Panderos wrote:...
Also, they'll just put their wealth in other assets...

You mean many separate legal entities that individually own parcels of land smaller than the LVT exemption size? Say it ain't so!

Whatever merit there is to this idea would be more than outweighed by the proposed wholesale discarding of existing tax legislation to be replaced with something cobbled together by well-meaning (?) lobbyists.

Animavore wrote:I'm not outraged. Please don't read that tone in my post. I was only asking out of interest

You've picked up on the same underlying attitude that I have - I mean look at the title of the article.

But don't let Seth get into your head and convince you there's something inalienable about property. We let people have property because it incentivises them to work. The work they do benefits society. Society rewards them. If you can take away a small amount of that wealth, without reducing their incentives (they get tax reductions elsewhere), and use that wealth to increase the well-being of others (increased wealth provides diminishing returns in well-being - a given amount is worth more to a poor person than a rich one), then why not? It's utilitarian.

ED209 wrote:

Panderos wrote:...
Also, they'll just put their wealth in other assets...

You mean many separate legal entities that individually own parcels of land smaller than the LVT exemption size? Say it ain't so!

Yes, this is a good point. I mentioned earlier how people would put their wealth into many such properties to avoid the tax, but the legal entity problem means you couldn't even track their land assets as their assets will be in the form of shares in land owning companies, not land itself.

Another bloody foreigner here who doesn't know what IHT is.

The system of a full land ownership register, independent valuation of unimproved land value, and an annual tax on owners based on that valuation sounds exactly like the Australian system for funding local government. The tax rate works out at about 0.5% for me, although it varies between local government areas. Local governments here are responsible for planning approvals, roads, and waste management, and support for community organisations such as volunteer emergency services and volunteer-run community events and festivals. (Unlike US counties, they're not responsible for local schools or police). Local government also receives funding from higher levels of government for large projects.

We still pay income tax, there are still payroll taxes, and we still have a GST (VAT). To replace all of those, the LVT would have to go to around 10% (back of envelope only). If there was a threshold below which it wasn't paid, then it would have to be even higher, possibly around 20%. Are those the sort of tax levels for LVT that those advocating it are proposing?

I've got to admit that seems high, and while the thought of having no income tax might make that attractive to me personally in the short term, continuing to pay the LVT in my retiremement when my income is tiny (and thus effectively being forced to move out of a house that I built with my own hands with a view to living in for the rest of my days) makes paying income tax while I have income, and not if I don't, a 100% better option.

Naturally, if a threshold system that made most or all of my property value exempt would change that calculus.

It's an interesting idea, and one that solve other problems with speculative property investment, too, but a lot of work would need to be done to address fairness concerns, especially of the retired. "Hey, person who's paid income tax all your life, suck it up and move to somewhere worth less money so that the young'uns don't have to pay income tax." isn't a vote-winner.

and by the time the trustees of a Jersey settlement actually own the shares of the Lichtenstein holding company that owns the underlying UK company via a string of bearer warrants held in a safe in Singapore (to exaggerate for effect) and not an individual in the UK at all amongst whole hosts of other legitimate avoidance schemes mean that the very people you think will fund the whole tax burden of an entire society will do nothing of the sort and the other taxes will have to be left in situ to make sure the country doesnt go bust and everyone is worse off as a result of a massive waste of public money in trying to implement a massive white elephant.

Panderos wrote:Also, they'll just put their wealth in other assets. I'm not sure how this is a better solution that closing tax loopholes for example.

Because it will (a) reduce the price of land, thus increasing the number of people who can afford to own land, (b) increase the proportion of land that is put to productive use (because it will only be worth holding much more land than you personally live on, if you're getting an economic benefit from it), and (c) allow other taxes, which are a burden to working people and to the economy, to be reduced.

Banzai! wrote:and by the time the trustees of a Jersey settlement actually own the shares of the Lichtenstein holding company that owns the underlying UK company via a string of bearer warrants held in a safe in Singapore (to exaggerate for effect) and not an individual in the UK at all amongst whole hosts of other legitimate avoidance schemes mean that the very people you think will fund the whole tax burden of an entire society will do nothing of the sort and the other taxes will have to be left in situ to make sure the country doesnt go bust and everyone is worse off as a result of a massive waste of public money in trying to implement a massive white elephant.

What's the situation now with regards to property taxes on properties owned by non-domiciled people? If there's an expensive house in Mayfair or a massive estate in Buckinghamshire, owned by some Saudi oil sheik or Russian oligarch who is officially domiciled elsewhere, does he still have to pay the council tax on it? (Not a leading question - I'm genuinely unsure how it works).

Council tax would be the thing to look at for an idea of effectiveness and enforcibility, since being a tax on property that's the closest thing we have to a tax on land.

Some challenging replies here, certainly making me think.

I posted these links in the other thread, but I'll put them here again in case anyone's interested as it was pretty short. Both the Labour and Lib Dem parties in the UK have groups within them campaigning for LTV. There are various articles on these sites that address some of the practical issues that have been raised here better than I can:

http://labourland.org

http://libdemsalter.org.uk/en

The wiki article on Georgism explains some of the philosophical and moral aspects. There are some fundamental concepts necessary to understand which might not be obvious, such as the distinction between land and capital I mentioned earlier:

http://en.wikipedia.org/wiki/Georgism

Banzai! wrote:IHT is an acronym for Inheritance Tax - that is an existing UK tax on wealth including real property held at the date of death i.e. a "death tax".

The posts in the thread referring to the UK make no mention of large tracts of land and all the talk has been a variation on the "mansion tax" where the value of the property rather than the size of it is the determining factor. This is exactly how IHT already works and would simply move the tax point.

How does taxing large estates of land whose market value is often rather smaller than you might imagine (the value of agricultural land is nowhere near residential values in nice places) benefit the economy to any significant degree?

I am really not against the proposal in any idealogical way but as a tax accountant (for my sins) i see obstacles aplenty.

The writer who penned the piece referred to in the OP was speaking strictly about the US, but somehow all you Brits missed that and jumped on the idea as though it had been suggested for your country, which it was not.

It may be fine to discuss such a land tax for the UK but not in the context of this thread. It does strike me as being a tax that would be much easier to implement and manage in the US.

As such, it doesn't occur to me that any comments that regard the situation in the UK vis-a-vis a land tax are relevant here.

Sorry that's probably my fault. Cali is British so I presumed he was posting from a viewpoint of more universal applicability.

It may be easier to implement in the US, but it's probably even more badly needed in the UK, since the pattern of land ownership is so unequal, class-based and deeply rooted in ancient history.

Beatsong wrote:Sorry that's probably my fault. Cali is British so I presumed he was posting from a viewpoint of more universal applicability.

Fair enough. It's easy enogh to get swept up.

Cali might have clarified the situation at the outset.

Beatsong wrote:
It may be easier to implement in the US, but it's probably even more badly needed in the UK, since the pattern of land ownership is so unequal, class-based and deeply rooted in ancient history.

I can't and won't argue with this.

Two questions (I'd still like to know the answer to the first, even though it's a UK question):

Is council tax in the UK based on improved value, unimproved value, flat service fees, or a combination of those?

What percentage of unimproved value (ballpark) are the proponents of the LVT proposing?

OlivierK wrote:Two questions (I'd still like to know the answer to the first, even though it's a UK question):

Is council tax in the UK based on improved value, unimproved value, flat service fees, or a combination of those?

I don't know the answers here.

OlivierK wrote:
What percentage of unimproved value (ballpark) are the proponents of the LVT proposing?

You can't really say "proponents" (plural) because one fellow and one only suggested an LVT would greatly simplify the US Tax Code, and he made no mention of any rate he thought might do the trick.

FACT-MAN-2 wrote:

OlivierK wrote:
What percentage of unimproved value (ballpark) are the proponents of the LVT proposing?

You can't really say "proponents" (plural) because one fellow and one only suggested an LVT would greatly simplify the US Tax Code, and he made no mention of any rate he thought might do the trick.

Beatsong posted links to two groups proposing an LVT in the UK. But amongst all the ideological arguments, I couldn't find a single mention of a proposed rate of LVT, not even in the FAQs. In the US, I'm certain that there's more than one person or group that thinks LVTs are a good idea.

It makes a huge difference whether an LVT is proposed at 2% per annum or 20%, and yet nobody seems willing to have even a ballpark guess at what level of LVT would be required to achieve the outcomes that they're happy to talk about, such as replacement of other taxes. This seems odd, but I'm no expert, and I thought someone else reading up on it may have come across something concrete. As I said, I've tried, but without success so far.

OlivierK wrote:

FACT-MAN-2 wrote:

OlivierK wrote:
What percentage of unimproved value (ballpark) are the proponents of the LVT proposing?

You can't really say "proponents" (plural) because one fellow and one only suggested an LVT would greatly simplify the US Tax Code, and he made no mention of any rate he thought might do the trick.

Beatsong posted links to two groups proposing an LVT in the UK.

Sorry, I missed that.

OlivierK wrote:
But amongst all the ideological arguments, I couldn't find a single mention of a proposed rate of LVT, not even in the FAQs. In the US, I'm certain that there's more than one person or group that thinks LVTs are a good idea.

Doesn't appear to be at this point.

OlivierK wrote:
It makes a huge difference whether an LVT is proposed at 2% per annum or 20%, and yet nobody seems willing to have even a ballpark guess at what level of LVT would be required to achieve the outcomes that they're happy to talk about, such as replacement of other taxes. This seems odd, but I'm no expert, and I thought someone else reading up on it may have come across something concrete. As I said, I've tried, but without success so far.

It'd require some pretty hefty and sophisticated number crunching to arrive at a workable rate. I suspect that's why we haven't seen any rates so far. As well, rate setting would have to be preceded by some rather thoroughgoing analyses. I presume one could build a model that could be iterated to find an optimum rate, but building it would be a real chore.

I'd have to doubt that the idea will catch in in the US to the point of mainstream economists and policymakers taking it on as a topic of serious discussion. It's simply too radical for many to consider. The US is notorious for being slow to change, and this would be a vey big and very fundamental and quite radical change, not something that occurs very often in America, which is pretty hard set on its ways and suffers enormous inertia.

On a tangentially diversionary note:

home_ wrote:Those who are enormously rich (the 1%) are not rich because they work hard, but because system is flawed and they just got lucky. They do not have any right to own that money because it was mere failure of system that they got it in the first place. That's why they should be taxed.

Animavore wrote:Now that just sounds like sour grapes

Actually, there's at least one scientific paper establishing precisely this. Namely:

Entrepreneurs, Chance, And The Deterministic Concentration Of Wealth by Joseph E. Fargione1, Clarence Lehman and Stephen Polasky, PLoS One, 6(7): e20728 (21st July 2011) [Full paper downloadable from here]

Fargione et al, 2011 wrote:Abstract

In many economies, wealth is strikingly concentrated. Entrepreneurs–individuals with ownership in for-profit enterprises–comprise a large portion of the wealthiest individuals, and their behavior may help explain patterns in the national distribution of wealth. Entrepreneurs are less diversified and more heavily invested in their own companies than is commonly assumed in economic models. We present an intentionally simplified individual-based model of wealth generation among entrepreneurs to assess the role of chance and determinism in the distribution of wealth. We demonstrate that chance alone, combined with the deterministic effects of compounding returns, can lead to unlimited concentration of wealth, such that the percentage of all wealth owned by a few entrepreneurs eventually approaches 100%. Specifically, concentration of wealth results when the rate of return on investment varies by entrepreneur and by time. This result is robust to inclusion of realities such as differing skill among entrepreneurs. The most likely overall growth rate of the economy decreases as businesses become less diverse, suggesting that high concentrations of wealth may adversely affect a country's economic growth. We show that a tax on large inherited fortunes, applied to a small portion of the most fortunate in the population, can efficiently arrest the concentration of wealth at intermediate levels.

Have fun reading the paper, which demonstrates that the 1% got there because they got lucky, not through skill.

I wasn't doubting that they got there by luck. Just saying it sounded like sour grapes to begrudge people fortune.

Animavore wrote:I wasn't doubting that they got there by luck. Just saying it sounded like sour grapes to begrudge people fortune.

Well this isn't just a fortune. This is like a fortune within a fortune. The 1% own 46% of the total global wealth.

The global wealth is around $241,000,000,000,000 (241Trillion).

46% of that is $110,860,000,000,000 (110.8 Trillion). That is a lot of money to be had by just 1% of the world's population. Furthermore, the richest 10% own 86% of the wealth. That is $207,260,000,000,000 (207.2 Trillion). That leaves the rest of the world's population, the 90%, with around $33,740,000,000,000 (33.74 Trillion) of the global wealth and even that is not distributed in a logical manner. Around 66% of all adults in the world average out to about 3% of the global wealth. That is only $7,230,000,000,000 (7.23 trillion) to more than half of the world's total population. Yikes. And within that 66% you can imagine the poorest of poor pretty much have no net worth, and what we consider middle class are also pretty much shafted in light of the amount of wealth those 10% have.

This isn't just a millionaire being lucky. These are billionaires who through manipulating the system are hoarding a vast amount of the global wealth and it is causing massive wealth gaps.

I have no problem with a person who built themselves up as CEO from working his or her life to earn high salaries. I do take issue with people who don't so much as work but rather use lawyers and private accountants to play with money which they don't really deserve.

Animavore wrote:I wasn't doubting that they got there by luck. Just saying it sounded like sour grapes to begrudge people fortune.

Except that we are talking about people who have enough money to endanger Western civilisation itself. I've already quoted elsewhere the fact that if the Waltons, who own Wal-Mart, wanted to spend a serious amount of their collective $150 billion fortune, they could afford their own navy, equipped with a Nimitz Class nuclear carrier, a Zumwalt class destroyer, and a Los Angeles Class nuclear attack submarine. If they bought this hardware, they would be something like the world's 15th strongest naval power. And they would still have enough change left over to equip themselves with half a dozen Minuteman ICBMs and become a corporate strategic nuclear power. Think about that for a moment. The 1% have enough money to buy themselves the military hardware to threaten Armageddon, if the rest of the world doesn't submit to becoming their slaves. Which means that they have become a threat to the planet itself. What's more, a fair number of them harbour the sort of attitudes toward the rest of us, that should make you take that threat very seriously indeed.

Take, for example,the Koch Brothers (currently worth about $100 billion, much of which they inherited from Daddy), who bankroll the Tea Party in the USA. These are people who have openly campaigned against a minimum wage for those doing the lowest and shittiest jobs, campaigned against universal healthcare, campaigned against any sort of social safety net for those falling on hard times, and who pump money into the hard-Right organisation known as the John Birch Society, a Randroid ideological war cabal who are so extreme, that back in the 1960s, they accused Eisenhower of treason. This organisation also has connections with the creepy Dominionists, via the Chalcedon Foundation, and their programme of seeking to establish a hard-line ideological theocracy in the USA. The Koch Brothers subscribe openly to the Dominionist view of the poor, as deserving whatever shit the rich heap upon them, and deserving only to be the slaves of the rich. They have enough money to buy the military might to force this through if they ever decide to become serious class warriors.

Seeking to clip the wings of these people via taxation isn't "sour grapes", it's vital for the future of humanity itself.

OlivierK wrote:....
Beatsong posted links to two groups proposing an LVT in the UK. But amongst all the ideological arguments, I couldn't find a single mention of a proposed rate of LVT, not even in the FAQs. In the US, I'm certain that there's more than one person or group that thinks LVTs are a good idea.

It makes a huge difference whether an LVT is proposed at 2% per annum or 20%, and yet nobody seems willing to have even a ballpark guess at what level of LVT would be required to achieve the outcomes that they're happy to talk about, such as replacement of other taxes. This seems odd, but I'm no expert, and I thought someone else reading up on it may have come across something concrete. As I said, I've tried, but without success so far.

Simple panaceas to complex situations are necessarily light on substance. Details are for the nerds to work out, I'm an ideas man!

Political attempts to fix the unfairness and loopholes in the tax system with clumsy and sweeping legislation tend to be like someone who hasn't a clue how to weld trying to fix the leaks in a rusty old cement mixer bucket. He can see the problems, has the right tool to fix them but however hard and long he works at it he just ends up blowing more holes through it than he started with