LVT has the advantage of being a direct tax.
One of the arguments against indirect taxes is that they are indiscriminate, ie. they are paid equally by the rich and poor alike and are therefore unfair. However they are popular with governments, as they allow the people to believe that
they are not really being taxed, they are simply paying higher prices. Direct taxes are therefore more honest. I suggest that they fall into two basic groups:
- Taxes imposed on existing wealth.
- Taxes imposed on the wealth creation process.
To encourage wealth creation and general prosperity it is always better to tax the first group rather than the second. Among the first group are property taxes (Council Tax and Business Rates). Also included are Capital Gains Tax and Inheritance Tax. Capital Gains Tax is more accurately a tax on the realisation of increased value at the point of a sale. Inheritance Tax is a tax on the realisation of value at the time of a transfer of wealth, but they are both taxes on existing wealth. None of these are impediments to wealth creation. Among the second group are Income Tax and Employee’s National Health Contributions, which are direct taxes on work. Also VAT, Corporation Tax and Stamp Duty, which are direct taxes on trade. These taxes act as discouragements to wealth creation. LVT would fall into the first group as a direct tax on unearned wealth, actual or potential, due to the simple ownership of land, one of the essential elements of production.