Here we go again...

From the BBC:

The government has announced locations for new "enterprise zones" in England to try to boost economic growth. Ministers said 30,000 new jobs would be created by 2015 by giving cheaper business rates, superfast broadband and lower levels of planning control...

Prime Minister David Cameron said: "We are determined to do everything we can to make Britain the best place in the world to start and grow a business. Enterprise Zones are a major step towards delivering this - cutting business taxes, easing planning restrictions and giving business the tools they need to invest and expand.

Successive UK governments have mucked about with Enterprise Zones with lower Business Rates (which are tax on land ownership, and not a tax on business), and all that happens is that rents go up to soak up the Business Rates cut. Simple, observable facts. Ditto with SDLT-free zones.

There's another variant on these, whereby the buildings qualify for capital allowances - all that happens is that the builders bump up their prices accordingly so that the net cost of the building ends up at a fair price.

"How can builders do this?" you may ask "Wouldn't other builders bid the price down to market value?"

Well no, because the owner of the land, who has the whip hand, appoints the builder and they split the difference somehow. And if you bought the land with the intention of trading there, no doubt your accountant will tell you that the most profitable use of that land is to build and sell an overpriced building.
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I suppose the good news is that the Tories have come up with something that will prevent riots and looting in future:

"David Cameron is being urged to accelerate tax breaks for married couples as part of his moral clean-up of Britain following last week’s riots."

You can just see it, can't you? If ever the riots and looting kicks off again, the police won't need truncheons and shields, they'll need megaphones. They can march line abreast up to the rioters and solemnly announce that if their mothers can find somebody to marry them, while they might admittedly lose up to £200 a week in extra benefits, their new husband will get £10 a week knocked off his PAYE. That'll have the little scrotes scurrying right back to their council estates to pass on the glad tidings, eh?

Heck knows what the story behind this is

Reader's Letter Of The Day

From The Evening Standard's 'Get it off your txt' section:

I trust that Boris Johnson will now have to swallow his own medicine and apologise to the owners of the Oxford restaurant whose windows I saw him smash while on a Bullingdon rampage. At least the 16-year-old Nick Clegg did his community service for burning property in Germany. Paul Wiffen

Killer Arguments Against LVT, Not (155)

One of the sneakier objections is that it is "unfair" to levy tax on a home which has been paid for out of post-tax income, i.e. that it's "double taxation'*, which ignores the point that income tax is morally wrong: you cannot use the fact that wrong has been done in the past to continue inflicting that on future generations. Two wrongs don't make a right, and all that.

So, as a Thought Experiment (and not a serious policy proposal), and ignoring welfare and pensions, how about adapting the Swiss Lump Sum taxation system, where you pay tax on the lower of a) your actual income and b) your notional income of five times the rental value of the home you live in?

Let's say, for sake of argument that there are two ways of raising £330 billion a year in tax - either a flat tax of 30% on all cash income (no exemptions, no higher or lower rates, no VAT or National Insurance) or a flat annual Land Value Tax, which would work out at approx. 8% on the current value of land and buildings (residential or commercial, let's ignore farms) of £4,125 billion. Let's ignore personal allowances as this would be dealt with via the Citizen's Income side of things (and this makes the maths a bit trickier**).

The gimmick would be that you get a full credit for any LVT paid against your income tax bill, so each household pays the higher of [30% x gross income] and [8% x current home value]. So let's say your household has the average earned income of £40,000 gross and your income tax is thus £12,000 a year (before deducting Citizen's Income**).

If you live in a £100,000 house/flat, your LVT bill is £8,000, and you get a full credit for this against income tax, which is duly knocked down to £4,000 (total bill £12,000). If you live in a £150,000 house, the LVT bill is £12,000 and your income tax bill is reduced to £zero. If you live in a £200,000 house, the LVT bill would be £16,000, so again, your income tax bill is reduced to £zero and the marginal cost (i.e. the relevant costs for decision making purposes) of living in that larger house is only £4,000 a year (and not £16,000 a year!).

The optimum position for any household would be to occupy a house which is worth (at current prices) just under four times the household's gross earnings; if you live in a smaller house, there's no further income tax reduction (income tax can't be reduced to a negative figure) and if you live in a larger house, there is an incremental extra cost.

In the fullness of time, we'd observe that nearly everybody would be living in a house which is worth approx. four times their earned income, at which stage we can just abolish income tax without any significant fall in revenues and without anybody noticing (apart from the few with a very low house price-to-income ratio, who'd save a few bob).
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* Which illustrates what rampant hypocrites the Homeys are, as their favourite tax is VAT - if that's not double taxation of incomes, then I don't know what is.

** You'd get the Citizen's Income anyway, whatever your living arrangements, so this has little impact on decision making. Regular readers may remember that my rule of thumb is, on a static basis and ignoring dynamic effects, that if your home is currently worth more than seven times your current gross income, you'd be worse off under LVT and if it's worth six times or less you'll be better off. It's the Citizen's Income which makes up the difference between "four times" and "six or seven times".

Home-Owner-Ist Special Pleading Of The Day

Exhibit One:

Rural areas in England and Scotland have been allocated nearly £363m to improve their broadband connections. Cumbria gets the largest share of the £530m pot, with over £17m to cope with its 96.2% notspots. By contrast, London gets nothing as it assumed that private investment will cover all parts of the capital.

In plain English: rural NIMBYs don't want to live in the horribly smelly towns with the little people; but they want the advantages without the disadvantages, so the self-same little people can cough up half a billion to subsidise the value of their homes, thank you very much.

Exhibit Two:

Millions of over-50s fear they will be forced to sell their family home to cope with the soaring cost of living, research reveals today. One in five worry they will have to ‘downsize’ to generate enough cash to pay the bills, according to a report from Saga. They fear that the rising price of everything from domestic energy to petrol and food, as well as higher taxes and rock-bottom savings rates will squeeze them to the point where they will have to sell up.

Righty-ho. We all face rises in the cost of living, but over-50s who haven't paid off the mortgage by now only have themselves to blame, by and large their mortgage repayments are tuppence ha'penny. To whom to they hope to sell their houses? To under-40s, perhaps?

Now, let's remind ourselves that the over-50s are demanding, on average, about £70,000 more for a house that the under-40s are willing or even able to pay - which is partly due to the "rock bottom savings rates" which self-same over-50s have engineered in order to prop up house prices even further. And that the under-40s face the same rises in the cost of living as well as the cost of bringing up children. If the over-50s can't even afford basics, how on earth do they expect the under-40s to pay for all this and the huge mortgage on top?

Something has to give somewhere, doesn't it?

Yet more fun with Yvonne, the fugitive cow

From The Mirror:

PLANS to lure a runaway cow out of a forest with a bull failed when rescuers realised the bull was castrated.

Animal rights groups brought in Ernst to tempt Yvonne, who escaped 12 weeks ago while on her way to a sausage factory*, without noticing he had been given the snip to make him calm.

Yvonne has been running free in a forest in Bavaria, Germany, with a herd of deer but police want her shot. Animal lovers say they will bring in another bull and have offered thousands for the cow’s safe capture.

* I'm sure there's a joke in here somewhere, along the lines of "Maybe she wants a sausage inside her instead of being inside a sausage", or something.

Australia: Raising the bar

From The Daily Mail:

Every hour spent watching TV, DVDs and videos as an adult reduces life expectancy by almost 22 minutes, a study suggests. And viewing TV for an average of six hours a day can cut short your life by five years.

The research claims that a sedentary lifestyle is as bad for health as smoking and obesity, because of the dangers posed by inactivity and the greater opportunities it offers for unhealthy eating...

Yadda, yadda, blah, blah. The write up in The Metro says that an hour's TV shortens your life by 22 minutes, and smoking one cigarette shortens your life by 11 minutes. Is this cumulative or consecutive? If you smoke two while watching an hour's TV, do you shorten your life by 44 minutes?

But that's not the point: look who did this 'research':

The researchers, from the University of Queensland, used information from the Australian Diabetes, Obesity and Lifestyle Study, together with population and death rate data...

The UK bansturbulary must be wriggling with envy at what you can get away with Down Under.

Hmm, but what will happen next year?

From The Metro:

The ‘popularity and desirability’ of some universities has led to increased living costs for students who are already facing higher tuition fees, a study has found.

The cost of a room in a shared house has risen by three per cent to £67.11 a week on average across Britain, according to the agency's study. But rental costs in Leamington Spa, close to Warwick University, jumped by 16 per cent this year, while student rents in Edinburgh rose by eight per cent and Cardiff, York and Reading all saw a six per cent rise.

The results of the survey come days after university guide Push found that student debts for this year’s freshers will rise by 6.4 per cent to an average of £26,100 on graduation, with London students owing the most. This year’s intake will be the last to escape top-up fees of up to £9,000 per year, which will be introduced in 2012.

You'd expect rents to increase slightly this year, because anybody who can bring forward his studies by a year saves £6,000* fees (do you avoid them for the whole three years, or just the first?), so there'll be a slight increase in the number of students (there is a practical upper limit), so what's going to happen to rents next year, when the number of students falls again and the number of students who stay living with their parents increases?

* Tuition fees are already about £3,000 a year.

"My Greedy Generation"

Killer Arguments Against LVT, Not (154)

From today's FT:

“If we do get rid of the 50p [income tax] rate we need to make sure there is something else levied on higher rate payers. Lib Dems think there should be a new way of taxing wealth,” one senior Lib Dem aide said. Talk of lowering the top rate of tax has triggered a dispute within the coalition, with Danny Alexander, the chief secretary to the Treasury, saying advocates of the move were “living in cloud cuckoo land”. (1)

But the Lib Dems expect it will happen, and are concentrating on coming up with replacement taxes that would raise extra revenue and win the support of voters, among whom the 50p rate is popular.(2) Mr Cable has long favoured the option of a “mansion tax”, levied on the sale of high-value homes, although others inside and outside the party have called it overly-complicated and unworkable...(3)

David Laws, the former chief secretary to the Treasury, and one of Mr Clegg’s closest political allies, is opposed to all these forms of wealth tax (4), saying they amount to double taxation after income tax has already been raised. (5)

1) Why? We managed perfectly well with a top income tax rate of 40p until a year ago, and according to HMRC estimates, it only raises about £1 billion. According to others, the top rate of 50p is past the top of the Laffer Curve and reduces overall revenues.

2) Have we really sunk this low? The 50p top tax rate on wealth creation is 'popular' but such is our reverence for 'people in big houses' that a tax on rent seeking and unearned wealth wouldn't be?

3) No it wouldn't be, not compared to the hyper-complexity of the current tax system, or the complexity of the 50p top tax rate alone (which requires a whole raft of anti-avoidance provisions to make it anywhere near enforceable), if anything it would be as simple as, or simpler than Business Rates in the UK or Domestic Rates in Northern Ireland. And given that any tax on residential land and buildings could and should replace other taxes, it would lead to a massive reduction in the overall complexity and unworkability of the tax system - the more taxes you replace, the easier it gets (including politically easier, as there'll be a minimum of people who'd lose out on Day One).

I sketched out a possible system for taxing residential land and buildings which ended up being published on Labour Left (of all places). If you want to get rid of the 50p top tax rate as well, or even the £30,000 non-dom levy, you just have to increase the target receipts from £42.5 billion per annum to £43.5 billion, hooray, yet more fiddly little taxes and jealousy surcharges out of the window.

4) A tax on the rental value of land is not a tax on wealth, it's a user charge. In the same way as a tax on petrol is not a tax on the wealth tied up in your car (VAT is), it's a tax on road use.

5) So if you pay 50% income tax, that's OK, but if you were to pay 40% income tax and approx. 5% of your income in LVT, that's double taxation, is it? Since when does "paying less tax" amount to double taxation?