1. Although Stamp Duty Land Tax is a tax on land values, it is not Land Value Tax because it is only triggered when somebody does something positive and is not an annual tax. It is therefore a bad tax.
2. The government's subsidy for land values, Help to Buy, is a very bad subsidy, firstly because it is a subsidy, and secondly because it is a subsidy to the main thing the government should be taxing i.e. land values.
So we have two bad things, which actually cancel out. We could get rid of both.
Let's look at one individual purchaser:
a) Buys a new build for £400,000 (approximately double the UK average excl. London).
b) Gets a Help To Buy loan of 20% of the price = £80,000
c) Pays SDLT of £10,000 up front.
d) That loan is interest free for five years, so the notional interest saving @ 2.5% per year = £2,000 x 5 years = £10,000.
He wins £10,000 on the Help To Buy swing and loses £10,000 on the SDLT roundabout.
This works out slightly 'progressive' relative to house prices/land values (or sellers thereof), i.e. at prices below £400,000, the subsidy is worth more than the tax and vice versa.
The Tories don't like 'progressive', of course, so they introduced a special Help To Buy for London, where the interest free loan can be 40% of the price paid. Helicopter money for people selling land in London! The break even point for that works out at £500,000, which is approximately the average price paid for a home in London.
Forbidden Bible Verses — Genesis 42:1-17
2 hours ago
3 comments:
Rather surprised to see the term "helicopter money" above . I was given to understand previously that helicopter money could never happen .
As a young fellow, thirty years ago, I used to shout shrilly and entirely misunderstood that house price inflation (or bribing homeowners with unearned, untaxed capital gains in house prices/building land) was a form of Douglas Social Credit focused entirely on homeowners.You know what ,they thought I was a nutter and that reaction persists on here.
There is nothing wrong with helicopter money paid as a Basic Income as Martin Wolf argues now and Major Doulas argued nearly a hundred years ago.You would need to have a LVT to stop people inflating land values of course (but Martin Wolf is a land taxer as well).
Ma Wa is less hip than Ma Wo ?
DBC, here we go again:
"I used to shout shrilly and entirely misunderstood that house price inflation (or bribing homeowners with unearned, untaxed capital gains in house prices/building land) was a form of Douglas Social Credit focused entirely on homeowners."
I've said the same thing a hundred times.
"There is nothing wrong with helicopter money paid as a Basic Income"
Basic Income is just an elegant replacement for the existing welfare and tax break systems, I've always been in favour.
"You would need to have a LVT to stop people inflating land values of course"
Actually no, it doesn't matter what kind of tax you use. Some people will pay more tax then they get in BI, depressing land prices and others will get more BI than they pay in tax, pushing up land prices. The two effects largely cancel out.
LVT is a good thing in an of itself, whether it is matched with cuts in taxes on earnings and output or whether it is matched with a BI or anything else. Don;t confuse the issues.
@MW
That's funny : I have never come across your argument that Land Price Inflation acts like Douglasite Social Credit for homeowners. And certainly not a hundred times. So if homeowners are receiving a Basic Income or, as Douglas would have termed it, a National Dividend, in unearned capital gains in their house/land price, how are they being required to pay this debt off? What debt?
What I have said a hundred times (in fact about three )is that ,although, internally logical, your plan to pay a basic income out of land tax receipts is just recycling existing money. The Douglasite National Dividend or Ma Wo's helicopter money is newly created money just spent into existence without thought of formal repayment as debt.
Seriously, I feel you must, during training, have been subjected to Pavlovian conditioning about "Bank lending", when banks don't lend on their savers' money and just make new money up and charge interest on it(So why can't the State do the same? Like Abraham Lincoln in the Civil War with Greenbacks and Hjalmar Schacht did for Hitler pre-war solving entrenched German unemployment in 18 months.)
Do you have unaccountable dreams of being locked in a darkened bank vault and being beaten over the head with ledgers containing double entry bookkeeping showing the same invented sums on both sides?
Drink and smoking are not the answer!
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