Outbreak of common sense in Wales!

Emailed in by John D, from the BBC:

Wales should slash income tax rates to the lowest in the UK, according to one of the candidates challenging Leanne Wood for the Plaid Cymru leadership.

Adam Price said the basic, higher and additional rates could be cut by 9p and business rates and council tax ditched*. New land value taxes on residential, commercial and industrial residential land would fund the changes**, he said...

The Welsh Government is getting more tax powers next April, including partial control of income tax...

In proposals published on Friday, Mr Price said "introducing a National Land Value Tax on residential, commercial and industrial land (agricultural land would be excluded) could generate £6bn at a 3% rate on current values. This would enable us to abolish business rates, council taxes and lower income tax, at the basic, higher and additional rates, by 10p," he said.***

* His proposals don't mention ditching Land Transactions Tax as well, unfortunately.

** On a political level, it is better to say the Land Value Tax would fund those public services which increase land values, which is the fair way to fund them and which in turn would enable income tax to be reduced.

*** Something has got lost in translation here. Rhys ap Gwilym's original proposal worked on the basis of total council tax, business rates and income tax (basic and higher rate) revenues in Wales at £4 bn a year, so the LVT revenues required to replace council tax and business rates, and reduce income tax by 10% would be less than £4 bn, not £6 bn.
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Sobers of course runs with the messed up numbers in the comments, knowing full well that they are messed up. He also ignores the distinction between land value and total value including buildings.

Suffice to say, on a fiscally neutral swap, more than half of people would be better off, as wages are distributed more evenly than land ownership.

Total required revenues from LVT on housing (assuming revenues from LVT on commercial = same as revenues from Business Rates) = £2.7 bn.

£2.7 bn divided by 1.34 million households/homes is average £2,000 per household/home (up from current average just under £1,000), not Sober's wild overestimate of average £4,100 per household/home. So all tenants end up better off; a single earner who owns an average value home earning £22,000 or more; or a two-earner couple which owns an average value home earning £17,000 or more each.

Plaid Cymru

Political Party Funding Fun

In El Comm's press release of last week on donations to political parties, they mention casually that "Five parties also received a total of £2,211,200 in public funds." In case you're interested in which ones and how much, from pages 132 and 133 of this (pdf) the lucky recipients were:

Plain Cymru: £34,168.14
SNP: £53,288.77
Labour: £71,412.35
Lib Dems: £634,785.18
Conservatives: £1,417,545.93

Just sayin', is all.

SNP and Plaid Cymru miss the point

This BBC write up of the joint SNP-PC press conference (held, ironically, in London) mentions what appeared to be the main thrust of the full coverage which I saw on the BBC Parliament channel*:

Mr Wyn Jones said... "We promise a strong block of Plaid and SNP MPs to fight for fair funding for Wales and Scotland, to protect local services and the most vulnerable in society, protecting them from the cuts agenda of the three main London parties, push the green agenda and push for business growth."

He and Alex Salmond kept referring to 'the London parties' and funding from 'Westminster'. Sure, this type of pork barrel pleading is what you'd expect - they want to get as much money from 'London' as they can, and I am sure that they will, but there is an upper limit to how much they can get (and it might well be less than what they get now). They also paid lip service to the idea that they want to get the private sector in their own countries going again, fair enough.

But they ignored or overlooked a third flow of money over which they have a lot of control, namely the flows which are a result of the restrictive planning system. Home-Owner-Ism is just as rife in those countries as it is in England, which forces Welsh and Scottish people to take out much larger mortgages than they really need to, and most of the interest that they pay goes 'to London'.

If I were in charge in Wales or Scotland (but not allowed to change the tax system to more locally collected property taxes and less nationally collected income taxes**) the next best thing I could do would be to liberalise planning laws. That would make it cheaper to rent or buy business premises; and it would make it cheaper to rent or buy houses. Because people spend the bulk of their money locally, all the rent that is longer being sucked out of the productive economy, and all the interest that is not being syphoned off 'to London' would slosh round the Welsh or Scottish economies instead.

What can possibly go wrong?

* The physical contrast between Wyn Jones and Salmond is quite comical, Wyn Jones is a small, thin, pale grey man, and Salmond appears to be about two foot taller, two foot wider and slightly larger than life. This is not so obvious from the picture accompanying the article.

** Both SNP and Plaid Cymru, like the Lib Dems, have the insane idea of replacing Council Tax with Local Income Tax - brilliant politics but terrible economics.

As I have said before, the problem with Council Tax is not that it is a property tax, the problem is that it is a Poll Tax. At the very least, we could increase the number of bands. If we had from Band A all the way to Band Z with a 20% gap between each band (as at present), then Council Tax on a Band A property would be £50 or £100 a year or something and for one in Band Z it would be £5,000 or £10,000.

Fun Online Poll

Who will you vote for* in the 2010 General Election?

* Yes, I know that should be "For whom will you vote..?"