A case for and against tax

InAlice bought a 2-bedroom home in the up-and-coming Dupont Circle neighborhood.

A case for and against tax

I posit that a reform to land-use planning, partnered with a land-value tax LVT substituted for business rates and council tax, offers a potential solution to all of these.

The unique merits of a land-value tax have pressed on the minds of economists for over years. Economics has taught us how to analyse taxes against the criteria of efficiency, equity and revenue raising potential.

The taxes most heavily applied in the UK today succumb to the theory of the second best: The key driver of inefficiency in both cases is the responsiveness of the payer, or the elasticity.

High elasticities imply a greater distortion and greater efficiency loss.

The trouble is, there’s no distinction between the spirit and the letter of the law

In accordance with the sacrifice principle of Mill and others, an equitable tax system is one in which the utility burden is equalised across payers. By this criterion progressivity is desirable. Revenue raising potential is a function of the size of the tax base and the ability to avoid or evade.

The LVT is an annual levy on the underlying value of land. As described by Henry George inand more recently by the Institute for Fiscal Studies in the Mirrlees Reviewthis value is borne out A case for and against tax community effort, rather than individual effort, and therefore its returns should properly be redistributed back to that community.

Since the supply of land is finite and fixed, it is perfectly inelastic. This means that economic decisions are unaffected by the tax and that the incidence coincides with the legal payer landowner. When a landowner builds a swimming pool on his plot its value increases but his LVT payment remains unchanged; when a public swimming pool is built a short walk away and the value of his plot increases, so does his tax liability.

There is no efficiency cost. But this presents a big opportunity. A recent IEA report showed how planning restrictions have led to a chronic shortage of affordable housing and a pernicious degree of intergenerational inequality. Relaxing planning restrictions would lead to a rebalancing of land designations towards their most profitable use, namely residential housing and business.

This would lead to a fall in house and business property prices as supply increased, and windfall gains to land owners. A concurrent LVT would capture some of those gains.

As the tax base is observable and fixed, neither avoidance nor evasion is possible, making collection cheaper. Substituted for other distortionary and inequitable taxes such as council tax and business rates, LVT could also increase efficiency.

Paired with an overhaul of the antiquated system of land-use planning, it would boost growth and ease budgetary woes. Having had our local library and only direct bus service to the local hospital, city centre, train station and schools cut by our local Green led council I am all for having a council tax cut!

Then again is the bus service a local council service? This would also capture land value increases arising from infrastructure improvements. After a while, the data collected could be used to provide better forecasting of the external benefits of infrastructure projects.

It would take the guesswork out of this kind of decision making. If it were calculated purely on locational value, then as you say, a plot with a mansion on it has the same value as plot without a mansion and indeed no planning for a mansion.

Their locations are the same therefore there LVTs should be the same, no? If on the other hand you have to take into consideration planning status, then LVT is no longer a tax on pure locational value, its primarily a tax on planning permissions.

So unless you free planning up to such an extent that you can build pretty much whatever you like where you like, then LVT will always predominantly be a tax on planning permission, not the locational value.

But I would think it is virtually unimplementable in its pure form as the resistance of home-owners and landlords would be vast. The old lady in a big house argument always comes out, as does the argument that the freeholder is the rightful owner of the land price gains resulting from local infrastructure developments.

There are orders of magnitude of differences between land values in, say, Westminster, Weston Super Mare and West Bromwich.

Likewise between grade 1 arable land in East Anglia and poor quality uplands grazing. These differences would be reflected in the valuation and hence the tax payable.

Under any system of taxation, there are differences in the taxable capacities of different areas. This is why LVT cannot be a local tax.


The issue of local government finance is a separate matter. One option is to give local authorities democratic control over a pot of money handed out according to a formula based on population and other factors.

Who would do the valuation? The valuation of land is their daily work. The system needs to be open, with an appeals procedure. When land values are plotted on a map, anomalies are obvious.The Case Against Strategic Tax Law Uncertainty LEIGH OSOFSKY* I.

INTRODUCTION Treasury and the IRS face a formidable task. Together, they are charged with administering the morass that is the U.S. tax . A widely quoted study produced for the soft drinks industry made much of the costs, but downplayed the benefits, of a tax on sugary drinks.

Case against soft drink levy is sugar coated Editions. The tax ends up raising prices for consumers, who bear the brunt of it but don’t see this line item on any bills they pay.

A case for and against tax

Ideally, taxpayers ought to . The tax bureau claimed Medtronic owed income tax of $ million for and $ million for ; the Fridley, Minn.-based company disputed the $ billion bill and took the case to the U. The new budget agreement commits the President and Congress to cut capital gains taxes.

That’s unfortunate. The leading plans—lowering the top capital gains rate from 28 percent to 20 percent. The Tax Foundation is the nation’s leading independent tax policy research organization. Since , our principled research, insightful analysis, and engaged experts have informed smarter tax policy at the federal, state, and local levels.

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