So I’m trying to work out if I agree with Frances or not.
I try not to be someone who thinks the world should be ordered in a manner that is convenient to me, so I argue with myself about the idea that wealth taxes like LVT and Inheritance* tax should be phased in/up to enable income taxes to be lower. I pay a relatively high level of income tax, and I neither own any property nor have any prospect of benefitting from a useful inheritance – so of course I think this way!
However, I aspire towards having the sorts of wealth that should be taxed. Notably, I intend to own property – that I don’t is a matter of choice, not affordability. In fact, I not only aspire to own somewhere nice to live, I aspire to have it entirely bought and paid for by the time I’m 40 so that I can live a life unencumbered by mortgage debt. I would like the option to move to a less financially attractive career, knowing that I can enjoy the property fruits of my previous efforts. In doing so I would also, as a by product, move to paying less tax.
LVT, therefore, puts a spanner in my life plan. Even if my property is bought and paid for, I must continue to pay my tax at a level commensurate with the property I bought with my income from more lucrative times. This is a feature, not a bug, of LVT. This is an inconvenience for someone with my particular plan, and it’s not an inconsiderable one. I would place significant value on the freedom to earn less money, doing something I find more rewarding.
But is this a moral issue? Is it immoral to prevent us from being free to pay less tax – albeit it’s a ‘soft’ prevention, in that we always retain the right to move somewhere without the LVT burden. We are currently taxed on things we do actively, but LVT is close to being a tax on existing. Someone who retires to a smallholding to live off the land, as removed from society as he is able, is still subject to LVT.
I think that my conclusion is that the tax itself is not immoral, but the implementation of it could be. The blindingly obvious solution to the ‘poor widows in mansions‘ objection is to allow LVT to be rolled up and paid on death. Why not the same for non-widows unable to meet their obligations from cash-flow? Even our man on his smallholding is a beneficiary of the state which enforces his property rights. Further, LVT combined with a Citizens Income ensures that all who pay LVT are also recipients of some of the proceeds, even though they may not cover the whole LVT bill (and if I personally wish to own an ‘above average’ property, we should assume that it will not cover all of mine).
We might also consider the moral dilemma of a transition from one mode of taxation to another. LVT is about replacing some of the rent collected by banks in the form of interest, with a rent paid to the society which gives the land it’s value. Those rents to banks are a sunk cost for all who’ve bought their property already – especially (in materiality terms) those of my generation who bought in the current century. A moral tax can have an immoral impact if it is disproportionately disadvantageous to people who just happened to be born in the wrong decade. If I were burdened with the high income taxes as I accumulated the money to buy property, then the high private rents to my bank, and then the LVT on top. then I might reasonably question the morality of that.
* I often hear IHT called a wealth tax, but I don’t personally see it as one. The person with the wealth is dead. It’s an income tax on the beneficiaries – and, with allowances for spouses and children, I would tax it as income.