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.