Land value tax got Twitter in a flutter last Thursday, yet MM discovers that many Mancunians support an Oldham West & Royton MP’s proposals.
The tax was one of MP Michael Meacher’s many suggestions in his Guardian article ‘How to kickstart the UK economy’, alongside two more familiar bids – a mansion tax and an imposition of the capital gains tax onto ‘the seriously rich’.
Unlike levies on mansions and capital gains, land value taxation may be unfamiliar to most Western readers since the use of land rents as a principal source of revenue is mostly limited to former British colonies, including Australia, Singapore, New Zealand and Hong Kong. (where the land is nationalised)
When Mancunian Matters asked the Labour backbencher about the lesser known of his preferred taxes, Mr Meacher responded that he was far from the first or only British person to support it.
Mr Meacher said: “I think that land value tax has been hovering over political debate for decades. I think the first mention of it goes back to forty or fifty years. I want to bring it up to the political agenda; I want it to be seriously considered.”
Mr Meacher suggests it as an alternative to the council tax, which currently charges properties, while stamp duty charges property transactions; LVT will deduct bricks and mortar, so vacant or derelict site can be valuated the same as a more bustling area if the two are in close proximity of each other. Everyone pays rent as usual, but the landowner is now clobbered with a higher tax burden.
While de-taxing buildings will obviously alleviate home-owners and businesses, proponents of LVT claim that the price of land will decrease as well.
Dr Adam Leaver, Manchester Business School, said: “The tax has a supply and demand implication. The price of property is being driven sky high at the moment simply because there is a shortage of developable land. One would prevent more speculative purchases of land if there’s a tax on it. You might see some kind of relaxing of prices if you were to tax the land in say London and therefore much more land might suddenly become available.”
The senior lecturer discovered the tax a few years ago when researching a paper, ‘Rebalancing the Economy’, for the Centre of Research for Socio-Cultural Change. (CERSC) He said that LVT would also lead to sharper distinctions between London and Manchester in terms of taxes paid – once it costs more to have land in the former, pressure is taken off London and businesses may be encouraged to source their activities elsewhere, as well as encourage subsequent infrastructure investment in those cities.
He added: “I would agree with the majority of Mr Meacher’s article, yes. I think generally it’s much more sensible to think about a shift from taxing income towards taxing assets.”
Though the tax is neither official Labour nor Liberal Democrat policy today, it seems to have burgeoning support in Greater Manchester. Leigh MP Andy Burnham proposed the introduction of LVT during his leadership campaign in 2010, while the Labour Land Campaign group has confirmed that they have at least one member based in Salford.
The more fiscally orthodox Taxpayers Alliance and Dr Brian Sloan, the chief economist for Greater Manchester’s Chamber of Commerce, are uncertain about the proposal, though Dr Sloan concedes he has not read about the tax in a few years.
Dr Sloan said: “Assuming that this tax would be in addition to existing business rates, I would think it’d reduce the amount businesses have, so it would increase costs. I’d also assume that land lords will have to increase the rents to pay that tax.”
John O’Connell, Research Director of the TaxPayers’ Alliance, said: “Income taxes and consumption taxes take a share of the money that a certain person or business is being paid. Taxes on property that people already own – such as Council Tax and proposals for a Mansion Tax or Land Value Tax – are dry tax charges, not necessarily levied when people have the cash to pay them, which can cause serious hardship.”
He added: “Given that residential and commercial property is already taxed at a local level, proposals for a Land Value Tax either double tax property or have a very narrow base. All the new tax would really do is extend taxation to some properties like second homes and empty properties.”
Of course Mr Meacher has no problem with extending taxation and doubts the levy would cause serious hardship – he cites the statistic that only 0.003% of the British population own 69% of the country’s land.
He said: “Most would be left completely untouched. One percent of the population would be 300,000 – but it would only be a small proportion of those who would be affected.
“I don’t want to put them out of business; I want to make sure they make a fair contribution – which could run into several billion a year.”