Christmas Books and Grenfell

In the introduction to his second book on the financial crisis, Vince noted:
“…one of the main tasks of opposition parties [is] to redesign the archaic, inequitable and unpopular system of property taxation… to make council tax more closely proportional to the value of property. A more radical and far-reaching reform would be to give practical substance to long-mooted ideas for the taxation of land… The practical problems of valuation and making the transition from a land market massively distorted by planning have so far frightened away reformers. But such a reform is now long overdue.”

In concluding he wrote:
“In principle, wealth taxation in the form of proportional levies on property values or land values should be easy to impose since property and land are immobile… Such taxes are … favoured by economists because they do …not discourage work or saving. We have proxies for wealth tax in the form of capital gains tax, but it excludes owner-occupied property and addresses only capital appreciation, not the stock of capital, which is …easily avoided through inter vivos gifts.
Without doubt a theoretically superior approach would be a land value tax, an idea that can be traced back to Adam Smith, David Ricardo, Henry George and Winston Churchill, and which has advocates on both right and left, and in the radical centre of politics. Such taxation has the additional merit of helping to deflate volatile bubbles in land and property values, and discourage the hoarding or inefficient use of land… Why, beyond a few limited experiments, has a land value tax never been tried in over two hundred years? Practical issues of valuation and the big gains and losses of moving from our current system help to explain it. There is, however, a strong case for moving incrementally in this direction, through a land value based approach to commercial property taxation or by trying to capture the value of land for the public in other ways; public land banks and/or community land auctions.
There is enormous scope for arguing about the detail of tax policy, but the strategic objective, on grounds of both fairness and economic efficiency, should be to shift tax from income to assets – property and land as well as to expenditure, provided that the latter can be applied progressively (maintaining VAT exemptions) or applied to goods that create wider social costs (carbon-based fuels, for example).
…the instability and inequalities generated by property and land markets were a major feature of the financial crisis. They lie at the heart of a distorted system of credit. They underpin a growing divide in the housing market between social classes and generations. And they cut to the heart of what it means to have a common identity, to belong to the same society. Political indifference is not sustainable.”

In the aftermath of the Grenfell tragedy will we, at long last, see the kind of radical reforms that Vince wrote about in 2016?

* Joe is a member of Hounslow Liberal Democrats and Chair of ALTER.

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  • David Cooper 2nd Dec '17 - 5:35pm

    @Why, beyond a few limited experiments, has a land value tax never been tried in over two hundred years?

    The richest person born in Britain, the Duke of Westminster, relies on inherited wealth dating from the Norman conquest. His family and others like it have pillaged the country’s wealth for a millenimum. Two hundred years is nothing.

  • The report from the Tony Blair Institute for Global Change – Home Truths: A Progressive Vision of Housing Policy in the 21st Century is well constructed and worth reviewing.

    Executive Summary
    A housing crisis is sweeping through cities from Sydney to London to San Francisco. Following a short slump in 2008, house prices across the OECD have soared, contributing to a decline in living standards and a rise in wealth inequality. Today, housing is the source of economic anxiety, social resentment, and political frustration.
    This report sets out a bold new progressive agenda for housing reform. Many governments today are caught between the competing interests of different housing tenures. The result is timid policy that tinkers at the edge of the housing market. The goal of this report is to move past the gridlock to forge a new political consensus that balances the aspirations of renters and homeowners and builds a future of shared prosperity.
    We begin with the principles. For decades, the goal of housing policy has been to boost homeownership. But the promise of these policies has recently given way to their pitfalls: levels of homeownership are at record lows, while levels of rental sector evictions are reaching record highs. Progressive housing policy must therefore be rooted in a broader set of principles: providing security for all tenures, promoting community between residents and newcomers, and guaranteeing macroeconomic stability against excessive property speculation.
    We propose five policies to advance these principles, including a community reinvestment programme based on a land value tax and a sovereign property fund that expands public housing investment. Together, they aim not only to boost overall housing production, but also to guarantee that the houses we produce are affordable.
    Housing reform will never yield easy win-win solutions. Each of the policies presented in this report involves trade-offs. We need now to address those trade-offs head-on. Only an open and honest discussion of the politics— not just the policy — of housing can move us toward a housing market that works for the many, not the few.

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