All taxes must be evaluated according to their likely side effects. The well-known effect of the windows tax was bricked-up windows. But the reasoning behind this tax was the assumption that the number of windows in a property was an indication of the owner’s ability to pay.Those of us who in favour of LVT would not seriously argue that the so-called “sin taxes” should be got rid of. And many existing taxes are in reality land taxes eg parking and congestion charges, mineral extraction dues, receipts from leases of radio spectrum. However, it is important to recognise, first, that all taxes have fixed administration and compliance costs, so the fewer the better, and second, that all taxes have an impact on land values and cut into a potential land value tax base. Alcohol duty, for instance, makes pubs less profitable and reduces the rental value of land occupied by licensed premises.
Sweden operates a land value tax at a rate of around 1% of selling prices, which corresponds to about 20% of the rental value, but land values are heavily depressed by all the other taxes. The country spends lavishly on the provision and operation of infrastructure eg car ferries are provided for use free of charge on routes comparable to the mainland to the Isle of Wight, for which the charge is about £25 single! At such a low rate of LVT, the effect of this is to sustain land values at the expense of the poor inhabitants of the estates round the big cities.
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