Killer Arguments Against LVT, Not (253)

Merryn Somerset Web detonated the LVT bomb over at Moneyweek* again.

Palgone: the problem here is that this mansion tax is setting an arbitrary bar at £1 million, and then arbitrarily assumes that the occupier of said house has a certain cashflow. This is the logical deduction of a child.

Nope.

There is no such "assumption" and it is he who is applying the "logical deduction of a child". The LVT system is based on the absolute 100% certainty that a potential tenant would be willing to pay a rent sufficient to cover the LVT plus landlord's running costs; or that a potential purchaser would be willing to pay for the cost/value of bricks and mortar and pay the LVT himself. The fact that the current occupant might not have the cash to pay the LVT is nigh on irrelevant.

It's like BMW, they don't set their prices at something which elderly BMW drivers can afford, or which drivers of old second hand BMWs can afford, they set them at whatever they think is the revenue-maximising price. And if you can't afford a new BMW, you make do with something cheaper, or public transport. That's free market capitalism for you.
--------------------------------------
Palgone himself then goes on to suggest a sensible transitional arrangement:

Would it be so hard to add a little more detail:

Houses in England worth over £1 million AND with the occupiers earning over XXX get charged this

Houses in London worth over £2 million AND the occupiers earning over XXX get charged this.

Boom. You have a basic appreciation for nationwide price differences, and more importantly, you have some means testing, so that pensioners who suddenly wake up in their WW2 house they bought 50 years ago to find it worth XXXXXXX don't get punished for have done absolutely nothing.

No, that would not be hard, and something along these lines would be included in any sensible LVT-proposals. Our current tax/means testing system takes away up to eighty per cent of your earned income (or pension income), and to get the ball rolling, I see little harm in capping any household's LVT bill at some percentage of its earned income, that percentage to be gradually increased over time.

I hotly disagree that pensioners played no part in pushing up rents and house prices, as they are as rabidly NIMBY as the rest and also campaigned long and hard to get Schedule A tax and Domestic Rates abolished, but there you go.

* Via Martin Green at HPC.