Mark Littlewood, Director General of the Institute of Economic Affairs, has some fairly blunt comments to make in a release on Labour Party leader Ed Milliband’s proposal to levy an annual tax (“Mansion tax”) on residential properties valued at £2 million or more. I would hope that it isn’t all that hard to persuade regular readers of this blog that such a tax equates to a tax on the right to continue owning a property after it has been bought or inherited simply because said property has passed some arbitrary valuation threshold. As I have come to learn, some people enamoured of the collectivist notions of Henry George, a writer in the 19th Century, believe that because physical land is fixed (you cannot make more of it) that when the value of said rises for reasons outside the direct control of the owner or owners, that because the state protects such holdings against theft, the state is entitled, nonetheless, to demand a sort of “rent” to be paid by the owners of the land to everyone else because of their enjoying some “unearned” rise in the price, so that the owner is not in a fundamental sense an owner at all, but a tenant of the collective. Advocates of the Mansion Tax” usually do not make the case in such abstract terms, perhaps because the sheer, socialistic nature of it would make it unappealing in some eyes. (There is no fundamental difference between taxing high-value properties on such grounds and taxing people with great inborn talents because they did not directly create them.) In cruder terms, this tax plays on a general hostility towards “the rich” that remains an ugly feature of UK society. Some may try and finesse the issue by pointing out that rising prices have been driven by central bank quantitative easing (printing money) and land planning, to which my response is to stop doing those things, rather than hit the owners. (There is, by the way, an urgent need to relax UK planning laws and yet, as I suspect is the case, most politicians, including the hapless leader of the Labour Party, are unlikely to enact thorough reforms, apart from superficial measures to hurt “the rich”).
There are, as Mark says in his comments below, specific problems that make the Mansion Tax bad, but I wanted to make the forgoing to remind people that there is nothing remotely liberal, in the proper, classical use of the word, in such a tax, even though there are people who sometimes try and pass themselves off as libertarians who have, in my experience, sought to champion such levies. (The writer Jan Narveson has a good debunking of Georgisism.)
Anyway, here is Mark Littlewood:
“Introducing a mansion tax would be poorly targeted, arbitrary and deeply unfair. The UK already faces some of the highest property taxes in the western world when stamp duty, inheritance and council tax are taken into consideration. Such a levy would act as a double tax, whereby people pay income tax and then are taxed again on a house bought with that income.
“Aside from this, it would disproportionately penalise those who bought houses many decades ago in areas where property prices have rapidly shot up. A person’s assets does not always equate to their income. It would also be an arbitrary tax. People could own several homes costing just under £2mn and not face the levy.
“This is an extremely unwelcome addition to the Labour Party’s already disastrous attempts to tax the wealthy. Evidence has proven that their favoured 50p top rate of income tax raises trivial amounts of money. Those earning over £150,000 pay nearly 30% of all income tax. Politicians should be cultivating this tax base, not eroding it.”
Remember, there is a fairly high chance that Milliband could be in power at some point.
Not sure why you put forward the idea of an inborn talents task as a reductio ad absurdem. An American Democrat friend of mine absolutely thinks that I should pay more of all kinds of tax precisely because I was born intelligent and had the good fortune to have middle class parents who instilled in me the value of hard work. Her view is that I was just lucky and so in the interests of fairness should be taxed to support the less lucky.
Alastair, I should have thought for all the reasons you stated from your friend as to why the land/property taxers think this way. They regard a rise in the value of a building/land that has been caused by external factors (planning laws, money printing, other) as creating an unearned benefit for the owner, just as a person who has a certain background should pay more because he or she did not earn those benefits, but was born into them. I did not “create” my own intelligence, etc.
One can, of course, turn this argument around: just as I did not “earn” my good looks or the value increase in my flat, neither did anyone else deserve to seize the fruits of my intelligence, etc. I am not a collective asset. Also, consider the “luck” of the poor person who is born into a rich country with a complex division of labour: should that person also be taxed for even less “lucky” people born in a desert, etc?
What’s interesting is this £2m mark is similar to the figure quoted when people talk about maximum wages. In the latter case, it is cited as just above what a middle class rent-seeker in the public sector or a lefty journalist can expect to earn at the top of their “profession”, around £150k per year. In this case, it is safely, but not too far, above the value of the sort of home such people would expect to own in London at the end of their careers (i.e. between £1-1.5m). Sorry, but a £2m house is not a “mansion” in the UK any more, not whilst flats are going for that sum in London. This is all about the middle and upper class lefties not being able to buy the nicest houses any more because those ghastly bankers and traders are buying them, and they don’t like it.
I always wonder how it would work in practice. If you intend to buy a house for exactly £2m could you avoid the tax by making an offer for a penny under asking price? Or you pay £2m and then yobs move in next door, can you have a revaluation to devalue your home below the threshold? What if your home was valued at £2m after you bought it for less years ago, could you intentionally devalue your home by say letting the grass in the front garden grow too long or hanging England flags out of every window. What would happen if someone from the government valued your home for £2m yet you believe it to be worth less – do you then appeal and argue that it has a lower value? After all the value of a house can only be determined by how much someone is actually willing to pay for it, if you put a one-bedroom ground floor flat in Slough on the market for £500m nobody is going to bite because it isn’t worth that, it’s only worth as much as someone is actually willing to pay and if you couldn’t actually sell your property for £2m then someone else’s valuation is meaningless
Mr “Ed” Miliband is a prat – all his policy suggestions show this.
Sadly the United Kingdom of Great Britain and Northern Ireland looks likely to have endure a few years of this prat “Red Ed” and his absurd policies.
However, the damage Mr Miliband’s policies will do – and (let us be honest) the sight of his funny face, and the sound of his funny voice (as he incompetently tries to defend his policies, will utterly discredit the whole socialist “Social Justice” doctrine in the United Kingdom.
The left in British politics will be DESTROYED – not in the election of 2015 (they will likely win that one – due to rigged constituency boundaries and so on), but in the election after that.
And there will be an election after 2015 – Mr “Ed” Miliband is no Stalin (he is not going to set up a People’s Republic) he is just a silly prat, and he is already a joke figure.
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The experience is out there if only the fools would look. Sarkozy when President raised the threshold for the wealth tax in France, ultimately he wanted to bin it altogether.
A large part of the reason was a number of landowners, mostly elderly farmers barely scraping a living, found because they own large lumps of rural France with nice stone buildings on them, the sort the British go potty over as ‘a project’ and indeed thanks to the influx of the aforementioned, property values had increased significantly over a decade making such farmers now across the threshold of the wealth tax but without the means to pay the tax and still eat.
Which is the next point: to pay a wealth tax for many people means liquidating the very assets which cause the tax liability, which means of course the thieving Government gets a diminishing number of bites at the cherry, but also a glut of asset sales drives prices down… and so it goes on.
For the ‘better off’ fat cat it means paying money in tax which otherwise they would reinvest to increase economic activity for the benefit of all.
Supposedly these people at the top of the political claque heap who would be king, went to university and economics were part of their studies, but apparently it was entirely beyond any of them and certainly they have no idea about Human behaviour.
2 million pounds buys you a one bedroom 800 sq foot apartment in Belgravia.
To a socialist that is probably a mansion.
My advice is to choose your friends more wisely.
Yes, but yesterday the Mansion tax was going to wipe out the deficit, today it’s going to save the NHS. Who knows what it will achieve tomorrow.
You can make more land. Just ask the Dutch.
Tim Newman’s point is a good one. Jealousy sadly appears to be a legitimate driving force in legislation making.
The mansion tax may yet have a benefit. What you could be looking at is setting a precedent that local and national government can tax the same thing – property. Think of it as having local council tax and a national council tax. Why restrict it to valuable properties?(Though I would prefer no council taxes at all. They do not vote and they do not consume.)
From that let’s also have a local and national income tax with no Employers contributions nonsense thankyou.
If you then require that the council tax bands must be the same locally as nationally and do likewise for income tax things become quite interesting without being needlessly complex. HMRC can collect the income tax and send the due portion directly to your local authority. You local authority collects the council tax and sends the due portion to the Treasury.
Both authorities are then in part answerable to the other, on our behalf, for some of their funding.
The bank of England is a pretty big mansion… maybe taxing that could lead to some sort of virtuous feedback loop that wipes the deficit, saves the whale and brings peace to the middle east all in one fell swoop 😉
so you still do not get the point of a land value tax….too bad. It is cheap to administer. It would not involve thousands of pages of rules and regulations. the courts of law would not be involved in further defining those rules. But still, land tax is BAD BAD BAD. When did anyone claim successfully that his land was in another jurisdiction?
The distinction of land by Georgists is based on a partial refutation of the socialist axiom that “all property is theft”. Georgists respond to this by pointing out that the value added by an artisan to raw materials is not theft, even if the raw materials themselves were.
By extension, this means land is theft, but other forms of property not theft. (They’d need to make an exception for the Dutch province of Flevoland, though.)
Now, taxation is theft, but if applied to land, which is itself stolen, then it is only stealing from a thief, as it were.
This means that land tax can be applied morally, unlike other taxes.
Introducing a new tax you have to tell people that only that group of people will pay, and to that group you say you’re only paying this rate of tax. Then you stretch it slowly but surely so more people pay the tax at a higher rate than you started with.
But apparently after catching the end of some Labour spokesman on BBC News earlier some MPs are arguing that the threshold should be as low as £400,000 in some areas.
Incidentally, as with many things MPs are shielded from the consequences of their policies by having things paid for them through expenses – council tax, energy bills, etc. I’m sure a number of Labour MPs live in what would be valued as mansions but wouldn’t pay the tax out of their pocket, it would be listed as an expense
2dogs makes a good point, and I think Johnathan’s characterization of Georgism isn’t all that accurate. As I understand it, George argued that the value in land that does not come from the owner’s added value, or such added value as the owner purchased upon acquiring the land, can’t be said to be owned by the landowner using any valid principle of ownership. Therefore, according to this argument, it is much better for the government to generate revenue by effectively taxing that value than it is for the government to raise revenue by actually taxing actual rightly owned property.
And nothing about George’s argument can legitimately be used to justify an arbitrary tax such as the one proposed by the Labour Party.
When I put my pragmatic hat on (i.e., the one that fits snugly enough not to allow me to imagine a world where the government doesn’t raise revenue through some form of taxation), I think George had a point. I suspect his method of raising revenue would be both more fair and more economically successful than what we have now. Also, taxation being limited to one revenue stream would tend to put more of a limit on how much revenue could be generated and on how much debt could be accumulated.
“the state is entitled, nonetheless, to demand a sort of “rent” to be paid by the owners of the land to everyone else because of their enjoying some “unearned” rise in the price, so that the owner is not in a fundamental sense an owner at all, but a tenant of the collective.”
So, is income tax the ownership of my body by the collective, as I pay income tax when I earn money using it?
Now you’re getting it, Stigler. A tax on income is a disguised form of slavery, nothing more.
Laird,
Meaning? That a tax on land isn’t or that all tax is slavery? Who’s going to pay for defence and the judicial system?
Exactly. George would have said, “Absolutely not. That’s what makes income tax objectionable.”
Debates about taxation often go off the rails because on one side you have people who believe that the majority can decide to tax whatever they want at whatever rate they want while the other side wants either no new taxes of any kind or discounts the validity of taxation of any kind. When you try to talk about the relative merits of one kind of tax versus another, neither side wants to hear it. I’m sure that’s at least partly why we get completely irrational taxation based on whatever half-baked policies each side is able to implement while they have the reigns of power.
Paul Marks, I would be interested in your thoughts on the relative merits (or relative objectionableness, if you prefer) of different types of taxes.
I could not disagree more. It simply denies the right to make decisions inconvenient to the state by, say, retiring and simply living in your house and not making any money from it.
The most pernicious of all taxes are those on ownership rather than activity, as they are essentially a negation of ownership and its replacement with a feudal rent. At least with an income tax you can try and structure ways around it, or ultimately just stop generating income. With a land tax, you are still fucked. At least a council tax is a tax-for-services, even if I would of course prefer to NOT have a council monopoly on those services.
The Georgists are some of the most profoundly statist people around today. And far from being fairer, it will turn the UK into a nation of small renters with less floor space, who pay to large land owners who can then pay taxes (rent really) to the state. Owner-occupiers, such as retirees, will largely be a thing of the past, and those that want to will find they *must* rent out just to pay taxes. It is a tax that massively favours the Big over the Small and the Institutional over the Personal.
I agree completely, and have made that argument myself many times. But, for it to stand as an argument against Georgism, you have to show how George’s argument about non-ownership of the non-value-added part of real property is wrong. Otherwise, that argument, fine as it is, is irrelevant.
And I don’t give a damn what foolish nonsense ostensible Georgists might advocate in addition to Georgism. That’s also irrelevant.
Actually I do not give a damn about George. Seriously, could not care less. I view him much like I do Marx or Mohammed or Mao. It is Marxists and it is Georgists who are the problem because they are the ones arguing for the neo-feudal land
valueownership tax.Alastair, become a buddhist, and then claim she is repressing your religion with her false beliefs! your skills come from a previous life, and this government had nothing to do with them! Also, if your friend is pretty, then she, by her own beliefs, should be rented out to ugly people and criminals, as part of a fair-share scheme (why should she selfishly get to choose who her bed-partners are?).
Nick LOL good answer I’ll give it a go
You could do a creepy satire on this- will cosmetic surgery be used to make us look alike? Imagine that the whole country votes on the best-looking person of either gender who is 21 on New Year’s Eve, and we have two winners- then everyone else who is 21 has to look like them, or previous winners! (To get rid of lookism and ageism!) DNA would still be different, but there would be no excuse for not LOOKING like a movie star, or at least a model! (Which anyone would now be able to be.)
So Labour regard the increase in property values through inflation caused by them as income and liable for tax. So if you’re on a tight budget and can’t pay the tax they can seize your home or let the tax accumulate and take it from your estate. When you buy votes, no trough is deep enough.
I am not an economist. However, it occurs to me that a tax on ownership of (high value) property might exert upward pressure on rents.
Much of the electoral merit (as viewed by politicians) of the Mansion Tax might be the assumption by tenants that it has no effect on them…
I looked at the epistemology of libertarianism (in quite a fair amount of redundant detail, and colourful imagery). Short answer: no sensible, or popular, concept of libertarianism is compatible with land value tax.
http://libertarianhome.co.uk/2014/09/libertarian-policies-by-measurement-ommission/
I got an interesting comment though, apparently LVT will be voluntary? I’m not convinced of the truth of that.
“they are essentially a negation of ownership”
Go read a title deed sometime. You will see they confer only an “estate” in the land, not the land itself. The land is owned by the Queen.
This gets back to the point that land tax is not theft. Her Majesty’s forces “produce” the land by defending it from invaders; she/her predecessors then on-sold an interest in it for an initial upfront fee plus an ongoing obligation to pay taxes on it. In this way, land tax is a contractual obligation, and not extortion by violence (that is, unless you are the would be heir of King Harold who William the Conqueror dispossessed).
That is very much a matter of opinion.
It’s the law, not an opinion. Caveat Emptor. If the real estate came with more rights, you would have to pay more for it. You are getting what you have paid for.
This discussion is interesting, particularly if you are a well retired economist like me. I happen to live in a Province of Canada where all real property (land and buildings on it) is taxed at one or two standard rates (depends on use) applied to “fair market value”. Essentially, this becomes a mansion tax, but applied to everyone!
Tony.
Perhaps Perry should make it clear whether or not he owns a mansion. Anyway, this is not relevant to the point that i am going to make.
In my ignorance of George’s original justifications for his scheme, i considered what good could come out of it and i note the following:
1. all taxation is evil, but some of it is a necessary evil. (One could discuss anarcho-capitalism here but i won’t.)
2. From a consequentialist point of view, the evil comes primarily from taxation driving a wedge between supply and demand.
3. While a tax on income from labor decreases both supply AND demand for labor, and a tax on capital likewise, a tax on land decreases only the demand for land.
Hence i conclude that there is a prima facie case to be made for (what i call) a Georgian SYSTEM of taxation, ie one in which there is no tax except tax on land. This is of course completely different from “Red Ed”‘s scheme, both because he would not abolish tax on income or capital gains, and because he would not introduce a tax on land: he would only make it progressive, like income tax.
No doubt there are also problems with a Georgian system, the main problem in my opinion being the transition from taxation LARGELY based on income to taxation entirely based on (a certain kind of) wealth.
Er, no it actually isn’t. Indeed there is more than a little in the unwritten English constitution that makes it clear that all land is not the Crown’s, even if the state might like people to see it that way and if the state acts as if that is the case. Even CPOs are actually less pernicious than a land tax as at least it pays for the value taken on a total market basis as opposed to bleeding the property as rent. Land tax replaces freehold with a vassal relationship.
Why? If I comment on racism should I make it clear what race I am?
Sure.
That is only one of many issues and by no means the primary one.
Nonsense. A tax on land passes that cost on to everything done on that land, every single commercial activity.
It is very unclear how you reach that conclusion. I cannot see the QED.
The most invidious consequence of a land tax is that unlike an income tax or a sales tax, it has no direct relation whatsoever to the ability to pay the tax. If you make rent from land by leasing its use to other people, then that received rent provides a taxable source. If you grow crops or graze cows or mine iron ore, likewise there is an economic activity to tax. But if you end freehold and make all land ‘owners’ vassals and so tax the mere ownership of land substantively simply by virtue of it being occupied, that is tantamount to a prohibition of residential owner occupation for anyone who does not have a separate income. It decouples the tax from economic activity. Taxing the sale of land is ‘just another tax’ really (the one-off sale itself is the economic activity that generates the ability to pay of course). This is why a land tax favours large institutional nominal ‘owners’ who then rent out to generate income on the land. Much more convenient for the state of course rather than having all those millions of owner-occupier simply living on what they quaintly think is their own land, eh?
I see Allister Heath has a strong comment on this issue in the Daily Telegraph today.
Graeme (above) writes: Now, taxation is theft, but if applied to land, which is itself stolen, then it is only stealing from a thief, as it were. This means that land tax can be applied morally, unlike other taxes.
I don’t know if Graeme agrees with this, but it is worth noting (I recommend people read the Narveson item I linked to) that the Georgist position is wrong: land is not “stolen” if you believe in a theory of just acquisition of land, such as the homesteading principle, or John Locke’s “labour mixing” principle, etc. In other words, Georgists and other land collectivists cannot just assert that no-one really owns land and that it is owned by “everyone”. One might as well assert that “everyone” owns the fruits of my “unearned” skills. The logic is the same, and equally ghastly.
I suppose it was inevitable that this thread should degenerate into yet another of those tedious debates about Georgism. No one ever has anything new to say, and the same arguments are endlessly repeated. Sigh.
“All taxation is evil, but some of it is a necessary evil.” By “some” I presume that you mean some amount of taxation, not necessarily some specific type of it, and with that I agree. And that is why I argue that it is beneficial to have a variety of different forms of taxation. Income taxes unfairly burden those who have to work for a living; corporate taxes are mere pass-throughs which burden the firm’s customers, employees and shareholders in unknowable proportions; property taxes unfairly burden retired homeowners on fixed incomes; sales taxes unfairly burden poor people who must spend essentially all of their income on the necessities of life; capital gains taxes reduce the nation’s capital stock and depress economic growth; inheritance taxes impose an immoral burden on the right to transmit one’s justly-acquired (and previously-taxed) property to one’s heirs. All are unfair to some constituency, but each is unfair to a different constituency in a different way. This “sharing of the misery” is, in my opinion, a valuable feature of a multifaceted taxing scheme. The burden of that “necessary evil” is diffused throughout society. Not necessarily equally or fairly, which is why we have constant debates about tax rates and details, but it allows us to approach a system which, in the aggregate, is as objectively “fair” as any human institution is capable of being. Relying on a single tax, be it land or sales or income or whatever, would concentrate all of the “evil” on a single group, which would be a recipe for disaster.
As to inherent unfairness of being born smarter or prettier than average, I recommend reading Kurt Vonnegut’s “Harrison Bergeron.”
I’ve always argued against property taxes for exactly the reasons Perry outlined. But when you look at real-world property ownership it’s hard not to think that something is out of whack. My mother in law’s house is worth almost exactly 100 times what she paid for it 50 years ago. And, considering that the value is now exclusively in the land (the house will no doubt be torn down when she’s gone), the real increase in the market value of the land is closer to 300 times in 50 years. There really is no other way to describe that than as a windfall. That property contributed nothing of value during those 50 years other than housing one family — a tiny fraction of its market worth. Investments in valuable economic activity, such as productive companies, can’t come close to matching that kind of value over 50 years, except in extremely rare cases.
It seems to me that one of the benefits of free markets is they tend to connect each person’s financial gain to the economic value they produce. But there’s a huge disconnect when that is applied to real property. Henry George proposed a solution to that problem. It may well be that his solution is a bad idea, but that doesn’t mean that the problem he was trying to solve isn’t a real problem.
2 dogs
That’s not my reading of section 1 of the Law of Property Act 1925 section 1
Yours truly:
Perry:
I suppose you mean that a land tax, while not decreasing the supply of land, has the unforeseen (by the short sighted) effect of decreasing the supply of capital and labor.
True, and i was short sighted myself. Of course, a Georgian system removes other taxes that decrease the supply of capital and/or labor, but you might be right that the net effect is not necessarily for the good.
Incidentally this is also relevant to Laird’s comment @1:57pm. (IE it goes against Laird’s argument.)
Perry again:
There are 2 issues here.
One is that residential owner occupation is indeed an “economic activity”: you get a benefit from living quarters whether you rent or buy them, so why should one be taxed and not the other?
Or to put it another way, if i live in your house and you live in mine, why should we both pay taxes on rent, when we would not, if we lived in our own houses?
The other issue is that what you see as a bug is also a feature: a land tax discourages keeping land unproductive, when it is feasible to make it productive.
I also object to the loaded word “vassal”. It looks to me that most homeowners in many countries today are worse than vassals: they are serfs, bound to the land they “own”.
Again, if we swap house, why should we pay taxes on the swap, which we would not if we stayed put?
Taxes on both the sale and on the rent of real estate decrease labor mobility.
Not sure that a land tax really would favor large institutional ownership, but more relevant here is that owner-occupiers are indeed deluded if they think they own their own land. On paper, they do; but what is to prevent the State from confiscating it?
No, it isn’t. Because…
Benefit is not always economic benefit. I should not be taxed because I bought it and it is mine, and probably paid a sales tax. Same goes for my clothes. They also give me benefit, by keeping me warm, but it is not an economic benefit I should be taxed on because keeping me warm does not produce an ability to pay a clothes ownership tax.
Productive for whom? The state, yes. Indeed this is the logic used in the USA for CPO’ing land (condemning it as they say over there) and then giving it to a commercial developer who can make more ‘productive’ use of it (i.e. they can generate more tax revenues for the people who seized and redistributed the property).
It is a very fascist (technical, not pejorative) notion. I am required by the state to use “my” land in ways that allows me to pay my feudal occupation rent, which is what makes this nothing less than a fascist-style (rather than socialist style) land nationalisation.
Which is to say, the state allows the people to nominally “own” a means of production fascist style, provided they use it in ways that are useful to the state. I am simply not allowed to buy land and live on it, unless I am rich enough to pay a vassal rent perpetually from some other source. There is even less “opt out” than we have now, which is saying something, under a system that ends freehold and imposes exclusive vassal land use.
Tedd, 50 years? My ballpark inflation calculator give that about a 32 fold increase so in real terms, it’s probably only worth about 3x more. That would not be a great return on an investment over the same period.
Snorri, there is no such thing as ‘a necessary evil’. Evil is used where individuals have choices- therefore, if something is necessary, there is no choice. You might call it a necessary burden, instead. And my definition of evil is the reverse of the Golden Rule- if any person acts to others in ways that he (or she) would not like if it happened to him (or her), then his (or her) action is evil.
Laird makes good comments about the need for a variety of taxes, not just one that attacks a single activity, for the reasons given. However, I don’t apologise for raising the Georgist argument – I haven’t raised it for almost two years and as people can see, my entries on this blog have been less frequent anyway. It is necessary to go to the philosophical core of why people think (wrongly) that land is somehow “different” and that it is okay to tax it in the way suggested. The “Mansion tax” may not be a pure LVT but it is close enough in general effect.
I have felt for far too long that not enough people in the free market movement have been aware of the sheer, imbecilic argument that is made for attacking such property ownership, and why it is important to counter it. That seems to be happening at last. Ed Milliband may even, at last, do us a favour in routing the Georgists who claim to be libertarians by making such a crass, ugly case for this tax.
Mr Ed, look at item 1(a) in the legislation you quoted. Practically all privately held real estate falls into that category. Such “owners” have only an estate, not the land itself.
Johnathan, I am not Graeme, and re:
I don’t need to consider the homesteading principle in relation to land in England, because no English real estate derives from such an arrangement. William the Conqueror stole it by violence, and English real estate derives from he and his successors distributing partial interests in it.
Nothing is “clear” in something “unwritten”.
I disagree with Laird on the need for a variety of taxes: it may work in theory, having been fine-tuned to the specific circumstances of this or that population sector, with care taken to make taxation as fair as humanly possible to that sector (or rather to that person, since no one really belongs exclusively to a single sector for taxation purposes). In reality though, we get a mess of a myriad of various taxes that burden virtually everyone, either directly or indirectly – rich and poor, and those in between.
I don’t think that is true, as income is far from being a result of work only – at least not work in the sense of employment. Clearly, a person not formally employed, may derive his income from investment in assets – such as rent or dividends. I see nothing wrong with taxing such income – at least no more so than taxing income derived from employment. More generally, everyone, even the poorest in society, have some kind of income on which they subsist, and which at least theoretically can be taxed (whether the poorest should be taxed at all is a separate question).
As hinted by Laird, the real issue with taxation is the amount, because under a certain level, the “taxation is theft” mantra loses most if not all of its validity, as the taxed population can see a more-or-less clear connection between the amount of money it pays to the state, and the amount (and quality) of services it gets from it (ideally such services being restricted to a night-watchman sort).
However, another but not-least important issue with taxation, is the simplicity or complexity of the mechanism used to implement it, beginning with underlying legislation, and ending with practical enforcement. Simplicity is important for many practical reasons, but also and not-least because of the need for legitimacy (see “taxation is theft” above). In that regard, a variety of taxes such as ostensibly proposed by Laird (and such as in fact exists throughout the West), is a system that is anything but simple.
2 dogs
1 (a) is a freehold, and the other rights are set out below. To say that the land owners own an estate and not the land itself is a distinction without a difference, there is no higher right than ‘An estate in fee simple absolute in possession’ , which can be disposed of in any way the owner chooses unless other rights over the land exist, e.g. a mortgage, and none can demand a rent for it (at present) BUT of course, local authorities may impose planning restrictions, the land may be leased out under a leasehold.
There might be rights over the land in equity, easements etc. but no land ownership is any use without rights of access, which is implied in any disposal of land in England unless expressly ruled out (e.g. if you bought a piece of land in a forest as a nature reserve).
The Crown does own the foreshore, between the high and low water marks, thereby giving a theoretical basis for immigration and emigration control, but the simple argument is damages for trespass which could only ever be nominal.
As Gareth put it above, “You can make more land. Just ask the Dutch.”
I’m reminded of one of Paul Merton’s comments – on HIGNFY I think – that the Netherlands is the world’s largest man-made structure. Unlike a certain other structure often cited, it’s most definitely visible from space.
Also, I have to note that Henry George was writing in the days before steel framing and telephony enabled practical and usable skyscrapers; any multi-storey building creates land, although that land isn’t general purpose. One of my favourite statistics about the Burj al Khalifa is that, if you consider the number of people it supports and the area of its base, it works out at 3 people per square metre.
The use of the term “mansion” for “a property costing more than 2 million quid” should be considered just as damning for a politician, as them not knowing what a loaf of bread costs. While it’s a bit lowbrow for Samizdata, http://www.buzzfeed.com/lukelewis/7-private-islands-that-cost-less-than-a-flat-in-london#412aukt gives some nice price comparisons between London flats and private islands. The comparisons may not be accurate, but the London prices will certainly have gone up since the article was posted.
Perry:
Nonsense: you could rent out your clothes, or sell them 2nd hand. If you don’t, then the benefit you get by wearing them yourself is higher than the benefit you would get by leasing or selling. You might not call it “economic” benefit but it’s a distinction w/o a difference.
Of course, in the case of clothes, you can get away with not paying any tax on the rent or sale. If you are saying that landlords should not pay taxes on rents, because that is triple taxation (ie they have already been taxed when they earned the money to buy the housing, and then again when they actually bought it) then i agree. But as an argument that rented property should be taxed and owner-occupied property should not, it fails.
Perry again:
Putting the land to an use that YOU think will earn you money is not the same as the State telling you what use the land should be put to. It is still not the same even if you did not want to put it to commercial use in the 1st place.
But this is beside the point: my starting point was the analysis of the economic efficiency of a Georgist system — as compared to the current system. You have scored a point about that in your 1st reply to me, i admit.
But then you have returned to a one-sided consequentialist argument: you only seem to care about the consequences for owner-occupiers with small incomes (mostly pensioners, presumably). The fact that incomes, including pensions, would not be taxed in a Georgist system, and would therefore be much higher than they are now — especially if more land is put to commercial use — seems to have escaped your notice. (Now it is my turn to refer to unforeseen consequences.)
Of course there would be winners AND losers: that is why i mentioned the problems in the transition.
Funny that you should keep using loaded words like “feudal” when (iirc) Marx claimed that Georgism is an attempt by capitalists to get back at feudal landowners! I am closer to Marx on this one.
If all tax is based on land as opposed to ability-to-pay, then this is hugely ‘regressive’, which is to say the lower your income, the harder it becomes intrinsically to occupy land, as that is the illiquid asset to be taxed, rather than something predicated on the existence of a sum of funds (which by definition produces the ability to pay).
But at least you do not seem to contest that this is a fascist-style (technical, not pejorative) nationalisation of land to force that means-of-production to be used for the convenience of the state rather than the occupier. Think of it as a super-layer adding to specific planning laws, it is a massive use of state power to skew land use to ‘tax productive’ uses and massively increase state power. The shift in principle is also massive, ending ownership entirely.
And you are both wrong 😀 Freehold is non-vassal land ownership. That is technically what it is.
“In reality though, we get a mess of a myriad of various taxes that burden virtually everyone, either directly or indirectly – rich and poor, and those in between.”
That is precisely my point, Alisa, and I view it as a feature, not a bug. Everyone gets to suffer a share of the pain. By contrast, relying on a single form of tax concentrates all of the pain onto a single group. If we’re going to have misery, all must share in it.
And I never claimed that taxes are “fine-tuned” to a specific population sector, and in fact I doubt that is actually the case. What I actually said is that having a myriad of different forms of tax spreads the burden across all of society. The relative “fairness” of that dispersal is subject to endless debate, but the resulting tension among competing groups to minimize their own tax burden helps to ensure that a sort of “fairness equilibrium” is attained. In a sense it is an odd form of market force at work.
But that is not true with regard to income tax, as I hoped I’ve shown.
The difference wrt the present system being what?
I do contest your claim: i see it as a system that discourages foolishly investing in real estate, beyond one’s means. The UK, more than most other countries, could do with such a system.
Again, you fail to look at the other side.
Income tax is a serfdom-style AND fascist-style nationalization of labor to force labor to be used for the convenience of the State rather than the laborer.
Capital-gains tax is a fascist-style nationalization of capital to force capital to be used for the convenience of the State rather than the capitalist.
Again, you fail to look at the other side.
As for planning laws, of course they should be drastically reduced, especially in the UK, but that is true irrespective of the taxation system.
Again, you fail to look at the other side.
See The Stigler’s comment above.
Not true, and this is the one issue where Perry and i seem to agree: this single group passes on the costs to the rest of society. Nobody can live without land, for instance: if they rent it, then they have to foot the tax bill for the landlord.
Seriously? The vast majority of tax now is based on the ability to pay. If you have a home but little or no income, other than service charges (which is effectively what at least most council taxes are), you pay very little tax. With a land tax, you lose you house if that is how all tax is raised. Obviously this impacts people with less money more than people with more money. Ergo is it regressive.
Actually I think you just agreed with my claim. You want the means of production to only be used in ways the state approves of. But yes, it encourages not investing in real estate at all unless you are far more wealthy than most real estate investors today.
Such taxes may be undesirable compared to, say, a sales tax, but is not particularly fascist as it makes no attempt to preclude what you use that taxed labour for. A land tax however very effectively tips the scales against inconvenient to the state residential use of land by ending freehold. You simply cannot buy land for security as that is not convenient for the state. Now THAT is fascist. What makes is also feudal is it replaces ownership with vassal rent.
Yes, there is a difference.
This depends on the rights inherent in the estate itself. These vary, and estates in other fees may have more rights. The Seigneurage of Sark is an estate in fee tail (but could be sold with the Queen’s permission), and the right it confers allows the holder to block laws by the Sark legislature and to appoint Sark office holders. These are not the kinds of rights that most real estate holders have, but are the sort that would come with owning the land. But even then, it is the Queen who owns Sark, not the Seigneur, who is merely an estate holder.
Yes but I do not live on Sark and I bought my freehold from the Duke of Westminster, whereupon he buggered off.
2 dogs
Sark is totally irrelevant, as is Bolivia FWIW, I am referring to the law of England and Wales, please tell me what the legal basis is for your argument, cite a case or a statute to show that you have a bass for your argument.
It may be my reading of your post, but please tell me what the difference is, as I see it, you are recycling legal gibberish without knowing why, or what you are talking about.
Here’s parliament on the matter:
I fully acknowledge that I am being legalistic here. But this just gets back to my point: Caveat Emptor. That “legal gibberish” is the “fine print of the contract”. It what specifies what people got when they obtained their real estate.
By all means, argue that the crown has been misleading when it has purported to sell land, but then only sells an estate in it.
But at the end of the day, it is a legality that only an estate in land is held.
Perry: our differences are irreconcilable because we have different values. You believe that the property right to real estate are of a different kind than the property right to income. I don’t.
I call yours a feudal mentality: it is typical of pre-industrial cultures to think that the only “real” wealth is wealth in land.
Let’s take a specific example: Tom and Harry live in identical mansions that they cannot afford on their identical meager income. They could afford it, if there were no tax, but Tom owns his mansion and has to pay a Georgist tax, while Harry rents his mansion and has to pay either a Georgist tax (through his landlord) or a tax on his income plus (through his landlord) tax on the rent.
You obviously think that Tom is not irresponsible. By my values, Tom is even more irresponsible than Harry, because Harry can move out of his mansion at a month’s notice, while Tom is stuck with the mansion he was foolish enough to buy.
If you don’t think so, then we have different values and there is nothing to discuss about this.
What is left to discuss is that you also say things that are just plain wrong:
This is patently absurd: would it be convenient for the State if we all lived under bridges?
The whole notion that a land tax “forces” people to put land to the use which is most economically convenient for the State, is absurd: in a Georgist system, the State gets exactly the same amount of tax revenue from a piece of land, independently of its use.
If this were so, then the State would have made it inconvenient to own real estate. Quite the contrary: the State makes it convenient to buy rather than rent. Do you really think that the ruling class acts contrary to their own interests?
Let me also point out that it is foolish to buy land for “security”.
But Snorri, he is stuck, in the negative sense of the word, precisely because of the Georgist tax.
Well, call me old-fashioned and pre-industrial, but as much as our brains as humans are all-important, we still need these physical bodies to contain our precious brains. And these bodies of ours need physical land to live on. Note that I’m not saying that land ownership is a must for each and everyone of us – that is obviously a matter of personal preference and individual circumstances. But, like Perry, I am saying that the philosophically and legally recognized concept of land ownership is indeed a must for a society based on individualism. Personally, you or I do not necessarily have to own the land we live on, just as we do not necessarily have to own our car, or the plane on which we travel abroad, or the table on which we dine at a restaurant – we may rent any of those things, as we very often do. But we must have the ability to effectively own these things (provided we acquire them peacefully etc.). That is the whole concept of personal property in a nutshell, which is the very foundation of free individualist society. Take that away, and you get the SU, where no one owned the home they lived in.
You were the one who wanted to make consequentialist arguments so…
You are wrong alas, on a consequantialist basis at least there is a material difference between something that when taxed intrinsically has the ability to pay, which is to say, income or sales or anything involving a transfer of money, means the money is there to be taxed. If land itself is taxed, then some activity that generates the ability to pay must be going on… the land simply sitting there with a house on it does not generate economics activity unless it is being rented. Land ‘values’ are nominal until realised by selling the property (by all means tax that). If activity is occurring, then surely it is the rent or sale or even purchase that should be taxed as that produces the means to pay. Taxing ownership on the other hand requires either a ‘cross subsidy’ if you will, if you are simply living there on the land you fondly imagined you owned prior to land nationalisation.
They are simply different things. One does not have any intrinsic means to pay a tax, whereas economic exchanges, such as sales or incomes, do.
And you would be wrong about that too. I think nothing of the sort. But I do think that “wealth” of any kind should never be taxed, only economic exchange activities. But that, unlike my arguments against land tax, is a position of principle rather than consequence.
Not only do you think that, you want the state to make it true by seizing ownership of said bought land. But absent the risk of state appropriation, it makes perfect sense for someone to make the decision that buying property when one has a sufficient income to either purchase outright or take a mortgage under advantageous terms that can be paid off before retirement, gives security in later part of life, as it means the funds to pay for ongoing rent can be avoided. I am somewhat astonished you think this is intrinsically foolish.
Yours truly:
Alisa:
If the Georgist tax was in effect when Tom bought the mansion, then he was foolish to buy it.
And if the Georgist tax was not yet in effect, then Tom was foolish not to foresee that it might come into effect.
In either case, Tom was foolish not to foresee that real estate is easy for the government to confiscate.
Additionally, he was foolish not to foresee that the government might become unable to prevent the value of his mansion to drop to zero. That is what happened to the Taleb family estate in the Lebanon civil war, as you might have discovered in The Black Swan. Nassim recovered the family estate, but by that time at least his grandfather had died in a small flat in Athens.
I have zero sympathy for people like Tom, who base their investments on the assumption that the State will behave as they think it “ought” to behave.
Perry:
Consequentialist arguments are not value free: you need values to decide which consequences are desirable, and which aren’t.
As for your “consequentialist” argument, it isn’t.
Again, a land tax is no more appropriation of land than an income tax is appropriation of human bodies.
Hilarious!
Which makes me wonder where do your sympathies lie?
Of course it is. The consequence in question is that taxing ownership means if you cannot pay the tax, the state takes the owned asset away. If that owned asset is not a divisible liquid asset (say, land for example as opposed to a sum of money), then you lose the all land as opposed to part of the money. The consequence in question is related to ability to pay (which is not a philosophical issue so much as a practical one with profound consequences).
Well you can keep saying it but that does not make it so. Personally I prefer sales taxes to income taxes but then to pay off a tax from a sum of money, you still have whatever is left, so they may be ‘shaking you down’ but they are not compelling you to use your labour (body) in this way rather than that way, and there is the intrinsic ability to pay (which you keep ignoring). With land, there is no intrinsic ability to pay and if you do not, they take it all, in effect, they take it back, as you have become the state’s vassal (technically) and you do not actually own it, you just rent it now.
Sorry Snorri but everything has a risk. You are simply not making your points with your usual adroitness. The state can potentially do anything, but as freehold has persisted for really rather a long time in England, it has not been a bad bet for anyone not in a stately home. If the state can make itself the owner of your land and turn you into a vassal rent paying occupier, it can also seize your bank accounts or confiscate your gold too.
No I think his point (and he is a lawyer) is that you are not being ‘legalistic’, but rather you are making statement that have no basis in law as it does not mean what you think it means, hence “legal gibberish”.
Yeah, he’s got a lot of nerve for failing to plan his life around the eventuality that you’d try to appropriate his property for the greater good.
We must be thinking of a different Black Swan. The version I saw had Natalie Portman either sleeping with, or not sleeping with Mila Kunis. Probably an infintely-better movie, but I was drunk and frankly don’t remember. But no matter…
I guess I don’t understand your point here. The state should appropriate people’s land in order to protect them from making bad real-estate investments?
Consider Alisa’s question seconded.
I can avoid income tax by not having income within the meaning of tax law. If I’m not working, I’m not paying. If I grow my own corn and chickens on my freehold and live in a yurt or a hole in the ground, I’m not all that likely to have income that the IRS considers to be income.
That is, as long as I actually own my land. If I’m just renting it from the state (excuse me, “owning it in a place where it’s subject to LVT”) then I don’t have nearly that security. I can stroke a check to the county assessor every year or armed agents of the state will come and evict me, regardless of whether I have an income or not.
2 dogs: The piece on Cornwall and the Duchy is rather off the mark, there is no point asking a government minister a question in Parliament to ascertain the law, the correct approach is to ask the High Court for a declaration on a matter, and that piece confuses statutory law on intestate estates of those with no heirs, a procedure established for England and Wales by Act of Parliament. IIRC I wrote something about that piece on Cornwall you cited some other time, it is simply a bit of pastiche Cornish ‘nationalism’, I can’t stannary it.
However, I suspect that anyone going to the High Court for a declaration would be laughed out of court (if they were lucky) if not testily told to go away by a judicial officer as there would be no obvious issue on which to make a declaration. The link is the best i can find at the moment, having driven for 6 1/2 hours out of Cornwall today. Perhaps more on Sunday.
‘The land is owned by the Queen” – oh the bleep.
Even in the Edict of Q (877) it was accepted as an “old right” that even the King of France could not take land from one family and give it to another – so much for the monarch “owing the land”.
“But William the Bastard” – 1100 and 1215 Charters put that to bed.
Or the Civil War of the 1640s, or the GR of 1688.
Or the FAILED Crown effort to question the property rights of the Duke of Portland in the 18th century.
So much for “the Queen owes all the land”.
As for David Ricardo and Henry George – Frank Fetter (a century ago).
Now time for grumpy middle aged man (with pains in X, Y, Z) to go to bed.