Wednesday, 7 September 2011

Just for fun

Here's what I got up to yesterday evening.

My latest blogpost: Just for funTweet this! Posted by Mark Wadsworth at 08:04

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17 comments:

David Holland said...

It was a good talk - thanks a lot

7 September 2011 at 09:16
Robin Smith said...

Well done. More wife jokes next time please.

No objections either. Amazing.

But you did get the:

"How will you stop LVT being passed on to the tenant"

And

"There will be some losers with an LVT"

And

"Show me some examples of whole countries doing it"

These are questions we know are moot but still struggle to find the language for. Perhaps that is where the effort should be directed?

7 September 2011 at 10:59
Mark Wadsworth said...

DH, glad you were there.

RS: "How will you stop LVT being passed on to the tenant?"

That will only happen to the extent that income taxes are reduced. Very approximately, it's a £ for £ swap.

"Show me some examples of whole countries doing it"

Business Rates.

7 September 2011 at 11:04
Robin Smith said...

Yah. We know all that. They do not. And we have not yet found the language to help them understand it. That is the point. It was abundantly clear last night.

No ones fault. Nevertheless we have not got there yet.

So should we focus on the observed facts they do understand and still object to, the infinite evidence.

Or the observed facts they dont yet understand?

7 September 2011 at 11:44
Duncan Stott said...

Great slides! I can see me coming back to this time and rime again.

I'm not sure I agree that newspapers would lose advertising revenue... lower housing costs would give more people more disposable income, which would surely increase advertising of consumer goods?

7 September 2011 at 11:59
Anonymous said...

> which would surely increase advertising of consumer goods?

I think the lowering/abolishment of Income Taxation would massively increase consumer services (and thus comparative advantage*).

AC1

*The fall in comparative advantage is being hidden with increased debt.

7 September 2011 at 12:09
Bayard said...

RS: "How will you stop LVT being passed on to the tenant?"

Perhaps you could tell this little story:
Mr A rents his house and works in B, a town that the Government build a high speed rail line through and a station for that time. Lots more people want to live in that town and commute into London. Local wages are unaffected, but property prices rocket up. Mr A's landlord puts the rent up as a result of the property price rise. Mr A can't afford to pay it and so has to move house.
Alternatively there is no high speed rail line and property prices don't rise, but Mr A's landlord decides to put the rent up because he needs the extra money, perhaps to pay the new land value tax. Again Mr A can't afford the increased rent, but, more importantly, nor can anyone else in B, so the landlord is faced with either reducing the rent to what it was before or having an empty property on his hands.

However, it is one of the pernicious myths of our society that rents (and retail prices) are somehow based on a cost-plus calculation.

7 September 2011 at 13:49
Mark Wadsworth said...

RS, there is no dispute on observed facts. We say "Location values are created by the community" and the Homeys advise people to buy a house in an "up and coming area which will benefit from new infrastructure". It's the same facts, it's just the conclusions we draw are different.

DS, glad to be of service. Re advertising, think about the time lag. If a newspaper piped up in favour of Mansion Tax, council tax rebanding etc, it would lose half its estate agent advertising by next week. But it would be years before the tax system is changed and other advertisers pile in.

AC1, yes of course.

B, the cost-plus delusion really pisses me off as well.

With actual producers, sure they put up prices, but it's a choice between not putting them up (and 100% chance of going bust) or putting them up (with smaller chance of going bust).

But a tax on rental income is not a cost, it is more like a profit share between government and landlord. If the government takes more of the profit then the landlord has to make do with less.

It's the same as interest a landlord pays to the bank, that is not really a cost either, it's a profit share, the bank takes some and the landlord gets the rest, i.e. if interest rates go up, landlords can't put up the rents, it just changes the profit share ratio between bank and landlord.

In any event, this is irrelevant because quite clearly, if we got rid of income tax then tenants would pay higher rents and the tax would appear to be passed on, i.e. income tax cut £1, LVT up £1, gross rents inclusive of LVT up £1.

7 September 2011 at 14:01
Bayard said...

"With actual producers, sure they put up prices, but it's a choice between not putting them up (and 100% chance of going bust) or putting them up (with smaller chance of going bust)."

Well not really. A sensible producer will already be charging a price that maximises his profit. Putting the price up can well have the same effect as not putting the price up on the profit levels. In fact, putting the price up could reduce the profit more than not putting it up, as the level of sales falls. So, the producer, like the landlord, is forced to accept lower profits. Also fixed price contracts etc. complicate matters.

7 September 2011 at 15:07
Mark Wadsworth said...

B, surely it works like this:

Assuming no barriers to entry, T-shirt manufacturers sell for price of cotton + labour + mark up. The price of cotton then doubles, wiping out the mark up.

Each manufacturer has a choice - leave prices as they are, run at a loss and go bust OR put up prices and hope that they don't go bust. For sure, qty of T-shirts demanded and sold will go down and some will still go bust, but you massively improve your chances of not going bust if you increase prices.

7 September 2011 at 15:14
Snarfangel said...

There is a mistake in the slide "Advantages of Land Value Tax."

It says "* Is easy and cheap to collect, easy to avoid, and impossible to evade."

"Easy to avoid" should be dropped. (It isn't easy to avoid, it is very difficult, but "Difficult to avoid and impossible to evade" would seem redundant.)

7 September 2011 at 16:04
Snarfangel said...

On further reflection, you may have meant that you can avoid it by moving to a smaller lot or less expensive area. Sorry if I misread it.

7 September 2011 at 16:07
Mark Wadsworth said...

S, tax avoidance = reducing your tax bill within the letter of the law (and hopefully the spirit). Evasion = breaking the law.

So taking in a lodger or moving from a large to a smaller house is perfectly legal tax reduction = avoidance = easy.

But whoever moves into your old large house will have to pay it instead. It cannot be evaded.

7 September 2011 at 16:08
Robin Smith said...

Bayard

Thanks for that one. Its good. The simplest one I've found so far is to ask a tenant

Imagine they abolished council tax and business rates. What would happen?

Nearly everyone I ask gets the right answer.

But still they don't believe it. WTF? Just like the guy last night. A nice honest guy.

Do you see my point yet? Its not about logic and reason. Its about beliefs.

This is why we all go round and round in circles for ever. We do not understand their belief system.

Its my "belief" that understanding this lies at the heart of changing peoples minds on LVT etc. And nothing else.

Goodness knows what it is yet? But I aint messing around with the logic any more. Yes, that means looking at morals and what goes deeper than the pocket or intellect. That will be a struggle for many I do realise.

7 September 2011 at 19:09
Bayard said...

Mark, if I was going to produce t-shirts, I would start by looking to see what t-shirts sold for in the sort of place I'd be looking to sell them (local street market, boutique, supermarket, whatever), then calculate the cost of production and subtract it from the selling price to give me my mark up. If the price of cotton doubles I can only put my prices up if everyone else does so, otherwise no-one will buy my t-shirts. If they do, then my new mark-up is the new price less the new cost of production and bears no relationship to the old mark-up. If they don't and the increased cost of production wipes out my mark-up, I go bust, otherwise I struggle along on a reduced mark-up.

Actually, the markup on clothes is usually of the order of 100% or more, so doubling the material cost is not going to put anyone out of business in a hurry.

7 September 2011 at 19:48
Mark Wadsworth said...

B, maybe T-shirts was a bad example, but let's assume (rather unrealistically, this is just to illustrate the point) that cotton currently costs £4 per T-shirt, your other overheads are £5 and you sell them for £10 (mark-up £1).

Now cotton goes up to £6. You can happily continue selling them for £10 but then you go bust after a while because you are making a loss of £1 per shirt.

So you (and a number of other retailers) drop out of the market (go bust or just stop selling T-shirts), and retailers will keep dropping out of the market until the price can be pushed up to £12 (supply curve shifts to the left). So we're back to the £1 mark-up again (via a very indirect route).

7 September 2011 at 19:57
Lola said...

B - I thought for one moment that you were offering to print 'Land Value Tax Now!' T shirts.

If so put me down for one.

8 September 2011 at 13:43

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