I explained yet again why taxing land rents does not take a penny out of the productive economy and Sobers tried yet again to come up with a killer argument against:
Of course LVT is paid out of earned income - where else would the cash come from? Your house doesn't generate any cash just by living in it.
Duh.
As he must know by know by now, two-thirds of LVT revenues will be dished out again as a Citizen's Dividend, so the LVT bill for about half of households will be entirely covered by their Citizen's Dividends, and the Citizen's Dividend will go a good way towards paying the LVT for most of the other half.
The rent for a median house is two-thirds as much as the average, so you can live in anything up to a median home entirely for free (you still have to pay for the bricks and mortar of course). It's only if you want to live somewhere nicer, bigger or in a higher wage area than the median that you have to dip into your earned income. And it is questionable whether the extra income you earn in high wages areas compared to low wage areas (for doing exactly the same job) is truly earned anyway.
All LVT achieves is a mass swap around of people and houses, and at the end of it all, people end up paying the same amount of LVT they would have paid in income (or other) taxes, but most likely living in a bigger or smaller house than before, depending on whether they were a low income/big house or high income/little house person. Everybody lives in a house that has a LVT bill that their income can afford, and that bill is paid out of earned income.
Apart from the lie at the end, that's probably correct. But the mass swap-around (or what I like to call 'right sizing') is just one of many positive impacts. Once the dust had settled, we'd also notice that we've a lot more housing than we thought and not so much need to build new stuff for the next decade or two; the economy will be doing a lot better; inflation will fall; unemployment will be down; credit bubbles will be very much dampened; social cohesion will be better; etc etc.
And as Sobers himself says, the 'ability to pay' nonsense will just melt away, as everybody will choose a home which either their CD will pay for, or where they can easily afford the 'top up' out of their earned income.
I'm So Glad I Never Clapped For Them...
43 minutes ago
16 comments:
I am afraid I'm with Sobers on this one. If you consider LVT in isolation, rather than the LVT/CI combo that you are giving as an example, then it will be paid out of "earned income". It depends somewhat, of course, what you mean by "earned income", now that the concept of "unearned income" seems largely to have disappeared.
But so what if it is? This is no more a KLN than saying "But taxes will still be paid with money".
The point remains: if you want a state, you have to pay tax and LVT is the most efficient form of taxation.
There is only one killer argument that stands up, and it is a political one: the people who run the country (not the pols, they are just window-dressing) would lose out if LVT was introduced. Therefore it will never happen.
It [LVT] is return to land, whether the money comes from a paycheck, profits from drug dealing or the lottery.
Of course LVT is paid out of earned income. The point is that it's not "paid out of productivity" in the sense that collecting it reduces productivity. If I say "I'll take 10% of your cash income", then you might reduce your cash income by 5% to have a smaller tax bill and more leisure. But if I say "I'll take £100 per square metre of land you own", you can't do anything other than sell the land to someone else who has to pay the same amount, or abandon the land of course (at which point the State can appropriate it and rent it out itself). You can't reduce the rate at which you produce land, either, because land isn't produced. This is the difference between LVT and a "wealth tax" - if I tell you I'll take £1,000 for every factory you own, you'll stop building them.
B, Kj, RA, your answers are as good as mine. It's all the same thing really.
So ultimately, Adam Collyer's point I was responding to is correct then? If the State wishes to take x% of GDP, it will take x% from production, as thats where the money comes from. Raising it via LVT may or may not be more economically efficient, but the point remains - its the size of the State thats the issue not the method of taxation.
A State that took 20% of GDP via income tax and VAT and lived within those means, would be far more economically vibrant that one that raised 40%+ of GDP via LVT.
S, no, it is incorrect.
LVT only takes that which would otherwise be collected by banks and landowners anyway. The net impact on the tax collection side is zero, which is a lot less than the impact of collecting income tax and VAT. The net impact on the spending side is hugely positive.
So your second proposition is also completely incorrect.
How about this for an uncontentious statement: all taxes on earned income come out of earned income. Taxes on unearned income do not come out of earned income.
If the state doesn't take that extra 20%, then the private tax collectors - banks and landowners - will collect it anyway. So overall, the tax + rent + dead weight cost burden on the productive economy will be a lot higher.
And however inefficient a government spends those revenues, it always puts more back into the economy (i.e. quite a lot) than banks and landowners (who put back nothing, they just consume other people's output).
By and large, that extra 20% which the LVT government collects would go back as Citizen's Dividend/Personal Allowance - meaning that a huge number of people simply pay no tax whatsoever, and receive no cash benefits. In your scenario, EVERYBODY pays 20% tax.
What? You seem to think there is some siphon, sucking 'rent' out of the economy. What do you think happens to private rents (as you call them) once they are collected? They are spent of course! The overall amount of spending in the economy is unchanged. Yes, some would gain, and some would lose out under LVT, I guess thats the point, but overall there's no new money suddenly been created. Its all just a redivision of the same pie.
S, to some extent it is just redivision of the same pie BUT the pie will be bigger AND people will - as you blithely deliberately overlook each time - get to keep one hundred per cent of their earned income (unless they want to live in an above average house, which is their good decision).
Consider: 100 Anglo Saxon peasants toiling over their 100 little farms. Their output is whatever it is and basically they get to keep what they grow.
Then nasty Norman comes along, declares the land to be his and demands that each little farmer hands over a fifth of their output, which he consumes himself or uses to pay off his bully boys, who are needed to keep the little farmers in line. So some of the little farmers pack in farming and become hired bully boys instead.
Do you seriously think that farm output shot up once the Normans arrived?
What LVT will 'free up' is the skills and energy of all those who currently live off rent and interest - they'll have to find something productive or useful to do. And if they can't, well tough. Those who currently live off earned income will see their net income rise quite significantly.
It's basic maths, you can do maths, can't you?
S, that is the Broken Window Fallacy: http://en.wikipedia.org/wiki/Broken_window_fallacy
B, good one!
People like S who deliberately ration land in order to be able to charge higher prices for the bits they deign to sell are a bit like glaziers who go round smashing windows to drum up business. Overall, GDP goes down rather than up.
As usual you say a non-LVTer is wrong then you agree with the point he is making while seeking to prove he is wrong by talking about something completely different.
Whether LVT will lead to a more productive economy is a different issue from whether the tax itself will be paid out of earned income. In fact the income used might be investment income or earned income, nonetheless the effect of LVT on productivity is still a different issue.
Sir Garfield's point was that LVT will be paid out of the cash people receive each year. You call that "the lie at the end" of his comment and then agree with it in your comment above timed at 11.29. Indeed you agreed with it when I made the same point a year or two ago.
TFB, nonsense and playing on words as usual.
All rents and taxes are paid out of earned income. The cash received becomes unearned in the hands of the recipient. With an owner-occupier, he has earned income from his job or investments and unearned income from his land rent which he consumes i.e. spends himself.
Go back to my Anglo-Saxon/Norman invader example. The farmers have earned income. The landlords have unearned income. The bully boys are working for their keep, but their work adds nothing to GDP as the farmers would have grown that food anyway.
And you and S resolutely refuse to address the point that for most people, most of their LVT bill will be met out of CI, which is netted off at source and thus acts like a personal allowance.
So by and large, for most people the position will be that they are owner-occupiers with a small or no mortgage who pay NO TAX at all on their earned income.
And if they want to occupy a valuable plot, yes, they will have to pay a bit extra (out of earned income) but that is NO DIFFERENT AND HENCE NO WORSE than how things are under current rules - where do you think people get the money from to pay rent of a mortgage?
And surely it is better for that extra to be pooled and dished out again on stuff that benefits everybody to a small degree than to have a rentier class of large landowners/landlords and banks living high on the hog?
And surely it is better for people to pay entirely voluntary taxes - user charges - on which public goods they want to consume more of than to tax every penny of people's earned incomes?
"... you and S resolutely refuse to address the point that for most people, most of their LVT bill will be met out of CI, which is netted off at source and thus acts like a personal allowance."
You're doing it again - seeking to defeat an argument against LVT by talking about something completely different.
No one other than you is talking about tax credits / citizens' dividend / guaranteed minimum income. Sir Garfield and I have been talking about LVT itself not about the extra gloss you have added to try to make a patently unpalatable tax seem warm and cuddly.
Land Value Tax does not involve handing-back anything by way of your version of tax credit, LVT involves taking money from people according to the nominal rental value of such land as they might own. You cannot seek to defeat complaints about LVT itself by saying that your version of it involves tax credits. There could be a universal tax credit under any system of taxation, LVT is not special in that regard.
If you are to compare LVT to income tax on equal terms you must assume there is a universal minimum income paid out of income tax and seek to make LVT attractive on that assumption.
The Fat bigot wrote:
If you are to compare LVT to income tax on equal terms you must assume there is a universal minimum income paid out of income tax and seek to make LVT attractive on that assumption.
But in a sense there is such a universal minimum income. That is fundamentally what the Income Tax Personal Allowance is. There is no difference between levying a 30% Income Tax with a Personal Allowance of £10,000pa and levying a 30% Income Tax with no Personal Allowance but paying a UMI of £3,000pa for anyone who earns more than £10,000pa. Even for those who earn less than £10,000pa Income Support means that there is no great difference.
So if we are to compare like with like it only makes sense to compare Land Value Tax + Citizens Income to Income Tax + Personal Allowance. I suppose you could compare LVT to Income Tax without a PA but what would be the point? That's not the way Income Tax is implemented. And just as the Personal Allowance makes Income Tax work better for low-income citizens the Citizens Income does the same for Land Value Tax.
There is an ambuiguous sentence in what I just said. Where I wrote,
"There is no difference between levying a 30% Income Tax with a Personal Allowance of £10,000pa and levying a 30% Income Tax with no Personal Allowance but paying a UMI of £3,000pa for anyone who earns more than £10,000pa."
I would have been better to write,
"For anyone who earns more than £10,000pa there is no difference between levying a 30% Income Tax with a Personal Allowance of £10,000pa and levying a 30% Income Tax with no Personal Allowance but paying a UMI of £3,000pa."
Hope that clarifies things
TFB, I really do not know what point you are trying to make and why it would be an argument in favour of taxing all earned income instead of taxing the rental value of land/.
My first, factual, mathematical point about the CI is perfectly valid.
I agree on the factual point that if people choose to live somewhere more expensive, the balance has to be paid out their earned income, quite clearly this is true from the point of view of the payer. You know that, I know that.
This is still a completely invalid argument against LVT for a number of reasons which I have explained at length.
Let me try another one for the benefit of the crowd (it is quite clear to me that you and S are just pretending not to understand, surely you can't be that stupid?):
The point about unearned income is that it only becomes unearned in the hands of the recipient. LVT is a tax on unearned income or on that earned income which would be quite VOLUNTARILY spent on rent i.e. which would be unearned income.
It then recycles this back to people as earned income (of coppers, teachers, soldiers, whatever) and as Citizen's Dividend.
D, ta for back up.
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