Skip to main content

Taxes Compared

The distinction between ‘local’ and ‘national’ services is highly artificial, to all intents and purposes, the UK has one single national tax-raising system; even supposed ‘local’ taxes like Council Tax or Business Rates are dictated by UK-wide rules (these are diverging slightly for Wales and Scotland, Northern Ireland retained Domestic Rates and does not use Council Tax). Simply putting the word ‘local’ in front of a tax or earmarking it for ‘local’ spending adds nothing to the merits or demerits of the tax.

When arguing against LVT, people’s stated preferences is usually based on whatever system they think will mean that they pay less than now (and everybody else will pay more). People with high incomes like the idea of a Poll Tax; people with low incomes like the idea of income tax; and people with a modest lifestyle like the idea of Sales Tax (such as Value Added Tax). The arguments for a Poll Tax are the opposite of the arguments for income tax, Land Value Tax sits comfortably between the two.

The actual economic or practical advantages or disadvantages of all these taxes can be summarised as follow. A Sales Tax is even worse than Income Tax, and starts to take on some of the disadvantages of a Poll Tax (but without the advantages).

Land Value Tax comes out the best when judged by objective criteria, with income tax in second place.

  Poll tax Land value tax Income tax Sales tas (VAT)
Takes into account ability to pay? *
Can be designed to include tax-free personal allowance?
Compatible with welfare and pensions system?
Inherently progressive**?
Low compliance costs?
Doesn’t discourage work and enterprise
Places some sort of market discipline on the government?
Low collection costs and evasion?
Encourages efficient use of land and buildings?
Does payer receive benefits proportional to amount paid?

* Assumes that people who wish to live in high value homes are prepared to take out longer term savings plans in the good times and/or downsize in the bad times.

** In the tax-technical sense, meaning that those with higher incomes; who own more land; or spend more pay a larger share as a percentage of their income, the value of land they own; or the amount they spend.