Saturday 20 June 2009

Killer arguments against LVT, not. (3)

Again, from here:

Pa Annoyed then came up with this: "I'm pretty sure we did the LVT to death here once before. The problems, if I remember rightly, were that totally unimproved land is technically valueless, that the supply of improved land is not fixed, that there is a third dimension (and ownership can vary with altitude), and that while it only distorts the market in the same sort of way as taxes on other things, that if you have it as your only tax this distortion becomes extreme. It would end up like the window tax."

Nope. 'Unimproved land' (i.e. a bare patch of earth) is not valueless, neither 'technically' nor in real life - it all depends on its location. If you own a few hundred square yards of agricultural land, the best you can do is sell or rent it to a neighbouring farmer for a few quid. If you own a few hundred square yards in an urban area with actual, or even potential, planning permission, you can sell it to a property developer for tens or hundreds of thousands of pounds.

Yes, you can build upwards. That's the whole point - the owner of an office block is not using more surface area than the neighbouring second hand car lot next door. It is up to the local council to set the parameters of who can build how much, it may be that the local roads are jammed and there's full employment and no need for another office block, or the council might be keen for the owner of the car lot to build another office block, either way, the tax on both sites would be the same.

Further LVT does not "distort the market in the same sort of way as taxes on other things". Taxes on turnover depress output and increase prices; taxes on employment depresses employment; taxes on profits encourage people to shift profits abroad (by fair means or foul). Seeing as there is a fixed supply of land, a tax thereon does not depress the amount thereof; as purchasers or tenants of land have fixed budgets, a tax thereon cannot make the total cost of buying or renting more expensive; and finally, you can't take land offshore.

And the window tax didn't work because people responded by bricking up windows - the window ceased to exist. I fail to see how you can make a plot of land cease to exist.

3 comments:

Lola said...

"I fail to see how you can make a plot of land cease to exist." Global Warming/MMCC?

Mark Wadsworth said...

Sure, but if the plot ceases to exist because of flooding, at least you don't risk ending up with a worthless plot but a big mortgage. It ceases to have value so even if you still own it, you don't have to pay tax any more.

Lola said...

Yes, I realise that! I was being deliberately inflammatory hoping to provoke a quick anti MMCC rant.

(Got flu. Hence Saturday posting. Grone).