Wednesday, 17 January 2018

Schrödinger's missing beats

I haven't spotted any wonky timing in ages, but there is something wonderfully weird in a song from Keith Richard's last solo album.

Listen to the chorus at about 25 seconds in, the first "Trouble..." is on the last two beats of the bar (third and fourth), but the next "Trouble..." appears to be slightly too soon, on the first two beats (until the next bit makes it clear that they weren't, they were on the last two beats).

What actually happens is that the next bar (after the first "Trouble...") containing the line "... is your middle name" is actually six beats long, so the "Trouble..." still comes on the last two beats (in 6/4 time) but appears to come on the first two beats, if you have been tricked into splitting it into 4/4 and assume that the left over 2/4 bit is the first two beats of the next 4/4).

So are there two extra beats, or two missing beats? I'll leave greater minds than mine to debate that one.

"... because they didn't teach us about it at school." is the short answer to that.

From The Daily Telegraph, April 2015:

Why has everyone forgotten about male suffrage?

... Before 1918, the vote was restricted not simply by sex but also by property qualifications. Roughly 60pc of adult men were then entitled to vote. At the 1910 general election, 7,709,981 men were registered to vote. By the time of the 1918 general election there were 12,913,166 registered male electors in the United Kingdom.

The 1918 Act is, rightly, most famous for having brought more than eight million women into the electorate; but, for the first time, it also enfranchised more than five million men over the age of 21 without regard to property or class.

I knew that the number of men allowed to vote crept up gradually over the centuries, as the "property owning" condition became less and less onerous, but I didn't realise that universal (male) suffrage was as recent as that.

Which makes the outcomes of the 1906 election and the second 1910 election, when the Liberal Party won on a platform of Land Value Tax, all the more surprising.

Economic Myths: Local taxes

Let's refer back to the handy cut-out-and-keep guide on what makes a good tax:

I've been prompted to think about this a bit more from the various KLNs that were advanced in response to a tweet by @tomcopley.

There is this brainwashing that taxes on land and buildings are only appropriate for paying for "local" services (this is actually embedded in the German constitution, at the suggestion of the Americans).

The Homeys always start flailing about and saying that LVT is the worst way to pay for "local" services, and either a Poll Tax or Local Income Tax is better (despite those two being diametric bloody opposites, with LVT being the Goldilocks middle. Sales taxes go round the clock and start behaving more like a Poll Tax, "on closer inspection, everything becomes something else", as Steve S and I like to say).

That's actually a minor issue.

I compiled that handy cut-out-and-keep-guide on the assumption that we are looking at national taxes. National taxes which serve to reduce regional discrepancies, so the wealthier regions subsidise the poorer ones (in return for leeching off them in the first place), are surely inherently better than "local" taxes?

Think about it, Council Tax operates like both LVT and Poll Tax at a hyper-local level. Me, the wife and two kids live in a detached house in Band G, so we pay about twice as much as a two-person household in a one-bed flat across the road in Band B. So we could express this as a modest LVT (our house is worth about twice as much as a one-bed flat across the road) or a Poll Tax of £700 per person.

Whichever way I look at it, that seems fine to me if I am just comparing what we pay with what the people across the road pay.

What is not OK, is when an arbitrarily defined amount of arbitrarily defined "local" spending is to be funded out of a "local" tax.

They could replace Council Tax (which pays for a tiny fraction of "local" spending) with a "local" income tax. To get £700 per person where I live, the appropriate income tax rate would be something like 3% of local incomes (assuming no personal allowance), no biggie and I'd be happy to pay it instead of Council Tax, it's a few hundred quid either way.

To raise £700 per person from the most depressed areas of the UK, the income tax rate would have to be more like 15%.

Does that outcome not seem like madness? That higher earners in high income areas pay 23% basic rate income tax and people in depressed areas pay 35% basic rate income tax?

Try this again with Poll Tax, local LVT or local Sales Tax and you get the same answer. They are all inherently regressive.

Which is why, if you really want LVT to come into its own, it has to be a national tax.

Here endeth.

Tuesday, 16 January 2018

Some people are a bit confused

From The Daily Mail:

Last April, federal prosecutors filed charges against two men suspected of spying on the opposition People's Mujahedin of Iran (MEK) on behalf of Iranian intelligence, Deutsche Welle reported.

The Paris-based MEK is an Islamist-Marxist-feminist militant group seeking to overthrow Iran's theocratic government. Iran has blamed the group for stirring up protests earlier this month in Iran.

I know what each of those four adjectives means, and I am sure there are plenty of groups which tick two of those boxes; if you drop "Islamist" then a group which ticks the other three is plausible; going for all four is a comedy sketch.

Killer Arguments Against LVT, Not (432)

From Farmers' Weekly:

The Scottish Land Commission has been instructed by the government to investigate the tax as part of a wider piece of research on land reform issues.

The taxation would raise public revenue through an annual charge based on the rental value of land, typically levied against the unimproved value of that land, not taking into account any buildings, services or infrastructure.

So far so good, here's the classic one-liner:

Shadow rural economy secretary Peter Chapman said the prospect of such a level could be “catastrophic” for farm incomes.

Woah! His argument is totally devoid of facts - without knowing the proposed tax rate (anything between 1% and 100%) it is impossible to say what the impact will be. It could be anything between "very modest claw back of agricultural subsidies" (which average out at £40 per acre per year in Scotland, as far as I can make out) all the way up to "quite a lot".

Then we get into logic free arguments:

Andrew Wood, partner with property consultant Bidwells, said this plan would increase food production costs and put Scotland at a further disadvantage for doing business and securing investment.

Whether it increases total food production costs or not depends on whether the Scottish government reduces other devolved taxes (income tax, business rates, LBTT and Council Tax). Because of the tendency of LVT to stimulate output per unit of land, per-unit production costs will probably fall, or worst case, stay the same.

LVT has little impact on "doing business", in fact it probably helps people wanting to "do business" because it strengthens their hand against land owners who want to hold them to ransom charge them rent, and after all, it's "business" which invests, land is just there to be used.

Money for nothing...

From the BBC:

Rudi Klein, head of Specialist Engineering Contractor, an umbrella group representing suppliers to the construction industry, said Carillion outsourced virtually all its work.

He said the government knew of Carillion's reliance on sub-contractors, but continued to award the company lucrative work despite growing concerns about its finances.

"It's that supply chain who is going to bear the massive loss," he said. "There could be a large number of firms that will experience substantial financial distress."

... and presumably their chicks for free, although that is not expressly stated.

Monday, 15 January 2018

Carillion: Winners and Losers

City AM have listed the winners to save me the bother:

... Amid the chaos, however, lurk some cunning opportunists – most of whom can be found in Mayfair.

In many ways, Carillion has been the story of the short sellers. The most bet-against stock in Europe will see hedge funds share profits of around £300m between them. Marshall Wace took the biggest piece of this as shares plunged in the autumn. After it exited stage left, the fund was quickly replaced by rivals, steadfast in the belief worse was to come. Blackrock, the world’s biggest asset manager, has stuck around and still holds a chunky bet against the contractor.

Then there is a raft of advisers picking up hefty fees. The jewel in the crown would be the administrator mandate. EY is reportedly in the box seat, but pension scheme adviser PwC may cry foul, arguing its rival has a conflict given EY’s six-month role helping the company right-size operations.

But never mind the winners, back to the many losers from Carillion's decline – including, of course, the government. A decade on from the financial crisis it is incredible the state yet again finds itself under pressure to consider a taxpayer bailout of a private company, this time during a period of economic growth. Such situations imperil public faith in business and the very principles of a market-led economy, and remind us that regulators – in the financial sector and beyond – have some way to go before we can be confident that the spectre of bailouts has been consigned to the past.

As to paying hundreds of millions for "administration", sod that. All the government needs to do is send somebody round to each site where Carillion operates and tell everybody "You're working for us now, here's your new employment contract". Those people will then get onto their own suppliers and tell them to send future invoices to the Department of [whatever] and everything continues as was. It'll save the government taxpayer a fortune.

This is also another argument for deposit funded corporations - like building societies, co-operatives or partnerships, they don't have a share price, so speculators will have to find something better to do.

Sunday, 14 January 2018

Daily Mail on top form

Black cab rapist John Worboys set to live in £300,000 seaside flat near FOUR of his alleged victims after his release from jail

Friday, 12 January 2018

Killer Arguments Against LVT, Not (431)

Arch-Tory/NIMBY Nicholas Clarke on Twitter @drmagwai

And what you fail to mention is that lvt only works properly when all land is already developed. Do we want the UK to become a mega city?

This is the sort of baseless crap that we have to deal with.

I remember that Sobers (I think it was him) once advanced the argument that LVT would only work for an agricultural economy, also without justification or explanation.

As per usual, we are presented with two baseless arguments which cancel each other out.

Let's take a breath and do facts and logic:

1. Most of the UK by surface area is 'developed'. Up to one-tenth is actually built on (incl. roads, reservoirs, back gardens etc) and most of the rest has been 'developed' or adapted for farming and some bits have been kept close to pristine for tourism, leisure, wildlife etc.

2. Even if both arguments, taken in isolation had some validity (which they don't), then it would be quite easy to split up the UK (or any similar country) into two regions - the urban bits (where LVT would work properly, even by Nimby Clarke's own admission) and the remaining rural area (where LVT would work fine by Sobers' admission).

3. The UK is not going to become a mega city any time soon - with or without LVT - it would require a twenty-fold increase in population to about one billion to make it worthwhile. So that is the stupidest rhetorical question of the day.

What is the tax base under a LVT + Citizens Income?

One objection against LVT I recently stumbled over was that as a single tax it violated the principle that everyone should contribute to state spending.

Saint of Bacon who recorded a video on Youtube critiquing the LVT said "My argument is the idea of a single tax isn't going to fly in the US because we've adopted the view that everyone should pay into the government. Meaning having some segment of the population be tax exempt by choice isn't how America likes to function. Efficiency only gets so far and that is my point, quoting philosophy that I don't subscribe to isn't going to convince me. You're literally in the position of a Christian quoting Bible courses to an atheist."

Let's assume for arguments sake the LVT could indeed cover all of state spending is Bacon correct?

Say a country spends £250bn on services and £250bn on benefits.  As the rental value of land is £500bn pa, for reasons of efficiency and justice it decides to shift to a LVT and Citizens Income , negating the need to tax incomes, capital or transactions.

The principle behind the LVT is that it is a compensatory payment to those excluded from valuable natural resources. That it is collected and redistributed/spent by the state is a separate issue.  As we are all equally excluded we are therefore all entitled to an equal share of the rents, so this hypothetical country does this by paying out the £500bn pa as a Citizens Income.

This country still has to finance £250bn of spending on defence, schools, hospitals etc, which it does by imposing a Poll Tax on each citizen.

For accounting purposes this makes no sense. So instead of collecting the Poll Tax, it's less bureaucratic just to deduct £250bn of the LVT at source, and pay the other £250bn out as a Citizens Income.

This is viewed by Bacon that only those that pay the LVT pay into state coffers, but that's not correct because that's not what is happening in principle.

The correct view is that the LVT  doesn't belong to the state as tax. The state is merely its collector and redistributor. Therefore any citizen that does not receive their full amount of compensation with no deduction is paying a defacto Poll Tax.

And as all taxes on income, capital and transactions are to some degree incident upon land, that's also true of all current tax systems around the world.  That is, we pay into state coffers simply by not receiving our full share of  land rent.