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An exchange of comments

I reproduce this exchange from the Guardian’s Comment is Free pages, commenting on an article by Peter Wilby on paying for care. I am sure, however, that there is no argument under the sun that could convince the author of the comments (in italics), who seems to have got out of bed on the wrong side this morning and is showing signs of irritation.

Me: Yes but what is wrong with land value taxation? It cannot be avoided or evaded.

Nor, unless the owner also has income from which to pay the tax can it be paid. But if they have such income, tax that – oh, hang on, we already do!

Rental income from land is not at present taxed as such. And it may have been remitted to a tax haven. And land is capable of providing the rental income from which the tax can be paid.

Land cannot be hidden or moved to a tax haven.

I have not the slightest doubt that there would be howls of outrage in the pages of the Guardian, and many other places as well, when it turned out that people earning megabucks were avoiding paying significant tax simply by keeping their wealth in financial instruments rather than land. Why would you want two people both making the same income, say a couple of million a year, depending on what they did with the money?

If you look at them you will find that “Financial instruments” are ultimately a way of holding what are mostly land assets, packaged up in various ways. They would be subject to the land value tax at source.

Secondly, it would be phenomenally expensive to collect, since land values would have to be revised every year, other wise it would be like paying income tax on your historic earnings.

That is not the experience where it is applied. Definitive valuation can be quinquennial with computer revision based on sampling carried out annually to allow for local changes.

Thirdly, what if the land falls in value during a tax year, do you really think that the Revenue would reduce the value on which they were to levy tax?

There is no necessity to levy 100% rate of tax to raise sufficient revenue. The point is that the amounts payable are in a correct proportion relative to each other. It is very unusual for the rental values of land to fall. That is why leases are almost invariably subject to upward-only revision clauses.

Fourthly, it’s all notional anyway, you’d be taxing on the basis of a value that was at best a guess as to what a particular piece of land was worth.

No. The basis is market evidence. There is no shortage of that.

Frankly, it’s one of those ideas that only appeals to those too lazy to bother to think through how it could actually be done in the real world or what the adverse consequences of such a tax would be. Ever considered the myriad problems which council tax creates, and you want a council tax plus to be the major source of government revenue, you’re daft!

Thanks for the compliment, and what exactly are the myriad of problems that council tax creates? And are you suggesting that taxes such as income tax and VAT are problem-free?

It does not discourage productive economic activity.

Rubbish. Invest in improving the land value and you get hammered for tax in your plans. So of course that is a disincentive to productive investment in the land, or even on the land.

An owner of a piece of land cannot increase its value. Is land less valuable in, say, the centre of Newcastle than in the centre of London because Newcastle landowners are less good at landowning? Under an LVT system, improvements are ignored. So there is no disincentive to improvement. The reality is precisely the opposite to what you are arguing.

Are you in favour of that system of legalised robbery involved in the taxation of wages, goods and services?