LVT is the most progressive and the most green tax of all, precisely because it allows us to lift taxes on earnings – starting by lifting those on low incomes out of tax altogether. The solution lies in merging property taxes into the income tax system, as is done in Sweden. LIT supporters often say “look at Sweden” but omit to mention that their “income tax” includes a substantial “wealth” element, which is overwhelmingly property.

So we actually can please everyone in this Party by introducing a national LVT, merging it into Income Tax, scrapping Council Tax and allowing councils to have some of it all! But by saying “not yet” to domestic LVT (we agreed to SVR in place of Business Rates and other LVT ‘long term’) we put a future Lib Dem Government in a bad place – as potentially the only country in the developed world without a domestic property tax. Noty somewhere I think the successors to Lloyd George want to be…..

Finally, for goodness sake lets not pretend we can do without some element of central government grant. Or that to have LIT we need set up hundreds of different local tax administrations. Precepting works fine.

If a tax on property owner is introduced, site value is the best tax base in all ways. Is there any particular need to band site values? I would much rather just bury all the anamolies of Concil Tax.

There is no practical way in which site value taxes can raise all the money which local government now spends. Raising tax centrally and distributing the proceeds by formula to local government to make up the difference just obscures whether local or central government is responsible. The central tax which can best be transformed into an effective local tax is income tax on income from employment (including self-employment and pensions). If we believe in responsible local authorities, we need to transfer all or much of that tax to local authorities.

How we time the transfer of much of income tax to the local authorities so as to fit in with reforming property taxes is quite tricky: I can see it might take two Parliaments.

The first problem is that equalisation between the authorities needs to be sorted out. The only fair base for equalisation of needs to spend is what it costs a fairly efficient authority to deliver each service. This is proven to be practicable. However, the present system does not work like that; it is much less fair. Equalisation of resources is now based on the yield from the present local taxes. We need to plan for transition to the new, better forms of local revenue.

The second problem is setting up the new taxes so that they work smoothly. That can be done partly in parallel with the sorting out of equalisation.

When we have sorted out the first two aspects, we have to enable each local authority to make a reasonably smooth transition from the old to the new. That is practical, but is the most complex of all the problems.

Tackling all this competently will probably take more than five years. But LibDem changes are meant to be purposeful, coherent and built to last. They take longer than Tory and Labour “initiatives”, and will last much longer.

But the way, you present the general cases for tax on the “commons” is a bit misleading. Taxing site values can and should act as a cogestion tax changing economic behaviour, but in uncongested areas an attraction of site value tax is that it should have relatively slight effects on activity in the market for land (unless it is raised very high). Tax on say CO2 emissions is aimed quite specifically at charging out to the polluters the full economic cost of their activities: the parallel would be a pure congestion charge on land value. The “dividend” concept arose from thinking in terms of site value tax in uncongested areas. Taxes intended to make economic activites bear their full costs are simply better taxes in that they may impose on the economy not near-zero costs, but positive benefits.

Is Vince going to be sticking to this line when enough people really understand that it is property owners who gain from their income tax spending.

This quick video makes it clear enough: http://fiscalreform.blogspot.com/2008/07/ricardos-law-great-tax-clawback-scam.html

The practical and implementable approach is to fix the bugs in Council Tax:
- It should be the property owner, not the tenant that pays
- There should be more bands added to the top
- All bands should be proportional to the land value, not the property value (no one should be penalised for improving their home)
- The tax should be payable irrespective of how many people are in the house (a tricky one for the single pensioner in a 4 bed house)

The problem with implementation is because we’re not looking at where our tax policy should be. The land is a “common”. We should each be entitled to a dividend – the surplus value – from revenue raised by taxing it. The same applies to the global commons of taxing the atmosphere.

Thankfully, we’ll be getting an introduction to Systemic Fiscal Reform at the ALTER event at conference, and Vince will be responding to some truly innovative and bold tax proposals.

I’d have thought it was. The Council tax took 2 years to introduce from Heseltine announcing that the Poll Tax would go (April 91) to first bills (April 93).

In that time all properties needed to be valued whereas AFAICS all the information needed to operate LIT (ie addresses and income) already exist.

I’d have thought therefore that introduction within four years should be achievable.

1)however those who would advocate LIT in the first term need to be clear that it is actually implementable in that timescale – Lyons records the professional view that it is not. This may be wrong but no-one has addressed this point. We are hoping that the Tory’s bubble will burst under scrutiny – we need to be sure that we can stand up to similar scrutiny ourselves, if we are potential players for government (or a share of) at the next election

2) those that are concerned about promoting localism need to be clear about whether than requires a greater share of taxation to be raised at local level – if it does, and most think so, then the policy at the last election of reducing the local tax take to soften the impact of introducing LIT need to acknowledge the policy conflict inherent in this. Once we do that – what is our USP on this core issue from the Con rhetoric?

3) if LIT raises less than council tax then this reduces the scope for reduction in other taxes which we are also promising, and which would be focused on the lower paid.

4) if the argument is about fairness then there needs to be an analysis that looks at all of tax and spend not just LIT – the overall shift to lower the tax burden and to focus the reduction on the lower paid provided this is not financed by reductions in spending on these groups which Nick has announced goes some way to addressing some of the inherent unfairness of our tax system. We also need to consider what can be achieved more quickly i.e. in the first term through reform of council tax benefit. There is also the issue of inter-generational equity – do we want to shift the tax burden in favour of the elderly (regardless of their wealth) and against the young who may be struggling in the housing / jobs market to bring up a family? Given the intergenerational (in) equity issues arising from decades of housing inflation , notwithstanding the current credit crunch this would seem perverse. More pragmatically, at the last election we had very expensive pledges to help the elderly (free home care and LIT) but in practice they are not floating voters!

5) Most countries have a property tax of some kind at local level – and there are good reasons for this – property prices / values are driven by local circumstances, (location, location, location) and it is relatively easy to collect by local government. One of our key priorities is to have more power at local level, and one of our key USPs from the others who now pretend the same thing is to argue that that wont’ decentralise financially. This is likely to be achievable through some form of LIT AND a local property tax in the medium term – but there are some tough choices to be made about how to get there. It is not for nothing that Mrs Thatcher was brought down by the issue of local taxation.

For all these reasons we need to think this issue through.

I suspect you need to explain to Declan what “progressive taxation” means.

My point was about the progressiveness (or regressiveness) of the tax system – not the total amount of tax raised. Replacing Council Tax with a LIT will not affect the latter.

I’m all in favour of “local choice in revenue raising” but, having approved such a laudable Liberal sentiment back in 1998 (‘Moving Ahead’), we’ve done bugger all to advance it. Our ‘choice’ for councils is the compulsory abandonment of domestic property tax and the forced adoption of a further impost on employment – as if the virtue of it being a ‘local’ levy is enough.

As property prices bottom out in about 18 month’s time, we should be calling for fiscal measures that will prevent the bubble inflating again and deliver generational equity, not more deadweight taxes on the productive economy.

i agreee, personaly i favour the local income tax system becaus ei do think it would be fairer but councils should be able to make there own minds up, the central government should say you we’ll give u a certain amount but u need ot make the rest and they can decided how to do it!
eventually though central taxes should be phased out to a much lower levelso only actually pying for things like the army which are a central govt issue!but this certainly shouldn’t happen by increasing VAT’s as these are the ones that hit the poor the worset, thats why thatcher raised them when she cut higher rate taxes!

Is the victory of the Thatcherites in our midst complete?

What our party has never tested is whether replacing Council Tax with extra income tax would be anything like as popular as simply having a fairer property tax.

A doorstep survey carried out by Lib Dem councillors in Newbury suggested that a fairer property tax would beat LIT in the popularity stakes by around 2:1 – not to mention generational equity and our alleged desire to shift the tax burden off productive work.

LIT? RIP!

Apparently it was only a likely shift in thinking? I admit it’s difficult to make coherent sense of the words that were actually used.

Then again, if people are going to claim that “vet” is synonymous with “comment on”, we may as well give up using words at all, and see how we get on with grunts and gestures…

“I would be happy to help in a research context.”

Aha, we shall bear this in mind! We have it in writing

Re: Lib Dem News, agreed, and it is quite a sobering thought that this is all the information that some (even perhaps most) party members get. I got my news and debate online from the start, and I am always struck when I get an all-party copy of Lib Dem News how tremendously out-of-date it is. If only we could set up a cheap information stream for slightly more techno-phobic members…

However, Stephen Tall wrote about “likely reforms of the party’s commitment to oppose tuition fees”. “Likely” means “change not yet announced”. Otherwise would not be likely.

In almost every local authority area the vast majority of people are in one of three Council Tax bands. Be that A-C,B-D C-E, D-F, whatever.

As I said before, even for a property tax, Council tax isn’t very good.

I think most people would not accept that fairness is entirely related to % of gross income paid in Council Tax. If they did, then they would support local income tax? Other people don’t think income tax is entirely fair and I’m sure you are aware that many rich people pay far less in income tax as a % than many less well off people.

You really haven’t addressed the point as to why someone with an income of £15,000 who owns outright a £500,000 house should pay less council tax than someone with an income of £25,000 but who may be spending
£12,000 a year on a mortgage for a house which isn’t remotely worth £500,000.

What is more the person in the £500,000 house is likely to have lots of other assets (in goods, if not in cash)

Which is why it needs to be considered as part of the overall tax take. Of course median, means, income teirs area guide but no system can claim to entirely fair or be able to cope with each individual case,

Heres a few food for thought hypothetical outrageous ideas about council tax. (I not really advocating them)

1. Triple it and cut government grants to councils be a similar amount – then people will realise just how unfair it is.

It might even stop the “I pay £1500 council tax and all they do is empty the bins once a fortnight letters” people might get out and find out what was really going on.

2. Pay it direct to the Government and give Councils 4p from income tax instead, that way, the government will get the blame for council tax increases. That might stop increases, at least in election year.

3. Halve the rate for people who rent. Make it more of a wealth tax.

4. Stop some of the exemptions, vicars, empty houses (who pay just 50%)etc instead, charge empty houses 200% after 6 months – lets stop empty homes staying idle.

5. Scrap the single person discount – you can’t tell if a single person uses more or less council resources than a couple – the tax is meant to be on the propety not the individual – so why confuse the issue with the single person discount?

I repeat, I’m not advocating them, just hopefully providing food for thought.