Dear Sir
You asked:
"Now, I think LVT is a brilliant idea, but if it were introduced into an area as divided as California, what is to stop all the wealthy residents leaving?"
That's the clever bit. Notwithstanding that the first thing California should do is reduce its state spending, it is high taxes on incomes that make people leave an area (and cutting taxes on incomes is nearly always a good idea). High taxes on land values merely reduce the capital value of properties (while leaving overall occupancy costs much the same), and such taxes clearly cannot drive land abroad.
Therefore, for a given total tax burden in different countries, people with high incomes will tend to migrate to those countries with lower taxes on incomes and higher taxes on land or property values. But conversely, there is no incentive for people with lower incomes to migrate in the other direction - not only would the income tax burden be higher, it would be more expensive to buy a house.
I submit the real life example of hedge-fund managers leaving the UK and going to Switzerland (because of Switzerland's lower taxes on income taxes and despite Switzerland having higher taxes on property values), without there being a corresponding flow of wealthy Swiss pensioners moving from Switzerland to the UK.
I trust this is of assistance and remain
Yours faithfully.
So What Will Be Done About The Officer?
1 hour ago
7 comments:
Thanks for your answer.
The Hedge Funds moving to Switzerland seems a good example for your argument.
A very quick google show that LVT is already being used in California, to some extent:
http://www.henrygeorge.org/rem4.htm
California - In 1909 the California legislature required new irrigation districts (and gave the option to established ones) to tax land values only, exempting improvements, crops, etc. Today over 100 districts, serving four million acres of the best farmland in the state and raising about 75% of its crops, follow this system. Speculation was eliminated, and California's pre- eminent role in US agriculture began during that period.
I am not very informed on the California situation. But I think it is interesting.
Some American bloggers say the problem is illegal immigration and general socialist type policies, whilst the lefty blogs claim the problem is proposition 13 - the low property tax.
http://en.wikipedia.org/wiki/California_Proposition_13_%281978%29
Interestingly, you, a UKIP member, seem to take a view which is more in line with the lefties, and appear to view the mass illegal immigration to California as a bit of a red herring.
And yet so often, UKIP get popped into the same bag as the BNP.
Hmmnn...
Mr C,
1. For an economist, there is no such thing as an "illegal immigrant". Either somebody is working and contributing or he is living off welfare/crime (make up your own mind which category Arnold S falls into) - from the point of view of Caifornia, it makes no difference whether somebody was born in Mexico or New Mexico.
2. California's spending policies are without doubt socialist. Spending has to be cut, the same as in the UK.
3. The last bit is how the taxes are going to be raised to pay for a reasonable minimum of spending/welfare. What's better - taxes on wealth creation (i.e. taxes on incomes) or taxes on simply sitting back and sharing in the wealth created by others (i.e. taxes on land values)?
That whole Proposition 13 debate is completely mad - the way I understand it, property taxes are based on the original price you paid decades ago, so new arrival at number 1 pays ten times as much as his longer-established neighbour at number 3. That has got to be wrong, surely?
I enjoy this conversesion very much. Thanks for these words.
Mark Wadsworth @ i am much concern with you point of view.
and higher taxes on land or property values.
The rich would gravitate towards this? Hmmmm. Notwithstanding all you've written on this - why would they?
JH, you're making the mistake of just saying "rich". There are two kinds of "rich" - high income or owning lots of land.
Assuming the total tax burden in two countries is the same, people with high incomes will always gravitate to the country with lower incomes taxes, sure they'll have to pay the property tax, but that pushes down the capital cost of properties so occupancy costs are the same.
I don't see any motivation for the land-rich in a country with high property taxes to sell up and buy a smaller amount of more expensive land in the other country with lower property taxes. If all they do is collect rents, then they're not really adding anything to GDP anyway, so it doesn't make much difference.
In general a single RDPVT (Rebuild Discounted Property Tax = LVT) and no taxes on exchange tends to encourage the immigration of highly productive people.
The opposite tends to encourage rent-seekers and gradual economic collapse.
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