Land Value Taxation Campaign

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Interview with Swiss economist Bruno Moser

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Employers' tax incidence 2013

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The figures, prepared by our resident accountant from the latest tax tables, show the excess cost to the employer compared to the real purchasing power of net wages ie the zero figure represents wages net of sales taxes. Thus for someone to earn £10,000 of net purchasing power, the employer must pay a surcharge of 55% on top, down from 60% (see last year's figures for comparison) Any figure above the zero line in the diagram constitutes the what used to be called the "tax wedge" and forms a tax barrier against employment and work. Amongst other effects, it means that low-skilled labour becomes hard to employ or find work in self-employment. Low level work such as street cleaning, care work and basic services does not get done or is automated out of existence with labour being replaced by investment in capital which would otherwise be unnecessary. Scottish prawns are flown to Thailand for peeling when there is a potential workforce of unemployed at the port where the prawns are caught.

This is the effect of tax incidence - that the cost of a tax is does not necessarily fall on the person or company formally responsible for making the payment. The incidence of tax on employers in the UK is by no means the worst in Europe - it is significantly higher elsewhere. It helps to explain the very high rate of unemployment amongst young people and immigrants there - and could have something to do with riots that break out in immigrant areas when the warm weather arrives.
 

Land tax, not wealth tax

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We are opposed to wealth taxes. It might seem pedantic to say so but land is not wealth and a land title is not wealth but a piece of paper which is a claim on wealth ie the rental income stream from the land. It is easy to value land. The valuations can be put on a public register for everyone to see and question if they wish. As long as the valuations are revised regularly - not less than every five years and there is a trustworthy appeals procedure, there is a solid base for taxation. Land can be taxed at 100% of its rental value, to no ill effects whatsoever - on the contrary, it is the LACK of this tax that is the primary cause of a raft of social and economic problems and is the reason why people can get rich by doing nothing.

When attempts are made to tax wealth, things start to get difficult. How do you value racehorses, pictures on the wall, jewellery in the beside table, etc? Wealth is protean. If any attempt is made to tax it, this wealth will go elsewhere and turn into things that HMRI would need an army of inspectors with draconian powers to track down. And for what, when the source of that which the rich have obtained without working for it ie land, can be taxed with so little trouble, effort or cost?


 

Our brief address to the House of Commons

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On Friday, Caroline Lucas, Green Party MP for Brighton Pavilion, will have the opportunity to present the case for LVT in her Private Member’s Bill, which would “Require the Secretary of State to commission a programme of research into the merits of replacing the Council Tax and Non-domestic rates in England with an annual levy on the unimproved value of all land, including transitional arrangements; to report to Parliament within 12 months of completion of the research; and for connected purposes.”

She will have just a few minutes to present the case. What might one of us say, given the opportunity?
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Could the UK economy implode?

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Several times a week I receive emails with scare stories about the imminent collapse of the UK economy. Most of them come from outfits trying to sell subscriptions to expensive investment advice magazines so they need to be taken with a pinch of salt. But some regular journalists are asking the same question, as here.

All of these gloom-and-doom forecasts draw attention to the same fundamental issues. Private and public debt remains at record levels. The economy is in the doldrums, with record levels of unemployment. It has failed to respond to Quantitative Easing, the government's chosen instrument for stimulation. Economic stagnation has affected the government's tax revenues and is leading to growing debt. There is no scope for tax rises under the present tax system because these will further reduce economic activity due to their deadweight cost.

These considerations leave the government with fewer and fewer policy options.
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Why LVT cannot be a local tax

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New Town

A new report on trends in house prices in Britain has just been released by Savilles. According to its annual "Valuing Britain" analysis, "The total value of the UK’s housing stock has risen slightly to £5 trillion over the past year, but housing wealth is becoming increasingly concentrated in London and the South East."

"Ten years ago the UK’s housing stock was worth just £2.9 trillion, rising to £5.4 trillion at the peak of the market in 2007. However, the UK total value remains -6.4 per cent below peak, though London’s residential real estate is now worth 14.2 per cent more than in 2007, having risen by 6.8 per cent over the past year alone.  At the other extreme, Northern Ireland’s stock is worth £72 billion, having fallen -10.2 per cent in the past year."

The extreme geography of land value

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Clearing up LVT misconceptions

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The Private Member's Bill promoted by Caroline Lucas calls for a feasibility study for the introduction of a Land Value Tax. This Bill is expected to have its second reading debate on 25 January 2013. I checked on We feel it important to clear up some misconceptions appearing in the press – such as ‘LVT is a stick to beat property firms …’ and it will ‘shift the burden of taxation to wealthy businesses and individuals.’ Nothing could be further from the truth.
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We are opposed to wealth taxes

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Thomas Picketty, in his new book "Capital in the 21st century", has stimulated public discussion on the need for an international wealth tax to remedy growing inequality. He could not be more mistaken. Although so-called wealth taxes are in operation abroad, the proposal is unworkable since it fails at the first hurdle - that of definition. What is wealth? Does it include pictures on the wall, jewellery in bedside tables or forgotten treasures in the loft? How does one value, for example, a racehorse or a painting, whose provenance may be in question - the Rembrandt that turns out to be by one of his pupils, or vice versa? And if racehorses are exempt from the wealth tax because valuation is considered too difficult, then it does not take too much imagination to predict that millionaires will invest in lots of racehorses in order to enjoy the exemption.

For the record, LVT is not a wealth tax. It is a tax on a revenue stream, its rental value.

 


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