LDVideo: Introducing the Land Value Tax

The Liberal Democrat campaign for Action on Land Tax and Economic reform has recently released a new video to explain the virtues of a Land Value Tax — described by ALTER as ‘making taxation more progressive and addressing the injustice of economic rent, it would encourage development and boost the economy. It’s the kind of measure that our country is in desperate need of right now.’


(Available on YouTube here.)

The campaign doesn’t start and stop with a video, though, with Land Value Tax also being pushed in parliament as an alternative form of local taxes:

This comes at an exciting time when Caroline Lucas, working with Lib Dem MPs such as Adrian Sanders and Martin Horwood, has submitted a private members bill calling for the Government to look into replacing Council Tax and Business Rates with a Land Value Tax, and to report back within a year. Her bill will be debated at its second reading on 6th November.

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78 Comments

  • But how much would it be???

  • Daniel Henry 14th Jul '12 - 9:30pm

    Tim, Caroline’s bill is to have the replacement of council tax and business rates to be looked into within the year. I assume that exact measures would be revealed then.

  • Richard Dean 14th Jul '12 - 9:51pm

    Council tax is a lot, so something must surely be wrong if the takeup of council tax rebate is only 65% of those eligible. This would seem to be a pressing matter to investigate.

    Are people not aware of rebates, and if so what else are people losing out on?

    Are the estimates of eligibility wrong, and if so what else in the UK’s demographic model is wrong?

    Do we automatically assume that the OECD is correct in their advice, and that national governments of some of the leading world economies have been wrong?

  • Neale – what is the advantage of taking my CLA proceeds very slowly, instead of upfront? The advantage of upfront is that those who allow more development get the benefit of doing so, so it creates an incentive to allow development.

    The answer that the tax will be “something” isn’t very illuminating! Everyone is happy in the picture, but that seems unlikely from a revenue neutral tax change…

  • Daniel Henry 15th Jul '12 - 9:53am

    Again Tim,
    Caroline’s bill is for it to be looked into. Then, within a year, we’ll finally see some specific proposals including the exact figures you’re looking for.

    This video merely presents the principle behind it.

  • Fiona White 15th Jul '12 - 1:29pm

    Given the fact that the cost of land is one factor in the high house prices in some parts of the country, we need to look seriously at the issue of LVT and make sure it becomes part of the public debate.

  • @Fiona White
    The cost of land is the pretty much the ONLY factor with regards to the variability of house prices across the country. Location, Location, Location. I’m not aware of construction costs being different across the regions.

  • The current council tax is unfair as it is not based on the ability to pay.
    It is an annual charge based on a property value (based on market values) that can change over time and does not take account of whether individuals actually have proportional levels of annual income or the money to pay.
    What does it mean for those who bought their house at a time it was affordable, and could never afford today’s prices,
    or those that rent?
    The council tax benefit has to be applied for, has a low take-up rate, applies only it you have less than £16,000 in wealth which isn’t much by today’s standard with low interest rates on deposits.

    My fear is that LVT will be no different than council tax, as council tax was not much improvement over poll tax and the old rate system.
    The points that was said on the video could be addressed more directly by changes to Capital gains tax (CGT) .
    Lets replace council tax by a system of LOCAL INCOME TAX and local corporation tax !

    Both the current council tax and LVT assumes that a paper wealth value brings real annual income which everybody here knows is not always the case.
    How would LVT differentiate between a property speculator and a hill-sheep farmer that has worked hard to put value in his farm, or a struggling dairy farmer ?
    The property could hold the same in land value but the farmer will likely to be income poor.

  • Richard Dean 16th Jul '12 - 1:44pm

    I agree with Ernest. And a tax on property is simply a way of discouraging poorer people from buying it. Probably one of the most regressive things you can think of! But all that will hopefully be revealed in the enquiry.

  • @Ernest
    “or those that rent?”

    An additional Land Value Tax has no effect whatsoever on those that rent as the tax is paid by the landlord and cannot be passed on to the tenant. An LVT applied as a replacement for another tax, e.g. income tax, will have no effect on the majority of tenants as when their income tax goes down, the landlord is able to take more in rent which covers the LVT they pay.

    “It is an annual charge based on a property value (based on market values) that can change over time and does not take account of whether individuals actually have proportional levels of annual income or the money to pay.”

    Can you tell me why you think a freeholder’s right to charge rent (all land in the UK is owned by the Crown) should not be paid for and can be simply inherited (either from their earlier life or from their ancestors)? Why do you want to protect those that simply own and do not contribute whilst punishing those that don’t own and contribute? Can you please explain to me why you think that land ownership should be decided on the basis of inheritance rather than work? Personally, I think land ownership should be based on the ability to pay, whereas you do not.

    @Richard Dean
    “I agree with Ernest. And a tax on property is simply a way of discouraging poorer people from buying it.”

    As pointed out to you on numerous occasions by people far better informed by you, LVT does no such thing. If it did then why aren’t the rich and powerful calling for it? I’ll give you a clue – it’s because they’re quite happy with the status quo where they can stay rich without lifting a finger and where the poor remain in their place.

  • Richard Dean 16th Jul '12 - 6:46pm

    The idea that LVT will benefit first time buyers seems rather naive. The cost of something is the purchase price plus the running costs. LVT increases the running costs, so at best, LVT will reduce the purchase price by the net present value of the increase in costs. Best net result is no change in the cost of buying land.

    The video certainly seems true to the level of thinking on this – the level of a 5-year old perhaps … oo, here’s something we can tax, so let’s tax it! The little story has lots of holes. The landowner didn’t ask the people to come build there, so the logic of the video would be that the landowner has every right to get those people to pay any extra LVT that their presence mught induce. Net result is the landowner “ought to” pay no LVT at all.

    Suddenly, added at the end of the video, the landowner builds a fantastic amenity, upping the value of everyone’s home by £22k. The logic of the video is that each houseowner should then pay the landowner £22k. Which makes for a nice tidy profit for the landowner if there are 1000 homes!

  • @Rihard Dean
    “The idea that LVT will benefit first time buyers seems rather naive. The cost of something is the purchase price plus the running costs. LVT increases the running costs, so at best, LVT will reduce the purchase price by the net present value of the increase in costs. Best net result is no change in the cost of buying land.”

    The purchase value of something is determined by its return on investment. For a landlord thinking about the return on a potential purchase, the yield (the percentage of the purchase price they receive back per annum after costs) is equal to the capital appreciation plus rent – costs. The landlord is already getting as much money from the tenant as the tenant can bear, so if the landlord’s costs are increased then the return on investment becomes uncompetitive with other investments unless house prices drop, which they assuredly will with LVT being levied.

    If LVT is levied as an additional tax (for something useful like reducing the deficit) then first-time buyers are definitely better off as they still have the same bargaining power as before but potential landlords are in a worse position. If LVT is levied as a replacement tax then first-time buyers who live efficiently will be better off (as the decrease in income tax will be greater than the increase in rent) and those that don’t live efficiently (in a big house, so their rent will increase more than the decrease in income tax) will be penalised. LVT levied at a flat rate is a proportional tax (assuming that people use land in proportion to their income). It certainly isn’t regressive (unlike, say, tuition fees).

    “the level of a 5-year old perhaps”

    I think that’s what Freud referred to as projection.

    “The landowner didn’t ask the people to come build there, so the logic of the video would be that the landowner has every right to get those people to pay any extra LVT that their presence mught induce. Net result is the landowner “ought to” pay no LVT at all.”, etc, etc

    You really don’t get it do you. People don’t alter the value of their houses by building their own utilities, schools, police stations and by committing crime/whatever. If I live in an estate where the other 999 people are junkies and petty criminals then my virtuous behaviour isn’t going to be enough to persuade someone to part with lots of cash to buy my house. However, if I live on an estate where the other 999 people are virtuous, upstanding members of the community with a strong sense of civic duty and work ethic then it doesn’t matter that I’m a junky and a petty criminal – someone will offer lots of money to buy my house off me. The reason is because land value is created by the many and not by an individual. If I choose to put a new kitchen in my house (improving the infrastructure on my piece of land) it does nothing for the value of the other surrounding houses – all it does is increase the value of my house by less than the value of the kitchen (given depreciation and the fact that it might not be to the taste of the next person that buys the house) . But – I won’t pay any more tax for putting in the new kitchen because it has had zero effect on the land value

    I really don’t understand why you choose to ignore logic, reasoning, overwhelming evidence and a substantial body of work by people who do know what they are talking about.

  • Richard Dean 16th Jul '12 - 8:51pm

    What seems to go unmentioned in the video is that many supporters of LVT seem to think of landlords as evil people who charge as much rent as the market will bear.

    If this is the case, and if landlords can pass on LVT, they will do so, and will essentially be unaffected by the change. Alternatively, if landlords cannot pass on LVT, then the tenant, who used to pay councl tax, now has less tax to pay, and so can now afford to pay more in rent. In effect “as much rent as the market will bear” is now increased by the LVT, so the nasty evil landlord will simply increase the rent by the LVT. Of course this will increase the LVT, but if LVT is charged at less than 100% the increase in LVT will be less than the increase in rent. It will always be possible for the landlord to increase the rent by exactly the amount needed to have no financial effect at all, either on landlord or on tenant.

    I’m not really against LVT, I’m just against the dishonesty that seems to be associated with the arguments used to support it. LVT is just a money grab, with no particular extra morality to it than any other money grab. As far as I can see its original motivation was as way of combating tax evasion, since land can’t be moved or hidden. At that time it was perhaps seen as a way of preventing peasants from acquiring land, so perhaps was consistent with landowners’ interests.

    I expect LVT nowadays would indeed encourage some landowners to develop land – those the leave land derelict – and this is good, but I don’t see it as having a big effect on other landowners or landlords, and or the widespread benefits that its supporters claim.

  • “What seems to go unmentioned in the video is that many supporters of LVT seem to think of landlords as evil people who charge as much rent as the market will bear. ”

    I think of landlords as perfectly normal people who charge as much rent as the market will bear. That is what perfectly normal people do. But “how much the market will bear” depends on the number of people who want to live in an area and the number of houses in it. LVT will not change either of those numbers: the size of the population of the country, and the size of its housing stock will stay the same. So there should be no effect on rents.

  • @Richard Dean
    “What seems to go unmentioned in the video is that many supporters of LVT seem to think of landlords as evil people who charge as much rent as the market will bear.”

    Really – where did you get that from – I haven’t noticed anybody talking about landlords as ‘evil’. Here’s a funny thing – I’m a landlord and I support LVT. Why? – because it’s fairer and will create a country with a better socio-economic outcome.

    “If this is the case, and if landlords can pass on LVT, they will do so, and will essentially be unaffected by the change.”

    If,as you say, landlords are evil – then why aren’t they getting more money out of their tenants than they can at the moment? This is the point you always fail to understand/address. If they can’t get away with charging more now, given their evilness, then how can they increase the rent to pay the LVT?

    “At that time it was perhaps seen as a way of preventing peasants from acquiring land, so perhaps was consistent with landowners’ interests.”

    Perhaps? – have you got anything (evidence/reasoning) to back up this idea of preventing peasants from acquiring land? Again, you haven’t answered the point that if it is in landowners interests to introduce LVT then why aren’t they all campaigning for it?

  • Richard Dean 16th Jul '12 - 9:23pm

    Ad – you don’t think that “what the market will bear” depends on how much money the people have? That’s definitely an odd view of human behaviour!

  • Richard Dean 16th Jul '12 - 9:36pm

    Just like before, none of you LVT apostles are going to see the errors in your micro-economic thinking! But I am more confident that the parliamentary committee will see macro-economic sense.

    Landlords will be able to increase the rent if the tenant gets a financial benefit from reduced council tax, because the financial benefit means that the market can bear more rent – by exactly the amount of the benefit. The alternative scenario is that the tenant does not benefit, so the landlord will lose out. Where will the money to pay LVT come from? Either from reduced service to the tenant, or from a reduction in the landlord’s savings or other investments. If the landlord sells some housing investments, the problem is not solved, it’s just passed on to someone else. If the landlord reduces savings or sells investments in stocks and shares, the problem is translated into less investment in industry, and so into fewer jobs. Is this what you call a “better socio-economic outcome”?

  • @Richard Dean
    “Landlords will be able to increase the rent if the tenant gets a financial benefit from reduced council tax, because the financial benefit means that the market can bear more rent – by exactly the amount of the benefit.”

    Yes – exactly as I said – pleased we’re getting somewhere here. However, landlords that make inefficient use of their land will be punished and those that make efficient use of their land will be rewarded.

    “The alternative scenario is that the tenant does not benefit, so the landlord will lose out. Where will the money to pay LVT come from? Either from reduced service to the tenant, or from a reduction in the landlord’s savings or other investments.”

    If we’re talking here about an increased rate of taxation beyond the current level (as a result of levying LVT without reducing other taxes) then yes, it will impact the private sector. The public sector would have more money (have to borrow less) though. That’s an argument about the size of the state/speed of deficit reduction/whatever, but not about the efficiency of one form of tax versus another.

  • Richard Dean 16th Jul '12 - 10:05pm

    Thank you, William Davison, for confirming that LVT is primarily a tool for combating tax evasion, just as it was when it was first proposed all those years ago. It really has no other relevant justification.

    I wonder if the effect might be that the millionaires move out of the UK? Taking their money with them. Reducing their spending in the UK …. reducing domestic demand … oh dear, here we go again on an endless Keynesian spiral!

  • LVT is about encouraging an efficient allocation of land as a resource via taxation. Its not about evasion. It wont make all the millionaires run away. It might encourage less wealth to be hoarded in property and more investment in enterprise though.

  • Richard Dean 16th Jul '12 - 10:26pm

    @Steve

    I am sure that you are an extremely responsible person. I have to say that I look up to you on your high moral ground. I am scurrying around in the mud, but I do like it here.

    I am particularly pleased to see that, as a landlord, you would be willing to pay extra LVT without increasing the rent you charge your tenants. That warms my heart. It also makes me realise that, of course, since you are not paying that extra LVT now, you have some spare cash. My first thought was to ask you to send it to me. Then I realised that, of course, you no doubt already give that cash to a good cause, perhaps to a charity?

    But what will happen to that charity when LVT comes along? You will have to stop giving to it, and give instead to the government! You won’t? You’ll find the money somewhere else? Oh oh oh, but aren’t you doing that now, as a responsible upright citizen interested in the social good?

    Anyway, if you ever got lost and stray into the muddy place, do look me up! Everyone knows me – just ask around, I am the person with disorganized thinking, many warts, and a willingness to relieve anyone of their burden of cash. 🙂

  • @Richard Dean
    ” It really has no other relevant justification.”

    No, the other main justification is that, at the moment, landowners get to keep unearned wealth (created by other people). LVT levied at the right level will remove the unearned bit, meaning that those that benefit from increasing land values will have had to pay for the improvements.

    Another argument is that it provides better regulatory negative feedback (or counter-cyclicality as economists like to call it) than exists with other taxes. If land values rise because of speculation rather than improvements in the economy (as happened over the last decade when land/house prices soared, rents stayed the same and yields dropped significantly) then the land value tax payable increases thus making landownership not look such an easy bet. Logically and phenomenologically, LVT reduces the scale of boom-bust cycles in land values (and credit booms/crunches associated with land values).

  • “I am particularly pleased to see that, as a landlord, you would be willing to pay extra LVT without increasing the rent you charge your tenants”

    If I increase the rent then the tenants might move elsewhere and I’ll lose out considerably.

    “since you are not paying that extra LVT now, you have some spare cash.”

    The “spare cash”, equivalent to the unearned income from landownership hasn’t materialised, as the value of the (other) house (land) has gone down since my wife bought it, partly as a result of bad timing on her behalf, but a big reason we have boom/bust cycles in land-values is precisely because of the lack of LVT. Besides, I’m more than happy to pay my way to those that improve the value of my land – I just didn’t realise it was you personally that is responsible – you must also, therefore, be responsible for the fall in the land value – so why don’t you send me some cash?

  • Richard Dean 16th Jul '12 - 10:56pm

    To be effective as negative feedback, the ratio of the negative change of controlling variable to the positive change of controlled one has to be sufficiently large. An LVT that is less than 100% may be ineffective for boom/bust control, as it may still leave room for speculative profits to be made.

    As indeed I know well, since that is how I lost my money, entered the muddy place, became disorganized, and acquired warts!

  • 100% of what? 100% of the land rental value sounds good to me. Problem solved. I’m glad we agree.

  • Richard Dean 16th Jul '12 - 11:11pm

    Suppose I am a landlord and I charge my tenant £1000 rent. Then LVT happens and I have to pay 10% tax.

    Deviously, I now increase the rent to £1111. The tax I pay is 10% of that, which is £111 to the nearest pound. So my net income is £1111 less £111 = £1000, just the same as before.

    The tenant pays the whole thing – not only the tax on the original £1000, but also the tax on the increase!

  • Richard Dean 16th Jul '12 - 11:13pm

    Thank you, Steve, for finally providing an answer to Tim Leunig;s question, which started this whole thing off!

  • Richard Dean 16th Jul '12 - 11:18pm

    Ok, WIlliam Davison, 50% tax. So I am going to increase the rent to £2000. The LVT on that is £1000, which still levaes me with the same income as before. The poor tenant is now having to pay double!

    At 100% tax, no-one could afford to rent. People would be forced to live in cardboard boxes, under arches. Can I interest you in one, only £30 per night, untaxed of course! No rats, honest!

  • Richard Dean 16th Jul '12 - 11:34pm

    My God! Thank you so much WIlliam Davison. I would have really lost out in that.

    Your rent is going up to £1500. Sorry, the tax man cometh, and I ain’t a gonna lose out. The land value is £500, and 50% of that is £250. The rent increase is £500, and 50% of that is £250 too. So I have to pay £500 tax, so you gotta pay me extra,

    Or would you prefer a cardboard box?

  • Richard Dean 16th Jul '12 - 11:48pm

    At 100% tax, no landlord would gain anything from renting, and the rental market would dry up completely. Anyone who could not afford to buy a house would have to sleep rough.

    Regressive just isn’t a strong enough word – this is rich folk turning poor folk out onto the streets!

  • Malcolm Todd 17th Jul '12 - 12:15am

    Richard — please pay attention to what people are saying! Even 100% tax (and I doubt even Steve is seriously proposing that, but I might be wrong) would be 100% of the rental value of the unimproved land. Landlords generally build (or rather, buy) houses and rent those out. So the tax would never amount to 100% of the rent. In fact, such a huge tax rate would probably have such a depressive effect on land prices (I’m willing to be corrected on that by anyone with more understanding of economics and LVT than I have) that the proportion of rent attributable to the property rather than land would be massively more than it is now, and that’s not taxable under LVT, unless I’ve misunderstood the whole notion.
    I think there is a certain naivety in the more zealous proponents of LVT sometimes (or possibly, just a far more sophisticated understanding of markets than mine): I find it very hard to believe that it would be beyond the wit of landlords to pass on any of the cost to their tenants. But what you’re attacking is a caricature, not the actual notion.

  • @William Davison
    ” all you have done is increase the land value”
    That argument seems to run counter to what others have said. They are stating that, in effect, the value is determined by the amenities and local population. In that case, if Richard raised his rent his LVT would not be increased as the amenities/population would not have changed.
    If however the LVT rise is due to the rent increase, then it really destroys the underlying logic of the LVT claim – it surely isn’t what others are doing that is causing the land value to rise, it is Richards desire for more money – i.e. what he as the owner is doing.

  • Richard Dean 17th Jul '12 - 12:29am

    @Malcolm Todd. You might find it instructive to read the whole discussion, not just the last part. The whole has ranged far and wide, and has helped to both reveal many things and clear up many things.

  • Malcolm Todd 17th Jul '12 - 12:30am

    @Chris_sh
    Yes, you’re right — some people trying to argue with Richard in this thread have fallen into the same error, of thinking LVT = tax on rent. (It doesn’t help that proponents of LVT have an annoying habit of using “rent” in some economist’s sense that I don’t really understand, but which certainly isn’t the same as “what the tenant pays the landlord for the right to occupy a house”!)
    The question is, how far can the landlord get away with increasing his rent to meet the additional obligations of LVT. Richard assumes that the landlord can charge whatever s/he likes without losing out in the marketplace. LVT purists seem to believe that the landlord can’t possibly increase the rent they’re levying now. (Odd, as it’s not unknown for landlords to put their rents up when their own costs rise for other reasons.) I find both propositions unlikely; I’m sure there’s evidence somewhere of what happens in the real world, since forms of LVT do exist in the real world (see William Davidson’s mention of Pennsylvania higher up this page).

  • Malcolm Todd 17th Jul '12 - 12:32am

    @Richard. I have indeed read the whole discussion, with interest! What is it that you think I’ve missed?

  • Richard Dean 17th Jul '12 - 12:49am

    Nothing, Malcom, I’m sure. I agree that actual experience and evidence would be very helpful to see, interpreted with clarity and with attention to context. I have learned a lot from playing devil’s advocate tonight. My thanks to everyone. Good night!

  • Malcolm Todd 17th Jul '12 - 12:52am

    And good night to you too!

  • @Malcolm Todd
    Thanks, I was beginning to wonder if I was suffering from confusion. I would imagine that like most things in life, the answer as to what could be charged is somewhere in the middle.

    It does highlight the importance of keeping the message simple enough for people like me though, if people start using “economist rent” or even phrases like ” landowners get to keep unearned wealth” then it just starts complicating things.

    Thanks for the link as well, another item on my ever growing list of things to read 🙁

  • Adam Smith Fan 17th Jul '12 - 6:50am

    Richard Dean states that he has “learned a lot from playing devil’s advocate tonight.” and yet I find that hard to believe since he has merely repeated questions for which he received perfectly good answers in May when the topic of Land Value Tax was last raised on this forum in the thread, “Opinion: Land Value Tax – an old idea with lots of modern supporters”. I am not sure what his intentions were in asking the same questions again but it seems unlikely that self-education was among them and I ask myself: what exactly did he learn?

  • @Richard Dean
    Sorry, I wsa being a bit facetious with the 100% thing late last night. Of course there is a fundamental difference between the rent paid by the tenant and the rental value of the land. The rent paid by the tenant is equal to the land rent plus the rent the landlord can charge for the improvement to the land (the construction + maintenance cost +labour costs + insurance costs + risk of voids + risk of changes to mortgages terms, etc). 100% of the land rent or a significant fraction would be a good level.

    However, I agree with Adam Smith Fan – you’re repeating the same points that you’ve previously made in that other discussion and that were shown to be fallacious then, so I’m not sure what the point is unless you still believe the same fallacies. Your straw men aren’t even consistent – you accuse LVT supporters of casting landlords as ‘evil’ but then you also accuse them of also wanting to prevent poor people from owning homes.

    LVT isn’t a miracle cure and it’s not perfect, but it’s a damn sight better than what we have at the moment.

  • Richard Dean 17th Jul '12 - 9:57am

    My points were not shown to be fallacious previously and they have not been shown to be fallacious now. Personally I think that LVT is ok but it doesn’t have the morality people say it has and it won’t have the effects people assume. I am just being realistic.

    Landlords who are renting out properties will increase the amounts they charge their tenants as much as they can, and they will be able to do that if the tenants pay less in other taxes. Broadly speaking, if the tax is fascally neutral, the net result is likely to be that neither existing landlord nor existing tenant will gain or lose much.

    Small landowners who have no tenants to pass the LVT on to, and who are not using the land to generate income that they can raise by increasing prices, will take losses or nsell their land to people who can afford to buy it, which basically means rich people. If they take losses without end they will eventually go under and hence their employees will lose their jobs. No investor will change any decision if the net present value of the required investment does not change.

    It would certainly help if the supporters of LVT got their act together and decided what exactly it is they propose to tax. A tax levied in relation to the value of amenities in an area is one thing, and arguably like council tax. It would not change if the rental amount charged to a tenant went up. But amenities are not the only determinant of land sale values. A tax levied as a percentage of amounts of rent paid (or notionally paid) by tenants is quite different, as the arithmetic last night showed.

    There is also the question of actually getting LVT accepted in a democracy. If LVT increases the government’s net tax take. of if there are likely to be more people paying more tax compared to the number of people paying less, there are also likely to be mpre objectors to it than otherwise, so it will be harder to get through parliament. And anything that is not fiscally neutral will have Keynesian effects on the economy too, some of which can result in job losses.

    It is reality that we need to address. IMHO we would be unwise to base decisions on the toytown approach of the video, or indeed on computer games since those reflect what games designers think and not necesarily what is reality.

  • @Richard Dean
    “Small landowners who have no tenants to pass the LVT on to, and who are not using the land to generate income that they can raise by increasing prices, will take losses or nsell their land to people who can afford to buy it, which basically means rich people. If they take losses without end they will eventually go under and hence their employees will lose their jobs. No investor will change any decision if the net present value of the required investment does not change. ”

    If someone owns land and doesn’t use it, what has that got to do with employment? If they’re not doing anything with the land then nobody is employed on it (or nobody employed locally is using it to live on). If they are forced to sell it then land values depreciate, meaning that whoever buys it will be able to do so with less money – i.e. poorer people. To argue that rich people will buy it is perverse in the extreme. At the moment people that inherit previous land rights are able to out compete people that work. Why are you against workers being able to buy land and in favour of those that don’t being able to keep it and extract money from those that do?

    “There is also the question of actually getting LVT accepted in a democracy. If LVT increases the government’s net tax take. of if there are likely to be more people paying more tax compared to the number of people paying less, there are also likely to be mpre objectors to it than otherwise, so it will be harder to get through parliament”

    Another straw man. Nobody is proposing altering the tax take (that’s another discussion about a different subject and a non-sequitur in this debate), just how the tax is raised.

    “It is reality that we need to address. IMHO we would be unwise to base decisions on the toytown approach of the video, or indeed on computer games since those reflect what games designers think and not necesarily what is reality.”

    With respect, you really are being absurd. As well as being completely insulting to the numerous people that have had the patience and time to discuss this subject with you, you’re just throwing in some more bizarre reasoning – computer games?? I take it you’re referring to economic thought experiemnts? So, you would prefer taxation to be levied without thought (and evidence) about the consequences of the current regime versus alternative scenarios?

    Getting back to the subject. As regards passing on rents to tenants – that is precisely what landlords are trying to do at the moment. Indexes such as LSL and rentindex.co.uk have been showing annual rent increases much greater(sometimes greater than 3%) than wage inflation (around 0.5-1.0%). Landlords are struggling to make their businesses work and are putting up rents. The only problem, as they are now finding out, is that arrears are now increasing as a result. (http://www.lslps.co.uk/documents/tenant_arrears_tracker_jun12.pdf). You can put rentss up but you can’t make people pay it if they don’t have it.

  • @William Davison
    Can we put aside the issue of tax levels/what the market will pay etc for the moment as it’s a bit distracting. The concept being put forward by both the video and some commentators is that we as individuals have little actual input on the value of land. I get that, we don’t build the infrastructure/choose our neighbours so it is a valid statement.

    However, you’re now saying that rent prices also effect the land value – stating that if the rent increases then the value of land increases and you pay more tax. Surely that would only be true if the facilities in the area also improved, if they don’t then the value of the land will not improve and the LVT will stay the same?

    To try and illustrate what I believe to be the case (in fairly simplistic (and possibly incorrect) terms):
    Fred owns a house on street A, he rents the house out at £100 and pays LVT of £100, the house is ten minutes from a train station and ten minutes from a motorway junction. His is the only house on the street available for rental.

    If Fred puts up his rent to £110 he hasn’t actually changed the value of the land, it won’t have a knock on effect on what people are paying to purchase property (he would have to sell it at what ever the going rate is) and the house is still 10 minutes from both the rail station and motorway junction. Therefore the value of the land itself hasn’t changed and there couldn’t be a justification for raising his LVT.

    Would that be a fair representation of LVT?

  • Richard Dean 17th Jul '12 - 12:35pm

    I am the Big Bad LVT Wealth Grabber and I am definitely going to get more LVT from Fred. I am also going to get more LVT from everyone else in the street, indeed the whole neighbourhood, because Fred’s house is just the same as all the other houses and Fred has shown by his example that the value of a house there – the available return on a housing investment – has gone up by £10 per rental period.

  • @Richard Dean
    So Richard, is that your round about way of telling me that I’ve got it all wrong? 😀

  • Richard Dean 17th Jul '12 - 1:12pm

    No, I have no idea how it is, I am just taking every opportunity to stake a claim on some money 🙂

  • Malcolm Todd 17th Jul '12 - 1:33pm

    @Richard and @Chris_sh
    Nope, I still don’t think you’ve got it! LVT relates to the rental value of the land, not the rental value of the house on it. Putting the rent up on the house you’re letting will have no impact on your LVT liability.

    Look at it this way: imagine you want to get into the landlording business, but without the trouble and the capital input of buying actual land. So you find an empty plot of land, go to the owner and say, “I’d like to rent that land from you on a long-term basis, build a house and let it out to tenants.” “Fine”, says the owner, “That suits me.” And you agree a rent with him. You then build your house and let it out — obviously, you charge more for that than you are paying the landowner for using his land! After all, you have the costs of building the house and maintaining, as well as other service costs and your own labour to pay for.

    LVT is levied on what you pay the landowner for using his land in this way, not what you can charge the tenants of the house you built there.

    If you are both the landowner and the owner of the house (as will usually be the case in practice), LVT is still based on what you would have to pay if you weren’t the landowner (in other words, it’s on the notional rent that you are paying to yourself for the land).

    Does this help any?

  • @Malcolm
    Thanks again – I think I have it now (I hope!!!)

  • Richard Dean 17th Jul '12 - 4:01pm

    Malcolm Todd. Thanks very much, that is very clear, and not at all what many of the supporters of LVT seemed to be saying. It means that the LVT may be a rather small fraction of the amount of money the houseowner charges the tenant. Also, since it’s small, the houseowner will probably not find it too difficult to sneak in a small increase , over time, so that neither the houseowner nor the landowner have a change of income – the tenant will in effect pay the LVT.

  • Richard Dean 17th Jul '12 - 4:24pm

    Malcolm Todd. Here are some more questions, hopefully not too controversial:

    If the value of my land stops rising, do I stop paying LVT?

    If the value of my land falls, do I get an LVT rebate? … it would certainly seem to be fair from a logical viewpoint.

    What is the macroeconomic effect? If the tenant pays the LVT, s/he has less money for other things, so national consumption does down. If an investing houseowner or landowner pays the LVT, s/he has less money for investment, so investment nationally goes down. Will these macro-economic consequences help get us out of recession?

    Thanks in advance!

  • @Richard Dean
    “Malcolm Todd. Thanks very much, that is very clear, and not at all what many of the supporters of LVT seemed to be saying.”

    It’s exactly what all supporters of LVT say.

    “It means that the LVT may be a rather small fraction of the amount of money the houseowner charges the tenant.”

    The LVT as a proportion of the house rental value increases with the price of land. A landowner in a three bed semi in a posh area will have a higher LVT bill than one with an identical house in a less desirable area. You keep going on about who pays LVT like you’re on some mission to uncover a truth being concealed by LVT supporters. You’re completely missing the point. If the land value rises then the local rents the landlord can get away with charging rise. At the moment, landlords benefit from that improvement in the local infrastructure at the expense of those that paid for it. With LVT the landlord’s costs increase in proportion to the imrprovements, so they don’t get something for nothing.

    “If the value of my land stops rising, do I stop paying LVT?”

    Are you being serious??? You’ve spent hours in discussions about L VT and yet you haven’t grasped that the LVT is proportional to the value of the land (hence if it stops rising then the landlord keeps paying the same amount).

    “If the value of my land falls, do I get an LVT rebate? … it would certainly seem to be fair from a logical viewpoint.”

    Er, ditto. It’s called LAND VALUE TAX. If the value of the land falls then the landowner pays less.

    “If the tenant pays the LVT, s/he has less money for other things, so national consumption does down. ”

    They don’t pay it. The tax incidence is on the landowner as the supply of land is finite. Please read an economics textbook. The national consumption does not go down. Why would it?

    “If an investing houseowner or landowner pays the LVT, s/he has less money for investment, so investment nationally goes down.”

    The “amount” of investment is an irrelevance. It’s the use to which our resources are put that increases productivity. Encouraging land use with LVT stimulates productivity (growth). Ensuring that invested money flows to those that work rather than those that own again encourages productivity. If you run a company that pays the less productive staff more money than the productive staff, how do you think it would perform? That company is the UK plc. A the moment you are defending such a system – where investment flows to the unproductive.

    “Will these macro-economic consequences help get us out of recession?”

    No, because they don’t exist – you made them up.

  • “A landowner in a three bed semi ” should read “A landowner with a three bed semi “

  • Richard Dean 17th Jul '12 - 6:41pm

    I see. Thanks, Steve, you have cleared my head and there is fresh air. I understand. …

    LVT is not justified on the grounds that the community creates value – if it was then there;’d be a one-off charge for the creation of value and no further LVT until the value increased.

    LVT is also not justifed on grounds that the community maintains value, because if it was then I’d get a rebate when the community failed to maintain value and the value went down.

    So, it’s just an amoral money grab after all.

    Why not do it a lot simpler and charge council tax on unused land and empty properties?

  • I’m glad that there are some people still discussing things here as I’ve one more query (hopefully not to controversial, or not intended as such anyway).

    We have seen occasions in the past where people living in run down areas (usually low wage areas at that) get together and sort out the neighbourhood (e.g. by making sure it looks nice, running a neighbourhood watch, clearing waste ground to create kiddie facilities etc).
    Hopefully we all agree that this is a good thing, but if they do that in the future isn’t there a chance that they’ll end up getting stung by an increase in their LVT? If so, could/should something be put in place that would help these people?

  • Argh – I should have said 2, I’ve just remembered something else I wanted to ask – sorry.

    Not a 5 minute stroll from where I live is a small nature reserve, wooded almost to the sea with a break for an area that includes space for picnics (complete with wooden benches etc) and public toilets.

    This land is actually owned by a private company who obviously think this is a good idea. If they suddenly get walloped with LVT what incentive could/should they be given to keep it going?

  • Richard Dean 17th Jul '12 - 7:06pm

    Something has to go down – either national consumption or national investment, because the government is taking money out of the economy, in the form of an extra tax – LVT.

    Is there a reason why the government should be better at using that money than the people it came from? Most givernment departments seem to be a lot worse!

  • @chris_sh

    Very good points, to which there is no easy answer. Perhaps someone more knowledgeable on the subject than myself might try and answer your legitimate concerns.

    On the first point – if those residents are currently renting and they all get together to improve the area then they will end up paying higher rents for their effort. The landlords (who may or may not be involved in helping to improve the area) receive a financial windfall in increased rents (and higher house prices). With LVT then the tenants wouldn’t be any better/worse off compared to the current taxation regime, but the landlord wouldn’t receive the windfall – their increased LVT contribution would however provide a greater source of funding for the community, but it would be unlikely to work equitably with regards to those who put in the hard graft. However, at the moment there is a financial disincentive for renters to get together to improve their area. With LVT they would still be disincentivised.

    Alternatively, if owner-occupiers get together to improve their area then they will benefit from increased land (and house) prices. That incentive would effectively be removed by LVT – a very good point. The concept of home-owners as stakeholders in their local community is enticing because of this concept – but in reality, home-owners have now realised that they can have a greater share of increased demand for housing by preventing new houses being built. The virtuous behaviour of home-owning stakeholders who are incentivised to improve their community versus the bad behaviour of home-owners preventing new house building is an interesting debate and I think one that been settled by the low number of houses being built unfortunately.

    With regards to the second point – what are the motivations for the private company to provide the facilities – is it philanthropy or are they receiving an income from receiving car-parking charges that cover the cost of running the place (plus perhaps a margin)? If they are receiving an income from the land through parking then they should already be paying various taxes – those taxes would be replaced by LVT and, given the land doesn’t have planning permission and therefore has a much lower value than residential land, they might not be worse off than before. If, on the other hand, they are providing the facility as an act of philanthropy then yes, they would be discouraged from doing so if LVT was introduced. However, I would have though that there would be ways of circumventing that kind of thing – e.g. exemptions for non-profit making community land use covenants, etc.

  • @Richard
    “LVT is not justified on the grounds that the community creates value – if it was then there;’d be a one-off charge for the creation of value and no further LVT until the value increased.”

    Value is something that is maintained by the labour of those in the area – they work – they earn money – they create local demand. If they all start working harder – they get more money – the demand goes up – they pay more rent – the landlord receives a good proportion of that increased effort without lifting a finger beyond the labour required on the non-land-value proportion of the rent.

    “LVT is also not justifed on grounds that the community maintains value, because if it was then I’d get a rebate when the community failed to maintain value and the value went down.”

    As I’ve said already, if land value goes down then the amount of LVT payable goes down.

    “So, it’s just an amoral money grab after all.”

    No that’s just you bizarre, twisted conclusion based on I know not what.

    “Why not do it a lot simpler and charge council tax on unused land and empty properties?”

    LVT needs regular updates of land value. When was the last time the council tax bands were updated? LVT is proportional to land value (related to the improvements of the area by many people) and is not related to the improvements made to the property on the land by the landlord. If the landlord puts a new kitchen in then he gets more rent but the kitchen hasn’t altered the land rent value. Council tax is not proportional to land value. A tax on the value of the house discourages investment in the house, whereas a tax on the land value does not – e.g. a derelict property might be knocked down to avoid a tax based on the house value rather than the land value. A landowner can’t avoid LVT by destroying the land.

    “Something has to go down – either national consumption or national investment, because the government is taking money out of the economy, in the form of an extra tax – LVT.”

    As I’ve already said – this debate is about LVT as a replacement tax. The debate about governments taking more/less money from the population is a separate debate. I’ve already destroyed that straw man so why have you resurrected it?

  • Richard Dean 17th Jul '12 - 8:22pm

    Because it’s not made of straw!

  • Adam Smith Fan 17th Jul '12 - 10:34pm

    Chris_sh, wrote “Not a 5 minute stroll from where I live is a small nature reserve, wooded almost to the sea with a break for an area that includes space for picnics (complete with wooden benches etc) and public toilets.

    This land is actually owned by a private company who obviously think this is a good idea. If they suddenly get walloped with LVT what incentive could/should they be given to keep it going?”

    Chris, LVT can be thought of as a payment which the owner makes in return for the right to exclude people from the land which is owned. So where an owner provides free access to the public it would only be fair that some form of rebate should be allowable on the LVT due. If the nature reserve that you mention were closed off to the public then full LVT should be due. However bear in mind that it may be impossible to get planning permission to develop such a site, particularly if it is an SSSI or a historic site and therefore the land value would likely be very low or zero even it was surrounded by land of high value. Consequently the LVT would also likely be zero or a nominal amount.

  • @Steve & Adam Smith Fan
    Thanks for the comments, the actual area is free access with free parking. It’s also (probably) a prime area for either holiday or retirement homes which is one of the reasons I asked really (it’s not historic or SSSI – I think the land parcel that was bought actually straddled the main road and they decided to build on the other side of that road).

    Obviously one of the little nitty gritty things that would have to be thought about as things progressed.

  • Adam Smith Fan 17th Jul '12 - 11:15pm

    Chris_sh wrote “We have seen occasions in the past where people living in run down areas (usually low wage areas at that) get together and sort out the neighbourhood (e.g. by making sure it looks nice, running a neighbourhood watch, clearing waste ground to create kiddie facilities etc).
    Hopefully we all agree that this is a good thing, but if they do that in the future isn’t there a chance that they’ll end up getting stung by an increase in their LVT? If so, could/should something be put in place that would help these people?”

    No doubt they would get stung, Chris. But then is this any different from the situation now? If they were to do the things that you mention at the moment it raise the value of the land (and therefore the price of the houses) in the area. This might well benefit those of them who owned their homes. However as you point out these are usually low wage areas where most people are tenants rather than owners. So most of them would find that their rents would rise.

    The fact is that while LVT can fix a large number of economic problems, it cannot fix all of them. And this is one area where the best that can probably be said is that, while it will not make the outcome any better than it is at present it will not make things any worse either.

    Having said that there are other policy measures such as the Citizens Income which can be combined with the Land Value Tax to overcome this type of issue. But that’s another story.

  • Richard Dean 17th Jul '12 - 11:26pm

    The upfront purchase price of a piece of land can also be thought of as the price the owner pays for the right to exclude others from the land. Indeed it has always been that way. So in effect, the present purchase price includes the NPV of all the future LVT that would otherwise be paid. This means that present landowners have already paid all future LVT, and so should not be charged it again.

    I hope that this interesting discussion helps ALTER to see that their video has significant flaws, that being coy and not answering Tim Leunig’s question simply leads to suspicon and resistance, and that they will have to prepare themselves much better, with believable answers ready in advance, if and when this thing is put to the electorate in a big way.

    I would also like to thank everyone, and Steve in particular, for helping me understand at least some of what might be proposed, in spite of the blizzard of my reasonable and unreasonable objections.

  • And the intended audience and age group for the video is who exactly?

    If you take the “un-improved” plot of land and label it “Farm” the entire argument as presented starts to fall apart: Why should the farmer pay more tax just because others decide to develop the surrounding land and in so doing raise the value of his land?

    Also whilst 70% of the land in the UK is owned by 1% of the population, it is largely meaningless in the context of our urban settlements; where the majority of the population actually live and work ie. the 30% of land owned by the 99%.

    From the clarity of discussion here, I anticipate the private members bill going the same way as several other LibDem proposals…

  • @Roland
    “If you take the “un-improved” plot of land and label it “Farm” the entire argument as presented starts to fall apart: Why should the farmer pay more tax just because others decide to develop the surrounding land and in so doing raise the value of his land?”

    No it doesn’t. It’s still farmland. The value of the farm is only going to increase if it has planning permission. As farmland it has a small fraction of the price of residential land and the tax paid by the landowner will just replace the taxes previously paid by the farmer (the incidence of the farmer’s income tax is currently on the landowner anyway). If the farmer is twice as productive as the surrounding farms then he gets to keep all of the extra revenue with LVT. Without LVT he gets taxed twice as much under current taxation.

    “Also whilst 70% of the land in the UK is owned by 1% of the population, it is largely meaningless in the context of our urban settlements; where the majority of the population actually live and work ie. the 30% of land owned by the 99%.”

    I’m not sure how that is relevant? Land values vary massively according to local community development and planning consent – that’s the whole point. A lot of that 70% is very low value at the moment compared to the bits owned by the other 99%. It would be more interesting to break down land ownership by value rather than area. LVT isn’t a tax on area.

    “From the clarity of discussion here, I anticipate the private members bill going the same way as several other LibDem proposals…”

    The only thing preventing people from understanding LVT is laziness – it just takes five minutes to read through and understand the arguments. Of course, many people don’t want to understand and are more than happy to present fallacious arguments as they have a vested interest in being rewarded for laziness,

  • @Steve
    Whilst your points might be valid they are not communicated in the video, hence what at first seems to be a very simple principle is already being complicated by caveats.

    > 70% of the land in the UK is owned by 1% of the population “I’m not sure how that is relevant?”
    Agree but it is in the video being used to justify the case for LVT…

    “The only thing preventing people from understanding LVT is laziness”
    The same can be said for many things, such as AV, Lords Reform … My point is unless LVT can be communicated to the British public in terms it understands and can readily translate into the impact on them it doesn’t stand a chance. This article illustrates the point as we still have no answer to the first comment “But how much would it be???”, which was also asked in previous articles.

    Finally, returning to the video and another hot topic, do the LibDems/ALTER have a license to use the Mr Monopoly character or is this just another example of copyright theft?

  • Richard Dean 18th Jul '12 - 1:17pm

    Is there any available material on LVT that is suitable for normal adults? – not lowbrow but not cloudy and highbrow? Maybe a readable, reference-supported and logical description and analysis of the economic and other advantages and disadvantages of the proposals?

    Here are some more thoughts around LVT and Citizen’s Income, perhaps fair/reasonable perhaps not, that ALTER might want to prepare themselves for …

    LVT seems to be a return to a feudal system. I was taught at school that the king gave the barons land in return for tithes (= LVT), and the barons allowed the peasants to live on and use the land in return for tithes (more LVT). Is a retiurn to feudalism what we want?

    One of the reasons that the industrial revolution was successful in creating growth was that the idea of “tax” was disconnected from the idea of “ownership”. An entrepreneur could pay, up front and once and for all, the price for the right to exclude others from using a thing, and was then free to focus all his or her energies on using it productively. Sure some owned things were used inefficiently, but adding a tax burden to every industrialist to fix small wastage would have slowed growth, not enhanced it.

    In practice, LVT won’t reduce the cost of land, it will reduce the upfront cost and add more to the ongoing costs, maybe even making the total cost infinite! There’s no reason to suppose that those who will be able to afford the reduced upfront costs will be productive enough to support the increased ongoing costs. If they were, they’d be able to afford a loan now to get the land at today’s LVT-inclusive prices.

    “Citziens income” sounds like something out of the Middle Ages – Oliver Cromwell maybe – and a return to the “Power to the People” 70’s sitcom, not real life at all, something that will simply support lazy unproductive good-for-nothings.

    Traumatized adults like to return to the simplicity of their childhood, and this video suggests that this is the real reason behind LVT – a way of trying to heal, or reject, the emotional and psychological pains of adulthood in an industrialized world. The riots last summer certainly showed that those pains exist and must be addressed, but is LVT the right way of doing this?

  • I don’t think it really matters if the land owner passes on the tax to the tenant. The point should be that you decide how much tax you pay by deciding where you live.
    This tax should only be used to replace taxes that are avoidable.
    At the minuet we have a massive welfare system being payed for through taxes by people who can least afford it whilst the richest avoid paying anything. The tax system needs to change and the equation needs to change so that wealth is tax rather than income.
    I think it would need to be proved where the tipping point is. Who would be better off by the proposed tax change? If it could be argued that for example a family of 4 in a 3 bed in St. Albans with an annual income of £60000 and a £200000 mortgage would be better of then this could be a vote winner as anyone in a less strong financial position would be proportionately better off

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