Killer Arguments Against LVT, Not (472)

From a Georgist forum:

Hello, I have a question. I know this has been addressed before but I forgot and can't solve it on my own.

If the land market price is the capitalization of the annual rent, and a 100% LVT thus makes market price 0, how would rental values be known in the future?

If people knew the rental income will be zero, what is the floor from which to bid for land, and why would the owner sell to the highest bidder, if he knows he will see nothing of that rent bid? He could just give it to the first comer and it would be the same for him.

1. The amount of rent that somebody is willing to pay for exclusive occupation of somewhere is unaffected by how the legal owner has to divvy up the rent payments - he pays some to the government in tax; some to his bank if he bought with a mortgage; maybe he has to pay some to his ex-wife in maintenance payments. The tenant doesn't care.

As it happens, there are plenty of buildings in the UK or any country where the location rent is zero anyway. There is still a functioning market in buying and selling; or owning and renting out homes or business premises. The rent payable, by definition, relates purely to the actual building and other improvements. Introducing LVT would just make all areas of the country like this, but markets would still function.

2. As to buying and selling, it is not difficult to imagine somebody buying an average UK home, worth about £250,000 with a £100,000 cash deposit (equal to the value of the bricks and mortar) and an interest-only mortgage of £150,000 (equal to the value of the land).

On paper, he has borrowed £150,000. The economic reality is, he owns the bricks and mortar outright and is paying £300 a month in land rent (disguised as mortgage interest payments). House prices don't change much and he then sells the house, the mortgage disappears in a puff of smoke and the vendor ends up with his £100,000 back, if he has kept the house in reasonable condition. If he has let it fall derelict, he gets back less than £100,000. If he has made sensible improvements, he gets £100,000 plus value of improvements, and might make a cash profit overall.

Under LVT, the cash position is no different. Our hero buys the house for £100,000 and takes on monthly LVT payments of £300 until he sells. (Sure, if the area becomes more desirable the LVT creeps up; which is the same as the bank's mortgage rate increasing, equally both could go down). When he sells, he gets £100,000 for the house (or more or less, depending on condition) and is no longer liable to pay the LVT in the same way as he would be no longer liable to make monthly mortgage payments.

3. Clearly, the government has to get a reasonable sample of up-to-date rents paid and selling prices in each area, and to update LVT assessments accordingly, in absolute and relative terms, but that is a purely administrative issue and not difficult to deal with.

UK employers have to report tens of millions of wage payments for PAYE purposes every month, and millions or billions of VAT-able transactions every quarter; millions of individuals have to submit tax returns and the tax paid figure has to agree to the PAYE deducted figure.

So keeping tabs on a few million new rental agreements and about one million sales of land and buildings every year (which HM Land Registry and HM Revenue & Customs already do) is a doddle in comparison. Outliers will be easy to spot and investigate; or they can simply be excluded from the averages.

Well played, Metro, well played.

From The Metro:

A MUM couldn’t believe her ears when her satnav started swearing at her... Everything was fine until six months ago when the voice suddenly changed from a woman to a man — and called her an ‘a***hole’...

A TomTom spokesperson said it was likely that Ms Dockerill has an older satnav where you can record your voice. ‘Whether it’s a previous owner, or a cheeky family member, we can assure her that it’s not the satnav shouting obscenities,’ they said.

The company has sent Ms Dockerill a new device — which politely tells her where to go.

Nobody move or your our income gets hurt!

From the BBC:

Boris Johnson's Brexit deal will leave the UK £70bn worse off than if it had remained in the EU, a study by the National Institute of Economic and Social Research (NIESR) has found.

It concluded that GDP would be 3.5% lower in 10 years' time under the deal.The independent forecaster's outlook is one of the first assessments of how the economy will fare under the new deal...

By force of habit (h/t Devil's Kitchen ca. ten years ago), let's have a look at NIESR's most recent accounts and see who funds them.

Page 26:

Income from research work
European Commission Institutions - £112,162
Research Councils - £402,651
Government departments - £1,506,958
Trusts and Foundations - £680,902
Other - £152,444.

In case you are wondering, 'Research Councils' are just yet more quangos.

Reader's Letter Of The Day

From today's Metro:

Ms Ahmed's fight for equal pay for BBC presenters is admirable.

The outcome, however, should not be a rise for a woman but a massive reduction in pay for the overpaid male 'talent'.

Peter Brown, Croydon.

Yes, that'll work. I wonder why nobody thought of this before?

From City AM:

The UK film regulator will this week roll out a series of new age rating symbols designed for online streaming platforms.

The digital classification symbols, which will launch on Netflix from Thursday, are designed to help young people make more conscious choices about what they watch online...

I've never bothered putting passwords or doing this age-related nonsense on my computers or on our Netflix and Amazon accounts. If my kids are old enough to hack them, they will be old enough to watch whatever they like.

"Blue is for a baby boy and spattered in blood is for a baby girl"

Woman, 56, is killed by flying debris after an explosion during a gender reveal party gone wrong in Iowa

Killer Arguments Against LVT, Not (471)

Faced with the incontrovertible assertions that:

a) LVT is not a "tax" but just a user charge for benefits received, like paying a roofer to fix your roof or paying the utility company for the power and water you use, and

b) that is totally unreasonable to make 'everybody else' to pay for the cost of those benfefits,

... the Homeys claim that the circumstances under which current owners acquired their land - or what they intend to do with the proceeds - entitle them to a special exemption.

Here's a selection from the years I've been doing this:

What about somebody who bought decades ago and whose house price has rocketed because of lack of supply/immigration/lax lending standards/gentrification?" (a variant of the Poor Widow Bogey)

What about a recent purchaser with a big mortgage who will be pushed into negative equity? The banking system will collapse!

I bought a semi-derelict house in a run-down area, I have spent tens of thousands on improvements, so it's unfair to tax me on the value I added.

I bought my house out of taxed income!

I inherited this house, it is my family's main asset and I want to leave it to my children who don't have much income or other assets.

I bought additional homes to rent out for security in my old age. (Bonus: I'll just pass on the tax to my tenants, who can't afford it)

I scrimped and saved my whole life, built up and sold a business. I've paid enough tax and I just want to enjoy the rest of my life in my mansion.

My house has shot up in value. I'd like to cash in and downsize, and the surplus cash will be my pension.

I made sacrifices to pay off the mortgage, why do you want to take that away from me?

Pensioners need to be able to release equity in their homes to pay for long-term care, if they can't do that, they'll just be a burden on the taxpayer

And so on and so forth.

1. None of these is an argument against LVT, taken in isolation.

2. Many of the categories are polar opposites.

A pensioner couple who bought their home for a regulated, below market price under Georgism Lite decades ago and paid off the mortgage out of petty cash is the polar opposite of today's FTB couple who have to take out massive mortgages which will take them thirty or forty years to pay off.

The argument that it is unfair to tax somebody on windfall, unearned gains is the polar opposite of the argument that is unfair to tax somebody on the increase in value of their home because they have ploughed so much into improving it. (LVT does neither of course, but that's by-the-by here).

3. The glaring problem, if you look at the whole list...

The categories cover just about everybody, and many - including me - will fall into more than one category.

I might as well accept that income tax is a good idea in principle - but that we should exempt employees (because they have to work hard and need their wages to live off); we should exempt businesses (because they maximise value in an economy); we should exempt business owners (because they are risk-takers and stand to lose everything); we should exempt savings and pension income (because that's return on savings); we should exempt consumers (because without them, businesses would collapse) and so on, in which case there's nobody left.

"US hunter killed by deer he thought he had just shot dead"

Glorious

Enlightenment 2.0

It's as easy as ABC

Arbitrary Authority + Big Bureaucracy = Complete Chaos

Nobody move or somebody gets hurt!

From The Metro, an absolute classic of the genre:

KNIFE crime could get ‘considerably worse’ under Boris Johnson’s Brexit deal, a former minister has said.

David Lammy, who represents Tottenham in north London, said the drop in GDP that the deal would cause would ‘mean everything’ to areas with high poverty rates — and have a bigger impact ‘than the 2008 crash’.

The Labour MP (pictured) told the Commons: ‘In my constituency, just the weekend before last, two men were knifed within an inch of their lives. We would see a reduction in GDP, with a Canada-style free trade deal, of 6.7 per cent in our country. 

'In a constituency like Tottenham, it means everything. It means that the knife crime I’m worried about could get considerably worse. I don’t want the south side of Chicago in Tottenham.’

I strongly suspect that a lot of people who voted Leave did so to thumb their noses at drivel like this.

'Remain' would probably have won if the Remain campaign had stuck to simply emphasising the positives of being an EU member (of which there are many); glossing over the negatives (of which there are just as many); and not wasting most of their energy on trying to scare people into thinking that the world would come to an end if they voted Leave (when it was quite clear that the world would carry on pretty much as normal, Leave or Remain).

The Leave campaign also have made some pretty outrageous claims, but they weren't so stupid as to claim that we'd all catch super-gonorrhea if we voted Remain.That would just have devalued their more plausible stuff.