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Land value taxation is a non-starter – Richard Murphy

Land value taxation is a non-starter when it comes to serious tax reform

 “My problem with LVT is that it is based on a mythical value that will never be explicitly recognised in an economic exchange i.e., in a sale value.”

LVT, properly implemented, is based on RENTAL VALUES. These are easy to extract from actual rentals. There is a “floor” to rentals in the poorer areas of the country eg places like Sunderland, where you can rent a 3-bed semi for around £800 pcm. The going rental for similar properties in places like Brighton, in commuting range of London, is about double that amount. The difference is location value ie land value. To a first approximation, the land rental value of residential property over large tracts of the country is about zero. Some LVT advocates are not clear on this point, and lay the entire campaign for LVT wide open to attack.

Most land value in the country is in urban property in commercial use. A substantial proportion of land rental value is already collected, inefficiently, through the business rates. Commercial land values are greatly depressed due to the presence of other taxes. The incidence of all employment related taxes ie PAYE Income Tax and NI (both employer’s and employee’s contributions) is on the employer; they are functionally equivalent to a payroll tax and cut into business profits, with a knock-on effect on commercial rental values.

VAT has a similar effect, since businesses are forced to absorb some or all of the VAT in order to maintain volumes of sales. This can be seen when VAT is cut; the cuts are not passed on in lower prices.

Murphy is probably right when his says that the politics are against it, but he has helped to create this situation by his long-term opposition to LVT and by disseminating misleading information. He also notes that the introduction of LVT would create a banking crisis, but the crisis of 2008 never really went away and is likely to return as a tsunami in late 2026. A shift to LVT is necessary to prevent these recurring banking crises.

The article can be read here. You will be able to make a few comments but Murphy does not like to be contradicted and will quickly dismiss you as a troll and shut you down. This is unfortunate because his own article, and many of the comments, are plain wrong, but there is no opportunity to correct them. Considering that he is regarded as something of an expert in the field of taxation, the number of howlers in his article is remarkable.