THE POLITICS OF TAX CHANGES —an excellent Guide (with 2 examples) from Ireland

Anyone interested in changing the tax regime, and this must include all Land Value Taxers, should read this recently published Report

    Jim O’Leary September 2018 How (Not) To Do Public Policy: Water Charges and Local          Property Tax Galway, NUI; Whitaker Institute for Innovation & Societal Change

It’s available as a free download from:

http://whitakerinstitute.ie/wp-content/uploads/2014/02/NUIG-Whitaker-Report-Water-Charges-LPT-Final.pdf

It’s about Ireland but the principles are universal. Any new tax or major change has to be acceptable to the politicians and the voters who vote for them. It also has to be administratively practical, and it helps it experienced Civil Servants design its implementation .

      So far, so obvious you might say! O’Leary uses the example of a Property Tax which was initiated without too much bother, and a system of water charging which is a complete shambles.

     I urge all land-taxers to read this paper (OK skip the sorry details of the water charging fiasco!) It is vital reading if you are serious about seeing LVT implemented in any form in our lifetimes.

GET REAL IF YOU EXPECT LVT TO HAPPEN A salutary tale from Ireland

There could never have been a better time than 2012 in Ireland for the introduction of LVT or Site Value Tax as they prefer to call it. Back in 1978 there had been the hurried decision to abolish domestic rates following a rash promise at an election (!). It was soon realized that this was a mistake and a form of property tax needed to be re-introduced. The result of the 2007 Irish General Election was a coalition, with the Green Party as one of the junior partners. 

All agreed that there should be a property tax, but it was the Greens who specifically advocated Site Value Taxation (SVT). By 2009 a Commission on Tax had reported which saw merit in SVT, but opted for Property Market Value as the basis for the new tax. 

In early 2010 a new coalition government made its proposal in its Renewed Programme for Government. This time, under pressure from all parties, SVT was the preferred option. 

Then in late 2010 the Great Financial Crash exploded on Ireland. The economy shrank by 8%, revenue from property taxes, mostly Stamp Duty on sales, collapsed. Government finances looked dire. 

This is the classic Shock Doctrine territory made famous by Naomi Klein. This is when, in the wake of the crash, the neo-cons move in to pick over the stricken economy, advising governments to privatise utilities, reduce taxes on the rich, crush the power of the trade unions. 

When, in post-crash Ireland a high powered outside group (which became known as The Troika) started issuing edicts, they included the ill-fated introduction of water charging through a privatized company. More promising was the Troika’s requirement to introduce a property tax.

Conditions in 2011 then, could not have been more promising for SVT/LVT. There was a crisis, and more tax revenue was desperately needed. The two previous coalition governments had plumped for a property tax based on SVT. A big bad external group (The Troika) was pressing the government to introduce some form of property tax, so could be blamed if anything went wrong. So what happened next?

In July 2013 the ‘Local Property Tax’ was introduced at 0.18% of the property’s value, payable to central government. But what had happened to the coalition government’s enthusiasm for SVT.  The design practicalities of the new tax were handed to an ad-hoc Inter-Departmental Group of Civil Servants. They produced a Report Design of a local property taxfor the Irish Government 2012. They were well aware of the political impetus behind SVT, yet in their wisdom and experience they produced the following rebuttal of SVT. I reproduce here in full, because I think every land-taxed and Georgist should know what hurdles must be overcome before SVT/LVT is implemented. 

If we cannot overcome these objections at such a propitious time then the project that we hold dear — Land Value Taxation — is a Dead Duck.

So why did Ireland flunk the introduction of LVT/SVT and bring in a property-value(price)-based tax instead? Read on..

LONDON NEARLY GETS IT! Convert SDLT to LVT

A very useful paper was produced in 2017 for the London Assembly “GLA Economics 19 Stamp duty in London Working Paper 81(2017)”, available at https://www.london.gov.uk/sites/default/files/stamp-duty-in-london-wp81.pdf

Full of useful statistics about SDLT, for example how just TWO boroughs in London pay 15% of ALL the UK’s SDLT — £1 billion out of the total of £9 billon. In a long section of Options for Reform, they finally bite the bullet: Why not convert the huge one-off SDLT to a small annual Land Value Tax? Here’s what they say:  

“HOUSEBUILDERS CASHING IN ON LAND-VALUES? 

How dare they muscle in on our Scam.” SAY BANKSTERS

Leasehold scandal: the banks that won’t lend on homes with damaging ground rents 

Developers hid damaging ground rent clauses in new-build homes, leaving them unsellable 

·        Sam Barker The Telegraph14 JUNE 2018 • 5:20PM

An investigation has laid bare the scandal of doubling ground rents affecting hundreds of thousands of people who own leasehold homes.

THE CORE IDEA TO FIX THE HOUSING CRISIS:

LAND VALUE TAXATION

Is there a housing crisis? Are houses too expensive, shoddy and too small? Is there a need for many more new houses, better suited to modern lifestyles? Of course there is a crisis especially of affordability. First to be fixed is the affordability crisis. Once that is achieved, then the production of better houses and many more of them becomes possible. But getting prices down is the first priority.

WHAT OWNING A HOME MEANS NOW,

 AND HOW LVT WILL CHANGE IT

Can we imagine a better world, one where the housing crisis is ‘fixed?

What kind of payoff can home-owners expect from the LVT revolution?

HOUSES CHEAPER, BETTER, MORE.

ARE WE ANY NEARER YET?

SO FAR: AS FAR AS CITIZENS (VOTERS) SEE IT

Finance and the Housing Market in the UK: Who Wins?

Finance and the Housing Market in the UK: Who Wins?

  [Hint: Very few Owner-Occupiers] 

WHY LVT WILL NOT HAPPEN — ACCORDING TO THE ECONOMIST

WHY LVT WILL NOT HAPPEN —

 ACCORDING TO THE ECONOMIST

Here's the economic establishment scoffing at LVT. They have a point, but I hope I am showing how these problems can be overcome 

PEOPLE'S LAND TRUST--

A BRILLIANT NEW IDEA FROM THE N.E.F.

How do you burst the housing market bubble in slow motion? One idea that might be worth exploring is a People’s Land Trust and Building Society[*] (PLT hereafter) – a publicly backed but independent non-profit institution which would buy land from underneath houses and lease it to members.

WILL THIS TINY TAX OF ½% OF LAND VALUE REALLY GIVE US LOWER HOUSE PRICES? HOW?

­­­­­WILL THIS TINY TAX OF ½% OF LAND VALUE REALLY GIVE US LOWER HOUSE PRICES? HOW?

 The whole point of going through all the political perils of dumping Stamp Duty and replacing it with a small LVT is to drive down House Prices.  So will a bit of  LVT do the trick, and if so How? 

Are you a victim[1] of a new-build leasehold? A digression

Just look at the howls of self-pity coming from house-buyers on discovering that their property is leasehold!

TWO GOOD ARTICLES IN TODAY’S PAPERS (SAT 27 JAN, 2018)

TWO GOOD ARTICLES IN TODAY’S PAPERS (SAT 27 JAN, 2018)

  Anne Pettifor, always a good read, explains as I have done, that

“Building more homes won’t solve the housing crisis”

https://www.theguardian.com/commentisfree/2018/jan/27/building-homes-britain-housing-crisis

And over in Ireland comes the explanation that too many people actually like rising house prices. There is a coalition of the greedy and the desperate who would be horrified if prices were to crash.

https://www.irishtimes.com/opinion/david-mcwilliams-rising-house-prices-suit-too-many-people-1.3368455 

EXCESSIVE HOUSE PRICES—HOW THEY LET IT HAPPEN

[of course it’s the price of LAND that is boosting the price, so in this extract I’ve added LAND to housing]

Here are four ways the State reinforces the hyper-commodification of housing LAND to make the price of housing so expensive.

—First, the state deregulates mortgage lending, ends rent control, and privatizes public housing LAND in the U.S. and U.K.

—Second, the state allows financialization of housing LAND by the banks pooling mortgages and selling them as “liquid assets.”

—Third, the state allows globalization of housing LAND with foreign investors speculating in U.S. housing or buying luxury housing as an investment which were never meant to be lived in.

—Fourth, the state allows gentrification to increase landlords’ profits with huge rent increases.

https://www.counterpunch.org/2018/01/19/the-myths-of-housing-policy/

In a review of David Madden and Peter Marcuse’s thought-provoking book In Defense of Housing asks us to rethink the U.S. housing crisis.

THE FIX: GIVE EVERYONE £40 P.A. TO HELP PAY THE NEW LAND VALUE TAX

THE FIX: GIVE EVERYONE £40 P.A. TO HELP PAY THE NEW LAND VALUE TAX

What’s wrong with abolishing Stamp Duty completely in one fell swoop, and replacing it with a simple mini-LVT based on the value of the plot your house stands on?