Jock's Place - Lib Dem - Comments

The Effect of Introducing LVT

David Chester — Wed, 13 Aug 2008 13:13:55 +0100

Much as I appreciate all the comments in support of this inovation, I always find it strange how much people can comment about a subject which they don't really understand. To properly understand how any change is going to affect the macroeconomy at large, one needs to first understand how such a system actually functions. This involves a simulation of the complete system. All of us can find out what macroeconomics is, but there are very few explanations about how it works and in particular the effects on making a change to the method of burdening the population by taxation.

As a researcher who has been examining this problem over many years, I have managed to develop such a means of providing a true explanation. It is essential to model the closed system as a set of functional entities (which allows for a lot of simplification due to collection of various operations into groups), connected by all of the kinds of macroeconomic activities. I find that but 6 entities are needed with 19 mutual money/goods connections only.

As a semi-retired engineer, I use this presentation within an extremely logical and scientific approach (which incidentally allows macroeconomics to now be regarded as an exact science), and I find that the short-terms effect of introducing LVT compared to that of increasing income tax by the same total amount, is to stimulate the economy. The income tax also stimulates the economy but when LVT replaces it, the amount of stimulation is 3 times as much. This is a discovery that is provable by theory and analysis, using George's two axioms, some high-school mathematics (no computing) and a Leontief type of model for the whole of the macroeconomic system.

Over the long-term other factors come into the picture including the reduction of landed monopolies and the greater opportunities available to entrepreneurs. My model has not yet been applied here.

Further Reply

Paul Lockett — Mon, 11 Aug 2008 23:25:15 +0100

Tim: "If you are a homeowner and the value of land goes up around you, LVT may well force you to sell up at a time not of your chosing. Can you not see how that is, frankly, an obscenity?"

No I don't. If the value of fossil fuels goes up, somebody living in a larger property may have to down size to reduce their bills. That is the effect of a free market in natural resources and I don't find is especially obscene.

"Land does not ask not to be bought and sold. Land is inanimate. A slave wants to be free and is denied freedom."

A freed slave would also want access to natural resources. Take his freedom or take his ability to access the natural world without paying tribute to somebody else - the result is much the same

"LVT as you describe will force land to be put up for rent, but the State will be taking 90% of the earning potential of that land"

No, as I described it, the value would be paid out to the electorate in equal shares. You seem to be throwing in the word "State" like a McCarthyite shout of "Communism" to invoke a sense of horror to mask the argument. I'm afraid that doesn't work for me; I'm not a complete anarchist. I'm perfectly happy to have a limited state which upholds the rule of law and basic rights, of which I consider equal rights to use natural resources to be one.

"Sorry, could you repeat that please, for I could not quite hear it over the sound of hairs begin split"

Freeholders have secure tenure, not absolute ownership. Hence freeholder, not owner.

"Answer - end the Crown ownership angle, not make it worse by replacing it with the State."

So your suggestion is to extinguish the legally recognised ownership of land in order to defend ownership of land?

"why don’t you just say you want to nationalise land instead of using LVT as a back-door mechanism?"

Because, from my perspective, nationalisation involves state control of a good or service. LVT would not increase the state's ability to control land in any way; in fact I'd like to see a weakening of that control through a scaling back of the planning system. One reflects an equal right to land, the other a collective right to land.

Mortgages end. Your LVT will follow people to the grave."

So does rent if you aren't able to buy. So for that matter do food costs, heating bills, transport costs, etc. Again, that's a free market for you.

"Land value is high when surrounded by well built and maintained houses. It is fantasy to think that you can separate the two in a country like Britain where we value old buildings and the condition and nature of our neighbours and neighbourhood"

Your original point was about somebody not be able to exploit the value of their own house. This point is about somebody having the ability to exploit the value of somebody else's house. The value of a plot of land is what that land would be worth with nothing on it. Hence, the value of the buildings on it would be ignored, but not the effect of buildings on plots of land around it (or for that matter, roads, schools, etc.).

"LVT as you portray it would reduce the scope for the little guy to retain land far more than the big guy. Think about that implication - it should not take very long"

I think that is completely wrong and with a little thought, I'm sure you'll see why. At present, the big guy just needs to gather enough capital to buy a plot and he can then sit on it and wait for the value to rise. With LVT, holding that land would be costly and would give no gain from increasing land values. Sitting on land and not using it would be money down the drain. The big guy would have to put the land to work, or pass it on to somebody who would. The little guy doesn't tend to be in a position to hold land just for speculative gain, he usual just hold lands that he has a use for. Think about it; who is more likely to off-load their land, Mr Average in his average house who would be paying the LVT but getting a chunk back, or the owners of Battersea Power Station, who have been sat on a valuable plot of land for years enjoying land value gains without facing significant costs and would suddenly be faced with paying the market rent for that land.

"but as a means to end private landholding it is another."

Complete straw man. Nobody is suggesting an end to private landholding. Anybody privately holding land would continue to be able to do so.

Sorry for the late reply, a

Tim Carpenter — Mon, 11 Aug 2008 10:00:36 +0100

Sorry for the late reply, a very busy time.

Paul: I don't see how introducing LVT would add more value to that knowledge. In fact it would reduce it, as that windfall gain would no longer be available

LVT is worse as it presumes value before it is capitalised. It is the State having first call. If you are a homeowner and the value of land goes up around you, LVT may well force you to sell up at a time not of your chosing. Can you not see how that is, frankly, an obscenity?

Paul: The calculation of land rental values with a high degree of accuracy is perfectly possible.

Then provide a mechanism to do it. The one you have provided is systemically dysfunctional for the reasons I have given.

Paul: This is not a strawman. In both cases, someone is claiming ownership over something which it is later decided they have no right of ownership over.

Land does not ask not to be bought and sold. Land is inanimate. A slave wants to be free and is denied freedom. You might as well say I only have secure tenure over my fridge.

Paul: Under LVT, freeholders would still retain secure tenure. As those freeholders would have been aware that the government exercises tax collecting powers when they obtained the freehold, the argument that they have had the rules of the game completely changed on them does not apply.

You are jumping into your worldview as if it is already running. How do you get from where we are now to that place? Incrementally cranking up LVT is “an answer” but does not solve the problems of implementation, but only alter the manner in which the upheaval will unfold.

Paul: As an aside, when the slaves were freed in the US, many of them ended up worse off

LVT as you describe will force land to be put up for rent, but the State will be taking 90% of the earning potential of that land. It is, in effect, when used in the way you describe, National Feudalism, where people work the land and the State Uber Landlord demands almost all the value of that land each year. People, especially little people, cannot hold land unless it is worked constantly AND constantly upgraded to yield almost as much as the surrounding plots.

Paul: There are numerous examples of LVT working in practice. The only difference is that they haven't been enacted at higher rates.

That is like saying that there are numerous examples of Income Tax working, so it is ok to charge 90%. LVT as a single tax? LVT as 90% of yield? LVT retrospectively applied to what was a mixed freeholding population?

Paul: Freeholders have secure tenure, not absolute ownership.

Sorry, could you repeat that please, for I could not quite hear it over the sound of hairs begin split. Answer - end the Crown ownership angle, not make it worse by replacing it with the State.

Paul: Yes, landholders would be paying 90% of the rental value of the land every year (if the rate were set at 90%). The word "indentured" is clearly wrong. Anybody holding less than the average value of land would receive more in dividend than they pay out, which is hardly a burden. If they are indentured, it is to a business of which they are an equal shareholder.

Indentured is not about equal ownership, but I do concede it is the wrong term. Nationalised Feudalism is a more appropriate phrase for the form of LVT you seem to be in support of. In fact, why don’t you just say you want to nationalise land instead of using LVT as a back-door mechanism? The whole cost and unintended consequences of the dividend is an entire conversation in itself.

I think it highly dangerous to liberty that people living in their prime residence will be subject to constant and ever changing and unpredictable demands for cash rental value upon that place by the State. Council Tax is obscene enough. LVT as you describe will make it far worse.

Paul: Compare that to the current situation where most people spend their working life paying off large amounts of mortgage debt and I know which looks more like indentured servitude to me.

Mortgages end. Your LVT will follow people to the grave.

Paul: No, just the land. It would be a Land Value Tax. The house is private property and the full value would belong to the owner.

Land value is high when surrounded by well built and maintained houses. It is fantasy to think that you can separate the two in a country like Britain where we value old buildings and the condition and nature of our neighbours and neighbourhood. In places like Asia, people always tear down properties and rebuild. Land is more of size and location and so LVT can be more effective. I know that from personal experience. In Britain it is far far more complex than just land value. I also know that from personal experience.

Paul: People can either choose to drive a smaller car and use less of it, or splash out and pay more.

Yes, but the analogy does not travel. People cannot uproot that house they call home but you say is not a factor in all this. People can change their car but that is no where near is disruptive as the need to change their very home, the kids school, furniture that no longer fits, leaving behind that new kitchen, their place of work even which might be necessary. It is also a matter of degrees. A new car lasts 10-15 years and one should in truth not be buying a new one without the idea that it could be lost, destroyed and most certainly not holding value.

Paul: LVT would reduce or eliminate the scope for the landholder to profit from sitting on land.

LVT as you portray it would reduce the scope for the little guy to retain land far more than the big guy. Think about that implication - it should not take very long. They would be forced to work it, justify it or develop it just to stand still. Retired people in a bungalow would not be able to sit there until they are happy to move or retire to sheltered accommodation and cash in, no, they would be forced due to high LVT to "sell up" to someone with the capital to convert that plot into something that could justify the LVT imposed, but sell up for what? Your version of the scheme is to render sale price marginal and not even factor in the bricks and mortar. This is why I see the mechanism moving towards State Landlord (de facto) and a form of National Feudalism that will concentrate landholding.

LVT on commercial property in respect to planning gain caused by public works is one thing, but as a means to end private landholding it is another.

Tim: "Again, this will play

Anonymous — Tue, 05 Aug 2008 22:35:02 +0100

Tim: "Again, this will play merry hell with sales, prices and put even more value on knowing what future plans the government has, i.e. corruption."

The value of knowing what the government plans to do is already huge. If you obtain land and for example, transport infrastructure is built near by, you stand to make a huge windfall gain. I don't see how introducing LVT would add more value to that knowledge. In fact it would reduce it, as that windfall gain would no longer be available

"Your LVT is not a “market force” but a tax imposed by the State, OK?"

As I've said previously, I don't agree. The calculation of land rental values with a high degree of accuracy is perfectly possible.

"This, Paul, is another strawman. I cannot see how you can in all honesty compare owning land with owning a person!"

This is not a strawman. In both cases, someone is claiming ownership over something which it is later decided they have no right of ownership over. I don't accept that anybody has a right to own a person, the land or the air around us. Whether one act is worse than the other doesn't change the underlying concept. The key difference is that slaveholders lost control of their slaves. Under LVT, freeholders would still retain secure tenure. As those freeholders would have been aware that the government exercises tax collecting powers when they obtained the freehold, the argument that they have had the rules of the game completely changed on them does not apply.

As an aside, when the slaves were freed in the US, many of them ended up worse off, because of an inability to access land. As they had no land to work or live on, they were still effectively reliant on the previous slave holders to give them access to it. The real downside was that, when the slaves were treated as property, the slave holders had reason to keep them healthy, as they were a valuable investment. Once they were freed, that incentive disappeared. An inability to exploit natural resources was in many respects just as bad for slaves as an inability to exercise their self-ownership.

"LVT would be an enormous upheaval and the mechanisms do not appear to be thought out let alone tried and tested elsewhere."

There are numerous examples of LVT working in practice. The only difference is that they haven't been enacted at higher rates.

"LVT is to fundamentally alter a basic underlying concept in England – land ownership."

There is no legal concept of land ownership in England. In law, all land in England is owned by the Crown. Freeholders have secure tenure, not absolute ownership.

"You need to explain what you mean by this. It seems you want to take 90% of the rental yield in taxation every year? Landowners then are not just tenants but indentured tax collectors!"

Yes, landholders would be paying 90% of the rental value of the land every year (if the rate were set at 90%). The word "indentured" is clearly wrong. Anybody holding less than the average value of land would receive more in dividend than they pay out, which is hardly a burden. If they are indentured, it is to a business of which they are an equal shareholder.

Compare that to the current situation where most people spend their working life paying off large amounts of mortgage debt and I know which looks more like indentured servitude to me.

"the house and land would be worthless in sale terms"

No, just the land. It would be a Land Value Tax. The house is private property and the full value would belong to the owner.

"In the end I suppose they would have to find some cranny somewhere that charges less rent than CBI. Why bother, eh?"

That's all down to personal choice. Somebody wanting to live a cheaper lifestyle may choose to live on a smaller cheaper plot of land. Somebody may be prepared to spend a bit more and pay out more than they receive in the dividend. I don't think this is any different to oil. It is a natural resource which can fluctuate in price too. People can either choose to drive a smaller car and use less of it, or splash out and pay more.

"As I have said before, LVT will probably do more to concentrate land ownership in the hands of the few (or the State) than the current system ever could."

Given the immense concentration of landholding already, I can't see that happening, but even if it did, it wouldn't be as much of an issue, because LVT would reduce or eliminate the scope for the landholder to profit from sitting on land.

Paul:I think that sort of

Tim Carpenter LPUK — Tue, 05 Aug 2008 14:30:00 +0100

Paul:I think that sort of answers the question. LVT would increase in response to price rises which were due to a market perception of a rise in value.

I am struggling with how to respond to this one as it is so non-sequitur, an inversion almost. LVT distorts and brings down the sale value, so how can the rise in that value be used to increase LVT? You have a negative feedback loop! You said you use market rates, actual sale values, NOT a “perception”, though I can say I think the State would fall back on its “perception” of “market value”. Rentals are not accurate until the planning gain has actually materialised, surely? Again, this will play merry hell with sales, prices and put even more value on knowing what future plans the government has, i.e. corruption.

Paul: But VED was increased on the whim of the state, not by market forces. A more relevant example is the fact that a number of people are in the same position with their cars purely because oil prices have increased and it has become less attractive to run a large-engined car.

No, Paul, No. Your LVT is not a “market force” but a tax imposed by the State, OK?

Paul: Exactly the same argument was made about the abolition of slavery. Some argued that, even if the slaves had the right to be free, freeing them would violate the slave owners' property rights, as they had bought their slaves in good faith. It was a reasonable point, but I don't think it would have ever been enough to make retaining slavery correct. I don't hate landowners, but I don't view land ownership as a valid concept, just land holding.

This, Paul, is another strawman. I cannot see how you can in all honesty compare owning land with owning a person!

Paul: If you feel uncertainty about the outcome of change (which there will always be), is sufficient to reason to retain the status quo, it seems strange that you are active in an organisation which seeks to move away from the status quo quite substantially in a number of areas.

Paul, please do not be disingenuous about views on uncertainty here. LVT would be an enormous upheaval and the mechanisms do not appear to be thought out let alone tried and tested elsewhere. LVT is to fundamentally alter a basic underlying concept in England – land ownership.

Paul: In principle, I would like to see zero land sale prices, although in practice, I'd be quite comfortable with a rate set at, say, 90% of rental value, with the other 10% rolled up into a selling price.

You need to explain what you mean by this. It seems you want to take 90% of the rental yield in taxation every year? Landowners then are not just tenants but indentured tax collectors!

Paul: Personally, I'd prefer to see it introduced gradually over a twenty year period. Given the amount of mortgage debt in the country, I don't think making the move too quickly would be sensible. I'd like to see the rate at 5% of rental value in the first year with all the revenue paid out as a citizens' dividend, so it is kept completely separate from other tax revenues and not seen as another tax grab by the state. The rate could be increased to 10% of rental value in the second year, then 15% in the third year and so on. As the citizens' dividend increased, it would allow the steady reduction of other taxes, as expenditure such as benefit payments could be fairly painlessly withdrawn.

So, a person owning their own home would pay the rental value in tax to the State and in return get “a share” via CBI. If rental rates do not alter much, the owner of a house will probably end up with a mortgage paid off but still paying to the State an LVT equivalent to their mortgage…for the rest of their working lives, the house and land would be worthless in sale terms and so they do not even get any retirement value from downsizing, just less tax. Oh joy. In the end I suppose they would have to find some cranny somewhere that charges less rent than CBI. Why bother, eh? All that effort just to have some choice over paint schemes and when to fit a new kitchen. As I have said before, LVT will probably do more to concentrate land ownership in the hands of the few (or the State) than the current system ever could.

Paul: That is exactly what I consider the situation to be.

Then you misunderstand what common land is/was and the difference to someone clearing uninhabited wilderness, or chose to conflate the two.

Paul: Yes, I am saying that land cannot be property. Not of an individual, not of an organisation and not of the state.

But the State is collecting and setting rates to the extent of reducing sale value to zero and forcing landowners to a) develop just to keep incomes up to match the demands by the State and b) become tax collectors.

Reply

Paul Lockett — Thu, 31 Jul 2008 21:04:01 +0100

"How do you intend to collect reliable data when the price of land (the value to the owner) is being constantly devalued and distorted by LVT? As soon as prices might start to rise due to a market perception of a rise in value, land taxation increases, forcing it down"

I think that sort of answers the question. LVT would increase in response to price rises which were due to a market perception of a rise in value.

" I refer back to the VED example. VED was retrospectively increased. The real loses will be the existing owners who a) have to pay more or b) try and sell, but can only sell at a price that already compensates for the tax increases for the remaining life of the car. The owner is stuffed either way."

But VED was increased on the whim of the state, not by market forces. A more relevant example is the fact that a number of people are in the same position with their cars purely because oil prices have increased and it has become less attractive to run a large-engined car.

"Only if you hate landowners, perhaps. Many landowners paid for the land “privilege” already, even if it was to the wrong person. You need to address that if you are to have even a shred of respectability to the scheme."

Exactly the same argument was made about the abolition of slavery. Some argued that, even if the slaves had the right to be free, freeing them would violate the slave owners' property rights, as they had bought their slaves in good faith. It was a reasonable point, but I don't think it would have ever been enough to make retaining slavery correct. I don't hate landowners, but I don't view land ownership as a valid concept, just land holding.

"In a theoretical environment this is an attitude people feel they can take, but it is not one for a Government."

If you feel uncertainty about the outcome of change (which there will always be), is sufficient to reason to retain the status quo, it seems strange that you are active in an organisation which seeks to move away from the status quo quite substantially in a number of areas.

"So you want to zero land sale prices? So land becomes just a tenancy?"

In principle, I would like to see zero land sale prices, although in practice, I'd be quite comfortable with a rate set at, say, 90% of rental value, with the other 10% rolled up into a selling price.

"Putting that aside, the point about phasing in. Fine – so outline the process. This is part of my reservations re LVT as a single tax. Everyone talks about the end point and almost nothing done about how to get there sensibly without chaos or revolution or even real thought about how the mechanisms will persist over time."

Personally, I'd prefer to see it introduced gradually over a twenty year period. Given the amount of mortgage debt in the country, I don't think making the move too quickly would be sensible. I'd like to see the rate at 5% of rental value in the first year with all the revenue paid out as a citizens' dividend, so it is kept completely separate from other tax revenues and not seen as another tax grab by the state. The rate could be increased to 10% of rental value in the second year, then 15% in the third year and so on. As the citizens' dividend increased, it would allow the steady reduction of other taxes, as expenditure such as benefit payments could be fairly painlessly withdrawn.

"Enclosures are not the same - the fencing off of the commons without consent from all."

That is exactly what I consider the situation to be.

"What you are in truth saying is land cannot be property, in effect, right? If it were like other property, the State would not be “granting” the monopoly (very Socialist/Statist mindset, the term “grant”, btw). It might seem like semantics, but it is a HUGE difference in mindset."

Yes, I am saying that land cannot be property. Not of an individual, not of an organisation and not of the state.

Paul: “The mind of the

Tim Carpenter — Thu, 31 Jul 2008 17:19:31 +0100

Paul: “The mind of the state would be irrelevant if the taxable value were set according to the systematic use of market data.”

What “market data”? How do you intend to collect reliable data when the price of land (the value to the owner) is being constantly devalued and distorted by LVT? As soon as prices might start to rise due to a market perception of a rise in value, land taxation increases, forcing it down (due to tax of holding the land). You will surely not get sensible prices because LVT aims to take the planning gain back from the landowner and into the State coffers, so surely land values (sale prices) would reflect that and so tend to post tax value, so making accurate tax value of that land harder to estimate. I refer back to the VED example. VED was retrospectively increased. The real loses will be the existing owners who a) have to pay more or b) try and sell, but can only sell at a price that already compensates for the tax increases for the remaining life of the car. The owner is stuffed either way. Maybe “geo-Libertarians” want to stuff landlowners till kingdom come, who knows.

Paul: “Even if the system were imperfect, it would still be a better option than maintaining the current system of landholders enjoying an extensive state granted privilege.”

Only if you hate landowners, perhaps. Many landowners paid for the land “privilege” already, even if it was to the wrong person. You need to address that if you are to have even a shred of respectability to the scheme.

Paul: “To me, maintaining a system of privilege because it might not be possible to resolve it perfectly is a little like saying we shouldn't try to catch murderers because we won't be able to catch them all, so it would be unfair to the ones we do catch.”

A strawman. Not even close. A good parallel is saying “well, we have not worked out a way of air traffic control, but hey, lets open the airport and see…”

Paul: “I don't believe it would do, but uncertainty about how things might turn out is not, in my opinion, a good enough reason to maintain the status quo.”

In a theoretical environment this is an attitude people feel they can take, but it is not one for a Government.

Paul: “In order to avoid the problems that would come with instantly zeroing land sale prices, the charge would have to be introduced gradually in any case, which would give plenty of time to iron out problems.”

So you want to zero land sale prices? So land becomes just a tenancy? Sounds like Communism to me. Putting that aside, the point about phasing in. Fine – so outline the process. This is part of my reservations re LVT as a single tax. Everyone talks about the end point and almost nothing done about how to get there sensibly without chaos or revolution or even real thought about how the mechanisms will persist over time.

Paul: “If land is being held privately, it has at some point been enclosed.”

Enclosures are not the same - the fencing off of the commons without consent from all.

Paul: “Nobody is suggesting that anybody should pay land rent because they've cleared land anymore than they would be charged more for building a house on the land. The reason that land rent would be levied would be reflect the fact that the holder is enjoying a state-granted monopoly over the land.”

Amounts to the same thing – tax for the value, development potential or actual development of land, even if the person has paid for it (you can argue it was paid to the right person or not, but how to fix that?). You cannot justify the tax on the reality of what is done and even what DETERMINES the tax level, yet you assert this “state granted monopoly” is a reason. Currently the State acts on my behalf to help defend my sovereignty over myself and my property. What you are in truth saying is land cannot be property, in effect, right? If it were like other property, the State would not be “granting” the monopoly (very Socialist/Statist mindset, the term “grant”, btw). It might seem like semantics, but it is a HUGE difference in mindset.

Systemic Fiscal Reform

Neale — Wed, 30 Jul 2008 11:43:44 +0100

A link worth adding onto this discussion is to the Systemic Fiscal Reform blog, where you can find "The Great Tax Clawback Scam" (video on income tax vs LVT), and a growing body of information on a radical plan...

Tim: "I mean in practical

Paul Lockett — Mon, 28 Jul 2008 21:01:56 +0100

Tim: "I mean in practical terms, not administrative - rezones in terms of use and "value" in the mind of the State, rezones in terms of taxable value."

The mind of the state would be irrelevant if the taxable value were set according to the systematic use of market data. Even if the system were imperfect, it would still be a better option than maintaining the current system of landholders enjoying an extensive state granted privilege. To me, maintaining a system of privilege because it might not be possible to resolve it perfectly is a little like saying we shouldn't try to catch murderers because we won't be able to catch them all, so it would be unfair to the ones we do catch.

"you risk introducing a greater evil, AFAICT, or at best have no idea how things will turn out."

I don't believe it would do, but uncertainty about how things might turn out is not, in my opinion, a good enough reason to maintain the status quo. In order to avoid the problems that would come with instantly zeroing land sale prices, the charge would have to be introduced gradually in any case, which would give plenty of time to iron out problems.

"As I mentioned elsewhere, if you want to talk about enclosures that is one thing, but you are not. Land cleared and developed long before others arrived and then the clearer forced to "compensate" others for the fact that it was cleared..."

If land is being held privately, it has at some point been enclosed. Nobody is suggesting that anybody should pay land rent because they've cleared land anymore than they would be charged more for building a house on the land. The reason that land rent would be levied would be reflect the fact that the holder is enjoying a state-granted monopoly over the land.

Paul: The Libertarian Party

Tim Carpenter — Mon, 28 Jul 2008 18:11:01 +0100

Paul: The Libertarian Party policy states "Until a practical Land Value Taxation system can be devised, forms of zoning (such as Green Belts) will still be needed," which implies that under LP introduced LVT, zoning would be abolished and would no longer be an issue. Even if some level of planning were retained, the system could be amended so that only the landholder could apply for a change in permission.

I mean in practical terms, not administrative - rezones in terms of use and "value" in the mind of the State, rezones in terms of taxable value. A council now says land is of higher value because of planning gain due to some project or other.

Paul: I'm also a little confused by the way you consider 100% LVT to be an unacceptable form of nationalisation, but seem fairly comfortable with the idea of planning restrictions, which are effectively collectivised control over the use of privately held land.

We are not "fairly comfortable" at all. Further, most planning zones are extant and as such people know what they can or cannot do with land.

Paul: The “collect rent and pay dividend” approach would not give the state any greater power over the use of privately held land and could actually help to weaken its control.

What, by giving the State the ability to set value and collect taxes? I think that will give control, for it can force people to develop or sell land. As mentioned, in trying to remove the evil of land banks, you risk introducing a greater evil, AFAICT, or at best have no idea how things will turn out.

Paul: This is probably the most common error that gets made when discussing LVT, because it is intuitively correct, but in economic terms, it can’t work that way. The land owner cannot pass on the LVT for the simple reason that he will already be charging the market rent. If there was any scope for increasing rents, the majority of landlords would have already done it. That is Ricardo's Law of Rent. Adam Smith describes this effect in The Wealth of Nations far more eloquently than I ever could.

The point is the tenant will not see any reduction in rentals or cost of land, which is touted as an advantage, for the rents will remain as high as possible, just that if you rent land you pay the State and if you are a freeholder you also pay and if you are a mortgageholder the value of the land will only drop enough to bring your LVT+mortgage payments to about the same level as Income Tax + etc etc + mortgage payments. I

So the landowner becomes, dispossessed (forced to sell), beholden to the State by being forced to work the land to a level dictated by tax levels - a form of indentured servitude - OR landowners set about corrupting the State (again?) as I mentioned. I think the latter will occur, frankly. Too much arbitrary decisions to be made. If the landowner is forced to sell, they sell to those few people who have the capital to exploit the land to the level decided by the State, so to me it will promote greater, not lesser monopoly of landowning.

I am being intentionally doom-laden here as a Devils Advocate for we really do need to have a sound system that will not end up putting us into an even bigger mess. It also presumes being a single tax. One would then need to work out how on earth we migrate to that. A big bang is just teenage fantasy, so abolition of taxes such as Income Tax would be a start.

Paul: The whole issue is that under the current system, the state enforces a private monopoly over land without requiring those who benefit from that state granted monopoly to compensate others.

As I mentioned elsewhere, if you want to talk about enclosures that is one thing, but you are not. Land cleared and developed long before others arrived and then the clearer forced to "compensate" others for the fact that it was cleared and forced to pay EVEN MORE when they improve it or make it a desirable place for people nearby to improve it is bizarre and borderline envy politics. If I keep my property tidy, behave in a law abiding manner and my neighbours do too, our reward will be not cheaper council tax but higher LVT. That is just plain wrong.

Response to Tim

Paul Lockett — Mon, 28 Jul 2008 11:27:35 +0100

Tim, "Firstly, do you now see that there is no conflict between what I said and our policy?"

I’m still not clear on that one. You say that you are happy with the concept of LVT and your objection is purely that you can’t see a way of practically implementing it and that “we at the Libertarian Party do say we would want to do it IF IT CAN WORK.” On the other hand, on the concept of 100% LVT, you’ve also said “That to me is "tax is theft" in its pure form. It is Nationalisation or even Communism.” Is that due to the percentage involved or the nature of LVT itself?

"giving a tax to the State set by the State is a million miles away from "paying a market rent to everyone else". It is very disingenuous to convey the idea in those terms."

I don't believe it is. With the citizens' dividend approach, the state would merely be acting as an agent, collecting land rent and paying it straight back out. The value would be determined by the market and the job of the state in that respect would be purely to collect the data from the market and process it.

If you accept that we each have an equal right to use the land, the sea, the air, the broadcast spectrum, etc., the only other libertarian method which would allow people to gain exclusive use of those resources would be the anarcho-capitalist approach to broadcasting rights I outlined in another thread. Each landholder would have to get everybody else to sign a contract waiving their rights to access the land. The other signatory would clearly make their own demands in return, be it a cash payment, a reciprocal arrangement regarding their own land, or a combination of the two. The issue there is one of practicality; requiring each landholder to negotiate bi-lateral agreements with everybody else in the country would clearly be a huge burden. LVT would achieve the same end in a much less convoluted way.

"Further, the idea does not take into account the conversion of the land from unused forest"

All suggestions for LVT that I have encountered are based on unimproved land value; any work done to the land, be it building or clearing, would not be reflected in the land rent. I believe the use of the word "land" in LVT is in some respects confusing. Location Value Tax would possibly be a better description.

“If you arrive first, clear land, you can understand that it would be rather annoying to find that others arrive later and say "hey, that land is now valuable. we want a piece so pay up"”

But, on the other hand, I would find it annoying to find that I was being denied access to a piece of land. I don’t believe that somebody saying “this is mine” is enough to entitle them to a perpetual monopoly over a location. If it was already there before man came along, it is something we all have an equal claim over, so it should either remain in common, with equal access for all, or, if it is necessary for somebody to have exclusive use, it should require the payment of compensation to those excluded.

Response to Tim

Paul Lockett — Mon, 28 Jul 2008 11:01:50 +0100

Tim: "You also conveniently sweep under the carpet the problem when an Authority decides it wants to "do something" and so rezones an area for development and so the value of the land rises."

The Libertarian Party policy states "Until a practical Land Value Taxation system can be devised, forms of zoning (such as Green Belts) will still be needed," which implies that under LP introduced LVT, zoning would be abolished and would no longer be an issue. Even if some level of planning were retained, the system could be amended so that only the landholder could apply for a change in permission.

I'm also a little confused by the way you consider 100% LVT to be an unacceptable form of nationalisation, but seem fairly comfortable with the idea of planning restrictions, which are effectively collectivised control over the use of privately held land.

That is partly the point I was making about the “state as landlord” issue. The “collect rent and pay dividend” approach would not give the state any greater power over the use of privately held land and could actually help to weaken its control.

"remember, that those renting privately will have to pay more because the landowner will be passing on the LVT- and don't think they will not! "

This is probably the most common error that gets made when discussing LVT, because it is intuitively correct, but in economic terms, it can’t work that way. The land owner cannot pass on the LVT for the simple reason that he will already be charging the market rent. If there was any scope for increasing rents, the majority of landlords would have already done it. That is Ricardo's Law of Rent. Adam Smith describes this effect in The Wealth of Nations far more eloquently than I ever could.

"Maybe that is the way - no compulsion"

The whole issue is that under the current system, the state enforces a private monopoly over land without requiring those who benefit from that state granted monopoly to compensate others.

Thanks again Jock. 1. You

Tim Carpenter — Mon, 28 Jul 2008 00:45:52 +0100

Thanks again Jock.

1. You CANNOT say the market sets the value, for the State is distorting the value by slapping a tax upon it. Any land that becomes valuable even by the work of others and not the state is re-rated and becomes an expense to hold and less valuable than the "market value" set by the State. Grief, it is bad enough when the State retrospectively taxes old cars.

2. So why did you raise it?

3. Why is it extortion? The Farmer has legal title unless you introduce your geo-lib mindset but that means you have a circular dependency. You also conveniently sweep under the carpet the problem when an Authority decides it wants to "do something" and so rezones an area for development and so the value of the land rises. Developments do not creep around unless you can in truth remove planning restrictions and return to organic growth and end "town planning" which has, with a few private exceptions, almost universally resulted in disaster.

4. CBI. You can disagree, but you did not provide an answer to the problem that CBI would be unlikely to cover all expenses and so millions will remain with means-tested benefits - remember, that those renting privately will have to pay more because the landowner will be passing on the LVT - and don't think they will not! I give you an indication of how much the original level will cost. Even at £100pw you will need to COLLECT an extra amount equivalent to 50-60% of TOTAL tax revenues just to redistribute it again. If it does not force individual urban home owners (mortgage holders) to have to sell up to pay the LVT, I would be very surprised. You also mention the rental income at the peak of the market. I bet you the State would not reduce LVT when the market dips because it will not have the income to pay for all that CBI.

5. You talk of 100% LVT now you speak of only a portion accruing to the State (and please do not use the term "community", it is NOT going to the people, but to the State).

I am still not convinced at all at the scenario you paint about companies moving. We already have vast differences in cost and it does not really make anyone want to shift to outlying areas in any great numbers.

In Hong Kong we are talking about leases bought up front, not retrospective and yearly taxes on land orginally held as freehold. The plots are sold at auction, also, not set by the State.

If Chang Kai-Shek looked into it, it is no advert, I am afraid - he was linked to all manner of gangland rackets. Further, LVT when selling State owned assets on is another game entirely to retrospectively applying it to privately held land as above. In fact I would prefer any land currently running as a Hospital or School and owned by the State to be leased and not sold to maintain some form of covenant over the use (and as such prevent asset stripping at the expense of us).

p.s. Paul did not properly answer the "state as landlord", question IMHO.

p.p.s. Maybe someone should make a new housing estate an "LVT zone" where the seller offers to pay all taxes in exchange for giving a CBI but charging LVT. Watch what happens when people have a choice to move in. See who moves in. See who does not. See if the operator makes money or loses money and what happens to those there and the decisions they make to stay or go. Maybe that is the way - no compulsion.

Paul, Firstly, do you now

Tim Carpenter — Sun, 27 Jul 2008 23:51:21 +0100

Paul,

Firstly, do you now see that there is no conflict between what I said and our policy?

Secondly, giving a tax to the State set by the State is a million miles away from "paying a market rent to everyone else". It is very disingenuous to convey the idea in those terms.

Further, the idea does not take into account the conversion of the land from unused forest and at a time that little or no people were using the land or even ON the land. If you arrive first, clear land, you can understand that it would be rather annoying to find that others arrive later and say "hey, that land is now valuable. we want a piece so pay up".

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?