Sunday, June 28, 2009

LVT is not a good tax

There are a good number of people wandering about this here blogosphere who advocate a Land Value Tax (LVT): often citing Adam Smith, they claim that it is the "least worst" tax.

Over at Samizdata, Johnathan Pearce delivers a pretty comprehensive smack-down of LVT—inspired by regular commenter (here and there) Ian B.
However, I wanted to post this by the regular commentator, IanB, as it was too good to leave at the bottom of a very long thread about the flawed idea that land, qua land, is special, and must be singled out for tax because of its supposed uniqueness, as distinct from say, income or consumption:
"Liberty is based on a different presumption which has the virtue of making sense, which is that people should own property and do with it as they wish, because it is their property. And, honestly, if I save up and buy some land and plant a big garden on it for my retirement, I don't care whether you think it would be better used for a glue factory because that would return you some externality that you can double charge for via your tax."

"This is why liberty and georgism are incompatible; you keep making claims on behalf of the community. Screw this "community" of yours. It has no rights or claims on me beyond the right to freely interact with me. The LVT is a crude social engineering plan. It attempts to maximise productivity of land. Liberty is not about maximising any statistical value- it is simply the principle that the person may do with themself and what is theirs what they wish. So long as they produce enough by whatever means to survive, there are no other demands upon their economic activity."

Exactly. Suffice to say, I doubt the LVT enthusiasts will give up (they are persistent, a bit like cockroaches that can apparently survive a nuclear blast). Question: why does this issue come up a lot on this site? Are we masochists? Well, libertarians obviously are against taxation, period, but there are grounds for debate on the least-worst form of tax; for what it is worth, some form of consumption tax is probably best in my view, not least because they tend to be fairly easy to collect, although there are still issues here.

Indeed, it is consumption taxes (preferably on luxuries) that I favour since they are as close to a voluntary tax as you can get—you don't have to buy things and thus you don't have to pay the tax.

And, of course, if the levels of tax are set, and the tax collected, locally, e.g. a Local Sales Tax, you can keep the levels of tax low through competition between different areas.

Further, consumption taxes, quite obviously, do take account of ability to pay: if you cannot afford to buy lots of nice shiny things, then you do not pay tax. If you are a multi-millionaire and you love nice shiny things, then you pay lots of tax. Very progressive, you see, but it doesn't disproportionately penalise people for the amount of money they earn.

Anyway, Johnathan continues to explain why LVT doesn't even work on its own terms, the first being the idea that LVT somehow stops property bubbles.
I don't know why Georgists should, for some reason, not give more weight to foolish central bank policy in causing asset price bubbles, or assume that property bubbles are bad, but other bubbles - like say, the dotcom one of the 1990s, are less so. One Georgist likes to raise the example of Hong Kong, which has a LVT. But that example won't fly as there have been big gyrations in the price of accomodation, which hardly suggests LVT did much to alleviate the situation, or by much. In fact I would say that proves pretty conclusively that LVT, on its own, cannot fix this sort of problem if monetary policy is deranged by Keynesian demand-management or other economic quackery.

Ah, yes, but at least land is fixed, is it not? Um...
There is another, even more fundamental problem with the Georgist position about land. The problem is that it does not distinguish between the fact that while land is, by definition, fixed, available land is not. This is why the likes of John Bates Clark, an economist of the late 19th Century, demolished the land value tax movement's arguments as did Murray Rothbard half a century later. Both men pointed out that the LVT argument ignores the fact that the price of land is driven by its marginal productivity, and in that sense is no different from labour or physical or human capital. To single out land for special tax treatment will lead to a misallocation of resources, encouraging more building density than is rational, etc. The total amount of land is fixed—obviously–but the total amount of sellable land is determined by the amount of marginal buyers and sellers, a very different thing. If demand is heavy enough, new land comes onstream. Just ask the Dutch.

Quite. Do go and read the rest of the post which, amongst other things, lays out Rothbard's case against Georgist taxes.

32 comments:

no longer anonymous said...

Personally I sympathised with the LVT on the basis that it was the tax least likely to cause damaging economic distortions (which isn't to deny that it would cause some). I certainly had no time for the philosophical meanderings about how the community owns the land etc. Nor have I ever subscribed to the Georgist theory of the business cycle.

Blue Eyes said...

DK thank you for posting this. I have always been uncomfortable with the LVT idea because, similar to the council tax and car tax it forces people to pay a fee just for the privilige of owning a piece of property.

The idea that land belongs to the community is a very feudal idea.

Several excellent posts this weekend, keep up the good work!

Patrick said...

Bad Devil ;-)

I plodded through the original thread, and tossed in a couple of comments. I'd decided to ignore the new one until I read this post. Wish I had :-(

As JP says, they're like bloody cockroaches.

Gandhi said...

The libertarian case for a tax on land is very simple: land is a limited natural commodity; nobody created it, nobody has the natural right to monopolise its ownership. Rothbard ignores the Lockean Proviso because it doesn't fit with his "logically consistent" system. Sadly for Rothbard, neither does our limited, interconnected, and nuanced reality or "real world" fit with his system.

If we are to continue to tax for anything at all - then limited natural commodities (including land) are the most legitimate choices. Whether or not you are a fan of Henry George does not change this.

To claim that LVT is illegitimate because it causes economic distortion is a sleight of hand - at least if you mean this as an argument for sales tax. An often-cited case for sales tax (or consumption tax) is precisely that it is distorting, only in a lovely "green" or even "progressive" way. Fine, but please don't use the same argument against taxes on land without that acknowledgement.

Sales tax is easy to administer? Easier than land tax? Really? Do you know why?
CORPORATISM. It is easier because it is paid by corporations and not directly by individuals, it is easier because it is unavoidable; the individual is powerless to object, the State and the corporation are in a conspiracy against him, he will have to pay, just as a wage-labourer will always have to pay income tax. Try formulating a non-corporatist version of VAT/sales tax and then compare those with LVT, things will seem a little different.

Will tax competition force sales tax down? Not while there's still a national element in tax collection/spending; rather, WORSE, it will force LOCAL taxes down in favour of national taxes! A locally-set land tax on the other hand, would not create competition in the same way and therefore could be sustained against the backdrop of a national sales tax. We still have democracy to argue over the level of tax we pay, and we have tax protest at the local level.

Sales tax is voluntary because you can choose to avoid it? Well clearly then you intend sales tax as a form of social engineering, so the poor will be discouraged from less-than-virtuous purchases, such as cigarettes (point 1). But more generally: you don't HAVE to buy!? What kind of an argument is that for a libertarian to make? You don't have to buy? You don't HAVE to be free? You don't HAVE to read books? You don't HAVE to use transport? You don't HAVE to take a holiday? You don't HAVE to have sex perhaps? Therefore BIG taxes on jimmy hats and sexual health products says Ann Widdecombe. Children are a luxury, so pushchairs: expensive. Just stay at your desk/cashpoint until you've saved enough to live like the real/important people or better still don't live at all.

Now of course, knowing - as I do - that you, Mr Kitchen, are a nice chap, I'm sure you won't have intended any of the nasty social engineering. But it's happening all around us.

I can avoid council tax, we the people could organise a Council Tax protest and get it cut if we wanted to. The same cannot be said for VAT (as it stands), and not for sales taxes as proposed by the Libertarian Party.

I can see no convincing case on either side for the exclusive use of one or other form of tax on natural resources. The real argument that's going on here is an argument over utilitarian outcomes, not an argument on the basis of liberty. I think it would be helpful for both sides to come clean on that point.

Devil's Kitchen said...

Ghandi,

"The libertarian case for a tax on land is very simple: land is a limited natural commodity; nobody created it, nobody has the natural right to monopolise its ownership."

Can you tell me what part of that sentence does not apply to oil, copper, aluminium, etc.?

Now, you can argue that one needs to extract copper and purify it, etc. But then one needs to work land in order to use it.

Land isn't special.

DK

Gandhi said...

DK: I'm not arguing that land is special, I'm arguing that it's a limited natural resource, so that the same logic which applies to other commodities (their being limited-therefore-taxable) applies equally to land. That is to say, we agree on that point, but not on the idea that we have to choose EITHER land OR commodity taxes. I think we should use both.

Patrick said...

The point which I raised on the original thread over at samiz was that Georgists don't seem to argue their case coherently: it should be a two-stepper, but they roll it all up into one.

First is property rights. What property rights should exist? Why? Are finite natural resources different from non-finite resources (e.g. ideas)? As ever, property rights are something that we all just make up, so we might not agree.

Second is taxation. Whilst a state exists, how should it raise its money? What's the 'fairest' way?

Note that the first point (property rights) is an ideological discussion, the second (tax) a utilitarian one. It's the common refusal to separate the two that makes any discussion around LVT an horribly painful process :-(

Gandhi said...

I would say it makes any argument around tax a painful process, yes because it has to be about utilitarian outcomes by its nature. I don't think we can completely separate property rights from that, it's messy, of course - it's an argument over what should be stolen from whom and for which utilitarian purposes.

Patrick said...

@Gandhi

I think that is imperative that we at least attempt to separate the two issues. How 'stuff' is later pillaged is a different matter from original ownership rights.

I mostly kept my head down on the samiz thread as I do have some sympathy for the Georgist position on land ownership, and more so for the mutualist one (which nobody brought up, thank God). There clearly are issues around Lockean rights over land, as none (or very little) was ever originally acquired in accordance with libertarian principles.

But I try not to let my sympathy there impact my views on utilitarian tax raising, or the negative utilitarian effects of LVT.

Pull the two issues apart and we can have a debate, keep them together and all we'll end up with is stalemate.

Gandhi said...

Patrick: There is another route. Give councils and central government the choice of land/property/commodity taxes on an equal footing (IE: create the req. administrative structures) and let them get on with it.

Those who want to see competition would struggle to argue against that one I think ;)

Paul Lockett said...

Patrick: "The point which I raised on the original thread over at samiz was that Georgists don't seem to argue their case coherently: it should be a two-stepper, but they roll it all up into one."

The mistake there is to assume that Georgists all have the same reason for holding their beliefs and speak with one voice.

You could make the same point about libertarianism in general and claim that libertarians don't argue their case coherently because they argue on both a deontological and a consequentialist viewpoint.

That said, I agree with the rest of your comment. Any argument on a ideological viewpoint is never likely to get anywhere, as the conservatives who oppose LVT ideologically are almost never going to be swayed by it. A utilitarian argument is likely to find more agreement, but will at best result in an uneasy truce.

Andy said...

Mine is not a popular idea with fellow libertarians, but here is is anyway:

Income tax is the fairest form of taxation.

The problem with any asset-based tax (like LVT, inheritance, CGT, etc, etc) is that it punishes ownership. Ownership doesn't necessarilly confer income, and so you get in the position of issuing bills to people who can only pay that bill by selling the asset you are taxing. Almost certainly at fire-sale discount prices. That's got to be counted as unfair to the individual being taxed, and a market distortion. So I reject those methods early on.

That leaves consumption and income. Here's my argument against a consumption tax: value of money is not linear (I think economists call it marginal value).

You are a billionaire. I am a wage-slave. Both of us are walking down the street and drop our wallets. Each wallet contains 100 pounds. You are pissed off, but it is 0.001% of your monthly income - it makes no difference to you. I can't make my mortgage payment because every penny of income is needed for me to survive. (This isn't the best example, but I hope I'll be forgiven for thinking on the spot).

My point is that the personal value of a pound is relative to your earnings. Since there is no way for a consumption tax to alter the taxation of a good based on the earnings of the buyer, it's not a good tax. It hurts poor people more than it hurts rich people.

So: a progressive income tax scheme is what I would propose. However, not the ridiculous threshold based system that we have now. Instead it should be a smooth gradation. So

TAX% = function(salary)

It needs a better mind than mine to come with this function, but it would have some key properties:

- A high "allowance" threshold that takes "minimum wage" earners out of tax. "minimum wage" wouldn't be a state enforced wage, it would be set such that the person earning gets more benefit from an increase in wage than from accepting state benefit. The tax system should never make it painful for people to go from unemployed to employed.
- A defined maximum taxation rate. The number doesn't matter (for the purpose of this suggestion), set with the idea that we should never get to the point where our millionaire entrepreneurs will find it so painful to earn that they would rather not earn.
- A smooth curve between these two points. Threshold levels just make salary increases suddenly worth less. A 1k raise for a 30k a year worker is worth an extraordinary amount less than a 1k raise for a 29k a year worker. This discourages ambition, since the amount of effort required to get the same increase is suddenly ~50% more. If the change were gradual (and made to match the non-linearity of value of money) the pain should be effectively zero.

Given the above, my policy would of course then be to cancel all other forms of taxation.

Off topic but related: If I were treasurer in the libertarian party government, my day-one act would be to get rid of employer NI contributions - there was never a more odious way of income taxing people (so that they don't see what they're paying). The fact that our true salaries are 12.8% higher than posted and that difference all goes to the government without appearing on a pay slip is appalling.

Gandhi said...

Andy: Ermmmm. Wealthy people don't pay income tax, low and middle income people pay it. If you've ever had to calculate an income tax bill you'd realise that that system is a straight fraud; voluntary for all intents and purposes.

Andy said...

@Ghandi:

I'm quite sure you are correct. However, since this was about a hypothetical tax system rather than the actual (acknowledged dreadful) tax system I'd argue that you can't say that about my proposal, since it doesn't exist.

I would add the following though:

Rich people manage to avoid tax at the moment because the tax system is so utterly huge and complex that if you have enough time and (I guess) have lined the right political pockets, there is a way to avoid it (which is perfectly legal). I think avoidance would be harder with a simpler system. Additionally, a libertarian government would presumably be reducing taxation anyway - so perhaps the rich would feel more disposed to just cough it up?

Let's also put pay to the myth that any practical tax solution would be affected by taxing rich people. There just aren't enough of them. Even if the state taxed the mega rich to the tune of 100%, it would be peanuts in comparison to the country's budget. Now I'm not suggesting that that is a reason not to tax them, but the constant calls for "tax the rich" by left wing morons is nothing more than envy - the recent 50% tax rate is going to do nothing for the treasury (even assuming the rich folk stay to pay it), but it sure does make us poor folk feel better to stick it to them doesn't it?

You could argue the rich should pay less tax, since the cost of provisioning services is per-population, why should a rich person pay more when they will not personally use proportionally more of the service?

There is more to be said about fairness of course. Think of a married couple (although the fact of marriage is immaterial, but makes the players in my story easier to identify). If the wife stays at home and doesn't claim benefits because her husband earns loads of cash - why does the husband have to pay high rate tax? In a fair tax system, I should be able to assign my allowances to anyone else I like (with the proviso of course, that I will be assigned a virtual income as appropriate).

As I'm on a roll, I will add another of my ideas about government to the mix:

Scrap the idea of benefits. Everybody should be classed as employed. If you are on benefits now you should instead get a pay slip, be paid by the state and taxed accordingly (which of course would be zero by my "minimum wage" point earlier). Your "job" as an employee of the state would be to keep your damned self out of trouble or get fired. If you get fired from your "job" you get nothing. Just as if I were negligent in my job I would expect to be fired.

In that way, the benefits system would do what it should have been for: helping those who have fallen on hard times. If I lost my job, I wouldn't instantly become a wastral, I would continue to keep myself to myself. Therefore I would have no trouble keeping my state "keep yourself out of trouble" job. Nor would anyone else who justifiably could claim benefits.

Gandhi said...

Andy: You are right about one thing, the best thing about your tax system is that it doesn't exist. Now please take your lithium and shush.

Andy said...

@Gandhi:

I thought we were having an interesting civilised conversation about tax systems. I'm very sorry that I misunderstood, and equally sorry if I upset you somehow.

I certainly didn't intend to be insulting, which I presume I must have been to merit your mean-spirited response.

No problem. I am happy to shush.

Gandhi said...

Merely bewildered.

DBC Reed said...

Johnathan Pearce's idea of demolishing LVT is to say John Bates Clark and Murray Rothbard have demolished it and repeat himself over and over and over again.
John Bates Clark uses a marginal utility theory that is so out of date that it measures all land value by the agricultural value dependent on soil fertility.Not much use in the sub-prime controversy.
Murray Rothbard gets criticised by his own side (the von Mises Institute) for assuming land tax will be 100%.David Friedrich( Von Mises 23 feb 2004 )points out that it does n't necessarily have to confiscate/ reclaim the lot.Rothbard claims hilariously that land speculators are doing everybody a service and he cannot work out how to separate land from buildings+ plus land in assesssment.
The vale of White Horse Study in the Uk showed that it was really easy.

Roy L said...

The notion that JB clark or Murray Rothbard made valid arguments against land value taxation is absurd. Clark's showed that he did not understand what "fixed supply" means, and Rothbard's was so stupid and ignorant that it can best be understood as an exercise in self-humiliation. At one point, he even claims that if all land rent is recovered for public purposes by taxation, the land's value will fall to zero, and the revenue will thus also be zero!

Roy L said...

Andy wrote:

"The problem with any asset-based tax (like LVT, inheritance, CGT, etc, etc) is that it punishes ownership."

To call a voluntary, market-based, value-for-value transaction "punishment" is mere propaganda. Would you also claim that a private landlord "punishes" his tenants by requiring them to pay rent?

"Ownership doesn't necessarilly confer income, and so you get in the position of issuing bills to people who can only pay that bill by selling the asset you are taxing."

Or by using it more productively. By definition, land rent is always affordable: just let the most productive user use the land, and collect the full rent from him.

"Almost certainly at fire-sale discount prices."

It is intended that LVT would reduce land prices. Prosperity is when things are cheap relative to labor.

"That's got to be counted as unfair to the individual being taxed, and a market distortion."

No, it doesn't, and isn't. Revoking a subsidy is not a distortion, sorry, it ENDS the distortion.

"So I reject those methods early on."

And all your reasons for doing so have just been conclusively demolished.

Have a nice day.

DBC Reed said...

All these criticisms of LVT seem to be based on the idea that a lot of people like their houses going up in value,without their doing anything and long may the UK political parties distort/ruin the economy to catch the votes of this homeowning majority.Thats about the size of it.Justice,equality? Stuff that!
LVt could be introduced when the market bottoms out (ie now) to draw a line in the sand beyond which if property prices inflate,LVT kicks in so LVT does n't bring down anybody's house price just stops the inflation of house prices once and for all.
Or LVT could be intro'd at any stage in the cycle at a rate where it exactly covers existing taxes on property (council tax ;Unified Business Rates) taking in as much money but from land values only.
There's not much of a problem really (little old ladies in big houses have their payments deferred to the inheritance tax settlement).
Where the problem lies is in the present "system" by which political parties make the whole economy contribute to a very pure form of inflation to stay in power(At least with wage inflation,some work went on.)
If the recession-busting measures only succeed in putting house prices back where they were before,we have got nowhere and picked up a crushing deficit on the short round-in-a -circle journey.

Andy said...

@Rob L

"To call a voluntary, market-based, value-for-value transaction "punishment" is mere propaganda."

I'd prefer "metaphor". But okay. I fail to see how LVT is voluntary. Voluntary in the same sense that income tax is "voluntary" because I don't have to go to work.

"Would you also claim that a private landlord "punishes" his tenants by requiring them to pay rent?"

In the sense that I used the word punish - yes I would. A tenant weighs that punishment against the reward they get for use of the asset. LVT would introduce a punishment for ownership of land that does not exist now, nor would it exist for any other type of asset under LVT. Obviously that would have to be balanced against the rewards for ownership; but that punishment in the case of LVT is a distortion.

There are a couple of differences in the case of land value tax
- Tennants rent through choice. Their other option (with no LVT) is to buy, and thus avoid rent.
- LVT would make everyone a tennant to the state. Given that the state has the ability to use force to get their "rent", this would be tennancy-plus; no other landlord has the facility to put you in jail if you don't pay.

LVT would simply mean that we all have to own more land. Since the only way I could pay for the land I want to live on would be to own land that I can rent to someone else that I can make enough profit on to pay for itself and the land I want to live on.

LVT to me seems to be based on the proposition that all land should be used for farming. We would all own enough land for our homes plus the "earning" portion that we would grow stuff on. This sounds like an idea that's trapped in the middle ages.

"Or by using it more productively. By definition, land rent is always affordable: just let the most productive user use the land, and collect the full rent from him."

This sounds like a world were all the land is owned by a robber baron and LVT is the way of making him choose the hard-working serf for his tennant over his lazy mates. This is not the world we live in. The "land" most of us own is the land that has our house on it.

I don't want to use the land, I just want somewhere to go home to after I've been at work all day, somewhere to retire to after I've been at work all life. LVT would put everyone in service to the state for their entire lives. At what point would an LVT economy be out of debt? Land is no different from any other asset; if we had LVT we would have to tax all ownership.

"It is intended that LVT would reduce land prices. Prosperity is when things are cheap relative to labor."

I don't mean "fire-sale" relative to what they are now; I mean "fire-sale" relative to their true value (even if that is lower in the LVT world)". By forcing (and it is force) a tax onto an asset, that the owner has no way of paying, you ensure that they will have to sell it. Because they will be thrown in prison if they don't - they will have to sell it quickly. That distorts the value of the asset because only the state can lock you up.

"No, it doesn't, and isn't. Revoking a subsidy is not a distortion, sorry, it ENDS the distortion."

SUBSIDY? Where is the subsidy? I must have missed the moment when the government offered to pay my mortgage.

"And all your reasons for doing so have just been conclusively demolished."

Your arguments are fine, and I am pleased to listen to you, but is there really a need to artificially inflate their worth with rhetoric like this? Since your opinion is of no more inherant absolute value than mine, "conclusively demolished" seems terribly arrogant. Especially since the brilliance of LVT is not universally recognised.

Andy said...

@DBC

"All these criticisms of LVT seem to be based on the idea that a lot of people like their houses going up in value,without their doing anything and long may the UK political parties distort/ruin the economy to catch the votes of this homeowning majority"

So you're saying political parties currently manipulate the housing market for political purposes and that should be stopped?

Why would LVT stop them? LVT would presumably still have a knob for manipulation - the proportion of land value that is to be the tax. That knob would be in the hands of the knobs.

We already have a knob for preventing house value growth: the national interest rate. Our government chose to turn that knob at utterly the wrong time(s). How then would LVT have prevented the same mistake, but with a different knob?

DBC Reed said...

@andY "LVT seems to be based on the proposition that all land should be used for farming" You what? I have seen a lot of mudpies flung at LVT in my time,but that is the all-time silliest.
On the other hand " LVT would presumably still have a knob for manipulation-the proportion of land value that is to be the tax"is something else entirely .Shrewd.
At present lowering interest rates leads to higher house prices and eventually bubbles (that collapse) If money is blocked going into housing by a stiff tax,it stands a better chance of going into non-housing consumption and production.
Therefore you have to set the LVT rate at the level where house prices stay steady (they did all the way through the 50's and 60's with Schedule A a tax on home-ownership taken straight out of income -would you believe? ).Setting the level would be a matter of starting low and raising the level till house prices stopped inflating .But best out of the hands of politicians.Something like the MPC but tax oriented.
It really is a matter of you LVT sceptics coming up with something better.Is house price inflation an issue? What do you propose to do about it?

Gandhi said...

DBC Reed: Gordon Brown whipped-up that house price inflation and then rode it (to my SHOCK) throughout his time as chancellor. The craziness there was all to do with the money supply, hence the term "inflation". We had a lot of cheap credit flooding in and while many had been calling for governments to "pop" asset bubbles early (such as the stock market), Gordon chose rather to exclude house price inflation from the BoE inflation target; the result being WILDLY LOW interest rates, cheap mortgages aaaaaand expensive houses due to increased demand from people holding cheap credit. Buy-to-let surged etc.

Trying to fix a problem by manipulating outcomes - the Little Miss Muffet approach - is the standard way things are done based on superficial utilitarian thinking, the lesson from libertarianism is that we must make major structural changes not just paper-over the cracks. In terms of the inflation problem, the libertarian solution tends to be - one way or another - preventing the initial inflation, often through the use of a gold standard "hard currency".

I think I'm seeing where Patrick's complaint (above) comes from now. If you just grab around at straws - rather than distil each factor of your argument - then you make no reasoned case for LVT. There is a case compared to other forms of taxation, but it is not being made here.

For anybody interested in LVT, there's plenty of info here:
landvaluetax.org
...it's UK-centric too. I notice one of the people behind it (at least) is a member of the Liberal Party, who I know are pushing for it.

My personal view is that it is better than what we have, and unfairly maligned/scapegoated (much as council tax is here), though I wouldn't like to see a single tax situation.

DBC Reed said...

@Gandhi
Your argument seems to depend on Gordon Brown starting House price Inflation: the most cursory glance at graphs of house prices since WW2will show a low plateau of invariant prices during the 50's and 60's then a spike in the 70's corresponding to the Heath/Barber giveaway budget ,followed by further spikes every decade culminating in the present crisis.
Your argument might also address why house price bubbles have occurred in the US,Ireland,Spain Latvia etc.There is obviously something fundamental going on beyond Brown's remit.
Your complaint that MPC inflation targets (which Brown did something to remove from direct government control) do not include an element of house price inflation ignores the obvious problem that rising house prices may prompt a rate rise
when the non-property economy needs low interest rates.
Your comments about the Gold Standard are obscure.Are you recommending credit restriction (in a recession) by means of hard currency?
I would point out that the UK started to come out of the Depression when it came off the Gold Standard in 1932.Interest rates fell from 5% in Feb to 2% in April.Three million new houses were built for sale between 1933 and 1939.Of course there was a lot of cheap land at that juncture,the factor of production which land taxers are really the only group to address consistently.

Gandhi said...

DBC Reed: Brown removed house price inflation from the UK's inflation figures, meaning that the newly independent BoE made its interest rate decisions based only on consumer price inflation. House price inflation meanwhile (and the stock market) were storming on upwards, IE the overall money supply was going up FAST and he rode the wave, carelessly ignoring the inevitable outcome. His excuse? "Everybody else does it this way". They could've set a separate interest rate for mortgages if they were just going to fiddle rather than deal with the fiat money problem, but the point you make about divergent inflation rates (very fair) is a reason why fiat money and a central(ish) interest rate is a disaster waiting to happen. All the countries you mention had a virtually identical system to our own, even banking regulations were being harmonised downwards.

It's widely thought that Churchill bodged the gold standard re-intro, if you swing over to http://lpuk.org/pages/manifesto/economy/LPUK :: Monetary Reform you'll see a mixed policy of gold standard for the (hopefully diminishing) BoE and free banking for the rest of the economy (IE, a decentralised currency supply and system of interest rates). Also this would address the problem of fractional reserve which creates much of our inflation.

Gordon Brown saw the bubble, inflated the bubble, watched with glee as the bubble kept his shonky economy afloat and encouraged massive debts - and then refused to accept any blame/responsibility. Inflation was responsible, LVT does not address inflation, in fact had we used it as you suggest ZERO difference would have been made to the financial crisis. On another day you'd be touting that fact as an advantage (non-distortion)?

DBC Reed said...

@Gandhi
However distortionary LVT may prove to be, it would scarely approach the distortionary mess that would be created by having as you suggest,different interest rates for mortgages Presumably higher.You don't think people would take out other loans and use the money to save on mortgage repayments?
I have suggested the same common rate for loans, with cheap credit being blocked from going into housing by a stiffish tax.You opine that this would be useless,as an unsupported statement.
I have shewn that a not totally dissimilar tax(to LVT)viz Schedule A of income tax helped keep house prices flat during the 50's and 60's when supported by Credit Controls ( an alternative to the talsimanic Gold Standard,this century's Mother Shipton's box).
I cannot how something calling itself libertarian can propose stricter controls on the money supply than Thatcherite monetarists like Milton Friedman,who was however a staunch supporter of LVT.

Gandhi said...

Well I saw that coming; you've latched-on to the most insignificant (and tangential) part of my argument rather than engage with the the beef.

Your approach to fighting inflation is akin to digging a hole in a river bed in an attempt to lower the water line.

Here's a quote from Towards Mutual Benefit:
"The most perfidious way of harming a cause consists of defending it deliberately with faulty arguments."
-- Friedrich Nietzsche


I'm gone.

Roy L said...

Andy wrote:

"I fail to see how LVT is voluntary. Voluntary in the same sense that income tax is "voluntary" because I don't have to go to work."
No, voluntary in the sense that you only pay for the benefits you get, which government and the community provide, and of which you deprive others.
"A tenant weighs that punishment against the reward they get for use of the asset."
Honest people call such "rewards" and "punishments" by their correct names: "benefits" and "costs."
"LVT would introduce a punishment for ownership of land that does not exist now, nor would it exist for any other type of asset under LVT."
A cost paid to obtain an equivalent benefit is not a "punishment."
"but that punishment in the case of LVT is a distortion."
No, it is the current exorbitant subsidy to landowning that is the distortion -- as the recent global financial meltdown proves so very conclusively.
"- Tennants rent through choice. Their other option (with no LVT) is to buy, and thus avoid rent."
Wrong again. Tenants rent because their liberty right to use the land is being violated without just compensation. And buying land does not avoid paying rent, it just pays the rent in advance.
"- LVT would make everyone a tennant to the state."
No, it would merely require everyone to compensate others for depriving them of what they would otherwise have.
"Given that the state has the ability to use force to get their "rent", this would be tennancy-plus; no other landlord has the facility to put you in jail if you don't pay."
That is just a fabrication on your part. The state would not put you in jail for not paying LVT. It would just allocate that land to someone willing to pay for what they got.
"LVT would simply mean that we all have to own more land. Since the only way I could pay for the land I want to live on would be to own land that I can rent to someone else that I can make enough profit on to pay for itself and the land I want to live on."
?? You have no idea what you are talking about. LVT makes it IMPOSSIBLE to do as you describe.
"LVT to me seems to be based on the proposition that all land should be used for farming.
We would all own enough land for our homes plus the "earning" portion that we would grow stuff on. This sounds like an idea that's trapped in the middle ages."

You are just makin' $#!+ up again.
"This sounds like a world were all the land is owned by a robber baron and LVT is the way of making him choose the hard-working serf for his tennant over his lazy mates.
No, of course it doesn't. You are just makin' $#!+ up again.
"I don't want to use the land, I just want somewhere to go home to after I've been at work all day, somewhere to retire to after I've been at work all life."
And you think that somehow does not use the land? Give your head a shake.
"LVT would put everyone in service to the state for their entire lives."
Lie.
"Land is no different from any other asset; if we had LVT we would have to tax all ownership."
Ahem. Other assets are not already there, ready to use, with no help from any person.
"By forcing (and it is force) a tax onto an asset, that the owner has no way of paying, you ensure that they will have to sell it. Because they will be thrown in prison if they don't - they will have to sell it quickly."
I have already explained how to pay LVT, and threats of prison are not part of LVT (maybe for bribing the assessors).
"Where is the subsidy? I must have missed the moment when the government offered to pay my mortgage."
By its expenditures on services and infrastructure, government makes it possible for you to earn enough money to pay your mortgage. That is the only reason you would ever be willing to pay so much for use of the land.But you paid the previous landowner for the benefits, not the government that provides them.

Roy L said...

ROTFL!

You can see the evil typical of anti-geoists displayed rather blatantly at Samizdata.

I demolished Johnathan Pearce utterly, and he had no answers. So he warns me not to be so embarrassing, or the editors will ban me. Lo and behold, Perry de Havilland starts baldly lying about what I plainly wrote, I identify the fact that he was lying, and I am instantly banned.

Sooooo typical of feudal libertarians -- who are in fact apologists for any kind of violent, forcible, aggressive coercion (like censorship) as long as it is inflicted in the name of the Great God Property.

We saw the same thing at Libertarian Underground, where the execrable Paul Birch first used his power as moderator to edit my posts without permission, then deleted them from the site unanswered, and finally banned me outright. Birch, of course, is the same scum who defends LITERAL SLAVERY in the name of property rights:
http://www.libertarianunderground.com/Forum/index.php/topic,1669.20.html

The pattern is always the same: they lie about what I have plainly written; I identify the fact that they have lied; and then they ban me for telling the truth.

How unutterably despicable.

Roy L said...

And speaking of Libertarian Underground's lying apologist for privilege, injustice and slavery (and practitioner of censorship) Paul Birch, Johnathan Pearce over at Samizdata claimed that Birch had written an article that "crushes" the geoist proposal for land rent recovery -- and that I would be unable even to understand it.

In fact, of course, I had already exposed and utterly demolished Birch's idiotic anti-geoist lies:

http://sci.tech-archive.net/Archive/sci.econ/2007-02/msg00272.html

http://sci.tech-archive.net/Archive/sci.econ/2007-02/msg00305.html

Pearce then claimed my refutation of Birch was "not so much a reasoned argument as a tantrum that I would not expect from my 1-year godson."

I invite all readers to read the arguments at the above links, and thus to verify for themselves that Johnathan Pearce of Samizdata is just a flat-out liar.