Killer Arguments Against LVT, Not (189)

The counter-arguments which the Home-Owner-Ists and Faux Libertarians bring to bear are usually completely without foundation. If not, they focus on such a tiny part of the whole picture as to be meaningless and thus contradict all their other counter-arguments which focus on another tiny part, and so on. So actually it's easier to deal with their nonsense in batches.

So here's today's batch:

1. You Georgists just hate landlords, you are closet Communists who hate those who have achieved something. If you impose LVT, there'll be fewer landlords.

2. You Georgists just hate owner-occupiers because [insert spurious motive, often same as for landlords]. If you impose LVT, there'll be fewer owner-occupiers.

3. LVT is pointless as landlords would just add it to the rent, so tenants would end up worse off. So there'd be fewer tenants.

4. LVT would "force" all owner-occupiers out of their homes, they'd have to sell them for a pittance. If pushed as to where all the former owner-occupiers would live, the Homeys and Faux Lib's claim that they would be "forced" to rent.

5. If tenants don't have to pay LVT, there'll be a massive underclass not paying LVT who will always clamour for tax increases at everybody else's expense.
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They all cancel each other out, don't they?

IF 1 is true, then 2 is not (there's a fixed amount of housing, which has to belong either to landlords or owner-occupiers, if we get fewer landlords we'd get more owner-occupiers and vice versa). If 1 is true then 3 can't be true (either the landlord or the tenant has to bear the tax but not both). If 1 is true, then 4 is not true (why would we propose a system that forces owner-occupiers into landlord's arms?). If 1 is true, then 5 is not (where will this underclass live if there are no landlords any more?)

IF 2 is true, then 1 is not (all housing has to belong to either landlords or owner-occupiers). If 2 is true, then 3 is not (if tenants don't want to rent they'd buy instead, so there'd be more owner-occupiers). If 2 is true, then 4 might be, but if 2 and 4 are true, then 5 can't be (if we want to make owner-occupiers worse off, why give them a get-out-of-jail-free card?)

IF 3 is true, then 1 is not (either the landlord or the tenant has to bear the tax, but not both). If 3 is true then 2 is not (tenants would stop renting and buy instead as that would be cheaper). If 3 is true then 4 is not (LVT can't simultaneously force tenants to become owner-occupiers and force owner-occupiers to become tenants). If 3 is true, then 5 is not (why would tenants clamour for tax increases they have to bear themselves?).

IF 4 is true, then 1 is not (if LVT forces people to rent from landlords who have just snapped up their homes for a pittance, it is pro-landlord, not anti). If 4 is true, then only if 2 is. If 4 is true, then 3 is not (why would owner-occupiers sell up for a pittance just end up paying even more to a landlord?). If 4 is true, then 5 is not (if we hate owner-occupiers, why give them a get-out-of-jail-free card?)

If 5 is true, then 1 or 2 might be (but 1 and 2 rule out 5, as I explained above). If 5 is true, then 3 is not (either the landlord or the tenant has to bear the tax, but not both and certainly not neither). If 5 is true, then 4 is just not a problem (owner-occupiers can shed themselves of the LVT payments by becoming tenants).
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So not only do these Killer Arguments cancel themselves out using pure logic, taken individually, they were all nonsense to start with:

Re 1: Under current rules, the overall tax rate on gross rental income is about forty per cent (council tax and business rates come out of gross rents, the balance is liable to income or corporation tax and repairs are liable to VAT and so on). Under a full-on LVT/CI system, people's disposable incomes before rents would double, so gross rents would double as well and the average tax rate on gross rents would be seventy per cent (zero per cent on the bricks and mortar, hundred per cent on the site rental value). The landlord's net income would be much the same, do the math.

Re 2: If you impose LVT, there would be far more owner-occupiers, because derelict and vacant homes would come back on the market; as would second homes and holiday homes, under-occupied homes etc. It's got to do with marginal utility of consumption. If something is provided free to some people and others have to pay through the nose, the former group will grab as much as they can and the latter will do without - if everybody has to pay the same, then people will just use what they need.

Re 3: Complete hokum. People go along with the delusion that "VAT is added to selling prices" when in fact, based on proper evidence, two-thirds of VAT is swallowed by the producer/supplier in lower margins, because supply is less price-elastic than demand. Seeing as the supply of land is far less price-elastic than VAT-able supplies, the chances are that nearly all the tax would be borne by the landlord.

Re 4: No it wouldn't, because LVT would replace taxes on incomes, profits, output, wages etc. At the margin, those with a high house price-to-income ratio might trade down, but this would enable others with a low house price-to-income ratio to trade up (the exercise being a slightly positive sum game as it will lead to a more efficient allocation of housing). The total number of owner-occupiers would not change. And trading down can be in absolute terms or in relative terms - if the NIMBYs allow more housing to be built where it's needed, their LVT bills will go down, because the owner-occupiers of the new housing will have traded up and will thus be paying a larger share of the total LVT bill.

Re 5: Not true either. By and large, around a tenth of households are private tenants, so there's no question of there being a 'massive' underclass. The LVT bill would be the same whether a home is owner-occupied or tenanted. So either the owner-occupier pays it in full (he cannot pass it on) or the landlord and tenant share it between them somehow. Landlords are free to express rents as a lower net rent + LVT if they so wish. And nobody is forcing the landlord to be a landlord, he can always sell out to the tenant and then the LVT is the new owner's problem.