Promoting LVT

I received an enquiry from someone representing a group in Italy who are trying to promote LVT. The enquirer was looking for data to show what the impact of a change from existing taxes to LVT would be. Unfortunately, I was not able to provide such information, and there is none on this web site. The link at the bottom of the article attempts to explain why. Within the LVT movement, the approach advocated has been, where possible, to migrate existing property taxes to an LVT system, in the first place either revenue-neutral or with rates set so that most existing property owners paid about the same.

From that point it becomes possible to move on to dismantling other taxes. First to go should be sales taxes such as VAT, due to their inefficiency and the harm they do, and corporate taxes, which can be avoided by those with the know-how. Getting rid of corporate taxes has the automatic effect of growing the land value tax base and the yield from a land value tax. Income taxes are best phased out by raising thresholds and allowances, since the incidence of these is on employers and they make it expensive to tempt people away from benefit dependency.

Campaigners for LVT need to accept that they are in for a long haul and might not see success in their lifetimes. The most important task is to build a body of people who understand the theory and can counter the arguments against the tax. The case for LVT has wide ramifications and underpinnings, including the moral and philosophical arguments, and the need for clarity over what are the reciprocal duties of governments and of the individuals. Unless there is a consensus of view on these wider matters, the seed will fall on stony ground.

That said, a realistic aim might be to reform the existing property tax, as suggested above. If the policy was to be revenue-neutral, most existing tax payers would be paying less, since owners of underdeveloped and vacant land would pay more, possibly more than nothing at all as is sometimes the case at present. It would also simplify the system, which is never a bad thing. The property tax system in Italy, as described by my correspondent, sounds unduly complicated, with different rates of tax for land in different classes of use, which distorts both the valuation list and the land market. It also sounded, from the description, as if the assessments are decades out of date, in which case a campaign could begin by pressing for an update.

Another approach is to hammer away at the dreadfulness of the present tax system as a whole: its complications, the extent of the avoidance and evasion, the costs of compliance and administration, the deadweight losses and the amount of churning. There would be no shortage of allies. Some of them might be recruited to the LVT cause.

But as to data, there is none, nor can there be, for the simple reason that if one element in the tax system is changed, then everything else is affected. We have long taken the view that priority must be to getting the tax system based on sound principles and letting the figures take care of themselves. There is a lot of material on our web site on this topic such as this article here.