That Lunancy from the Greens in Full...
Discussion
turbobloke said:
Since at present that remains an assertion, and ahead of your future post with 'highlights' which would be interesting to see - thank you in advance!
At the moment I hold that your comment applies more to the fluff at the link posted earlier which creates poor widow owners etc which is done to construct easy counter-arguments. Hartwich's approach is fundamental.
I did have time to Google though.. At the moment I hold that your comment applies more to the fluff at the link posted earlier which creates poor widow owners etc which is done to construct easy counter-arguments. Hartwich's approach is fundamental.
http://markwadsworth.blogspot.co.uk/2012/04/killer...
http://econpapers.repec.org/article/blaecaffa/v_3a... - this needs a subscription though so I have no idea what he says
edh said:
turbobloke said:
Since at present that remains an assertion, and ahead of your future post with 'highlights' which would be interesting to see - thank you in advance!
At the moment I hold that your comment applies more to the fluff at the link posted earlier which creates poor widow owners etc which is done to construct easy counter-arguments. Hartwich's approach is fundamental.
I did have time to Google though.. At the moment I hold that your comment applies more to the fluff at the link posted earlier which creates poor widow owners etc which is done to construct easy counter-arguments. Hartwich's approach is fundamental.
Given that work is arriving thick and fast, as of now I don't, but hope springs eternal.
Churchill gave a fantastic speech on a land value tax in 1909: http://www.landvaluetax.org/current-affairs-commen...
I'm all for it
I'm all for it
BJG1 said:
Churchill gave a fantastic speech on a land value tax in 1909: http://www.landvaluetax.org/current-affairs-commen...
I'm all for it
Did anyone else read that in Churchill's voice?I'm all for it
Churchill said:
I hope you will understand that, when I speak of the land monopolist, I am dealing more with the process than with the individual land owner who, in most cases, is a worthy person utterly unconscious of the character of the methods by which he is enriched. I have no wish to hold any class up to public disapprobation. I do not think that the man who makes money by unearned increment in land is morally worse than anyone else who gathers his profit where he finds it in this hard world under the law and according to common usage. It is not the individual I attack; it is the system. It is not the man who is bad; it is the law which is bad. It is not the man who is blameworthy for doing what the law allows and what other men do; it is the State which would be blameworthy if it were not to endeavour to reform the law and correct the practice.
We do not want to punish the landlord.
Aye really don't think this would be applicable in this day and age, it would all be about bashing the rich as usual. We do not want to punish the landlord.
bodhi said:
Churchill said:
I hope you will understand that, when I speak of the land monopolist, I am dealing more with the process than with the individual land owner who, in most cases, is a worthy person utterly unconscious of the character of the methods by which he is enriched. I have no wish to hold any class up to public disapprobation. I do not think that the man who makes money by unearned increment in land is morally worse than anyone else who gathers his profit where he finds it in this hard world under the law and according to common usage. It is not the individual I attack; it is the system. It is not the man who is bad; it is the law which is bad. It is not the man who is blameworthy for doing what the law allows and what other men do; it is the State which would be blameworthy if it were not to endeavour to reform the law and correct the practice.
We do not want to punish the landlord.
Aye really don't think this would be applicable in this day and age, it would all be about bashing the rich as usual. We do not want to punish the landlord.
Churchill's approach from his era has been discussed on PH before, and while his name in the game is eye-catching, his ideas are flawed - Hartwich nailed it.
Forgive me, I haven't read though every post, but how do supporters of LVT feel smallholders should be treated?
We own some land. It's in an AONB, and so is worthless from a development point of view it would never be permitted. It's enough to generate an income of a couple of hundred quid a year in theory, but we use it ourselves so we can't realise that. The capital value of the land is quite high, however, as there's loads of rich people round our way who are looking for horse paddocks and such
When we retire we'll be on a very restricted income, so we'll be using the land to grow food, raise chickens an stuff, none of it will generate a serious income as we'll be consuming it ourselves. If someone comes along and demands LVT from us, it could well end up forcing us to sell, which doesn't seem a very attractive proposition?
We own some land. It's in an AONB, and so is worthless from a development point of view it would never be permitted. It's enough to generate an income of a couple of hundred quid a year in theory, but we use it ourselves so we can't realise that. The capital value of the land is quite high, however, as there's loads of rich people round our way who are looking for horse paddocks and such
When we retire we'll be on a very restricted income, so we'll be using the land to grow food, raise chickens an stuff, none of it will generate a serious income as we'll be consuming it ourselves. If someone comes along and demands LVT from us, it could well end up forcing us to sell, which doesn't seem a very attractive proposition?
Gaspode said:
Forgive me, I haven't read though every post, but how do supporters of LVT feel smallholders should be treated?
Generally, not specific to you. Most smallholders are lifestyle choices/hobby farmers/vanity projects. Make it commercially viable and pay little to no income tax on your hard work. Or, as at present, pay no CGT on sale when the value triples.Back to my original point. The value of work should not be taxed; land appreciation should be.
Gaspode said:
Forgive me, I haven't read though every post, but how do supporters of LVT feel smallholders should be treated?
We own some land. It's in an AONB, and so is worthless from a development point of view it would never be permitted. It's enough to generate an income of a couple of hundred quid a year in theory, but we use it ourselves so we can't realise that. The capital value of the land is quite high, however, as there's loads of rich people round our way who are looking for horse paddocks and such
When we retire we'll be on a very restricted income, so we'll be using the land to grow food, raise chickens an stuff, none of it will generate a serious income as we'll be consuming it ourselves. If someone comes along and demands LVT from us, it could well end up forcing us to sell, which doesn't seem a very attractive proposition?
If the land isn't worth much it won't be taxed much. Simple as that. We own some land. It's in an AONB, and so is worthless from a development point of view it would never be permitted. It's enough to generate an income of a couple of hundred quid a year in theory, but we use it ourselves so we can't realise that. The capital value of the land is quite high, however, as there's loads of rich people round our way who are looking for horse paddocks and such
When we retire we'll be on a very restricted income, so we'll be using the land to grow food, raise chickens an stuff, none of it will generate a serious income as we'll be consuming it ourselves. If someone comes along and demands LVT from us, it could well end up forcing us to sell, which doesn't seem a very attractive proposition?
And for the stupid TurboBloke point of point and tax - this isn't just some extra tax, it's about proposing a new way of taxing and works in conjunction with major overhauls in other taxes, too.
Andy Zarse said:
Gaspode said:
Forgive me, I haven't read though every post, but how do supporters of LVT feel smallholders should be treated?
Generally, not specific to you. Most smallholders are lifestyle choices/hobby farmers/vanity projects. Make it commercially viable and pay little to no income tax on your hard work. Or, as at present, pay no CGT on sale when the value triples.Back to my original point. The value of work should not be taxed; land appreciation should be.
As for the other posters comment about only those will a large income being allowed to own land, fine, provided Farmers are given a mandatory state funded high income to pay the LVT with, funded by a levy on all food sold in the UK.
BJG1 said:
And for the stupid TurboBloke point of point and tax - this isn't just some extra tax, it's about proposing a new way of taxing and works in conjunction with major overhauls in other taxes, too.
Replacement of taxes is mentioned from time to time but the people mentioning it aren't in HM Treasury and the chances of other taxes being replaced as 'promised' are vanishingly small.Your point isn't stupid it's just naive dreamworld fantasy. Pointing at things and taxing them is indeed stupid, it reflects failed left-liberal dogma.
'Income taxes introduced to defeat Napoleon'.
http://webarchive.nationalarchives.gov.uk/+/http:/...
http://webarchive.nationalarchives.gov.uk/+/http:/...
HMRC said:
Nicholas Vansittart was Chancellor when Napoleon was defeated. His inclination was to maintain some tax on income, but public sentiment and the opposition were against him. A year after Waterloo, income tax was repealed ‘with a thundering peal of applause’ and Parliament decided that all documents connected with it should be collected, cut into pieces and pulped.
Timmy40 said:
Andy Zarse said:
Gaspode said:
Forgive me, I haven't read though every post, but how do supporters of LVT feel smallholders should be treated?
Generally, not specific to you. Most smallholders are lifestyle choices/hobby farmers/vanity projects. Make it commercially viable and pay little to no income tax on your hard work. Or, as at present, pay no CGT on sale when the value triples.Back to my original point. The value of work should not be taxed; land appreciation should be.
As for the other posters comment about only those will a large income being allowed to own land, fine, provided Farmers are given a mandatory state funded high income to pay the LVT with, funded by a levy on all food sold in the UK.
turbobloke said:
edh said:
Halb said:
I'd like to see a land value tax.
https://en.wikipedia.org/wiki/Land_value_tax
Makes sense to me - definitely one Labour should adopt. There are stirrings within the party. Andy Burnham was proposing it as part of his leadership campaign.https://en.wikipedia.org/wiki/Land_value_tax
http://www.labourland.org/
http://labour-uncut.co.uk/2014/01/29/if-labour-wan...
Also a Liberal policy I think (although you wouldn't know it)
Article said:
Today we see that most of the arguments in favour of LVT rest on a few axioms that are either highly questionable or outright wrong.
First, it is assumed that land ownership does not fulfil any economic function and that, therefore, all income received from owning land is basically unjustified, even unjustifiable. not sure this is right - I think LVT's more about the view that land is a common asset, no-one created it.
In order to reach this conclusion the supporters of LVT since David Ricardo have divided land rents into rents that derive from the land itself and rents that derive from the improvements done to this land. For example, if one cultivated a piece of land or built a house on it, then such investment would – even in the eyes of LVT supporters – justify an income. But the income that simply flows from the ‘indestructible powers of the soil’ (Ricardo) would not.
In practice, however, one could hardly ever separate the incomes from land and from improvements to the land. It would take a government agency and some highly questionable assumptions to determine which part of the value of the land was ‘justified’ and which was ‘unearned’ and thus taxable. not at all - it's common practice to value property, and reasonably easy to separate the value of the land But worse than that, modern economic analysis has moved beyond the old Ricardian land value theory and concludes that each factor of production will receive its marginal product. This means that land does not receive the residual value of all economic activity, but capital and labour equally receive value according to what they have contributed. not sure how this applies to domestic property?
There is a more fundamental flaw in the reasoning of the supporters of LVT. They assume, implicitly or even explicitly, that landowners do not perform an economic function. no - but they perform little or no function by just holding land Their perception of landowners is that they do not contribute the least to the economy, yet at the same time they reap large profits from owning their land. From this perception it is not far to the claim that their allegedly undeserved profits from land should be taxed away. true I think - or rather they should pay a rent for using the land
Closer inspection, however, reveals that landowners perform a number of valuable economic tasks. Like the owners of any other factor of production, landowners have to make frequent decisions on what use to make of their property. They decide in which way to utilise their land, which could mean to keep land idle. For one, there is much more land than there is labour to keep all land in use all the timeno idea what this means in the context of urban land for example. Secondly, it can be necessary at times to keep land from the market and wait for a better opportunity to bring it back into use, for example when there is a chance to develop a larger area.or for speculation on asset prices These decisions have to be made, and they have to be made by someone who bears the economic consequences. not sure this is "valuable economic tasks" and why landowners should get a great reward for it - LVT looks to incentivise landowners to put land into use - rather than leave it derelict for example
This is the task of the landowner who accepts the residual risk and takes the opportunity costs of withholding land from its most valuable unrealised economic potential. or who persuades the bank to lend the money to buy it In many ways, the role of the landowners resembles that of entrepreneur-investors in other markets. Like any other investor they have to allocate scarce resources over time and ultimately direct them to their most productive uses. To take this role from them by means of taxing the value of their property means creating a distortion in the market as landowners would be unable to make independent decisions about their property. It resembles a kind of central planning in the land market.or you could say it removes the deadweight of property speculators
People owning land should be treated like people owning other forms of capital.apart from it isn't like "other forms of capital". For one thing, its quantity is fixed. Owning a factory, money in a bank account or a plot of land should thus not be taxed on their respective values, but on the actual income – not a hypothetical income – generated from them. The proper tax for this is the income tax. An additional land value tax would be both unnecessary and undesirable. Besides, it would not fit into our general approach to taxation. In our current tax system people are usually not taxed for the resources they own but for the income they make from these resources.we have many taxes - business rates are a form of LVt for example, as were the old domestic rates. there's no law that says taxes should be on income, and LVT proponents would seek to reduce taxes on income
For example, you would not be punished if you decided to keep your money in a money sock or a piggy bank instead of directing it to a high-interest investment. You would only be taxed once your capital yields an income. Thus the capital owner is free to decide how to use his resources, even if that means running the risk of not making the most of them. In a market economy with individual autonomy, however, this is something that has to be accepted. It is the general principle of a market economy with private property rights that property owners are free to make their own decisions.and they still would be
As we have seen, in a market in which landowners make decisions about land uses, an LVT would have severely negative economic side effects.I don't think he's described any - but there are many positive economic side effects, like directing capital to productive enterprise, like reducing tax on income Yet in Britain, land-use decisions are not only made by landowners, but also by planners. In effect this means that landowners would often not even be able to make the most of their land, but they are restricted to what planners have allowed them to do. But when it then comes to imposing an LVT on these landowners, on what value should this tax be based? On the current use value, on the use allowed by the plan, or on some fictional use regardless of what is currently permitted? it's quite clear, LVT is levied on the permitted use of the land, not on any possible future permitted use. LVT on farmland would be very low, but if that farmland was granted planning permission for housebuilding, the LVT charge would be much higher Once again, an LVT would turn out to be a source of extreme legal uncertainty – and it would be difficult to implement, practically.not really
In addition to all these economic difficulties, there is a further moral complication to LVT. As the supporters of LVT claim, the tax should be levied on the intrinsic value of a site.no they don't But it turns out that such values often depend on the surroundings of the plot and not only on the plot itself. There is no purely intrinsic value, especially when it comes to land in the cities. In other words, changes made by your neighbours will affect the value of your property. If your neighbour builds a polluting factory, your land value and thus your LVT will fall. If your neighbour, however, opens a theme park or if a new tube line stops in front of your door, your land value will increase and with it the tax you would have to pay on it. So in other words, the tax one has to pay does not actually depend solely on one’s own property positions, let alone one’s financial situation, but on the consequences of other people’s actions. Surely, such a system of taxation cannot be regarded as fair or just.one of the aims of LVT is to capture the gain in improvements made by the community that currently accrue to the land owner - such as the jump in property prices attributable to crossrail - seems fair to me. Likewise, wouldn't it be fair to reduce LVT if your land value falls?
First, it is assumed that land ownership does not fulfil any economic function and that, therefore, all income received from owning land is basically unjustified, even unjustifiable. not sure this is right - I think LVT's more about the view that land is a common asset, no-one created it.
In order to reach this conclusion the supporters of LVT since David Ricardo have divided land rents into rents that derive from the land itself and rents that derive from the improvements done to this land. For example, if one cultivated a piece of land or built a house on it, then such investment would – even in the eyes of LVT supporters – justify an income. But the income that simply flows from the ‘indestructible powers of the soil’ (Ricardo) would not.
In practice, however, one could hardly ever separate the incomes from land and from improvements to the land. It would take a government agency and some highly questionable assumptions to determine which part of the value of the land was ‘justified’ and which was ‘unearned’ and thus taxable. not at all - it's common practice to value property, and reasonably easy to separate the value of the land But worse than that, modern economic analysis has moved beyond the old Ricardian land value theory and concludes that each factor of production will receive its marginal product. This means that land does not receive the residual value of all economic activity, but capital and labour equally receive value according to what they have contributed. not sure how this applies to domestic property?
There is a more fundamental flaw in the reasoning of the supporters of LVT. They assume, implicitly or even explicitly, that landowners do not perform an economic function. no - but they perform little or no function by just holding land Their perception of landowners is that they do not contribute the least to the economy, yet at the same time they reap large profits from owning their land. From this perception it is not far to the claim that their allegedly undeserved profits from land should be taxed away. true I think - or rather they should pay a rent for using the land
Closer inspection, however, reveals that landowners perform a number of valuable economic tasks. Like the owners of any other factor of production, landowners have to make frequent decisions on what use to make of their property. They decide in which way to utilise their land, which could mean to keep land idle. For one, there is much more land than there is labour to keep all land in use all the timeno idea what this means in the context of urban land for example. Secondly, it can be necessary at times to keep land from the market and wait for a better opportunity to bring it back into use, for example when there is a chance to develop a larger area.or for speculation on asset prices These decisions have to be made, and they have to be made by someone who bears the economic consequences. not sure this is "valuable economic tasks" and why landowners should get a great reward for it - LVT looks to incentivise landowners to put land into use - rather than leave it derelict for example
This is the task of the landowner who accepts the residual risk and takes the opportunity costs of withholding land from its most valuable unrealised economic potential. or who persuades the bank to lend the money to buy it In many ways, the role of the landowners resembles that of entrepreneur-investors in other markets. Like any other investor they have to allocate scarce resources over time and ultimately direct them to their most productive uses. To take this role from them by means of taxing the value of their property means creating a distortion in the market as landowners would be unable to make independent decisions about their property. It resembles a kind of central planning in the land market.or you could say it removes the deadweight of property speculators
People owning land should be treated like people owning other forms of capital.apart from it isn't like "other forms of capital". For one thing, its quantity is fixed. Owning a factory, money in a bank account or a plot of land should thus not be taxed on their respective values, but on the actual income – not a hypothetical income – generated from them. The proper tax for this is the income tax. An additional land value tax would be both unnecessary and undesirable. Besides, it would not fit into our general approach to taxation. In our current tax system people are usually not taxed for the resources they own but for the income they make from these resources.we have many taxes - business rates are a form of LVt for example, as were the old domestic rates. there's no law that says taxes should be on income, and LVT proponents would seek to reduce taxes on income
For example, you would not be punished if you decided to keep your money in a money sock or a piggy bank instead of directing it to a high-interest investment. You would only be taxed once your capital yields an income. Thus the capital owner is free to decide how to use his resources, even if that means running the risk of not making the most of them. In a market economy with individual autonomy, however, this is something that has to be accepted. It is the general principle of a market economy with private property rights that property owners are free to make their own decisions.and they still would be
As we have seen, in a market in which landowners make decisions about land uses, an LVT would have severely negative economic side effects.I don't think he's described any - but there are many positive economic side effects, like directing capital to productive enterprise, like reducing tax on income Yet in Britain, land-use decisions are not only made by landowners, but also by planners. In effect this means that landowners would often not even be able to make the most of their land, but they are restricted to what planners have allowed them to do. But when it then comes to imposing an LVT on these landowners, on what value should this tax be based? On the current use value, on the use allowed by the plan, or on some fictional use regardless of what is currently permitted? it's quite clear, LVT is levied on the permitted use of the land, not on any possible future permitted use. LVT on farmland would be very low, but if that farmland was granted planning permission for housebuilding, the LVT charge would be much higher Once again, an LVT would turn out to be a source of extreme legal uncertainty – and it would be difficult to implement, practically.not really
In addition to all these economic difficulties, there is a further moral complication to LVT. As the supporters of LVT claim, the tax should be levied on the intrinsic value of a site.no they don't But it turns out that such values often depend on the surroundings of the plot and not only on the plot itself. There is no purely intrinsic value, especially when it comes to land in the cities. In other words, changes made by your neighbours will affect the value of your property. If your neighbour builds a polluting factory, your land value and thus your LVT will fall. If your neighbour, however, opens a theme park or if a new tube line stops in front of your door, your land value will increase and with it the tax you would have to pay on it. So in other words, the tax one has to pay does not actually depend solely on one’s own property positions, let alone one’s financial situation, but on the consequences of other people’s actions. Surely, such a system of taxation cannot be regarded as fair or just.one of the aims of LVT is to capture the gain in improvements made by the community that currently accrue to the land owner - such as the jump in property prices attributable to crossrail - seems fair to me. Likewise, wouldn't it be fair to reduce LVT if your land value falls?
sidicks said:
Which other taxes are begin being replaced?
turbobloke said:
Replacement of taxes is mentioned from time to time but the people mentioning it aren't in HM Treasury and the chances of other taxes being replaced as 'promised' are vanishingly small.
LVT has the potential to raise £200bn + annually in the UK. It's not an "add-on" tax, it's a fundamentally different structure for tax. Stamp duty, IHT, VAT (EU permitting), Income tax & NI would all be in the mix for removal or reduction.I don't think you can justifiably dismiss it simply by saying "it wouldn't happen"
Timmy40 said:
Eh? I bloody wish. I can assure you CGT is payable on Land scales. I wish you were right though.
As for the other posters comment about only those will a large income being allowed to own land, fine, provided Farmers are given a mandatory state funded high income to pay the LVT with, funded by a levy on all food sold in the UK.
LVT on farmland would be very low, rental values are very low (compare it per acre to Mayfair..) LVt on a small holding would be pretty small, It could be levied on the possible rental value of your land as a horse paddock I guess.As for the other posters comment about only those will a large income being allowed to own land, fine, provided Farmers are given a mandatory state funded high income to pay the LVT with, funded by a levy on all food sold in the UK.
I posted this link earlier, but maybe it's better in full.. comments in italics, from someone who understands a lot more about LVT than I do
he also wrote an article on conservative home http://www.conservativehome.com/platform/2008/03/m...
he also wrote an article on conservative home http://www.conservativehome.com/platform/2008/03/m...
Mark Wadsworth said:
Oliver Hartwich trotted out the tired old lies again in 2006, I don't know whether he's changed his mind since:
...most of the arguments in favour of LVT rest on a few axioms that are either highly questionable or outright wrong. First, it is assumed that land ownership does not fulfil any economic function and that, therefore, all income received from owning land is basically unjustified, even unjustifiable.
Of course there has to be land ownership, or there'd be nobody to pay the tax and nowhere to build buildings! Hurray for land ownership! The point is that instead of people who want to own land having to pay large amounts of money to the previous owner or to the bank, they would pay the same amount of money in tax, with a corresponding reduction in taxes on earned income. And nobody said "unjustified". The point is that land rent is entirely unearned in the sense of being passive income; it is generated by the community as a whole; and it can be taxed at 100% at no detriment to the economy.
In practice, however, one could hardly ever separate the incomes from land and from improvements to the land. It would take a government agency and some highly questionable assumptions to determine which part of the value of the land was ‘justified’ and which was ‘unearned’ and thus taxable.
Schoolboy error. This is the easiest thing in the world. Even if you know nothing about rebuild costs and amortised costs, all you have to do is identify comparable buildings in different areas. If the rents for some of them are higher than for others, it stands to reason that the difference can only be due to the location rent. And now to the nub of his argument:
Closer inspection, however, reveals that landowners perform a number of valuable economic tasks. Like the owners of any other factor of production, landowners have to make frequent decisions on what use to make of their property. They decide in which way to utilise their land, which could mean to keep land idle. For one, there is much more land than there is labour to keep all land in use all the time.
Secondly, it can be necessary at times to keep land from the market and wait for a better opportunity to bring it back into use, for example when there is a chance to develop a larger area. These decisions have to be made, and they have to be made by someone who bears the economic consequences. This is the task of the landowner who accepts the residual risk and takes the opportunity costs of withholding land from its most valuable unrealised economic potential.
I'm glad he mentioned 'opportunity costs' because that completely demolishes his own argument.
1. A sensible businessman works on the basis of opportunity costs. In other words, if you've bought raw materials for $1 and the price shoots up to $2 before you've sold them, then you put your selling prices up as if you'd paid $2 for them. And most land speculators use borrowed money anyway. All LVT does is turn opportunity costs or interest costs into tax costs. It does not and cannot increase the total costs.
2. For example, a site with planning permission to build a certain building has a site-only rental value of £50,000 i.e. once the building is finished, the rent you can collect will cover the entire amortised cost of the building and leave you with £50,000 surplus. If you are a land speculator looking to buy that site and interest rates are 5%, then you will bid up to £1 million for it (£50,000 divided by 5%), and once you have bought it, you will be paying £50,000 a year in interest on the £1 million you borrowed. Imagine instead that this site was subject to £40,000 a year LVT. Clearly, the land speculator would only bid up to £200,000 for it, so he will end up paying £10,000 in interest and £40,000 in LVT - his total holding cost is exactly the same.
3. Or maybe you own the site anyway, free of debt, having acquired it for pennies decades ago, and it's now worth £1 million. If you are a sensible businessman, you will at all times bear in mind the opportunity costs of owning an undeveloped site with no rental income. This is however much interest you could earn by selling it and putting the money in the bank, so your opportunity cost of owning that site is £50,000 a year - and that is what you base your decision making on. If the site is subject to £40,000 LVT, then your opportunity cost is only £10,000 and the real tax cost is £40,000, but your total cost is the same.
We can at this stage merge 2. and 3. Perhaps you own a double-sized site, debt-free which you bought for pennies ages ago, inherited last week, won at a game of cards etc, and you sell off one-half for £1 million to a land speculator who takes out a £1 million mortgage to acquire it. Whatever is the optimal use of your remaining half is exactly the same as the optimal use of his half. If the best you can do (restricted by local demand, planning laws or both) is to build a three storey building with mixed retail/residential, then that will be the best thing for the owner of the other half to do as well. The fact that you have no cash holding cost and he has a £50,000 a year holding cost is irrelevant.
4. So as long as the LVT on that site (or each half) is no higher than £50,000, the decision making will not change very much. Yes, this is a bit of an annoyance for land speculators who have bought expensive tax-free land with borrowed money, who lose on both sides of the equation on the day LVT is introduced, but hey. Most land speculators go bust at regular intervals anyway. The point is that the land is still there - and even if the current owner goes bankrupt, the land can be sold off to the highest bidder.
5. It may well be that with LVT, land owners behave slightly differently, but they will behave 'better' rather than 'worse'. On the other hand, it is pretty clear that taxes on income, output, wages and profits ONLY have bad impacts, they have dead weight costs, lead to unemployment, business failure, evasion, off shoring etc etc.
6. The mantra that "land owners perform a valuable service by holding land out of use" was originally invented ages ago by Rothbard and was demolished for the umpteenth time by Fraggle http://fraggle.wordpress.com/rothbard-v-georgism/l... recently
...most of the arguments in favour of LVT rest on a few axioms that are either highly questionable or outright wrong. First, it is assumed that land ownership does not fulfil any economic function and that, therefore, all income received from owning land is basically unjustified, even unjustifiable.
Of course there has to be land ownership, or there'd be nobody to pay the tax and nowhere to build buildings! Hurray for land ownership! The point is that instead of people who want to own land having to pay large amounts of money to the previous owner or to the bank, they would pay the same amount of money in tax, with a corresponding reduction in taxes on earned income. And nobody said "unjustified". The point is that land rent is entirely unearned in the sense of being passive income; it is generated by the community as a whole; and it can be taxed at 100% at no detriment to the economy.
In practice, however, one could hardly ever separate the incomes from land and from improvements to the land. It would take a government agency and some highly questionable assumptions to determine which part of the value of the land was ‘justified’ and which was ‘unearned’ and thus taxable.
Schoolboy error. This is the easiest thing in the world. Even if you know nothing about rebuild costs and amortised costs, all you have to do is identify comparable buildings in different areas. If the rents for some of them are higher than for others, it stands to reason that the difference can only be due to the location rent. And now to the nub of his argument:
Closer inspection, however, reveals that landowners perform a number of valuable economic tasks. Like the owners of any other factor of production, landowners have to make frequent decisions on what use to make of their property. They decide in which way to utilise their land, which could mean to keep land idle. For one, there is much more land than there is labour to keep all land in use all the time.
Secondly, it can be necessary at times to keep land from the market and wait for a better opportunity to bring it back into use, for example when there is a chance to develop a larger area. These decisions have to be made, and they have to be made by someone who bears the economic consequences. This is the task of the landowner who accepts the residual risk and takes the opportunity costs of withholding land from its most valuable unrealised economic potential.
I'm glad he mentioned 'opportunity costs' because that completely demolishes his own argument.
1. A sensible businessman works on the basis of opportunity costs. In other words, if you've bought raw materials for $1 and the price shoots up to $2 before you've sold them, then you put your selling prices up as if you'd paid $2 for them. And most land speculators use borrowed money anyway. All LVT does is turn opportunity costs or interest costs into tax costs. It does not and cannot increase the total costs.
2. For example, a site with planning permission to build a certain building has a site-only rental value of £50,000 i.e. once the building is finished, the rent you can collect will cover the entire amortised cost of the building and leave you with £50,000 surplus. If you are a land speculator looking to buy that site and interest rates are 5%, then you will bid up to £1 million for it (£50,000 divided by 5%), and once you have bought it, you will be paying £50,000 a year in interest on the £1 million you borrowed. Imagine instead that this site was subject to £40,000 a year LVT. Clearly, the land speculator would only bid up to £200,000 for it, so he will end up paying £10,000 in interest and £40,000 in LVT - his total holding cost is exactly the same.
3. Or maybe you own the site anyway, free of debt, having acquired it for pennies decades ago, and it's now worth £1 million. If you are a sensible businessman, you will at all times bear in mind the opportunity costs of owning an undeveloped site with no rental income. This is however much interest you could earn by selling it and putting the money in the bank, so your opportunity cost of owning that site is £50,000 a year - and that is what you base your decision making on. If the site is subject to £40,000 LVT, then your opportunity cost is only £10,000 and the real tax cost is £40,000, but your total cost is the same.
We can at this stage merge 2. and 3. Perhaps you own a double-sized site, debt-free which you bought for pennies ages ago, inherited last week, won at a game of cards etc, and you sell off one-half for £1 million to a land speculator who takes out a £1 million mortgage to acquire it. Whatever is the optimal use of your remaining half is exactly the same as the optimal use of his half. If the best you can do (restricted by local demand, planning laws or both) is to build a three storey building with mixed retail/residential, then that will be the best thing for the owner of the other half to do as well. The fact that you have no cash holding cost and he has a £50,000 a year holding cost is irrelevant.
4. So as long as the LVT on that site (or each half) is no higher than £50,000, the decision making will not change very much. Yes, this is a bit of an annoyance for land speculators who have bought expensive tax-free land with borrowed money, who lose on both sides of the equation on the day LVT is introduced, but hey. Most land speculators go bust at regular intervals anyway. The point is that the land is still there - and even if the current owner goes bankrupt, the land can be sold off to the highest bidder.
5. It may well be that with LVT, land owners behave slightly differently, but they will behave 'better' rather than 'worse'. On the other hand, it is pretty clear that taxes on income, output, wages and profits ONLY have bad impacts, they have dead weight costs, lead to unemployment, business failure, evasion, off shoring etc etc.
6. The mantra that "land owners perform a valuable service by holding land out of use" was originally invented ages ago by Rothbard and was demolished for the umpteenth time by Fraggle http://fraggle.wordpress.com/rothbard-v-georgism/l... recently
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