Thursday, 26 February 2009

A brief history of UK tax, Part 5.

However, there is nothing so bad that you can't make it worse. The post-modern tax/subsidy system that has now been introduced looks superficially like the picture in Part 4, but some of the arrows have flipped round.

1. Instead of homeowners, wearing their homeowner hats, being net payers of even a little bit of property tax (i.e. Council Tax, average bill £1,000 or so), the government is now subsidising mortgages via artificially low interest rates and other subsidies (things are even more extreme in the USA or Australia, but let's stick to the UK for now) that is worth around £3,000 per annum to the typical mortgage borrower.

2. Banks have cut interest rates on savings far more than interest rates on mortgage lending, so banks are now net recipients of interest from savers, who we can look at as being in the 'landlords and home-owners' box, including people who cashed in at the top of the market and sold to rent or traded down. On a cash basis, older homeowners with savings are worse off, but the political advantage of trying to keep house prices above their equilibrium level seems to be keeping them quiet so far.

3. Banks are unlikely to pay much corporation tax for the foreseeable future, and are now recipients of taxpayers' money in the form of various bail-outs, interest rate subsidies and government guarantees.

Of course, now that government revenues from landlords and banks have gone negative, the arrow for 'Income tax etc' has to become even fatter. We are now seeing the largest amount of churning in the history of the world ever - from young to old, from rich to poor, from non-property owners to property owners, from savers to borrowers, from productive to unproductive, from childless to single parents etc - that it is difficult to work out who is actually a net winner or loser from all, but it would appear that younger, childless private sector workers who are tenants are propping up the whole system, which is why the number of them becoming first-time buyers has now dried up while they wait for the whole pyramid to collapse.

Click here for full series, final episode with my suggestions for a 'least-bad' tax system tomorrow.


John B said...

"it would appear that younger, childless private sector workers who are tenants are propping up the whole system"

So what's the best way of gettnig out of the group - should I:
a) have a sprog
b) get fired
c) buy a house
d) grow old?

Mark Wadsworth said...

Buy a house and then get fired, at least you get your mortgage paid in the interim.

DBC Reed said...

There is a useful summary of the land tax from 1066 up to his own time by Richard Cobden the Anti-Corn law leaguer.Just Google Richard Cobden Land tax and you will get a sizable quote from a parliamentary speech he made at the height of the controversy.This appears on the Prosper Australia website which is I believe Land Taxy. Jocj Coates used to quote this quote from Cobden a lot

Mark Wadsworth said...

DCB, I know. Jock posted it in the comments to Part 1.

DBC Reed said...

Sorry,must have missed it.
Some kind of follow-up was made by Charles Bradlaugh who made a fact-based plea for the revival of the land tax in 1877 in "The Land ,the People and the Coming Struggle" (originally 1871)This used to be on the net in its entirety, being a pre Progress and Poverty stunner,so I never made any notes apart from:"Out of this taxation in this country less than one seventy seventh portion of the burden falls on land." The reference to this country is because he makes a lot of international comparisons esp with Imperial territories.
The whole thing, as far as I remember is a huge denunciation of the Royal family ,the House of Brunswick,which he is convinced has colluded in exempting the big landowners from tax.

Anonymous said...

"it would appear that younger, childless private sector workers who are tenants are propping up the whole system"

Arse. I was wondering why my back was sore. Still, younger, childless private sector workers are the ones most able to fuck off to another country which hasn't been ruined by Socialists, and which has better scenery, more sunshine and isn't full of rude, subsidy demanding violent c**ts.

Mark Wadsworth said...

Rob, exactly. The national debt may be binding on the government but it is not binding on any particular individual.

If enough of us threatened to leave the country or go on a buyer's strike or a tax strike, then things would change. But there are more people motivated solely by the value of their home than by economic or demographic logic. And where the heck would we go?