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Back in a different life, I worked on the Lyons Inquiry which looked at English Local Government finances. Final report was issued in 2007[1]. As part of the wo

Back in a different life, I worked on the Lyons Inquiry which looked at English Local Government finances. Final report was issued in 2007[1]. As part of the work we had to look into Land Value Taxes as a supplement/alternative to Council Tax and Business Rates. There's nothing wrong with the idea. The big issues were mainly around introducing a new tax system and the massive upheavals and uncertainties businesses and people would face as part of the change. Winners and losers, etc. Given the uproar surrounding the later introduction of Universal Credit I'm glad Sir Michael chose not to recommend LVT in his report. Anyway - anecdote time. One of the big questions we asked at the start of the Inquiry was: "Why tax property?" After long consultations with the most senior Experts and Gurus across Government and Academia the answer came back: "Because it's there." [1] https://www.webarchive.org.uk/wayback/en/archive/20070411120000/http://www.lyonsinquiry.org.uk/index8a20.html https://www.webarchive.org.uk/wayback/en/archive/20070411120... (I'm mainly commenting because it's an opportunity to show off the Inquiry's website. I built that! I had to do it in my "spare time" because we didn't have a budget for the work. This version is from 2007, but the original code was written in 2004 in PHP and after that most of the work was adapting the site to add events, display responses received, etc. Simpler times!)

MiroF 6y ago
> The big issues were mainly around introducing a new tax system and the massive upheavals and uncertainties businesses and people would face as part of the change. Winners and losers, etc. It's funny how we introduce massive upheavals all the time - ending this social program here, injecting trillions of dollars there, but this one addition is considered infeasible. I suspect that the primary problem with George's theory is that he underestimated the political power of rent-seekers.
- rikroots 6y ago
  The Inquiry didn't happen in "splendid isolation", and the recent history of property taxes across the UK was not a happy one. Property rates were replaced in 1990 by the Poll Tax (Community Charge) which led to protests and riots across the country. Council Tax was introduced in a rush in 1993 ... and the poor design of the system is not easy to hide. The Inquiry was set up in 2004 because there was a legal requirement to undertake a property revaluation before 2005 which, as things stood, would have led to massive changes in people's tax burdens (winners and losers). The Government wanted a way out of the problem - but the Inquiry didn't give them one: Lyons decided that revaluation was essential and should go ahead. The Government sorted the issue in time-honoured fashion by changing the legislation to remove the need for a revaluation, and changing the Inquiry's terms of reference. And so it goes ... > It's funny how we introduce massive upheavals all the time - ending this social program here, injecting trillions of dollars there, but this one addition is considered infeasible. My understanding is that things are done in at least 51 different ways in the US. Maybe one of the smaller, more progressive States in the Union will be willing to try out some form of LVT in the near future?
pydry 6y ago
If I were representing the wishes of extremely wealthy landlords I'd try and make sure the rationale for killing LVT were something like "it would introduce upheavals and uncertainties" too. I'm certainly not going to say something like "because me and my mates and people like me would lose a stream of unearned income".
- rikroots 6y ago
  The Inquiry didn't kill LVT, and efforts to promote it haven't stopped just because Lyons didn't recommend it as a solution going forward. > ... extremely wealthy landlords ... killing LVT LVT would not be an appropriate method for targeting tax extraction from extremely wealthy landlords. They would (probably) make up their losses through rent increases and additional service charges - effectively passing on the tax to renters and leaseholders. If you want to target the rich you need to use tools that target their personal and/or business income streams - in the UK, for example: Income, Capital Gains, and Corporation taxes.
  - pydry 6y ago
    >LVT would not be an appropriate method for targeting tax extraction from extremely wealthy landlords. They would (probably) make up their losses through rent increases and additional service charges Seriously?? If your inquiry concluded this then it certainly was being run on behalf of landlords. They would no more be able to make up their losses through rent increases than I could make up the loss of being charged extra for a loaf of bread at the supermarket by unilaterally raising my wages. One does not drive the other. When the supply of housing remains constant and the demand of housing remains constant then prices remain constant. LVT changes none of these variables directly.
    - rikroots 6y ago
      > They would no more be able to make up their losses through rent increases than I could make up the loss of being charged extra for a loaf of bread at the supermarket by unilaterally raising my wages. One does not drive the other. Do you have research, or an evidence base, for this? > [...] it certainly was being run on behalf of landlords. It certainly was not.
grey-area 6y ago
Why tax capital instead if income? The reason to do so is because it reduces inequality and leads to a fairer society.
- andi999 6y ago
  Well, if you tax potential capital (like house prices), then gentrification is the consequence. Think somebody living in a modest house mixed neighbourhood. Rich ppl buying houses there, property tax shoot so high (because the small house is now worth millions) that the person has to sell. As far as I understand that happened in Vancouver. Not sure if it leads to a fairer society. (of course one could argue it is fair for a not so rich person not to live in a rich area :-) )
  - grey-area 6y ago
    Gentrification happens everywhere all the time without high property taxes. I'm not sure it is something we can or should avoid. A little inequality is ok and may function as a driver for growth, a lot of inequality had bad outcomes for everyone, even the rich. I sincerely believe all types of capital should be taxed instead of income, the tax burden doesn't have to change but it should be redistributed a bit. This would also deal with companies like Amazon and Apple who pay very little tax on profits - they'd pay a tex on assets instead like land or cash and pay a larger share.
    - andi999 6y ago
      How would you value the asset and not come up with (almost) arbitrary numbers? Especially since biggest value of google are non material assets (brand name, domain name and customers)
      - grey-area 6y ago
        Every system is subject to gaming of course, but I think taxing assets would make it a little harder for companies and individuals with lots of assets to avoid taxation and would encourage putting money to work. Values for assets are market values, which are arbitrary and every-changing yes, just like income and profit is arbitrary and every-changing but at least values for assets are generally set by third parties, as opposed to the value of profits - the situation could not be much worse than the one at present where large companies choose how much tax to pay by manipulating their books to adjust profit. I don't think companies should be taxed on customers personally, but if they choose to value their brand name at $10m owned by a subsidiary as a tax dodge (as at present), sure they should be taxed on that.
somewhereoutth 6y ago
I'm from the UK - Council Tax was always a real pain, its based on property price but paid by the occupiers (i.e. renters) NOT the owners. When you are house-sharing this becomes very problematic as its the largest and not insignificant shared bill - especially when housemates are moving in/out frequently. Collection is also a nightmare for the councils - sure they know the address and the amount owed - but who was living there in the period in question? Its a shame the inquiry didn't recommend formula funding from central government receipts (couple of pennies on income tax?) - so much grief could have been saved.
- rikroots 6y ago
  > Its a shame the inquiry didn't recommend formula funding from central government receipts The Inquiry's main objective was to investigate possible revenue streams that could be raised locally, to help local councils free themselves from the tyranny of central government funding. At the time local government revenue came from Council Tax, Business Rates (though the level was set by central government, not local authorities themselves), licence and other fees (eg to open a tattoo parlour, or register a death), small fines (dog mess and other litter) and car parking charges. Altogether the revenue raised covered less than 10% (I think) of all local government spending. The rest of the money was supplied by central Government - making the UK one of the most centralised states in the world. A "couple of pennies on income tax" would've made the situation worse - though one of the things the Inquiry looked at was the possibility of localising (some) income tax.
perilunar 6y ago
> "Why tax property?" Because its appreciation in value is largely unearned wealth, especially in a country like England with a long history of aristocracy and landed gentry.
- rikroots 6y ago
  No seriously. The answer was: "Because it's there." The whole thing about tax is to extract the maximum number of feathers from the goose with the minimum amount of hissing. Taxing property is easy "because it's there" - you can't hide a house, or a barn, or a factory. Though deciding _how_ to tax property is a bit more difficult. At one time they tried taxing by the number of chimneys a house had[1]. Another was the Window Tax[2]. Have you ever heard of the phrase "They got away with it scot free"? I was born in the village which (by legend) introduced the Scot Tax - not a per-head levy in our Friends born north of Hadrian's Wall but rather a tax on properties across the Romney Marshes, specifically raised to pay for maintenance of the sea wall. Houses below sea level had to pay the tax, houses above sea level were 'scot free'.[3] ... And people think tax policy is boring! [1] Technically they taxed hearths, but it's a lot easier to count chimneys from the outside of a house than it is to gain entry to the house to count the number of fireplaces - https://www.nationalarchives.gov.uk/help-with-your-research/research-guides/taxation-before-1689/#4-hearth-tax-1662-1689 https://www.nationalarchives.gov.uk/help-with-your-research/... [2] You can still see many houses in the UK with bricked up windows. It wasn't done for aesthetic purposes; it was done to limit the level of tax that could be levied on the property - https://en.wikipedia.org/wiki/Window_tax https://en.wikipedia.org/wiki/Window_tax [3] https://theromneymarsh.net/newhall https://theromneymarsh.net/newhall
- LVTfan 6y ago
  And as Adam Smith pointed out, it is there, and visible. It can't be hidden, can't be spirited out of town or offshore during the dark of night. You don't even need to know who it is that owns it; as long as they pay their land value tax, they can remain anonymous. You might search for the term "unearned increment." It was a common expression to point out what people who reaped but did not sow receive due to our failure to collect the economic rent. One person's unearned increment is another's — and likely many others' — lost birthright. Who is entitled to it? All of us! How do we implement this? Land value taxation.

MiroF 6y ago

> The big issues were mainly around introducing a new tax system and the massive upheavals and uncertainties businesses and people would face as part of the change. Winners and losers, etc. It's funny how we introduce massive upheavals all the time - ending this social program here, injecting trillions of dollars there, but this one addition is considered infeasible. I suspect that the primary problem with George's theory is that he underestimated the political power of rent-seekers.

rikroots 6y ago
The Inquiry didn't happen in "splendid isolation", and the recent history of property taxes across the UK was not a happy one. Property rates were replaced in 1990 by the Poll Tax (Community Charge) which led to protests and riots across the country. Council Tax was introduced in a rush in 1993 ... and the poor design of the system is not easy to hide. The Inquiry was set up in 2004 because there was a legal requirement to undertake a property revaluation before 2005 which, as things stood, would have led to massive changes in people's tax burdens (winners and losers). The Government wanted a way out of the problem - but the Inquiry didn't give them one: Lyons decided that revaluation was essential and should go ahead. The Government sorted the issue in time-honoured fashion by changing the legislation to remove the need for a revaluation, and changing the Inquiry's terms of reference. And so it goes ... > It's funny how we introduce massive upheavals all the time - ending this social program here, injecting trillions of dollars there, but this one addition is considered infeasible. My understanding is that things are done in at least 51 different ways in the US. Maybe one of the smaller, more progressive States in the Union will be willing to try out some form of LVT in the near future?

pydry 6y ago

If I were representing the wishes of extremely wealthy landlords I'd try and make sure the rationale for killing LVT were something like "it would introduce upheavals and uncertainties" too. I'm certainly not going to say something like "because me and my mates and people like me would lose a stream of unearned income".

rikroots 6y ago
The Inquiry didn't kill LVT, and efforts to promote it haven't stopped just because Lyons didn't recommend it as a solution going forward. > ... extremely wealthy landlords ... killing LVT LVT would not be an appropriate method for targeting tax extraction from extremely wealthy landlords. They would (probably) make up their losses through rent increases and additional service charges - effectively passing on the tax to renters and leaseholders. If you want to target the rich you need to use tools that target their personal and/or business income streams - in the UK, for example: Income, Capital Gains, and Corporation taxes.
- pydry 6y ago
  >LVT would not be an appropriate method for targeting tax extraction from extremely wealthy landlords. They would (probably) make up their losses through rent increases and additional service charges Seriously?? If your inquiry concluded this then it certainly was being run on behalf of landlords. They would no more be able to make up their losses through rent increases than I could make up the loss of being charged extra for a loaf of bread at the supermarket by unilaterally raising my wages. One does not drive the other. When the supply of housing remains constant and the demand of housing remains constant then prices remain constant. LVT changes none of these variables directly.
  - rikroots 6y ago
    > They would no more be able to make up their losses through rent increases than I could make up the loss of being charged extra for a loaf of bread at the supermarket by unilaterally raising my wages. One does not drive the other. Do you have research, or an evidence base, for this? > [...] it certainly was being run on behalf of landlords. It certainly was not.

grey-area 6y ago

Why tax capital instead if income? The reason to do so is because it reduces inequality and leads to a fairer society.

andi999 6y ago
Well, if you tax potential capital (like house prices), then gentrification is the consequence. Think somebody living in a modest house mixed neighbourhood. Rich ppl buying houses there, property tax shoot so high (because the small house is now worth millions) that the person has to sell. As far as I understand that happened in Vancouver. Not sure if it leads to a fairer society. (of course one could argue it is fair for a not so rich person not to live in a rich area :-) )
- grey-area 6y ago
  Gentrification happens everywhere all the time without high property taxes. I'm not sure it is something we can or should avoid. A little inequality is ok and may function as a driver for growth, a lot of inequality had bad outcomes for everyone, even the rich. I sincerely believe all types of capital should be taxed instead of income, the tax burden doesn't have to change but it should be redistributed a bit. This would also deal with companies like Amazon and Apple who pay very little tax on profits - they'd pay a tex on assets instead like land or cash and pay a larger share.
  - andi999 6y ago
    How would you value the asset and not come up with (almost) arbitrary numbers? Especially since biggest value of google are non material assets (brand name, domain name and customers)
    - grey-area 6y ago
      Every system is subject to gaming of course, but I think taxing assets would make it a little harder for companies and individuals with lots of assets to avoid taxation and would encourage putting money to work. Values for assets are market values, which are arbitrary and every-changing yes, just like income and profit is arbitrary and every-changing but at least values for assets are generally set by third parties, as opposed to the value of profits - the situation could not be much worse than the one at present where large companies choose how much tax to pay by manipulating their books to adjust profit. I don't think companies should be taxed on customers personally, but if they choose to value their brand name at $10m owned by a subsidiary as a tax dodge (as at present), sure they should be taxed on that.

somewhereoutth 6y ago

I'm from the UK - Council Tax was always a real pain, its based on property price but paid by the occupiers (i.e. renters) NOT the owners. When you are house-sharing this becomes very problematic as its the largest and not insignificant shared bill - especially when housemates are moving in/out frequently. Collection is also a nightmare for the councils - sure they know the address and the amount owed - but who was living there in the period in question? Its a shame the inquiry didn't recommend formula funding from central government receipts (couple of pennies on income tax?) - so much grief could have been saved.

rikroots 6y ago
> Its a shame the inquiry didn't recommend formula funding from central government receipts The Inquiry's main objective was to investigate possible revenue streams that could be raised locally, to help local councils free themselves from the tyranny of central government funding. At the time local government revenue came from Council Tax, Business Rates (though the level was set by central government, not local authorities themselves), licence and other fees (eg to open a tattoo parlour, or register a death), small fines (dog mess and other litter) and car parking charges. Altogether the revenue raised covered less than 10% (I think) of all local government spending. The rest of the money was supplied by central Government - making the UK one of the most centralised states in the world. A "couple of pennies on income tax" would've made the situation worse - though one of the things the Inquiry looked at was the possibility of localising (some) income tax.

perilunar 6y ago

> "Why tax property?" Because its appreciation in value is largely unearned wealth, especially in a country like England with a long history of aristocracy and landed gentry.

rikroots 6y ago
No seriously. The answer was: "Because it's there." The whole thing about tax is to extract the maximum number of feathers from the goose with the minimum amount of hissing. Taxing property is easy "because it's there" - you can't hide a house, or a barn, or a factory. Though deciding _how_ to tax property is a bit more difficult. At one time they tried taxing by the number of chimneys a house had[1]. Another was the Window Tax[2]. Have you ever heard of the phrase "They got away with it scot free"? I was born in the village which (by legend) introduced the Scot Tax - not a per-head levy in our Friends born north of Hadrian's Wall but rather a tax on properties across the Romney Marshes, specifically raised to pay for maintenance of the sea wall. Houses below sea level had to pay the tax, houses above sea level were 'scot free'.[3] ... And people think tax policy is boring! [1] Technically they taxed hearths, but it's a lot easier to count chimneys from the outside of a house than it is to gain entry to the house to count the number of fireplaces - https://www.nationalarchives.gov.uk/help-with-your-research/research-guides/taxation-before-1689/#4-hearth-tax-1662-1689 https://www.nationalarchives.gov.uk/help-with-your-research/... [2] You can still see many houses in the UK with bricked up windows. It wasn't done for aesthetic purposes; it was done to limit the level of tax that could be levied on the property - https://en.wikipedia.org/wiki/Window_tax https://en.wikipedia.org/wiki/Window_tax [3] https://theromneymarsh.net/newhall https://theromneymarsh.net/newhall
LVTfan 6y ago
And as Adam Smith pointed out, it is there, and visible. It can't be hidden, can't be spirited out of town or offshore during the dark of night. You don't even need to know who it is that owns it; as long as they pay their land value tax, they can remain anonymous. You might search for the term "unearned increment." It was a common expression to point out what people who reaped but did not sow receive due to our failure to collect the economic rent. One person's unearned increment is another's — and likely many others' — lost birthright. Who is entitled to it? All of us! How do we implement this? Land value taxation.