Wednesday, 21 November 2012

Killer Arguments Against LVT, Not (254 thru' 281)

It took a dozen Tory MPs to compile a cracking summary of at least eighteen completely false and misleading claims, which they helpfully summarised in a letter to the Evening Standard (21 Nov 2012, page 57):

As MPs representing London constituencies, we are very worried about the effect of a new property tax being proposed by the Liberal Democrats.(1)

Additional local property taxes would hit ordinary families (2) and pensioners(3) who have worked hard, saved carefully and paid their taxes.(4) It would include those with large mortgages(5) who are not otherwise capital-rich,(6) and professionals who live in shared houses in London.(7) Pensioners now on modest income living in their long-standing family home would be hit the hardest.(8)

The revaluation process need to impose this new tax requires inspectors to visit people's homes,(9) would take three years to complete,(10) and cost taxpayers over a quarter of a billion pounds.(11)

We believe that there are much better ways to ensure that the most well-off in society pay their fair share of tax.(12) The Lib-Dem "mansion tax" would turn out to be a "granny tax" fuelled by the politics of envy.(13) It would be another blow on top of the heavy burden of council tax which doubled under the last Labour government.(14)

It is costly, bureaucratic(15) and unfair:(16) Government ministers should resist this attack on those Londoners(17) who have worked hard all their lives and done the right thing.(18)

Bob Neill, Mike Freer, Nick De Bois, Bob Blackman, Angela Watkinson, Matthew Offord, Andrew Rosindell, Angie Bray, Zac Goldsmith, Mark Field and Mary Maclead, London Conservative MPs

1) Mainly they're concerned for their own buy-at-taxpayers'-expense-to-let portfolios and their banker friends.

2) Lie. Ordinary families in London do not live in homes worth more than £1 million or £2 million or whatever the cut-off point is.

3) Poor Widow Bogey.

4) Irrelevance. Massive windfall gains have accrued to everybody who bought a house in London over the past few decades, regardless of whether they were otherwise hard-working, careful savers or honest taxpayers.

5) A few of them yes, the proposed "mansion tax" would be about as terrible as an interest rate hike of rather less than one per cent. We can reasonably expect them to have budgeted for that, and they'll still probably be paying less than they originally budgeted for if they bought more than five years ago.

6) Since when does not being "capital-rich" have anything to do with it? isn't the traditional rallying cry that "Taxes on the rental value of land would hit the capital-rich, cash-poor"?

7) Who by implication are tenants. The Home-Owner-Ist élite celebrates the fact that London rents are rising year on year, and the tax would be borne by the owners not the tenants anyway.

8) Poor Widow Bogey again. Is it so terrible if they bank some of their million pound winnings and move elsewhere, so that a truly hard working/high earning family can move in?

9) Outright lie.

10) Outright lie.

11) Outright lie based on actual fact. The Morbidly Obese One claimed recently that doing a full Council Tax revaluation for the whole of the country would cost about £260 million, which is less than £10 per home and is the sort of thing that ought to be done in the interests of fairness anyway, or would you rather than HMRC saves itself a few quid by insisting you continue to pay tax based on your earnings of twenty-one years ago?

12) But they don't say it. Therefore lie.

13) Woah! Let's say we scrapped NIC, VAT and higher rate income tax and just had flat 20% flat income tax. Would that be "politics of envy" or a "rich giveaway"? For sure, somebody earning a million quid a year would be about £400,000 a year better off, but he'd still be chipping in £200,000 a year to the general pot, i.e. forty times as much as an average earner. Why is it so terrible to expect somebody in a £2 million house to pay ten times as much Council Tax as somebody in a median value home? Why does the latter count as "politics of envy" but not a proposal for a low-rate flat income tax?

14) The Council Tax is pennies, it raises less than the taxes on booze and fags. And even the "mansion tax" would be a lot, lot, lot less than what the old Domestic Rates would have been, which the Tories thoughtfully abolished in the 1980s.

15) Taxes on land are neither costly to administer nor particularly bureaucratic. That £260 million potential cost of a full Council Tax revaluation is less than one per cent of annual Council Tax receipts, and collection rates are very good (which means that the honest don't end up paying for the dishonest).

16) Define "fair".

17) But income tax is also an "attack on Londoners" because people in London have the highest incomes. Simple fact is that a tax on land values is a tax on land values, if land values are highest in London, then so be it.

18) Lie. People who are sitting on massive unearned windfall land price gains have usually done little or nothing to deserve them, it's like a lottery but more corrupt (and yes, I have also banked massive unearned windfall land price gains, which I duly declared for CGT, unlike most MPs, and it just sort of lands on your doormat, there is little skill or hard work involved).


Ian Hills said...

Not so long ago UKIP were pushing for business rates on empty property to be scrapped - apparently speculators/developers like Mike Natrass MEP have to pay half, and they often damage their properties so they don't have to pay any. With LVT of course these leeches would have to re-develop and re-let. Nice glut=lower rents=more jobs 'n' tax for the Treasury.

Mark Wadsworth said...

IH, yes, sadly, UKIP have turned out to be one of the most Home-Owner-Ist parties, which is one of many reasons why I had to leave.

mombers said...

Mike Freer is my MP, I have regular correspondence with him that consist largely of KLNs. He's a BtL landlord so not too surprising.

John said...

I read the letter last night and thought "what tripe". Dragging out the Old Widow Bogey was a scrape the barrel move. But people will believe all that nonsense they read.

Ultimately I believe we should not single out expensive homes and allow auto-scalable LVT to sort it all out.

Unfortunately we do not live in an LVT world. In more expensive homes the land is a greater proportion to the total property value than the buildings - usually far more in London. So, the Mansion Tax does make some sense. Mansions cannot be taken off-shore and hidden. The tax cannot be avoided. The Mansion Tax is also the thin edge of the wedge in getting a full LVT through.

I admire Vince Cable for keeping the Mansion Tax on a high profile.

I hope it gets in.

Kj said...

Why does the latter count as "politics of envy" but not a proposal for a low-rate flat income tax?

If you were to analyse their rationale transferred to the tax on labour/capital income, it would mean that there wouldn't be a deduction in the bottom, but a cap at a perceived "fair" level (average solicitor pay maybe?). Something I don't think they would advocate.

John said...

I hope a group of LibDems send in a letter to the Standard countering this Tory group.

John said...

@Ian Hills said...

"Not so long ago UKIP were pushing for business rates on empty property to be scrapped - apparently speculators/developers like Mike Natrass MEP have to pay half, and they often damage their properties so they don't have to pay any."

I relative of mine did this. The building was a mansion and listed. A hole in the roof, take out the kitchen and toilets/bathrooms and hey preto no paying.

He wanted the house demolished to build ticky-tacky homes. Being listed that was a no, no. So he allowed the vandals to make the place unsafe. Down it came and he got what he wanted.

The local community lost a wonderful building that was supposed to be used as some sort of social centre. They also had a wrecked eyesore for years as well.

Mark Wadsworth said...

Momb, go on, email it to me so that I can have a good laugh/massive heart attack.

John, exactly.

1. The letter plays the Poor Widow Bogey three times (at 3, 8 and 18).

2. Pure LVT is better than on total value of land and buildings (like Business Rates), but it's pretty marginal.

Kj, exactly. Our British system of Council Tax is like having a 40% income tax on incomes up to (say) £50,000 but then having a zero rate for incomes above that.

Mark Wadsworth said...

John, re deliberate dereliction, such tales abound and they are true.

Problem is that the Homeys say "Ah, but LVT would be like the Window Tax and people would demolish buildings to save LVT." which is KLN # 13 or so.

Clearly, if the tax is on the site only, you would try and keep your buildings in good repair. That KLN is about as idiotic as saying that "If people have interest only mortgages, they will demolish their own house to try and get the mortgage repayments down."

Bayard said...

There was a case not long ago where a surveyor was killed because some bastard landlord had taken out part of the stairs to make the building unuseable. The girl was surveying the building, but her company had not been told about the missing stairs.

Mark Wadsworth said...

B, I take it the poor lass was trying to go downstairs not upstairs when this happened? So how did she get upstairs in the first place?

Bayard said...

Dunno, perhaps my memory is at fault on the details, though I do remember the salient points. Perhaps all the stairs were gone and she was trying to go down to the basement.

Lola said...

Bayard: I recall the same story. From memory she was going down into an unlit cellar where the stairs weren't.

ontheotherhand said...

I looked up those MPs on wikipedia and here are those where property is mentioned:

Bob Neill

In 2009 The Times recorded that Neill was claiming an allowance for a second home despite living outside London. A spokesman said that his claims were "in accordance with the rules".

Mike Freer

He lives in one of the three properties he owns in Barnet.[2] Professionally, Freer worked for Barclays Bank as a relationship director.[8]

Andrew Rosindell

At the beginning of the parliamentary expenses scandal The Daily Telegraph reported that Rosindell "claimed more than £125,000 in second home expenses for a flat in London, while designating his childhood home 17 miles away - where his mother lived - as his main address"

Mark Wadsworth said...

OTOH, thanks, keep up the good work.

Bayard said...

I wonder how many of the remainder are "only acting under orders".