Interesting thoughts, hadn’t considered them…would love to hear arguments against to get some balance (if it is possible)

the trouble is that it is very hard to make consumption taxes progressive. Given those on lower incomes spend more – as a percentage – of their pay on comsumption than the rich (no matter how expensive the restaurant (with them spending more on investments)), in percentage terms they would end up paying more tax. This is part of the reason why green tax proposals need to be closely watched to ensure they do not make the overall tax system more regressive.

Equally land taxes by definition only cover land based wealth. While the distribution of land in this country is still remarkably inequitable it is only one of many types of asset owned by the rich and so would not be comprehensive enough. Plus, it would basically, if enacted, cause a shift from land invesments to non-land investments. CGT, while far from perfect, is designed to capture most asset growth.

I suppose one way round would be to either have varied VAT according to one’s income- but then why not just tax the income in the first place; or tax the consumption of investments (e.g. Stamp Duty) – but this would not capture dramatic rises in their value.

I would prefer for us to look into the idea of merging CGT and income tax so that all capital growth is basically treated as income and taxed accordingly. This would avoid people switching income to capital to pay lower rates. Equally the same could be said of inheritance tax and income tax (ie. with the inheritrance being taxed as the benefactor’s income) so that system becomes more equitable (and easier to sell politically).

That said, none of these would deal with non-dom’s not paying tax on investments or income abroad – but then nor would land taxes and consumption taxes wouldn’t make much of a dent. my knowledge on how to get them to pay a fairer share is much more limited

The main argument against a consumption tax is that the well off tend to spend far less of their income compared to the poor and therfore consumption tax tends to disproportionately hurt the poor. Since consumption is far harder to measure than income it’s hard to introduce progressive measures to counter this effect.

Land taxes, altogether seem a pretty sensible measure and something I’d agree with Chris could really do with being intoduced. There is some risk that these taxes could be passed on to tenants, but IMO it’s not a particularly great risk.

It is possible for consumption taxes to be progressive: Laurence Seidman showed how in his book, The USA Tax. One drawback of this is that it requires everyone to fill in annual tax returns – though one advantage of this would be that it would greatly increase the pressure upon governments to make the tax system as simple as possible.
Alternatively, should we worry about consumption taxes being regressive if other parts of the tax and benefit system (land tax, or the citizens basic income) are progressive?

Well, land value taxes (LVT) are being used in distressed towns in Pennsylvania, and they have been empirically successful in transferring tax burden from poor and working families and renters and onto absentee-owned properties, often corporate-owned properties.

Philadelphia and NYC are looking at the land tax as a way to transfer taxation off the backs of the poor and onto those that hold out valuable land that could be used to make more affordable housing.

If we looked at a state like New Mexico where there are nearly no property/land taxes, we see that low land taxes lead to really huge tracts of land being held by such “usual suspects” as Ted Turner. http://members.aol.com/wmpb/CrossLand/

That’s just wrong. A lot of money is poured into land, and land is a great place to hide it!

I completely missed this when it was first published – only picking up on it when I was browsing my Technorati links – so thanks for that Chris.

I would just want to address some of Roger’s concerns about land tax.

In a sense you are right, land taxes may well produce a flight from land based investments into non-land based. However this would be a good thing on the whole. The point about land values is that they arise because of the inputs of all the interactions around a location that make that location attractive. The landowner, as a landowner, does absolutely nothing to produce these. David Ricardo two hundred years ago showed that locations absorb the excess productivity of a location reducing the returns to labour and capital. Taxing land would increase the returns to these beneficial processes of labour and capital investment. Our left-liberal forebears knew this a hundred years ago when they won the first great debate between protectionism and free trade in favour of free trade.

If we are to be “liberal” about it we should be encouraging economically beneficial processes and investments – things that employ capital and labour to create wealth – rather than the leeching of both capital and labour to land values. Churchill, when a liberal supporting land taxes in 1909 made the case that the tax system should be asking not merely “how much have you got” (and how much of it can we take before you squeal by implication), but also “where did it come from” – was it by beneficial processes, like labour and capital investment, or just by leeching off others.

And yes, that may mean that if the tax savvy entrepreneur decides he wants to reuce his or her tax bill he would move from an expensive location to a cheaper location, but in the process he or she would also have more left to spend in that new location – bringing new economic activity to an undervalued area. Wouldn’t it be more healthy for clever, hard working, business generating people to move out of the overheated south east and take their business to the north east, instead of taxpayer billions being spent propping up such parts of the regional economies to the extent they do? That coercive redistributive function, which actually does little in the long run anyway actually to redistribute wealth – because as above, land values tend to absorb it – could be drastically reduced as economic activity spread out across the nation.

On another, related point, we cannot nor should not be trying to tinker with global capital flows. And these flows are only going to get easier in the era of mass communication. Nation states will find it increasingly difficult to track more and more of their populations’ income and investment money – as earning aborad or investing abroad move out of the province of the super rich and into the wider population (I remember as a newbie on the Stock Exchange in the eighties just how difficult it was for an individual to invest in an overseas company). Whereas the one thing that a nation state still has in its favour is a territorial integrity. It can charge for occupancy of land within its borders, just as it protects the right in law to occupy that land and exclude others from it. We face a choice – in a globalized world the state could become more intrusive into our daily affairs, making the tax system ever more complicated to cater for new ways of earning (Second Life anyone?) or it could radically simplify it, make it harder to avoid those simpler taxes because they are on a tangible, fixed asset. I know whicih I prefer.

PS – Disinvestment from land based investments would of course have one massively beneficial consequence – property for those who need a first home would become more affordable, never mind have the spare capacity to invest in it for fun and profit.