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This is a spare 'blog in case my main 'blog at markwadsworth.blogspot.com isn't working
Continuing the series available on my previous ‘blog…
A Devon Pensioner played an interesting variant of The Poor Widow Bogey over at The Adam Smith Institute:
You have to be careful – replacing “as many taxes as possible with LVT” could create other problems due to non-imcome earners effectively then paying “income tax” and not being able to afford the land rent…
To which I responded: Ah, the Poor Widow Bogey again, can you imagine how many times I’ve heard that? Exemptions, rebates, deferments, discounts or higher state pension, perhaps? Or trade down, take in a lodger, rent out or sell, ask your heirs to pay, equity release schemes, perhaps? Are you telling me none of this is do-able?
She kept going: Funny kind of “fair society”: to force a family on a low income out of their home to let a high income family move in, solely because they are asset rich and cash poor?! LVT would not even ensure land is used in the most economical way, it would be down to your ability to afford the LVT… We would end up with ghettos for the poor families and the poorer retired… and all young high income earners living in the same prosperous areas – there would be no diversity, and society would be ‘poorer’ and less fair as a result…
Me again: I’m a great believer in a welfare system and redistribution (I have no grudge against low income people), but the least bad kind of tax is LVT (which is not an attack on wealth creation, so is not inherently against high income people, as I have no grudge against high income people either)… with LVT and a welfare system (preferably a Citizen’s Income), low income people end up better off (in cash terms) and high income people end up better off (because they can now afford to live in the nice houses vacated by the low income people they were previously expected to subsidise)…
[And] what social segregation issue? What happens when these Poor Widows In Mansions die? Do their heirs then say “Ah well, it’s important to make sure the area stays as a mixed community – so we’ll sell the house really cheap to a low income family?”
What happens is that they sell it to the highest bidder, so over time, expensive areas become populated by the highest earners. LVT just speeds up the process by a couple of decades.
She then adopts a different line of attack: I think you’d find that introducing LVT would force most people out of their current homes as they have made no provision for this kind of tax
Me: Now you are being plain silly. People have half their earned income taken off them in income tax, NIC, VAT [Working Tax Credit withdrawal] and so on, and most people can still afford to live somewhere, because land prices adjust down to a level where people can afford them.
And then she tries yet another bit of Homey propaganda: … once land is reclaimed by the sea it’s value would undoubtedly be effected – it is effectively destroyed…
Of course, common sense tells us that land which falls into the sea has little value (unless it can be reclaimed), and that under LVT, somebody who’d bought land which fell into the sea would be compensated in full because the LVT liability would be extinguished (and the buildings are presumably covered by insurance, and if uninsurable, the price he paid for the site and the LVT he pays would adjust down accordingly) unlike current rules where the land might have fallen in value but you are still stuck with the original mortgatge) but Homey tradition is to always ignore those who would be better off or who would not lose out, they only care about making sure that those who benefit from current rules continue to do so in perpetuity. However, to enliven the debate I threw in this:
That is a complete red herring.
Land has value because of people living there, carrying out businesses, trading with each other. If bits fall into the sea, the people move a bit further inland, and then the value of the new bits they inhabit goes up by exactly the same amount that the cliff edge went down.
Did you not understand the plot of the Superman film where Lex Luthor buys up Nevada and then plans to trigger an earthquake which will make California collapse into the Pacific?