Mark Wadsworth

This is a spare 'blog in case my main 'blog at markwadsworth.blogspot.com isn't working

[Caroline Flint edition] Killer Arguments Against LVT, Not (140)

As background: this evening I attended the ’round table discussion’ (the table was distinctly long and rectangular) which Priced Out had organised with Caroline Flint and Alison Seabeck.

The topic turned to subsidies aimed at ‘helping first time buyers onto the ladder’ and one attendee (Gary F) pointed out that this was futile – in Australia, they had introduced a $7,000 First Home Owner Grant, the result of which was merely to inflate the selling prices of homes to first time buyers by $7,000. We have observed exactly the same wherever this has been tried (and the reverse where it has been withdrawn), it’s fairly basic economics.

Everybody seemed to agree with that.

I asked Ms Flint whether she’d heard from the Labour Land Campaign (and clearly she didn’t know who they were) and explained that if we reduced other taxes (I mentioned VAT and Employer’s NIC as the worst taxes and Council Tax because it is a poll tax) and replaced the shortfall with LVT, this would discourage land-hoarding, over-occupation, speculation etc. and hence lead to more efficient use of land and housing, everybody gets what they pay for, problem solved.

NIMBYism wouldn’t really be an issue, because if the NIMBYs drove up the price of housing then they’d be shooting themselves in the foot because this would merely drive up their own LVT bills.
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So far so good, people seemed to agree with that as well, but Ms Seabeck then went for the old fallback: “If we had LVT, then surely landlords would just ‘pass it on’ to the tenant in higher rents?”

After the meeting ended I pointed out to her that Gary’s example illustrated that subsidies to housing merely result in higher prices and do not help first time buyers; and seeing that a tax on something is the opposite of a subsidy, then quite clearly (as borne out by real life evidence) if a subsidy increases the price then a tax reduces the price, so tenants (or indeed first time buyers) would not be affected.*

* To be fair, scrapping Council Tax and reducing VAT and Employer’s NIC would increases people’s disposable incomes and some of this saving would result in a higher total amount being devoted to housing costs, so some of the LVT would be borne by tenants, but so what? It’s only a small proportion of people who rent privately or who buy their first home every year and LVT would still function as an admirable rationing measure.

Also thanks to Dana C for the pint afterwards.

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