Killer arguments against LVT, not (36)

Over at HousepriceCrash, Tom 101, at comment 8 said:

MW, What are the downsides of LVT? I read an article a while back on the planned introduction of LVT in Auckland and how poor people who happen to live in an affluent area would be priced out of their homes because of its introduction.

To which I responded, at comment 12:

Tom 101, the traditional "killer argument" deployed by the Home-Owner-Ists is "what about a poor widow living in a mansion" (and all its variants).

This is twaddle of course; most poor people leave in small houses or in cheaper areas where LVT wouldn't be much; most rich people live in big houses in nice areas where LVT would be a lot.

Assuming that other taxes were cut accordingly, shifting from income tax/VAT to LVT would help the 95% of poor people who live in small houses [or in cheaper areas]. The 5% of poor people who happen to live in a big house in a nice area will have to trade down; roll up the tax to be repaid on death; take in a lodger; get their heirs to pay it etc etc. Such is life.

Without LVT, when that little old widow in a mansion dies, her heirs will of course sell the house to a rich person; LVT merely speeds up the transfer of nice houses to [high income] people (which is fine - that is the whole point of being rich) and does not fundamentally alter anything much.
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In case readers of this 'blog imagine that I don't live in the real world, I, like most middle-aged 'bloggers, have parents in their seventies who bought their house for about £2,000 back in the 1963. They struggled, scrimped and slaved for a few years to pay off the mortgage, but the high inflation of the 1970s eroded the value of the mortgage, and hey presto, by the late 1970s they paid off the mortgage out of petty cash. They traded up once and now live in a house 'worth' £270,000.

So effectively, they have lived completely mortgage and rent-free for over thirty years. If somebody stumbled into power and adopted my plan of replacing all existing property and wealth related taxes* with a flat 1% tax on residential property values, replacing my parents' current Council Tax bill and TV licence fee (which cost them about £2,000 a year, let's say) with a £2,700 LVT bill - but in turn scrapping Inheritance Tax (you never know, they might have some other loot tucked away) and Stamp Duty Land Tax (which would knock 3% of the selling price, at current rates), would I be too mortified? Nope.

If they don't want to pay it, then let them roll up the tax. Seeing as in the long run property prices rise slightly faster than wages (i.e. 4% a year nominal, let's say), the value of my 'inheritance' is still going up by 3% a year. And if it turns out that my parents have MEWed to the max and spent it all on new cars and holidays abroad, and I inherit nothing, well so what? It's their house and they can do with it what they like.

And if whoever is in power decided to go further, and to shift from taxing incomes and production to taxing land values, then every £1 that is taken from 'my' inheritance goes 50p to my parents in terms of cheaper goods and services (less VAT!) and 50p to me as a saving in income tax. Even if the tax were 4% of property values per annum, at least the nominal value of 'my' inheritance is not going down - it's the same as if my parents had £270,000 in the bank and spent all the interest every year, but no more than that.

Just sayin', is all.

* Council Tax less Council Tax Benefit, Inheritance Tax, Stamp Duty Land Tax, TV licence fee, Capital Gains Tax, Insurance Premium Tax, VAT on domestic fuel etc. You can do the same exercise for commercial land and buildings by starting with 'Business Rates'.

Black is White! Up is Down!

From Monday's FT:

For internationalists everywhere, for believers in much deeper co-operation between nations, for those pushing for the establishment of an international legal order, the EU is a beacon of hope.

If the European experiment begins to unravel – after more than 60 years of painstaking advances – then the ideas that Europe represents will also suffer severe damage. Rival ideas – the primacy of power over law, the enduring supremacy of the nation state, authoritarianism – may gain ground instead.

As opposed to the EU dream, which is, er, the primacy of power over law, the enduring power of the EU and authoritarianism?

And yes, I know that the FT is an EU-phile paper...

Maybe she called him "Sky" once too often..?

From The Metro:

A British tourist has been arrested on suspicion of beating his girlfriend to death on holiday island Crete.

Luke Walker, 22, faces charges of 'causing fatal bodily injury' after his girlfriend, 20-year-old Chelsea Hyndman, died in hospital on Monday. She had suffered ruptured internal organs 'evidently caused by physical violence', said a coroner...

Oo-Eur!

I got round to updating my currency spreadsheet yesterday, and I must say that the recent fall of the EUR against my currency basket is pretty impressive - down 15% or so so far this year - but it's still 10% above where it was back in 2000 (click to enlarge):

"Spelman must go"

Obo summarises.

I'd like to point out that An Englishman's Castle covered this last week, but he didn't mention what the husband was up to.

George Osborne turns bubble machine back on again.

From Citywire:

Chancellor George Osborne has backed plans to include housing costs in inflation measures, reversing the move many blame for allowing the housing bubble. In a letter to Bank of England governor Mervyn King, Osborne said: 'Over the longer term I would welcome your views on how we might accelerate the process of including housing costs in the CPI inflation target.'

Back in 2003, then chancellor Gordon Brown changed the target the Bank of England used to measure inflation, stripping housing costs from the main measure. King has repeatedly said the Monetary Policy Committee was unable to use interest rates to slow soaring house prices because it was charged with targeting CPI at 2% and anything else was outside the bank's remit....

Of course, an incoming management is perfectly entitled to restate the opening balance sheet to put as much blame on the previous management as possible - and in terms of Labour's scorched earth spending, I don't think that the Lib-Cons have even started to scratch the surface - and it is inevitable that a government will prefer to focus on whichever measures of inflation or unemployment happen to be more flattering at the time.

The Lib-Cons clearly expect house prices to be flat or falling for the foreseeable, and most people expect imported inflation and higher prices because of the National Insurance and VAT hikes, so, being charitable about this, he's just recommending this because he expects RPI to be lower than CPI, and hence will make his 'economic stewardship' look good. Fair enoughski.

Being less charitable about this, he's just continuing the Home-Owner-Ist policies originally pioneered by the Tories but honed to perfection by Labour - if house prices are rising, you exclude them from the inflation measure; that makes inflation seem lower and so interest rates can be lower; which stokes house price inflation even more.

Conversely, if there is general price inflation, as a rule of thumb this means that interest rates ought to go up; so if you include flat or falling house prices, the headline inflation rate is lower, which enables the Bank of England to keep interest rates lower than they otherwise would be, thus tending to prop up house prices, which is the central aim of the British political/economic system.

Fun Online Polls: Next General Election & 'Government by international treaty'

There was a very high turnout in last week's Fun Online Poll; results as follows:

Days - 0
Weeks - 10
Months - 131
Years - 56
Other (please specify) - 5

I voted 'months' as well, FWIW, so now let's sit back and see what happens...
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This week's Fun Online Poll is based on this fine diagram showing some of the international organisations of which the United Kingdom is a member, see also my post of a couple of days ago.

It's multiple choice, and you can choose from The United Kingdom, Euro-zone, European Union, Schengen Area, European Free Trade Association, United Nations, G7 to G20, IMF and World Bank, World Trade Organisation, NATO, and last but not least, 'None of the above or Other, please specify'.

Vote here or use the widget in the sidebar.

UPDATE: Oops. Lola points out that I forgot to include 'Commonwealth', so I'll assume you'd like to stay in that, unless enough people say otherwise.

Health Scare Story Du Jour (2)

The story itself ('Sausage not steak' increases heart disease risk) is of no particular interest, but what is interesting is:

1. This and the previous one were imported from the USA and Australia respectively, and not dreamed up by bansturbators in the UK.

2. Until a few weeks ago, a BBC article on this sort of thing would have been studded with rent-a-quotes from fakecharities - today's article only includes one*, and right at the end they allow a spokesman for the pork producers to respond.

3. Also of note is that the previous article said "animal fat = bad", but this one says "animal fat = harmless, it's the salt you should be worrying about".

* While I'm on the topic, has anybody else noticed that for the past few weeks there has been hardly any government sponsored advertising on the television? Until March or April 2010, nearly every single advertising block had at least one (for YouGov, benefit cheats, work permits for illegal immigrants, five-a-day stuff, Tax Credits, 'smoking cessation products', fakecharities etc etc'). Did Labour get a ticking off for using taxpayers' money for pushing party propaganda? And if so, from whom?

Health Scare Story Du Jour

This story was in today's Metro but the only place I could track it down was DNA India. It's full of long words and technical terms so "it must be true". I'll leave it to the experts (i.e. you) to point out all the half-truths, inconsistencies and inherent contradications:

Washington, DC: Asthma patients should keep their hands away from heavy, high-fat meals, suggests a new study. People with asthma who consumed a high-fat meal showed increased airway inflammation just hours after the binge, according to Australian researchers who conducted the study. The high fat meal also appeared to inhibit the response to the asthma reliever medication Ventolin (albuterol).

"Subjects who had consumed the high-fat meal had an increase in airway neutrophils and TLR4 mRNA gene expression from sputum cells, that didn't occur following the low fat meal. The high fat meal impaired the asthmatic response to albuterol. In subjects who had consumed a high fat meal, the post-albuterol improvement in lung function at three and four hours was suppressed," said Dr Lisa Wood, research fellow of the University of Newcastle.

Asthma prevalence has increased dramatically in western countries in recent decades, which indicates that environmental factors such as dietary intake may play a role in the onset and development of the disease.

Westernised diets are known to be relatively higher in fat than more traditional diets. High dietary fat intake has previously been shown to activate the immune response, leading to an increase in blood markers of inflammation. However, the effect of a high fat meal on airway inflammation, which contributes to asthma, had not been investigated.

Researchers recruited 40 asthmatic subjects who were randomised to receive either a high-fat, high-calorie "food challenge", consisting of fast food burgers and hash browns containing about 1,000 calories, 52% of which were from fat; or a low-fat, low-calorie meal consisting of reduced fat yogurt, containing about 200 calories, and 13% fat.

Sputum samples were collected before the meal and four hours afterward, and analysed for inflammatory markers. Subjects who had consumed the high-fat meal had a marked increase in airway neutrophils and TLR4 mRNA gene expression.

TLR4 is a cell surface receptor that is activated by nutritional fatty acids: TLR4 'senses' the presence of saturated fatty acids, and prompts the cell to respond to the fatty acids as if they were an invading pathogen, releasing inflammatory mediators. While the study didn't definitively distinguish between high fat and high energy, this increase in TLR4 activity suggests that dietary fat is important to the effects.

Subjects who had consumed the high fat meal also had reduced bronchodilator response as measured by FEV1 percent predicted and FEV1/FVC percent, when compared to those had consumed the low-fat meal.

"This is the first study to show that a high fat meal increases airway inflammation, so this is a very important finding. The observation that a high fat meal changes the asthmatic response to albuterol was unexpected as we hadn't considered the possibility that this would occur," said Wood.

The research will be presented at the ATS 2010 International Conference in New Orleans.

Mili-Band Of Brothers