By: Ludovic DELANNOY

Ludovic DELANNOY — Thu, 29 Dec 2016 01:01:00 +0000

“Set at a flat rate of 5-10%, LVT” : that is the issue: LVT needs to be set at rates relatively high (60%,80%,85% to 98%-100%) (of the rental value of Land by definition of LVT) to work effectively & due to the height of the rate, need to introduced over a transition period of 10 years (or 5 years) (& reduce the other taxes it replaces), because LVT is a charge on the annual rental value of the Land. The capitalised value of the Land is a value derived from the rental value, but has nothing to do with true LVT;
tax/charge on the capitalised value of the Land is a falsified LVT (it is not truly georgist, it is a plot, an imitation, just as a placebo is an imitation of a drug)(or the bread in UK is an imitation of the bread we have France, if you are French, you know it is not the same); even if the capitalised values are usually 20 times the annual rental value (annual rental usually 5% of capitalised value).
You have well summarised the advantages of LVT, but the definition is important. The most important point is without LVT, Landlords (globally also including banker charging interest on mortgages) always charge their tenants (by law of economic rent) around 98% of their disposable income after other costs of living, so the vast majority of increase in wages that have been observed (since 1946, even more since 1978) have pushed up the level of rents, the highest wages/incomes of the top 0.1% of the most well-off of the tenants (i.e. it would include those who actually would have enough money to buy, but actually genuine prefer renting for convenience) tend to push up rents in the most expensive areas, and everything below follows. The issue is that with the current system (council tax yield no more about 17% of the total rental value of residential land, and is very regressive, especially above the bottom/poorest third of Land values of residential plots of properties), Land is very under-taxed (Labour is very highly taxed [with benefit system making marginal rate of deductions in the 70% to 96% range] for very large parts of the bottom 4 deciles of incomes; & wealth creation & physical capital creation is usually much more taxed than unearned income, including from rent of Land). So for LVT to work, it needs to tax all Land, especially and including Land that is not used (as it permitted) to get out of speculation. in my understanding, if ownership of the Land is with the state, it is not a reason to not levy LVT: if Land belong to the (UK)state, LVT is due to be paid to the county/city council, if Land belong to the council, LVT is due to be paid to the UK state (part may then be eligible for re-distribution, but preferably directly to all residents in the UK, with a smaller part to the councils only based on the number of their residents). The only non-charge on Land is if the value is zero due to being used & needed by all the public like the roads & public infrastructure, or public natural lake.

Comments on: Introduce a land value tax to curb gentrification

By: Ludovic DELANNOY