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The LVTC blog, by Henry Law

The comments in the LVTC Blog are a personal view of our Hon. Secretary Henry Law and do not necessarily reflect the official policy of the Campaign.

This is a place for personal observations and comments on politics, economics, current affairs, on-going discussions on the potential for LVT to remedy some of the current ills, and the impact on Society of any of the above. 

Please read and enjoy, and feel free to respond to Henry if you have any thing you would like to add.


Bank of England deputy advocates monetary recklessness

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"A highly stimulatory monetary stance was needed to sustain demand", writes Charles Bean, Deputy Governor of the Bank of England, in an article in the FT.

The purpose of money is (1) to facilitate the exchange of goods and services and (2) to enable people to retain their claims on wealth over a period of time - to provide "a store of value".

Money can be used as a tool of economic management but this is an abuse and prevents it from performing its principal functions. "Stimulus" is nothing more than a means of transferring claims on wealth from creditors to debtors. It is legalised debasement of the currency.

Governments round the world indulge in the practice because, amongst other things, it puts off the time when they must implement effective tax systems that do not give rise to deadweight losses.

It is frightening that someone in such a high position should be advocating this policy.

 

LibDem LVT support group loses its way

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It is depressing how some of our own supporters can lose their way. ALTER, the LibDem group, seems to have suffered this fate with the publication of a Position Paper giving support to the idea of Community Land Auctions (CLA), a brainchild of Tim Leunig, a member of the staff at the London School of Economics.

The idea, which is less than straightforward, is explained in the ALTER position paper. The aim is that local authorities should be able to collect some of the uplift in land price that arises from planning consents. ALTER claims that it is compatible with LVT. It is not.

Land price and land value are two different things. That is the fatal flaw. The underlying value of land is the revenue stream from its rental value. Land price is the capitalisation of the expected rental income stream, plus a layer of speculative froth on top, dependent on, amongst other things, interest rates, expectations of future interest rates and the general performance of the economy.

The change in rental value accompanying change of use is the cause of the uplift in LAND PRICE. The planning consent is incidental - that unlocks the change in use. If there was the expectation of LVT in the future, the land price would be reduced not only by the capitalisation of the amount that had to be paid in LVT, but also by the speculative froth that sits on the top. If people had bought into these land auctions then they would cry "foul" if a government unexpectedly came along with an LVT afterwards. This was understood by Layfield when pointing out that LVT was incompatible with the Community Land Act which was in force at the time and operated in a similar way.

If anyone wants to kill off the prospect of LVT, then CLAs are a good way of doing it. This business also goes to confirm the general principle that anything with the word "community" in it should be regarded with suspicion.
 

Catholic bishop should mind what he says

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Scotland's most senior Roman Catholic, Cardinal Keith O'Brien, has accused the prime minister of acting immorally by favouring the rich ahead of ordinary citizens affected by the recession.The Cardinal also denounced David Cameron's opposition to a "Robin Hood tax" on financial institutions.

I do not have a problem with the first sentence. But when a Catholic bishop is criticising the government for not supporting a financial services tax, he is venturing into an area in which he has no competence to comment.

The only formal statement on taxation within Catholic Social Teaching is in Rerum Novarum, published in 1891, which states merely that governments should not over-tax. Catholic teaching has a broader remit, of course, in its commitment to justice, which includes economic justice, but the question that then arises is how a financial service tax is congruent with principles of economic justice? We would expect a Catholic bishop to endorse LVT on that basis, ie that the surface of the planet is the gift of God to the entire human race, a point that has indeed been made in Catholic Social Teaching. A bishop might also be expected to refer to the scriptural and Catholic church teachings on usury, a practice which lies at the bottom of the present financial crisis. But on that, I have heard not a word in public from any Catholic church prelate.

The sad thing about all this is that Catholic church teaching has much of relevance to the condition of the contemporary political economy. It seems as if those responsible are unaware of this. But then the same is evident in the majority of Catholic churches, where the standard of the liturgy is poor, and far removed from the intentions set out in the relevant documents. It is as though, having gone to great deal of trouble to produce this high quality material, it is quietly forgotten.

 

Pious hypocrisy about tax avoidance

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I for one am sick of complaints about tax avoidance. It is legal and it arises because of the incompetence of legislators. The papers this weekend are full of ill-thought-out comment on the subject. Those who write this stuff, and most politicians, appear unable to grasp the most obvious fact: taxes on people's earnings and companies' profits are bound to be avoided and evaded. It cannot be otherwise.
Read more...
 

Cameron family fortune made in tax havens

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So what? That was my response to this headline in the Guardian. No doubt more ink will be spilled in pious expressions of disapproval. None of the commentators, probably, will make the obvious point that leakage is inherent in the concept of using the taxation of incomes and profits for public revenue. The only way to prevent these losses is by substantially replacing these existing taxes with an annual tax on the rental value of land.

Most corporate profit consists of land rent anyway. Why not collect this directly before the accountants have had a chance to apply their magic and spirit it away out of sight? Much of the rest of corporate profit consists of intellectual property covered by patent and copyright law. Perhaps this is being sold too cheap?
 

Tax Research needs to think more deeply

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Richard Murphy of Tax Research, the think tank behind the Tax Justice Network, came up with this in response to a discusssion. And then closed the forum from further comments.

"Whenever someone mentions tax and theft in the same phrase the response 'anti-social libertarian' (or worse) comes to mind. How about tax for redistribution? Or for repricing market failure? Or economic management? You dismiss all of those?"

I would suggest that he needs to think more deeply. We do not argue that all taxation is theft. Far from it. We assert that the private appropriation of the rent of land is theft, since it is a value that belongs by right to the community and is the right and proper source of government revenue. Failur to collect this stream of wealth gives rise to the necessity for a second theft, as a matter of expediency: the taxation of the wages of labour - the product of his work. That is legalised robbery for it is taking what rightly belongs to the labourer. This is true even of the very high wages received by the rare football star. Many of us might think the amount received for kicking a ball around a field is absurd but it is nevertheless the reward for his labour. We fail to understand how anyone of either a left wing or a right wing persuasion can convince themselves otherwise.

Next, we come to redistribution. To argue that taxes are necessary for the redistribution of wealth is to beg the question why the wealth is maldistributed in the first place? We would suggest that the primary reason for this maldistribution is land enclosure and the private appropriation of the rent of land that has gone with it. This immediately creates two classes - those who receive rent, and those who must pay rent and work for wages.

Market failure can also be traced to the private appropriation of the rent of land, since it places the owner of land at a permanent advantage in relation to those who are not owners. They have no option but to accept whatever terms the land owner deigns to offer. The alternative is to live in the street and starve.

As for the use of taxation for the purposes of economic management - any tax other than one on the rental value of land can only affect the economy negatively. A tax on windows led to bricked-up windows. Taxes on beer and fags discourage smoking and drinking, which is arguably a desirable aim. But since the tax system is substantially levied when economic activity tax place, the only thing it can do is to discourage the production and exchange of goods and services.

We do not for a moment deny that taxation can be put to good uses which sustain and promote economic activity. Our case is that many of the means used for raising this revenue are indeed theft and can do nothing but harm.
 

Mansion Tax could dash Great Expectations

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We are no fans of the mansion tax, which is as bad an implementation of a property tax as it is possible to conceive. However faced with the prospect, one old friend of mine has decided to realise a long-standing ambition and convert part of his West Wing into additional stables. It will all be done very tastefully of course but the alterations will take the value of his pile just below the threshold. In the meantime he will send off to Sotheby's a couple of twentieth-century paintings which are worth a tidy sum but he refers to as "daubings", and invest instead in two or three good horses - the aim is to go to a Tattersalls auction later in the years. If they bring in a wealth tax, the valuers will have their work cut out to put an estimate on what they are worth.
 


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