Seems a Bit Pointless at This Stage

From the Daily Mail

The ECB and VW

As an update on my earlier post I read somewhere recently (on the DT but I can't find the link now) that the ECB purchased VW bonds as part of its QE program. That is the ECB bought packaged up auto finance loans from VW.

IMHO this does not make the practice any better.  It's still crony financing of industry favourites by the simple expedient of the ECB expanding its balance sheet, which it can do ad infinitum. It creates money ex nihilo and uses it to buy VW's bonds.  This is money for nothing. It's very similar to Help to (Buy) Sell, in that it is an indirect subsidy to producers (land owners under HtB).

Of course all this brings into question the GDP figures for the Eurozone.  If these are being boosted by QE, they must be meaningless since there has been no 'real' growth.  Just lots more money pumped into the system.

It's an outrage and it's not going to end well. Is it?

Or, as usual, am I missing something?

Killer Arguments Against LVT, Not (371)

Emailed in by MBK from The Southern Reporter:

Last week’s audience, such as it was, was split into three discussion groups with each asked to consider one of three broad alternatives – Property Tax, Land Value Tax and Local Income Tax.

“As one would expect, a Property Tax was most readily understood and is administratively quite simple to collect, but without a long overdue revaluation, which would undoubtedly result in both winners and losers, it would not be progressive,” said Councillor Bhatia.

“Land Value Tax, which is based on an assessment of someone’s land as well as property, was considered the most difficult to understand although it is used in a number of European countries and also Australia. Although this was probably the least popular of the options, on the plus side it would help prevent land banking and may free up brownfield sites for housing in preference to greenfield sites."

“Local Income Tax, based on PAYE and ability to pay, was considered the fairest alternative, although revenues would be most likely to fluctuate with economic cycles. Although no consensus emerged from the options discussed, all the feedback will be considered by the commission when we formulate our final report at the end of this year.”

We've done the 'ability to pay' nonsense enough times. As to "fair", just imagine that a small group of people own all the homes in the UK and everybody works and pays rent. Would we still think it "fair" to tax earned incomes at much higher rates, use that money to pay for the local services which give homes their rental value in the first place and then tax the landlords' rental income at low rates (as at present)? Surely not?
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What I don't understand is why people say "OK" to a property value tax, or revalued Council Tax with additional bands but think that LVT is off the scale and somehow administratively unworkable. If you want a longer version of the progressive property tax 'good' vs LVT 'too complicated' school of thought, see also pages 6 to 10 of UNISON's submission to the Scottish tax commission.

In terms of assessment and collection, there is no difference between Council Tax and LVT, they are just calculated slightly differently and could in theory end up with unchanged tax bills.

For example, our Council Tax is £2,800 a year, because the house we live in was worth between £160,001 and £320,000 on a certain date in 1991.

We could simply rename Council Tax to 'Land Value Tax' and leave the annual amounts payable unchanged, in which case our LVT bill would be £2,800, expressed as 16% of the "site premium" of £17,800 a year. (The "site premium" is quite simply the rent we had to pay to the landlord (£20,000), plus the Council Tax which we had to pay as tenants (£2,800) minus (say) £5,000 a year for the rental value of the bricks and mortar.)

They can leave the collection completely unchanged for the time being, in administrative terms it is always better putting the legal liability on the owner registered at HM Land Registry to pay because unlike a tenant, he can't just leave the tax unpaid and do a bunk, but that's details.

We could do the same for the Mansion Tax for foreigners (i.e. ATED) and collect it together with the LVT/reformed Council Tax. To anybody who wails that "foreigners won't pay" all I can say is "Well in that case, why does the ATED raise more money than HMRC was expecting"?

And we know pretty well how much Inheritance Tax would be payable on each home on average (current value minus nil rate band(s) x 40%), divide that by average time between purchase and death (forty years?) and make that an annual amount (we would be paying £nil on that basis as our house is just about covered by our two nil rate bands). Seeing as housing makes up the vast bulk of people's estates for Inheritance Tax and there is no logic in subjecting anything else to IHT, plus it is a right old faff taxing anything else, we can then get rid of Inheritance Tax.

The same goes for SDLT, a dreadful tax on transactions, if we sold the house today for what we paid last year, the SDLT would be £20,000. Assuming a sale every twenty years, that equals an annual tax of £1,000. £1 million homes would be paying £2,188 a year instead of £43,750 every twenty years etc.

And so on. We can replace lots of stupid little faffy taxes on 'assets' this way, and the administrative savings in future would far outweigh any extra up front costs of implementing the system. So maybe our annual bill would end up as £3,800, now expressed as 21% of the site premium of £17,800.

Having got this far and done the same calculation for every home, we will soon notice that people pay wildly different rates, it might be more than 100% of the site premium for homes in cheaper areas down to 15% for £1 million homes and then rising again for £-multi-million-homes with potentially high IHT/SDLT/ATED bills. You then just harmonise the rates across the board, so that the bill for each home is a similar percentage (about 25% - 30% initially) of its site premium. It doesn't need to be too terribly accurate, and in any event, it will be much fairer/flatter than the current hit and miss system.

And then we can start replacing the big ugly taxes - VAT, National Insurance, higher rate income tax. That 25% - 30% rate just goes up and the tax base (the rental value) will go up all by itself and after five or ten years we could have phased out VAT, NIC, higher rate income tax.

(Clearly, some councils will now collect more and some will collect less, in which case their central government grants, which make up three-quarters of their funding get adjusted up or down a bit to even things out. Separate topic).

Sorted.

Jeremy Corbyn vs The Taxpayers' Alliance - what if they are both right?

In the Red Corner, Jeremy Corbyn, suitably fired up by Richard Murphy and his ilk, wants to reduce corporate subsidies, which they claim amount to £93 billion a year.

I have a nasty feeling that they started at the wrong end when they calculated this, see e.g. here. In other words, they are looking at the extra tax which they think businesses ought to be paying; and that £93 billion figure is plucked out of the air.

But I do have some sympathy with the general approach and, as we will see, their £93 billion number is - probably by luck rather than judgment - actually not far off.

In the Blue Corner, we have the Taxpayers' Alliance, who know bugger all about 'tax' and deny there is an implicit subsidy to landownership, but do absolutely sterling work when it comes to identifying public sector waste and overspend see e.g. The Bumper Book of Waste.

I have a lot of sympathy with their approach as well.*

How do we reconcile the two? Always start with the facts.

According to HM Treasury's Public Expenditure Statistical Analyses 2014, Table 5.3, govt spending on goods and services acquired from the 'private sector', plus grants and subsidies are £258 billion a year (38% of total govt spending); public sector pay and pensions are £174 billion (26%) and welfare and pensions are £242 billion (36%); and out of that 36%, two-thirds is old age welfare and one-third is working age. (The other bits and pieces net off to nothing, ignore those).

How much of that £258 billion paid to the 'private' sector is waste and/or overspend? What does the TPA say? Think about Ministry of Defence, NHS IT projects, PFI projects, all this nonsense. The cost of over-employment in the public sector is small change in comparison, despite all the revolving door quangocrats on six-figure salaries.

If we conservatively assume a quarter of that £258 billion is pure waste/theft/overspend that's £65 billion straight off. Add to that most egregious tax break of all, tax relief for pension contributions of £30 - £40 billion, all of which is creamed off by 'the pensions industry' and none of which actually goes into higher pensions? Bung in third world aid and gross EU contributions (about £20 - 25 billion in total), which are largely recycled back to 'private' UK businesses, and £93 billion a year is not far off, and might well be an understatement.

That's how you plug deficits, not by twatting about persecuting welfare claimants to shave of a few billion a year at most.

* Where it gets tricky is because people draw an artificial distinction between cash spending, subsidies and overly generous tax breaks i.e. exemptions. The biggest single subsidy/tax exemption is the fact that the £200 billion a year implicit subsidy to residential land is not clawed back with a direct tax/user charges. Most households pay far more in taxes on income and spending than they get back in land freebies; it is only the top One Per Cent who cash in. But put that to one side for now.

I can't Believe the BBC made this...

One of my favourite TV series from the '70's. Here

This article reminded me of it and told me where it had been published.  Like the man says, download it before the BBC claims copyright or something.

Fun Online Polls: Dead pigs & The Land Value Taxation Campaign

The results to last week's Fun Online Poll were as follows:

Have you ever f***ed a dead pig?

Yes - 6%
No - 49%
I'm David Cameron and I couldn't possibly comment - 46%

I'm surprised that our Prime Minister has nothing better to do than vote 33 times, or 32 times if you exclude James Higham. But hey.
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This week's deadly serious poll:

Can you attend the LVT Campaign AGM in central London at 12 noon, Friday 2 October, sign up for £12 and vote in a new committee? Please?

Vote here or use the widget in the sidebar.

Pavlovian reflex

I was in a bar in eastern Europe recently (large glass of white wine, 70 cents, seeing as you ask) in which smoking was clearly permitted.

But the reflex urge to take my glass outside before lighting up was too strong, so I did.

Hmm.

The Classics

From the TES

Education secretary Nicky Morgan is to ask publishers to cut the prices of classic English novels for secondary schools, in a bid to ensure more teenagers have access to the books.

Ms Morgan is expected to make the request as part of a “rallying cry” to improve literacy, in a speech at Charles Dickens Primary School in Southwark, South London, today.

She will say that all children should have access to “our nation’s vast literary heritage” and that cheaper access to novels by Jane Austen, Charles Dickens and Emily Brontë would encourage schools to buy in more of the texts.

Jane Austen, Charles Dickens and Emily Bronte are already available for a low cost. If you've got an e-reader or computer, you can get them for nothing. Their works entered the public domain long ago, and you can get them from places like Project Gutenberg, or sometimes Amazon, for £0.

If you want a paperback, it's about £2 a book, which is basically production and a little profit. And it's "little profit" because anyone can print and sell these books. There's no monopoly publisher. So, competition drives down the price. I doubt that this government scheme will be much cheaper.

This does then raise the thorny question of whether kids would want to read Dickens rather than The Hunger Games or Discworld books.

Just run that past me again?

From Here

"Volkswagen could face trouble funding leasing deals on new car as the European Central Bank (ECB) threatens to refuse to buy the loans that finance sales of its cars. The ECB declined to comment on claims it has put a temporary ban on buying VW's asset-backed securities debt backed by car loans"

So VW is packaging up car loans for purchase by the ECB?  WTF? IMHO this is outrageous.  The European Central Bank is getting involved in a commercial transaction, effectively printing money to buy loan books from VW.   That's like the Bank of England directly financing Jaguar, say.

Or am I missing something?

Assad and ISIS

From the Daily Mail:

One in five Syrians prefer living under the rule of Islamic State terrorists rather than President Bashar al-Assad's regime, according to new research.

Or to put it another way, 4/5ths of Syrians prefer living under Assad's regime. In which case, why are we pissing and crying about what Assad is doing rather than arming him to the teeth like Putin is doing?