Scrap inheritance tax for an LVT


By D. J. Webb

May I comment briefly on the recent fuss over MPs’ tax affairs. Firstly, I would never agree to publish my own (meagre) tax return, as private income is not in the public sphere. I chafe already at having to disclose my income to the government, in defiance of a traditional interpretation of English Common Law and the boundaries it places on statute law and the Crown.

That is not to say that I am not enjoying Mr Cameron’s predicament! He is a big public spender, but his family clearly prefers to limit their own contributions to the public purse. Were he a libertarian who had unhypocritically espoused small government all the way through, I should be much more sympathetic to him now.

The key point about inheritance tax is that wealth earned by capital investment or labour should not be subject to any form of taxation. Labour and capital should keep their own rewards. However, most estates are made up of windfall gains from speculation in landed property. An unimproved plot of land that stands empty and is then flipped after a year may be sold for more money. This is all down to market demand, of course — the value of anything is what people will pay for it — but that market demand is manipulated by the government.

Soaring land values make labour pointless, and drive up the cost of capital investment. Anyone who owns a home along the route of the Crossrail project in London has seen the value of his land increase — public money capitalized directly into his property portfolio — and imagines, wrongly, that that is the product of his own “investment”.

I would say: bring in a land value tax, as John Stuart Mill demanded, and scrap inheritance tax. Anyone who works hard or who invests for a return should be able to pass the increment on. The land value tax would enable society to enjoy the benefits of the increase in the value of land, a natural resource that belongs to us all and that may not truly belong to any individual.

An LVT would bring to a halt the current constant moving of the goalposts, whereby land values appreciate more quickly than you can save up a deposit for a property. Work will become worthwhile again. The false opposition of labour to capital — which is the socialist misconception — would be seen for the error it is.

The real opposition is between the interests of rentiers and monopolists and the interests of society as a whole. As much tax as possible should be derived from naturally occurring resources, such as land, road pricing, oil and gas levies in the North Sea, and broadband spectrum licences.

There is nothing wrong with people being rich. We should not be jealous of those who have worked hard or built up businesses. By bringing in an LVT, we make sure that the rich get there via investment and hard work (thus benefiting us all), and not rentierism. Consequently, there should be no need to publish anyone’s tax returns publicly.

If we don’t bring in an LVT, though, we should find out how our MPs got their money, and I would extend the principle, as a matter of urgency, to the judiciary and magistracy of the land, so that we know exactly what private interests lie behind court judgments in our country.

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17 comments

  • Unequal distribution of the value derived from natural resources and the taxation of privately produced income and capital equals economic slavery.

    Property rights are the foundation upon with we build a peaceful and prosperous society. If we have our framework of property rights incorrect we get distorted incentives and excessive inequality. A recipe which inevitably shrinks the economy and leads to a large bureaucratic State in order to mitigate the symptoms of poverty and inequality caused by economic injustice.

    If you don’t like LVT then you are by default accepting an overweening and overblown State apparatus.

    Far from being a Communist conspiracy, a LVT is as hardcore as Capitalism gets. Which is precisely why so many of those in power, in business or with great wealth hate it. LVT is the great leveller. By ending the perpetual free lunch of land rents, we get a true meritocracy.

    The very last thing the Conservative Party wants. How fortunate are the idle rich that the Left are so obsessed with high taxes on income and capital it has completely blinded them.

    • Benj, you are quite right. Libertarianism without an LVT is a contradiction in terms.

      • But who gets to set the value? If the government generously decides to “improve” my land’s value by some public works boondogle I don’t want, why should I pay more?
        You’re arguing from consequences, not principles. Go back to the Gulag.

        • The market sets the value i.e the rental value, which is the highest price another individual or firm would pay to exclude all others from that Land title. So, Land is always allocated to individual or firm able to put it to it’s highest productive use. This is hardcore Capitalism, which is precisely why the Blue-Socialist freeloaders don’t like it.

          How can something be “yours” if you didn’t create it, nor did anyone else? By what principle can you claim exclusive rights to it?

          Because you paid for it? You have legal title?

          They were both justifications for slaves being private property.

          Under LVT we are all equal share landlords, and we have to pay rent if we want to occupy Land that has gained a scarcity value.

          The richest person in the World, which the highest income wouldn’t owe a penny to the community if their property only occupied a marginal location.

          If the rental value of Land goes up, and you are unwilling or unable to pay it, then you are free to move somewhere else.

          Chose a location with zero rental value and you would enjoy a net rental income/lower tax liabilities.

          Imagine that. A tax system where you choose your own liabilities based where you want to live, not based upon a coercive deduction of income/capital that punishes work, effort and enterprise.

          • @benjiiiiii blah blah blah … if you don’t like our system of government then move elsewhere. Do you actually read what you write. If you did read what I wrote you certainly didn’t comprehend it.

            • It’s not a system of government. It’s compensation paid to those excluded from a scarce natural resource. One which none of us has a right to call our own private property.

              For an anarchy to be peaceful and prosperous it would need to have property right than encompassed the equal sharing of land rents.

              If you go into a shop and they put the price up on your favourite brand of X, is this an infringement of your rights, or do you “move” to a cheaper brand.

              Same thing with paying compensation for exclusive rights to valuable Land i.e rent.

              • You’re arguing for a tax – theft via government – to resolve what you perceive to be a market failure. That makes you a collectivist not an anarchist or libertarian. You’ve asserted that the free market is unable to allocate land efficiently and that taxation is an appropriate and useful mechanism to apply in an attempt to address this perceived failure.
                Both assertions are nonsensical. Land ownership is not subject to the free market and we’ve seen over and over that violence based solutions don’t solve anything, absent an actual physical confrontation (clear and present danger).
                Go back to gulag.
                I can’t believe this BS is getting posted at the LA blog!

  • As Benji says, the market determines the value of the land. Mind you, we’re talking about land, not property (property includes buildings). A one-acre plot of land that has not been built on, standing next to a one-acre plot of land with a hotel on, attracts the same LVT as the the land with the hotel on. Site location only is the basis of the tax. People living in an area where site locations have become more valuable owing to public works have the option to move elsewhere. There should be no stamp duty to deter sales transactions, thus producing a responsive market that makes better use of the land. If you are in London sitting on a £5m plot of land (looking at the value of the land, not the property as a whole) and can’t afford the LVT – you simply can’t afford to live there. You are plot-blocking. The plotblockers all want to benefit from the capital appreciation, of course, which is their so-called “investment”. Land doesn’t belong to anyone; freehold title is “tenancy in fee simple” held of the Crown. You may as well argue that you should be entited to have a licence, for free, to part of the broadband spectrum, without using it, thus blocking use of a natural resource that no one owns and is but the gift of nature.

    • @djwebb2010 you’re not answering my concerns at all.

      * The value of land to me may well be that it’s unimproved but I’m forced by the collective to accept improvements I didn’t want or anticipate. There’s a classical example of this – where during the industrial revolution the factory polluters were indemnified against common law torts about pollution so that drop in value of land near factories for farming couldn’t be addressed by the farmers.
      Indeed, vast swathes of land are put out of use as UN protected something or another. Land value is entirely artificial.
      Hong Kong airport is built on an artificial island. Why should they pay tax?
      The market doesn’t determine the value of the land whilst there is government action e.g. zoning, emminent domain, subsidies to business etc. – political action does.
      * Taxation is theft. That’s all I need to know to discard this proposal. You’re not arguing from principle and your justification is purely by *imagined* consequences based on plainly false presumptions. Go back to gulag.

      • So, because of the UN, the Duke of Westminster is the UKs richest born Citizen?

        Land is all that is not created by human effort. An artificial island is therefore Capital.

        Not that it matters, as the most valuable Land is 3D space AKA “location, location, location”.

        Hope this helps 🙂

        • @benjiiiiiii Here in Edinburgh, the dodgy land deals around the new Royal Infirmary construction and the Scottish Parliament building give direct evidence of how wrong your statement is. Land values depend on political action, not the market.
          Go back to gulag.

  • Some good points here. But David says, “Libertarianism without an LVT is a contradiction in terms.”

    Ummm… I thought that libertarians want people only to have to pay for things they find of benefit to them? Beyond this, taxation is simply theft.

    Of course, land values are going up steeply in the UK right now, because politicians are actively encouraging immigration… And I do understand David’s frustration.

    But David doesn’t tell us who would be entitled to collect his proposed LVT, what kinds of land it would apply to, or what he thinks should be done with the proceeds.

    And, while I can see the issues with land which has been taken, or made more valuable, by conquest or fraud, I still don’t grok why land should be different from any other kind of property. Perhaps someone here can enlighten me about this.

    • Paying to those excluded from a scarce natural is not a “tax”. It is paying market based compensation for a benefit received in exactly the same way, and exactly the same reason we pay for any other good or service.

      And, because this is fair, the market allocates that resource at optimal efficiency. Which is why, unlike unfair taxes on human effort, an LVT has negative deadweight losses. That is, it expands our stock of wealth and economic welfare.

      Land values have been going up steeply for hundreds of years. The aggregate value of Land comes from two things. The efficient exploitation of agglomeration effects and a preference for locational amenity over private goods and services.

      In other words, high land values are a better economic indicator than GDP. Think of all the places in the World with high vs low land values. Where would you rather live?

      Indeed, by having an LVT only system, it a) puts a natural limit on State spending b) aligns the interests of the State with those of it’s Citizens because if it wants to increase it’s LVT yield, it has to balance i) effective exploitation of agglomeration effects (building and development for example) with ii) protecting and providing locational amenity.

      LVT means sharing the rental value of all natural resources, that is the value of everything not supplied by human effort.

      In our current way of government, LVT is collected in exactly the same way a Council Tax or Business Rates.

      In an Anarchy, we’d all pay our rent by direct debt, and collect our equal share of the rent by direct debit.

      Only the creation of value, or compensation paid for the efforts of others can confer property rights ie provenance.

      Land, by definition (unless you believe in God) has no provenance. It cannot therefore be private property as income and capital are. Or rather should be, because if they are taxed, they are not.

      • “Paying to those excluded from a scarce natural is not a “tax”. It is paying market based compensation for a benefit received in exactly the same way, and exactly the same reason we pay for any other good or service.”
        Say what? This is incoherent nonsense.
        “Only the creation of value, or compensation paid for the efforts of others can confer property rights ie provenance.”
        Bullshit. Says who? Who owns your liver then?

  • I’m not going to spend a long time engaging with trolls here. But it’s worth — as my final point, as life is too short to spend arguing with people with big houses who want to see labour taxed highly — that, if taxation is theft, that’s because taxation is a form of rentierism, as indeed is land “ownership”. Actually, land ownership is theft. J S Mill can be considered a standard for libertarians: and he agreed with the LVT. It is not libertarian to argue in favour of rentierism — which shifts the burden of public revenue-raising, quite deliberately, onto labour and capital. In fact, an LVT, as a property developer who taught me everything I know about land, once explained to me is not truly a tax at all. It is an “assessment”. I would call it the ALFA payment: the Anti-Land Fraud Assessment. I would like to see the government whittled down so much it could survive on ALFA payments and import taxes, and if not quite enough, than indirect taxation (VAT etc), with no income tax, capital gains tax, inheritance tax, corporation tax, national insurance etc at all. Of course, these pernicious forms of tax exist purely in order to facilitate rentierism. Taxation and rents are both theft in various degrees. I don’t subscribe to this thread, so won’t read any replies. Have at it!

    • Redefining words to suit your purpose doesn’t magically stop taxation being theft. By your argument about land, anything that is materially finite should be “taxed” to prevent rentiers.
      You’re following the well-worn socialist road and arguing market failure in the case of land ownership justifying government intervention. On what planet this can be seriously advanced as in some way Libertarian (with a large “L” as in something to be seriously considered by people who are sympathetic to the aims of the Libertarian Alliance) completely eludes me.
      Go back to gulag.

  • Contemplate this on the Tree of Woe…

    http://www.newstatesman.com/life-and-society/2011/03/million-acres-land-ownership

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