Jeremy Corbyn has announced that if the Labour Party wins the upcoming general elections, his administration would consider implementing a garden or land value tax, which would essentially triple council taxes for middle-income homeowners.
This type of levy would primarily affect those homeowners with large gardens, as it would tax properties based on the value of the land.
As explained by The Telegraph, “while council tax works by taxing the overall value of a property, Land Value Tax would impose an annual charge on the rental value of land, not counting any improvements such as houses built on it.”
Hence, they write, “It would mean that a vacant plot in the middle of a row of houses would have the same value as the plots that had houses on them.”
As laid out by the proposal pitched by the Labour Land Campaign, an organization that wants a “more equitable distribution of the land values that are created by the whole community,” the deal is to introduce “a 0.85 per cent levy, rising to 3 per cent over a ten to 20-year transition period, on the value of land for owner-occupied residential properties.”
Voices Against the Land Value Tax
This kind of levy has received ample criticism from the Tories and other conservative analysts.
According to The Telegraph, conservatives estimate that this move would ramp up the tax on properties “from £1,185 to £3,837 per year, an increase of £2,651 or 224 per cent.”
UK Foreign Secretary Boris Johnson said, ““Corbyn’s garden tax will send tax bills soaring, house prices plummeting, plunge people into negative equity and force families to build over their back gardens.”
The Institute for Public Policy Research (IPPR) explained, “There would be many losers,” one being the environment as landowners might be pressured into selling off green areas to developers.
Additionally, says the IPPR, a garden tax “might push some heavily mortgaged homeowners over the edge,” forcing banks to repossess properties.
Likewise, since agricultural lands would also be affected by this land value tax, many analysts expect this additional cost to be reflected in higher prices for agricultural goods.
For example, the National Farmers Union said a land value tax would “would simply increase the cost of UK food production with no benefit for shoppers.”
Arguments For the Land Value Tax?
Conservative pundit Tim Worstall, on the other hand, believes the land value tax is an excellent idea; albeit, he thinks it will never be implemented.
Writing for CapX, Worstall says, “However you might want to tax mansions, or factories, the LVT is upon the value of the land itself, plus what permissions you’ve been granted to build upon it. So, planning permission changes the value of the land, changes the tax. Whether there’s a house there or not does not.”
Considering this explanation, Worstall writes, “One reason to like this tax – as Milton Friedman pointed out – is that it’s the least distortionary tax there is.”
The Independent agrees with this advantage of the land value tax: “Taxing land is seen as practical and non-distortionary because land is an immobile asset. A wealthy person can’t move his or her land offshore to avoid the tax inspectors in the way that they can with stocks and shares.”
However, despite its many benefits and fairness, Worstall concludes that it will never be implemented “for who would dare come between the English and that Great God of house prices?”
Do you think a land value tax is a good idea? How would it affect foreign investment in real estate in the UK?
Also, does your county have a land value tax? How has it worked for your jurisdiction?