From The Register
Game development firm OysterWorld is opening up a base in south Wales that will bring 60 jobs to the region in the next three years.While I normally can't stand subsidies, that's not too bad a deal - £16K/job, for the sort of jobs that produce something that people want, in an industry that have people that make a lot of money. It's basically reversing a load of the income tax.
Wales beat out Canada as the site for the development, marketing and research centre, which will be backed by £1m from the Welsh government.
But what it's really doing is fixing the result of the problem, rather than the problem itself.
Income tax takes no account of how portable a job is. A bloke writing computer games gets taxed at the same rates as someone selling snowglobes of the houses of parliament. But one of these can go anywhere in the world and do it, the other has to be in London.
So, we throw money at companies to move to Humberside, Wales etc as a way of compensating for the problem. We adjust their tax to cover for the fact that we don't have Land Value Tax. The problem is that it's crude, complicated, means government is picking winners rather than letting the market work things out, requires lots of bureaucracy and corruption and only works for companies of a certain size.
If we had LVT, we'd be able to scrap all of this, all the rural development fund malarkey. Companies would move to former mining areas because well, they could get really cheap staff because the staff would be paying bugger all in income tax, and the UK would probably become a major location for startup businesses.
22 comments:
From memory Canada has been throwing huge subidies at the Game trade for some time. So what this is is subsidy competition.
Agreed. There is an insane theory that taxing (only) the rental value of land would somehow drive businesses (or people) out of an area, which is nonsense.
Quite clearly, the market rental value tells us exactly how much businesses (or people) are prepared to pay to be based in a certain area.
So asking people to pay whatever they are willing to pay (but no more) cannot possibly drive anybody away from anywhere.
Yep. FYI in talking to investors about expanding our business, it has been accepted that keping the main admin base here in Ipswich is good because staff quality is as high as London, but we can pay them less, although the net to them is the same - the difference is entirely their 'rent' costs which are far lower here.
(Just don't tell anyone else...)
Not keen on all this" Pay LVT and get lower wages" malarkey. This is what it sounds like and is a complete turn-off. I thought the attraction was that you paid less in housing costs and were able to spend the rest of your disposable income to the general good of all.Even from an extreme right-wing p.o.v.this pay LVT get lower wages crap would do nothing for demand ,lack of which is the problem now.
DBC: lower wage costs without taxes, not wages. Ah yes, the high wages and high prices is the saviour-crusade.
DBC, hang abut here. Things are what they are, it all reaches an equilibrium and the landowner's loss is the wage earner's gain etc.
If wages are low in area XYZ surely it is better for some capitalist to come along, invest and employ people, and if he is "exploiting" them, then at least the price he pays for that "exploitation" goes into the general pot, rather than into the hands of a landowner?
Kj, of course, even if the supposedly evil capitalist takes the piss, the gain to the wage earner from not paying tax on his wage far outweighs anything else (plus more people will have jobs).
DBC, I've been thinking about this and have come to the conclusion that it sounds bad but it's not really. Some employers will pay lower gross wages under LVT but some of their employees will still end up with higher net wages owing to reduction of income taxes. Even those unfortunates whose net wage drops should still come out ahead because all employees will benefit from lower overall living costs owing to the removal of VAT, etc. And that benefit will be greater for low-wage earners than for high-wage earners.
So even in the case where the nominal wage level drops, the real wage level should still rise for every worker.
Of course it does makes for a tougher political sell. No one likes a wage cut even when the lower wage buys more than the higher wage did.
Derek: fair analysis. Anyway that's a long term projection of how things might turn our as measured against what would have happened without our proposal. IMO, any wage structure established under the conditions of collection of economic rent, with a basic income, will be the "right" one as far as the market can establish such a thing.
These Dr Pangloss declarations that everything will be alright in the best of all LVT worlds fail to take in a number of pertinent considerations. MW's division of people into landowners and wage earners takes no account of the fact that, under Homeownerism, a majority of voters are both. They are going to pay a hefty enough LVT to see their one and only asset depreciate in value and take a wage cut as well. This is unsellable electorally.
If the private sector contracts wages in the LVT Millenium, it will be up to the public sector and the unions to keep wage levels and effective demand up.I cannot see how you get growth in the economy without chucking newly created money about as wages or as National Dividends or Quantitative Easing for the People (Kaletsky ,Keen Skidelsky et al).
The problem with a Basic Income based on LVT returns is that there is no new money for demand stimulus entering the loop.
Did anybody see Adair Turner on Head to Head on Al Jazeera last night? He suggested helicopter money or big spending of government created money.The attendant experts, barring John Moulton, acknowledged that banks create money.
Also to return to the question of the "mining areas": there is nothing to stop private businesses moving in right now and scooping up all the cheap labour unable to move out because they can't sell their pit cottages foisted on them by the Coal Board.
DBC, you are talking nonsense, this is like a typical Killer Argument Against.
There is not the slightest shred of evidence to say that reducing taxes on earnings and profits will reduce wages!
It will not, all the evidence tells us that gross wages will increase and that net wages will thus increase doubly so (because gross wages increase and tax deducted goes down).
And I've set up spreadsheets on the KAALVTN blog which demonstrate that most homeowners (whose house is currently worth less than ten times as much as what they earn, gross) will be better off, some will be quite hugely better off.
DBC Reed wrote: The problem with a Basic Income based on LVT returns is that there is no new money for demand stimulus entering the loop.
There could be though. Even if Basic Income is mandated to be 100% or less of LVT returns (and it doesn't have to be), government spending on infrastructure, education, the military, the justice system, the NHS, etc. could still be used to spend new money into the economy.
While some LVTers may favour a balanced-budget approach, there is nothing about the LVT/CI system which mandates one. If [CI spend] = [1.05 * LVT receipts] is necessary to keep demand up, it can and will be done.
@MW If I am talking nonsense ,it is because I am following you. See above "If we had LVT...Companies would move to former mining areas because, well they could get really cheap staff because the staff would be paying bugger all in income tax." I can't see how this squares with your later, more guarded, comment " all the evidence tells us that gross wages will increase and net wages doubly so". According to your first statement, people will be taken on at the net rate post LVT and once the contract is signed, why should wages double thereafter? Also as a general point how can you present evidence of something that has n't happened yet?
I am somewhat tetchy on this subject having had to deal with a prize fuckwit on another site who insists that, not only will wage levels most likely fall after LVT ,(because well employers won't have to pay so much) but that any attempt by the unions to keep up wage levels would be gross rent seeking. He also thinks it is rent seeking for unions to keep up wage levels in the present crisis as real wages drop (see, for time scale> intro of Minimum Wage in 1999 and Working Tax Credits in 2003, the latter a State subsidy to underpaying employers).
However the logic of your position on lower income tax post LVT with no need to pay any more than present net wage level, might lead on to a similar wage setting scenario where, because young people are paying less for housing post LVT they don't have to be paid as much and bugger the oldsters stuck with a mortgage and LVT.
Derek seems to understand the problem but his idea that the Gov spend money into existence through sending out cheques etc to pay the army is quite sensible but strictly unorthodox and is a straight example of the helicopter money Adair Turner (and Benanke) have proposed.
Slow down, David. Mark didn't make the "If we had LVT..." comment that you quoted. That comment comes from the original post which was actually written by "The Stigler".
You have my sympathies on your ongoing battles with your opponent on the other site though. I am pretty sure that he will argue with you even when he agrees, never mind when he doesn't.
And, yes, Steve Keen and the MMT crew have convinced me that as well as taking care of the Land issue we have to take care of the Money issue, in order to get a sensible economy with as few rentiers as possible.
@Derek
You're right.My apologies to Mark.
I had got very steamed up on the other site and coming to this one thought: Not again!
But it's true to say there's more than one person thinks LVT could help peg wages. Perhaps some Tory politico will get hold of this idea and climb aboard the LVT train; then, when we get near the terminus, we can push him off and down the bank.
I am with you in thinking that MMT
and other ideas should be packaged up with LVT. Its a question of balance. I get a lot of stick ,including on here ,for not prioritising recycling and redistributing old money through LVT but for advocating the government just spend new money into existence ,downplaying Gov borrowing and taxation ( including LVT which to my mind should be primarily an anti-inflationary measure) .However not everybody is Keen on this idea.
Of all the money recycling schemes MW's is much the best worked out and I would campaign for it if the occasion arose.
DBC, how do you explain the fact - under the existing tax system - that not all jobs are minimum wage jobs?
It is because wages aren't really a "cost" they are a kind of "profit share".
So people who generate a lot of profit for their employer get paid most it. If the current employer only pays you 50% of what you make for him, then sure as eggs is eggs, some other employer will offer you a bit more, and so on.
So we observe that in the long run, employees get about 75% - 80% of total profits and the shareholders/financiers get the rest.
Under LVT, with low or no tax on profits, earnings, output etc, the £ value of what each employee produces will go up, and within a few months or a year or two, people's gross wages will rise to soak up 75% - 80% of the employer's tax cut.
And The Stigler did NOT say that wages would fall, he also said that wages would rise - before the new employers turns up, wages are £nil as there are no jobs, after the new employer turns up, well, wages are £something at least.
"Why are n't all wages minimum wages?" Depends on how you define 'minimum'. At the moment because of the fall in real wages, thirty years long in the US, fifteen (?)here, the workers are n't being paid the minimum amount to buy the products of their own labour, cannot consume the surplus value as Marxists would put it. Hence not enough demand, like now.
If the poor sods in the "former mining areas" trapped by relative house prices from moving somewhere there's work , are suddenly privileged by the arrival of employers, there's no reason to pay them over the odds because the employees cannot access alternative employment. They'll be stuck on a minimum whichever way you use the term.
To get all nineteenth century about this labour is being ground between two millstones: the top one descending real wages; the bottom one rising housing costs. We can truthfully say we've got the second one covered but when you read stuff on here about post LVT workers being cheaper to employ ,we cannot say we've got the first (surplus value) one sorted. As I keep saying: there's nothing now to stop employers scooping up cheap labour in the "former mining areas" or, as lola says, Ipswich.
"...labour is being ground between two millstones: the top one descending real wages; the bottom one rising housing costs... Both are the result of financial repression created by the current rentier class unholy alliance of rent seeking governments and rent seeking bankers. LVT - combined with fundamental reform of the current banking settlement - would kill stone dead the power of these two groups.
As you may have gathered, I will support any reform that has LVT in it and am not entirely wedded to the State's creation of money and chucking it about plus LVt to stop land prices (lower millstone) rising with it school of thought. In very unradical moments I sometimes think that even the present banking system would work with LVT.I cannot understand why the banks don't lobby for lvt : otherwise they're going to get pushed into investing in another housing bubble and go bust again (or even more bust than they are already).
L, exactly. The so-called increase in the share of income taken by owners of "capital" is no such thing - it is the landowners and bankers (and other monopolists) who are taking a larger share and pretending that they are making a return on "capital".
DBC, look, the MMTers and deficit spenders might well have a point. It's not my thing really, but let's assume they do...
So that is still perfectly compatible with an LVT-CI system - you just increase CI payments during a recession. Sorted. And when the recession is over, you then reduce the CI payments again.
Increasing LVT payments in a recession? Moooooo! That' s an open goal for the cod Keynsian interventionist to make Ci ' progressive'. It won't wash. As long ad LVT / Ci is combined with bank reform boom/ bust will be less of a problem
L, I happen to agree with you, but I was pointing out that an LVT-CI system does not prevent you from running a deficit.
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