadcasters would still have to pay everybody else for exclusive rights, but the whole process would be far more convoluted than the Georgist approach.

"Oh, and there is nothing to stop a greedy, high-spending government simply raising land rents across the board whenever they run out of money. Sure, that applies to other taxes but there are ways to get around those (and thus demonstrating the truth of the Laffer curve): there is no way to avoid paying rent on the land on which you live."

But it is possible for people to move to a plot of land with lower rent. If the state tried to set the rent above the market rate, land would begin to go unused, as, amongst other things, businesses would cease trading and people would begin living at higher density by, for example, taking in lodgers or moving back in with parents. For that reason, land rent would probably behave roughly in line with the Laffer curve; set it at zero and it would yield no revenue, set if too high and people will begin living and working at high density and leaving the country, resulting in an expanse of unused land yielding no revenue.

"land rent bears no relation to the services used. Take a block of flats and a single house occupying the same land area. The block of flats contains two hundred people, the house contains four. They have all of the usual services. Should the house pay the same rent as the block of flats?"

If there are no planning restrictions preventing the land being used for either a house or flats, then my answer would be yes. The landholder would be paying for the privilege of having a monopoly on the use of the land, not for using it in a certain way. Also, as a Geo-libertarian, I would push for services such as rubbish collection to be provided by the private sector through user fees, with as much as possible of the land rent being paid out as a citizens' dividend.

Jock, "No, the market sets a

Devil's Kitchen — Sat, 26 Jul 2008 15:43:21 +0100

Jock,

"No, the market sets a location's value. It does it all the time at the moment."

No it doesn't.

Look, most people only know the value of their property if they actually come to sell it. OK, actual land will fluctuate in value less than any properties on it but, at the same time, the land also fluactuates in price outwith the land-owner's control.

How much a property is worth is based partially on the value of the land on which it stands, but really on whether it's a nice space, what condition it's in, etc. How much land is worth (under the Georgist system) depends on its location and the services connecting it to the community.

So, we come to the valuation. Do you know precisely how much your home is worth? Do you have an idea to the nearest £10,000? Is it worth more or less than this time last year?

Even the government don't actually know what your land or your property is worth. We are, after all, rather living in fear of the constantly threatened Council Tax re-evaluation. When I owned a flat in Edinburgh, I was in the £40 – £50,000 band (IIRC – it was band D anyway) but I bought the flat for just over £70,000 and sold it, six years later, for an awful lot more than that.

This is not an argument against LVT as such – I am simply pointing out that, whilst the market might actually dictate the price of land, most people do not know that price until they are either buying or selling. Further, the government does not know the price of it either and is unlikely to get it right.

My objection to LVT is more ideological – I severely dislike the idea that the state owns the very land upon which I walk. Oh, and there is nothing to stop a greedy, high-spending government simply raising land rents across the board whenever they run out of money. Sure, that applies to other taxes but there are ways to get around those (and thus demonstrating the truth of the Laffer curve): there is no way to avoid paying rent on the land on which you live.

P.S. Further, land rent bears no relation to the services used. Take a block of flats and a single house occupying the same land area. The block of flats contains two hundred people, the house contains four. They have all of the usual services.

Should the house pay the same rent as the block of flats? If you say "yes", then you are ignoring the fact that it is the cost of services that should determine the rent – after all, two hundred people will throw out considerably more rubbish than four.

If you say "no", then it is no longer a pure land rent. It becomes, in effect, just like the Council Tax (although nearer the Poll Tax): the tax level is determined by the number of people as well as the value of the land.

If I could just supplement

Alix — Sat, 26 Jul 2008 10:10:42 +0100

If I could just supplement the London point; this is a case of drawing a false dichotomy between problems that may arise under an LVT system and current conditions that are assumed to be healthy.

Of course, they're not healthy - nor are they essentially behaving very differently to how an LVT system would work. The current trend for London is for the population to get older and richer and less likely to work in front-line service industries, as a result of a concentration of high incomes & property values. London is currently on course, reductio ad absurdam, to become a "dead" community that can't sustain itself.

Market adjustment will eventually deal with this (I'm off within the next year myself and I'm *from* London; I wasn't even a migrant originally), but an LVT system would deal with it much more quickly as a leveller, so far as I can see.

The Justification for LVT

Paul Lockett — Fri, 25 Jul 2008 16:09:53 +0100

As someone who considers himself a Geo-libertarian, my response to Tim's request for an explanation of why the state thinks it has the right to charge 100% land tax would be that the state doesn't have an automatic right to do anything, but each person has an equal right to use land and other natural resources, so, if somebody wants to make exclusive use of a plot of land, they should be required to pay the market rent for the land to everybody else, in the form of a citizens' dividend, to represent the opportunity that they are monopolising.

Likewise for other natural resources, like oil drilling rights, or the electromagnetic spectrum. If somebody wants to broadcast reliably on a certain frequency, they need the equivalent of secure tenure, which means the state preventing anybody else using the same frequency. The individual or company that obtains that right to exclusive use is being given a benefit by the state and it is right that they pay the market rate for that broadcasting licence.

To address the freehold issue, it is perfectly possible for somebody to have freehold, but be required to pay land rent. Both Council Tax and NNDR incorporate some element of land taxation, but neither are a direct threat to secure tenure.

clarifications

Tim Carpenter — Fri, 25 Jul 2008 10:32:57 +0100

Thanks, Jock, for your full reply, but I do need to clarify things here.

I am not against LVT as a concept to tax and in the policy we at the Libertarian Party do say we would want to do it IF IT CAN WORK. That proviso has not yet been met by a long way, and btw, it is inaccurate of Paul Lockett (in the comments) to suggest there is any inconsistency here - we want a practical plan, and I criticise what I see as IMpractical plans.

1. When I say who defines the value of your land, you say "why does anyone need to decide", yet immediately go on to talk about collecting the tax! Someone DOES decide the taxable value and that affects the actual value. Can you not see that?

2. As you should know, we aim to eradicate income tax., so the comparison does not hold. The problem comes when some local area under the influence of whomsoever, adjusts taxation on land they wish to gain access to because a new development is coming. So, building a road, whack up the value of land next to it. Farmer has no CAPITAL to develop it, so has to sell it for a knock-down price because he HAS to sell to meet the tax bill. If this does not concentrate land into a few hands, I do no know what would. This is just one example of the potential risks.

3. Living costs - if you have CBI as described you would still keep the most expensive parts of the Welfare bureaucracy - the entire means-testing apparatus. Housing benefit would probably remain in all but name.

4. Income. You need to clarify here - are you saying that COMPANIES have 40% more or that wage earners do? Be under no illusions, if you have CBI, income tax will be enormous. I worked out once that if we went for CBI with no other tax changes but a cull of QANGOs, income tax would need to be about 64% flat from the very first penny (IT is currently £140bln, 7k x 50m = £350bln pa). A HUGE disincentive to working especially at the lower end. Result: black economy, unproductive citizens, more companies shutting down and a growth in imports (and do not say "cheap imports make us richer" because that only holds if we are simultaneously exporting a greater amount of higher value exports).

5. Movement to low tax areas: A company will consider workforce supply as a prime consideration, not just rental costs. If that were not the case, expensive London would be empty. People pay top dollar for London rents because of a massive pool of labour - they can gain access to many cheap or more chance of snaring the best. To think LVT would make a company move out to a depressed area? Those places are already cheap. Why doesn't it happen now? Limited skilled labour pool. As you say the Government does it now and did it in the past (remember the Hillman Imp?) and it creates quasi-soviets. If LVT has an influence, it might IMHO move a few companies, deter some from even setting up where they need to and the rest of the companies will be bled paying higher rates just to keep near the labour pool they require. In the case of London, the move will be to New York or Hong Kong and we all lose out.

6. Mutualism: your previous reply was not an answer and neither does this answer, m'fraid. It is not a case of being employee or mutual but mutual or owner here. CBI, I agree, will allow people to consider taking the risk in a new venture, but I cannot see where changes are put forward that would encourage more mutualism, or should I say remove the discouragement to mutualism (that is very important distinction - no favouritism!). BTW, if only the Co-op did not fund the Labour Party, I'd seriously consider changing my bank account to them. I use Nationwide, though.

7. I think you need to rewind a little here and explain why the State thinks it has the right to charge 100% land tax! That to me is "tax is theft" in its pure form. It is Nationalisation or even Communism. The State as landlord? Go to China and see the misery and abuse the lack of freehold creates. I can see that you have no idea what will happen with 100% land tax in terms of ownership or even the banking industry - this is a core part of my concern with LVT schemes.

Funny you mention Second life. Do you remember the recent banking crisis therein? This is a problem if you are not careful about banking, though the mistake SL had was allowing Lindens to be used. What I want is for all those Social Creditors to go on to SL and try and make their ideas work.

Private competing currencies might well be a good thing, but eventually the State would collect taxes measured in one currency or basket thereof (which in effect becomes a currency!), regardless of how the other currencies floated around it purely from a perspective of budgetary planning. I would not be surprised if VISA and MASTERCARD were quick to create their own - they have the operational systems to create a currency without even printing a single note or minting a single coin and to match the exchange rate transaction by transaction.

btw I am no "anarcho-captialist". I am not a "geo-libertarian" either.

p.s. your page has a script that my browser asks me to kill due to risk of resource hogging.

reply

Tax Jobs — Fri, 25 Jul 2008 08:42:11 +0100

Hmmm..interesting.

reply

Tax Jobs — Fri, 25 Jul 2008 08:41:00 +0100

Hmmm..interesting.

I have a feeling that

Jock — Thu, 24 Jul 2008 22:47:13 +0100

I have a feeling that things changed quite a lot in the early days of the website. I've not heard from them either since probably their membership system got really going. I heard once, from Parick, saying tah tthey were closing down the public forums and revoking any internal forum memberships they had given to people who hd not joined, including me - end of June maybe?

But they did give me private forum access when I explained much the same as it sounds you did. Maybe I made more of the possibility of my joining them.

Tcoh.

Alix — Thu, 24 Jul 2008 22:34:59 +0100

Well, at least the Libertarian Party give you the time of day. I signed up to their alleged mailing list when their website was about a week old, with a chirpy message saying how interested I was in the Libertarian/Lib Dem overlaps, and have heard bugger all since. [/grumble]

I wasn't actually going to

Jock — Thu, 24 Jul 2008 21:25:07 +0100

I wasn't actually going to mention that. I had read it and suggested that we were pretty well there practicality wise. Inching closer to a full register, building more and more data all the time with which to estimate values. A colleague has written a book, "Location Matters ", about one way of implementing some LVT. I know there is great disagreement between types of libertarians about whether "goe-libertarianism" and "mutualism" are really libertarian at all and that land tax is a crime against private property. And as you say, they'd hardly be a libertarian party if they were not allowed to disagree with each other!

Libertarian Party Policy

Paul Lockett — Thu, 24 Jul 2008 21:16:28 +0100

Obviously, a member of a political party doesn't have to agree with every policy of that party, but I find it a bit odd that the Head of Policy at the Libertarian Party would go out of his way to criticise LVT when the Housing and Planning policy statement in their manifesto tacitly supports it with the statement:

"Until a practical Land Value Taxation system can be devised, forms of zoning (such as Green Belts) will still be needed."

On-communications

Jock — Thu, 24 Jul 2008 11:35:47 +0100

Very interesting, thanks Anon. Nobody here seems to know anything about them! But Wireless Oxford is rather hoping not to have to build out a system ourselves, so a supplier aiming at a different part of the market could be a very welcome partner. I will be in touch with them!

WiMAX

Anonymous — Thu, 24 Jul 2008 11:20:43 +0100

On-communications currenltly supply a WiMAX service in the Oxford area. Check out their website.