Flashman submitted the only vaguely coherent counter-argument over at HPC, which kicks off at comment 24:
... there are also such matters as LVT penalising large factories that own their own land. They would continue to pay large amounts of tax even when they are operating at a loss in a recession or when they are operating at loss because of a huge investment. A company like Honda would not tolerate such unjust treatment and they would fly into the arms of a more welcoming country….or would there also have to be some sort of large exemptions on taxing land?
Honda's current tax bill on their Swindon site appears to be over £500 million a year (see footnote).
If all existing taxes were replaced with LVT, their tax bill would be £41 million a year (370 acres x 4,840 x £23/sq yard/year, see earlier workings for SN3 4.. postcode sector).
That looks like a ninety per cent tax cut to me.
At comment 66, Flashman then says " You didn’t address the consequences of a business leaving because they resented (or were bankrupted by) being taxed heavily during a long-term loss-making period... . If you don't support struggling strategic businesses, they have a habit of disappearing or being transferred to foreign ownership."
Yes I did.
I pointed out that cutting somebody's tax bill by ninety per cent strikes me as 'light' taxation rather than 'heavy' taxation (a point which he refused to accept) and there is little need to worry about their factory being transferred to foreign ownership because, er, it's already in foreign ownership.
Anyways, to spell this out, Honda's factory has a capacity of 250,000 cars per year, so in a good year it would pay £900 million in taxes. They had a bad year or two during the recession when its production halved, so in that bad year, its tax bill went down to 'only' £500 million, and in one of those years it received the car scrappage scheme discounts worth maybe £139 million, bringing the net bill down to £361 million. That's still a heck of a lot more than £41 million.
And yes, maybe Honda would blackmail the local council and threaten to leave, knowing that there are one or two bad years ahead in which, of course, they'd prefer to pay £nil in tax rather than £41 million, but they're going to do that anyway in good times and bad, and realistically would they disappear abroad?
a) They've invested £1,380 million in plant and machinery, how much would it cost them to dismantle it all and reassemble it overseas? A damn' sight more than £41 million, I suspect, so if they gamble on things picking up in a year or two, they might well mothball the factory but they would not relocate.
b) And where would they go? That £41 million works out at an average tax bill per car of £311, there is nowhere else in Europe where they'd pay that little. And why would they go to all that trouble of avoiding a £41 million annual tax bill if they'd end up paying £500 million a year elsewhere, even in the bad years?
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To guesstimate Honda's current tax bill:
According to this:
- their factory site in Swindon is 370 acres,
- they have invested £1.38 billion in plant and machinery
- they have 5,000 'associates' (i.e. employees).
According to this, they have 3,000 employees and expect to manufacture 135,000 cars this year (reduced because of Japanese tsunami-related parts shortage).
Their cars sell for between £12,000 and £24,000, let's call it an average of £18,000= VAT of £3,000 per car; plus £1,000 worth of labour per car = PAYE of £400 per car; plus £1,000 profit = corporation tax of £300 per car. This gives us a total of £3,700 tax per car x 135,000 = £500 million a year, plus another £25 million or so in Business Rates.
So Bad They Named Him Twice?
19 minutes ago
56 comments:
Flashman is clearly talking out of his arse, most factories use very little in the way of land resources because they tend to operate on the outskirts of towns and cities where the land is cheap. They are however capital and labour intensive, and this is where the tax system punishes them.
If we implemented full LVT companies would be queing up to get in the door! Some areas of the country would tax exempt for goodness sake, distortionary subsidies notwithstanding you cannot get a better incentive than that.
>>If we implemented full LVT companies would be queing up to get in the door!<<
Which is why LVT will NEVER happen while we are part of the EU.
CD, he still refuses to accept that a 90% tax cut is a 90% tax cut. Very strange.
Shiney, sure, neither will we be able to get rid of VAT, all the more reason to leave the EU.
HPC usually sends my comments to /dev/null so I don't bother trying anymore.
My favourite though is his trying to tie the French government bailout of Renault to the tax system:
you say it was outside their tax system and I say it was part of their tax system. It's a tough call but their tax system was not repealed or altered in any way to enable this write off, so I'm quite sure it's at least reasonable to say that the write-off was part of their existing tax system.
...and their existing criminal justice system, and their existing foreign policy, and education, and healthcare...
F, he also refused to accept my point that a sensible business would prefer
a) a low tax bill of £41 million a year (and correspondingly cheap land), to
b) having the tax bill go between £500 million and £900 million (and correspondingly expensive land) with the off chance that if they bribe the right people, they might get an occasional massive rebate or car scrappage subsidy.
I'm struggling with the overall incidence of LVT now. If businesses such as Honda (whose factory I can see out of my window as I type) are going to get a 90% tax bill cut, where is that revenue going to be replaced from? You often state that most people will be either better off or no worse off when you take CI/LVT/no other tax into account, so where is the revenue to replace the business taxes going to come from?
The heaviest tax increases would obviously fall on owner occupiers of large houses, but most of those are owned by retired people who would be exempt until they die. So while the State might get its money eventually, what's it going to do in the meantime?
Something doesn't add up. Businesses, better off, most people better off/not worse off. Which means HUGE increases on the remaining people as far as I can see. Which I suspect they don't have the income to pay. So where the money will come from I just don't know.
Oh and I remember you saying there would be a saving for individuals from not having to pay VAT as well. It can't be counted as a saving for individuals AND businesses now can it? Its got to be one or the other (or split between the two) but you can't count it twice.
S, Ok, here's a folksy example. A group of friends set off to the pub.
a) They can agree to all chip in £x to the kitty and that amount gets spent, regardless of how much or little you drink. That's like Poll Tax.
b) They agree that the highest earner picks up a third of the tab, those people in jobs pay two-thirds and the non-earners drink for free. That's like income tax.
c) They agree that everybody pays for his own drinks. That's like LVT.
You can argue to the death who would be better or worse off, fact is, it's all affordable - if we decide that everybody pays for his own drinks, then you just spend what you can afford.
In the background of course, the Home-Owner-Ists own the brewery and rake off the profits, so all they want is to maximise the amount that is collected from the populace by force and spent in the pub, so they like a) or b). They hate c) because people would spend less in the pub and their unearned income would dry up.
So in a Georgist world, everybody gets given a share of hte profits in the pub, not just the Homeys.
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"You often state that most people will be either better off or no worse off when you take CI/LVT/no other tax into account, so where is the revenue to replace the business taxes going to come from?"
I've just given Honda and its 5,000 employees (plus Heaven knows how many smaller suppliers) a £500 million tax cut. So their employees have (say) £12,000 a year higher net salaries and they pay (say) £12,000 a year in LVT on their average Swindon semi, from which further you can deduct their CI.
That's where the money comes from - from people going out to work and growing food or cutting people's hair or building cars or doing heart by-pass operations. The same place as any other kind of wealth comes from or where income tax comes from.
It's typical Homey to claim that everybody would end up worse off, no they wouldn't, about a third would end up worse off, so they trade down and the two-thirds of people currently FORCED to pay loads of income tax and FORCED to live in small, expensive houses can trade up - maybe they end up paying the same amount in LVT as they did before in income tax etc, but at least they have a nicer house to show for it.
"their employees have (say) £12,000 a year higher net salaries and they pay (say) £12,000 a year in LVT on their average Swindon semi"
OK, so the employees get an extra £12,000 a year they didn't get before and then pay £12,000 a year they didn't pay before. The Treasury gets the same from them as it got before.
So what about the £459million shortfall between what Honda paid before and what it pays under LVT?
TFB: "So what about the £459million shortfall between what Honda paid before and what it pays under LVT?"
What about it? Somebody claimed that replacing all taxes with LVT would bankrupt Honda, so I worked out how much they'd be paying and it happened to be ninety per cent less.
I invited him to give me a real life example of a business which would pay more under LVT and he just ignored the question. I doubt very much that there are more than five or six such businesses in the whole of the UK.
Clearly, other people will be paying a lot more under LVT than they are now - i.e. those people whose house is currently worth more than seven times their gross income. I've never disputed that.
What really hacks me off about you Homeys is that you insist that everybody and all businesses will be worse off under LVT, which is quite simply not true, otherwise I wouldn't recommend it.
"Clearly, other people will be paying a lot more under LVT than they are now - i.e. those people whose house is currently worth more than seven times their gross income. I've never disputed that."
Yes, but as they don't have the income to pay that LVT, how are you going to raise billions from that section of society? In the end you can't have what isn't there. The vast majority of those who you 'expect' to pay more will be trying (by downsizing etc) to not pay more LVT than they did in taxes before.
I would expect to see house prices be squeezed into a much smaller range under LVT. Those at the top would fall significantly as people had to sell to avoid massive LVT bills, and the only way of selling would be to reduce the price. Perhaps by up to 50%. They would then want to buy a smaller cheaper house which would push up the price of them. So the LVT raised from the (now) high property price areas would fall and the (now) low property price areas would rise. The distribution of house prices would reflect almost exactly that of income, it would have to, because you need to have the income to pay the LVT.
My take is that LVT revenues would drop as the top end properties reduced in value fairly sharply, and its popularity (as you tell us it would be) would drop sharply as the bottom end house prices rose, increasing LVT for those in the poorer areas.
By definition LVT is taxing land values, so if people cash out their property value and don't reinvest it in land (either by downsizing or by renting) then the value of the pot you are taxing is falling. You then have to raise the LVT rate to keep the revenues up, which in turn prompts people to try and remove their capital from the property market.
S, if in doubt, apply commonsense:
"The vast majority of those who you 'expect' to pay more will be trying (by downsizing etc) to not pay more LVT than they did in taxes before."
Correct. But for every downsizer there is an upsizer. Those who are willing and able to pay most tax get to live in the nicest houses, and those who want to be net beneficiaries of the system live in the cheapest houses.
"I would expect to see house prices be squeezed into a much smaller range under LVT."
Correct.
Selling prices would be much flatter (and would reflect just the bricks and mortar value), the difference would be that the tax you have to pay would be higher in rich areas and lower in poor areas.
"My take is that LVT revenues would drop as the top end properties reduced in value fairly sharply, and its popularity (as you tell us it would be) would drop sharply as the bottom end house prices rose, increasing LVT for those in the poorer areas."
Nope, it's a tax on relative rental values, not absolute capital values (I merely use selling prices as a proxy for rental values). Let's assume there are only two houses, one small and one large.
Currently, small house sells for £100,000 and large house sells for £300,000. Required tax take happens to be £32,000, so for a tax base of £400,000 = 8%, small house pays £8,000 and large house pays £24,000.
Maybe this gap is too big and everybody tries to downsize, small house falls to £80,000 and large house to £160,000, so tax base = £240,000 and required rate to raise £32,000 = 13.33%.
So tax on small house now = £10,667 and tax on large house now = £21,333. Sooner or later the gap between the two will level out because people are (clearly) prepared to pay more to live in a nice house, in the same way as people pay more for a BMW than a Ford, or more for organic free range chickens than for battery chickens.
... cont.
"The distribution of house prices would reflect almost exactly that of income, it would have to, because you need to have the income to pay the LVT."
Correct, there is already an 80% or 90% correlation between average house price and average earnings in UK local authorities. So we already have this on a wider geographical basis, all that remains is for people within each smaller area to arrange their affairs accordingly.
"... which in turn prompts people to try and remove their capital from the property market."
You can't remove capital from the land market, the land is just there, we have exactly the same land and buildings as we did 15 years ago, it's just that the selling/buying price of the land element has quadrupled, it's not actually worth four times as much, it's just a massive pyramid scheme which I would like to unravel.
Wadsworth: I resent you sneakily attacking my comments when you though I wouldn't be watching. You got caught fudging the figures with an accounting sleight of hand, which has left you smarting and you were continuously red carded for ducking and diving any comment that you couldn’t dismiss with your potted answers. I studied and supported LVT long before developed your OCD style attachment to it and I can say with confidence that you have completely perverted LVT in an attempt to make it fit your extreme right wing, little Englander UKIP politics. A 90% tax cut for businesses? Don’t make me laugh. You couldn’t handle the debate on HPC, so you skulked off to continue it on you own site, in order to drone on unopposed. I am disappointed in you
For the rest of you: I am a long time supporter of LVT but I am alarmed at how it has been hijacked and subverted by a rag tag collection of right wing and left wing blog ranters who would swing punches at each other if they got into the same room. Mark is usually an honourable chap but he is deliberately not giving you the full story (like any aspiring politician he only feeds you the good bits). Ask him to comprehensively tabulate exactly who would gain what and lose what under (his version) of LVT. Most of you will not be pleased. He was asked to do this yesterday but he, of course, ducked out of it. Make sure you also ask him about the probable effect on house prices. Many house prices will rise, which will either please or displease you.
Mark: I've just read though some of your critique of my comments. I can't work out if you genuinely misunderstand every point I make or if you are some sort of shifty wanna-be politician who deliberately takes things out of context. I hope and suspect that it is the former. Here are two examples:
I said: “If you don't support struggling strategic businesses, they have a habit of disappearing or being transferred to foreign ownership."
You said: ”there is little need to worry about their factory being transferred to foreign ownership because, er, it's already in foreign ownership.”
I was clearly talking about manufacturers in general. You know full well that I am a trained economist and that I am rather likely to know (in common with most pet cats) that Honda is Japanese. It’s generally only sore losers and the hopelessly inadequate that would stoop to cheap shots like that. I am left wondering how low can you go?
You said: “I pointed out that cutting somebody's tax bill by ninety per cent strikes me as 'light' taxation rather than 'heavy' taxation (a point which he refused to accept)”
I had to repeat the same point to you at least ten times but you still couldn’t or wouldn’t grasp it. Like most LVT newbies you have a zealous refusal to accept that LVT is not always a one size fits all solution. I demonstrated this by pointing out that some giant manufacturers have needed more than just a tax cut or even a deferment of LVT tax to help them survive. I used GM and Renault as examples of currently thriving companies that have previously been gifted huge dollops of cash and/or support o keep them from disappearing altogether. Why can you not accept that a 90% tax cut is no where near as much as actually giving someone 3 billion quid? Let me make it simpler for you: Would you be better off if I gave you a tax cut or if I gave you a million quid? Get it? It would usually take a madman or an imbecile to argue that a large tax cut is more than a giant gift plus no taxation. Of course you re not an imbecile or a madman, so you just cheerfully misrepresented me instead. Very sleazy and if you don’t mind me saying, a little desperate. Mark I can put this episode behind me but you will have to make some sort of courteous gesture because I am quite appalled by your behaviour
Many house prices will rise, which will either please or displease you.
Robin Smith has been making this claim, but I can't for the life of me see how that would work. Care to enlighten me?
Ask him to comprehensively tabulate exactly who would gain what and lose what under (his version) of LVT.
Will do. Mark, please comprehensively tabulate...etc...etc...
“If you don't support struggling strategic businesses, they have a habit of disappearing or being transferred to foreign ownership."
The problem with these sorts of debates is that they, by definition, cannot be resolved. You can't take both paths and see which turns out best. And that's without even considering what 'best' means.
Is Renault as it now exists better off for having being bailed out? Absolutely! Was there a better Renault/Motor Industry/France that would have appeared had the money been used in some other way?
That's why this Renault thing has nothing to do with LVT. I know you have problems with Mark's implementation and approach, but you're conflating different issues with LVT in order to have a dig at him. As an LVT supporter, do you not think that counterproductive?
As a final thought: How would you implement LVT? Do you see yourself as left or right or whatever? Is it really so bad that some lefties and righties have found *some* sort of common ground?
fraggle: mark has publicly made the claim himself (on HPC). You have to realise that LVT is just a replacement tax and that it is not magic. If one group gets a huge discount... I'll let you work out the rest
For the record, I had no desire to intrude on this blog but I am quite angered by Marks behaviour. How dare he try to falsly portray me as the sort of person who doesn't know that Honda is a Japanese company? He’s a sore loser and he’s let himself down
Flash, you were the one who said that Honda would go abroad because of punitive LVT, and I did a fair guesstimate of their current tax bill and what it would be under full-on LVT.
As it happens it would come down by ninety per cent, that's a fact. I accept that Honda is an extreme case, and for most businesses it would only come down by two-thirds (or whatever) and yes, I imagine there must be a marginal business somewhere which would end up worse off. But these would be few and far between and you failed to give a single real life example.
The point about French system with high taxes and subsidies is not relevant to this debate. You can still have subsidies and protectionism with LVT if you so wish. I personally am against.
"Ask him to comprehensively tabulate exactly who would gain what and lose what under (his version) of LVT. Most of you will not be pleased. He was asked to do this yesterday but he, of course, ducked out of it."
I have done these workings loads of times, and here's a brief summary (assuming no changes in behaviour):
1. Nearly all businesses = considerably better off.
2. People who live in a house worth less than seven times their gross income = better off.
3. People who live in a house worth more than seven times their gross income = worse off.
This is on a 'fiscally neutral' basis, i.e. assume LVT raises as much as income tax, NIC, VAT, corp tax, council tax etc.
I've never made any secret about this, and it's basic maths anyway. Whether you like or dislike this outcome is a separate issue.
"Would you be better off if I gave you a tax cut or if I gave you a million quid?"
That's an equation with at least three unknowns, please specify:
- what my current tax bill is per year,
- what my tax bill would be with the tax cut,
- for how long the tax cut will be in force.
Then I can work out whether the NPV of the tax cut is more or less than £1 million.
Frag, under LVT there are opposing forces on house prices
- LVT, in isolation, depresses house prices.
- higher CI to some extent feeds straight back into higher house prices.
- income tax cuts and boost to real economy mean higher house prices.
- existing houses more efficiently used, vacant and part-occupied and second homes come onto market, this depresses house prices.
So it could go either way.
As to winners and losers, see table above.
"Flashman is clearly talking out of his arse, most factories use very little in the way of land resources because they tend to operate on the outskirts of towns and cities where the land is cheap."
Mind your manners. The above comment is a complete mismatch to my original comment. Is that a blog policy here? I was originally pointing out that a factory that owns its own land (Nissan Sunderland) would, under LVT, continue to pay full LVT during spells when it was operating at a loss. This is because they are also the landowners, so LVT would penalise them more than a factory that operates at a loss but doesn’t own its own land. It’s a simple matter of fact and its only possible to debate it if the original comment is once again misrepresented by Mark. This point was, in fact, one of the points that Mark ducked over and over because it is inconvenient to him. I like LVT but a grown up usually accepts that nothing is perfect.
Flash: "You have to realise that LVT is just a replacement tax and that it is not magic. If one group gets a huge discount... I'll let you work out the rest."
Correct, it is a replacement tax, it replaces taxes on incomes and output with taxes on land values.
Correct, it is not magic - it's a tax, like fuel duty or tobacco duty. All very unglamourous. There are enough real life examples where it is or has been used to convince me that the benefits are real, not purely theoretical.
"If one group gets a discount..."
I'm sorry, are you in favour of a flat rate simple, take-it or leave it system, or one with exemptions?
I prefer the former, I'll leave it to politicians to over-complicate it with exemptions for favoured groups, i.e. multi-nationals, small local businesses, farmers, pensioners, young families, new houses, social houses, film companies, churches, schools, libraries etc.
But that is not an argument against LVT in principle, that is an argument about implementation. The fact that income tax is so hideously complicated is not an argument against income tax in principle.
I'm not a sore loser, I've had far worse grief than this, I'm used to it by now.
Thats nonsense - the £100K house would RISE in value not fall! There would be a wall of people all desperate to downsize, and not as many people willing to upsize, unless the price is right. So people with small houses will demand higher and higher prices and sellers of big houses will have to accept lower and lower offers, just to get rid.
So on your postcode system of valuation the price per sq yard would fall in the formerly very expensive areas, and rise in the formerly very cheap areas. The revenue might offset, I couldn't say. But I can guarantee those at the bottom will not be happy to see rising LVT bills, and those who lost half the value of their houses because they had to sell at a knockdown price certainly wouldn't be.
Ironically the 'winners' would be those who currently live in a nice house and have higher incomes. They could afford to sit it out for a few years, watch their LVT bill drop every year as poorer people than them have to sell and reduce the price of houses in their area, thus reducing the LVT bill.
Strange tax system that rewards the richest and takes an increasing amount from the poorest, and discriminates significantly against single households, which is one of the demographic growth areas.
Flash: "I was originally pointing out that a factory that owns its own land (Nissan Sunderland) would, under LVT, continue to pay full LVT during spells when it was operating at a loss."
Don't worry about corporation tax, that raises £30 bn a year out of total UK taxes approx. £560 bn.
And I was pointing out that Nissan's overall tax bill (including VAT, PAYE, corp tax, Business Rates), over a long period with more good years than bad ones, would be considerably lower under LVT.
As to Nissan owning their own land, well why does LVT (or Business Rates) penalise them in particular? If Nissan rented their factory, then they'd have to pay rent + Business Rates during slow periods, does paying rent 'penalise' them?
S: "the £100K house would RISE in value not fall! There would be a wall of people all desperate to downsize, and not as many people willing to upsize, unless the price is right."
I wish you'd put actual numbers on these forecasts. OK, so small house rises to £120,000 and large house falls to £160,000, in which case the tax is split as follows:
- small house £13,714
- large house £18,286.
Do you seriously contend that people aren't prepared to pay at least an extra £4,572 for the extra bedrooms, the larger garden, the nicer location?
Don't forget, under current rules, renting the larger house would cost £10,000 a year more than renting the smaller (assuming yield of 5%), and that out of income taxed at about 50% (on average).
If people have correspondingly higher disposable incomes under LVT, then would the differential between tax on large house and small house not increase?
Spot on Sobers.
Mark: I am not interested in your party political broadcast for LVT. I only ever made one simple point and you lost your mind and dragged it out for two days because you were too nuts to admit that you didn’t have an answer that would maintain the illusion of LVT being the second coming.
I'll try something again and please don' talk any more nonsense about " unknowns". It might work with the financial illiterates who are impressed by your numerical window dressing but you should know better than to try it with me. I caught you out fudging the numbers yesterday, so learn your lesson.
Try this your for size (an there is nothing unknown about it):
Your LVT tax bill is 30 pence a year (because LVT is magic, innit)
I’m sure any factory would be delighted by this incredibly small LVT tax bill and they would probably give you a free car and your choice of female employee. It would be such a small bill that they could probably pay it, even if they were going bankrupt. Now, imagine a factory that is in a giant finacial hole and they need 3-billion quid just to keep the doors open. If one government offered to give them this 3 billion quid and you countered by telling them that your government would only charge them 30p and you would even defer it, they would tell you to stick your offer up your rear end and bugger off. They would probably even take their car back and tell you that the female employee had the pox. Stop being such an obstinate dingbat. My comment was not even meant to be an argument against LVT but you chose to box yourself into a corner by being so zealous about your marvellous 90% tax reduction, that you were willing to portray yourself as a madman. Of course you soon recovered by slinking off and misrepresenting everything I said, to make yourself feel better. I was never my intention to make you look stupid. You did it to yourself and even a dishonest attack behind my back will not make you feel better. Only an apology will do that, and I’m still waiting
Just in case you’re still in madman mode, I'll offer you a deal: You give me 2 billion quid and in return I'll give you 30 pence. You should take the deal. Mark Wadsworth says the 30 pence is worth way more than the poxy 2 billion
Flash: "imagine a factory that is in a giant finacial hole and they need 3-billion quid just to keep the doors open."
If one government offered to give them this 3 billion quid and you countered by telling them that your government would only charge them 30p and you would even defer it, they would tell you to stick your offer up your rear end and bugger off."
Can we at least agree that businesses are in for the money?
You still haven't said what ongoing tax bill will be in the country which offers the bung, so I'll put some numbers on it to illustrate the point:
So if Country A says "Your tax bill is 30p but no bungs" and Country B says "We'll give you £3 billion as a settlement grant, but once the tax-free honey moon period of two years is over, you tax bill will be £1 billion a year" then the pay back period is about five years, if I own that business and now I can up sticks before five years are up, then I will take the bung.
But once the honeymoon period is over and I can choose to go to Country A and just pay 30p a year, that is what I will do. Unless of course Country B extends the honeymoon tax-free period, and so on.
But Country A could retaliate and put an import ban on cars manufactured in Country B, and say that only cars manufactured in Country A may be driven on roads in Country A. What happens then?
In any event, this has nothing to do with LVT-vs-Existing taxes, this is about the wisdom or otherwise of corporate subsidies and protectionism.
Even under LVT you can have as many subsidies or trade barriers as you like. As we observe, the French appear to be quite good at industrial corporatism, the UK is hopeless at this.
Mark, you are a hopeless case. Why can't you or your sort ever give a simple answer to a simple question? Your laboured obfuscations make you look like the shifty politician, you aspire to be. What hope do we have if the next wave of politicians is as seedy and dishonest as the last lot? I will not waste my time talking to someone who is incapable of truth or reason. You quite deliberately misrepresented me and I intend to get an apology out of you, one way or another and even the most convincing display of Asperger’s Syndrome will not get you out of it. I’m waiting
Flash, I did answer your question.
I said that if I were a large multi-national, I would deduct the bung from the tax I'd have to pay during the lock in period (figure X) and then compare it with the lower tax I'd have to pay in the other country with no bung over the same period(figure Y).
If X < Y, I'd take the bung, else not. I think that this is a fairly uncontentious answer from the point of view of the multi-national. Whether this is a good policy for a country to have is another topic.
I also gave you a crash course in "winners and losers" and I explained how I guesstimated Honda's tax bill or LVT bill.
I also said that I personally don't approve of corporatist subsidies and trade barriers.
Or was your question "Do you accept that LVT will be wildly unpopular in certain quarters, whatever its economic merits; and do you accept that politicians will fall over themselves to offer discounts and exemptions to favoured groups to ameliorate perceived 'unfairness'?"
In which case my answer is an unequivocal "yes" on both counts.
So Mr politician, just like the rest of your kind you are incapable of an apology? Ok, lets try this: You have quite a lot of experience of my posts, do you not? Do you think that it was reasonable to portray me as someone who didn’t know that Honda was Japanese? A straight answer please and no talking about unknowns.
I intended to ignore your penultimate post but I'll give you one more example of why I am often exasperated by your inability to think things through.
You said: "You still haven't said what ongoing tax bill will be in the country which offers the bung, so I'll put some numbers on it to illustrate the point"
If a dieing company gets an offer of a giant life raft and it was the only life raft on offer, do you really think they would not take the life raft on offer because they are unsure about the ongoing tax bill? Do you really think they would say ‘no’ on their deathbed and then issue a death rattle? Please give a straight and simple answer to this without banging on about something else.
The ongoing tax bill is a matter for negotiation but how on earth do you expect me to know the value of the ongoing tax bill for a theoretical company going to a theoretical country? As I’ve explained above, its not actually relevant for practical purposes. It's this sort of craziness that makes me read some of your comments with an open mouth. One more time: The dieing company will invariably take the only life raft on offer, PERIOD. In any case, if a country is prepared to offer support like this, they are hardly likely to strangle the company later on. Honda, Nissan and many others receive regular delegations from other countries, so we must stay competitive. We all aspire to owning our houses mortgage free. Companies also aspire to owning the land they work on. If a company like Nissan goes to the expense of buying their own land then we should celebrate because they are more likely to be successful without having to pay rent to a landlord and they are more likely to feel anchored to our country. If they go through a rough patch and during this rough patch we penalise them for owning their own land by making them pay more LVT than a factory without their own land, then they will not be impressed. They stumped up the cash for the land for a very good finacial reason. If the goalposts are subsequently changed by the imposition of LVT AND and they have to pay more LVT than a company that doesn’t own their land, then they will be furious. I’ve tried reason, so if you don’t get this then I am afraid that I will have you committed. If you respond with an LVT manifesto, then I will have to try violence
I'm still waiting for an apology.
F: "Do you think that it was reasonable to portray me as someone who didn’t know that Honda was Japanese?"
That was just a bit of light relief! For the benefit of anybody reading this: yes of course Flash knows that Honda a Japanese.
"If a dying company gets an offer of a giant life raft and it was the only life raft on offer, do you really think they would not take the life raft on offer because they are unsure about the ongoing tax bill?"
If it were do or die, then they would take the life raft, of course. May I point out that Honda was not in a do or die position?
"If a company like Nissan goes to the expense of buying their own land then we should celebrate because they are more likely to be successful without having to pay rent to a landlord and they are more likely to feel anchored to our country."
I'm no expert on Nissan, but I believe you said that the government allowed it to buy land for agricultural prices, i.e. tuppence ha'penny? And remember, if that land is now worth a lot, then this reduces the marginal cost of going abroad as they can sell it for a load of cash.
"If the goalposts are subsequently changed by the imposition of LVT AND and they have to pay more LVT than a company that doesn’t own their land, then they will be furious."
Agreed. If the LVT on owner-occupied land were higher than on tenant/landlord land, then they would be furious. May I humbly add that my basic model is exactly the same rate on everything in each area, be it residential or commercial; owner-occupied or tenanted?
I'm happy to apologise for the first point, but not on the others.
Thanks Mark. I'm delighted to accept your apology and I'm looking forward to some less fraught debates. We have, after all, usually rubbed along quite well
Mark - You couldn't help me with my roulette endeavours could you? I've got excel...I don't know how to use it with regard to roulette.
Just a thought.
F, fair play, and thanks to you too.
JJ, can you elucidate? Does your comment relate to this post or to actual roulette? I do enjoy a maths puzzle!
Should we really be debating what is the optimum tax system using the example of the car-building industry? It strikes me that this operates on its own highly irregular playing field and the extent of government subsidization means that it's players approach nationalization. If a country decides that it would rather bail out a failing business than let it go under or move then you simply factor in the cost to the budget for national infrastructure.
Thanks Mark, I will email you my problem. For someone like you it won't even tax you (no pun intended), but for me I start confusing myself over simple sums and then get frustrated.
I'll start writing it now.
DNAse, it was Flash who offered Honda as an example and so I dutifully did a before and after calculation just to see what the impact would be. I'm not sure why we drifted on to these massive occasional bungs (which you could have under current rules or under LVT).
And while OT1H, the car industry itself is subsidised (or has huge barriers to entry, partly natural and partly because of government action such as restrictions on imports), OTOH let's not forget that cars and lorries are - rightly or wrongly - very heavily taxed (VAT on new cars, road fund licence, fuel duty, not to mention insurance premium tax, parking fines, bridge tolls, congestion charges, income tax and NIC on hideous P11D benefit in kind charges, restricted capital allowances etc).
If you tot up all those taxes, you'll arrive at a total figure of £60 billion or something, i.e. three times as much tax on a low value depreciating asset as we raise in council tax on a far more expensive 'asset' which tends to appreciate in value.
And while I'm no fan of new cars, the more of them they build the better, as it gives me a wider choice of cheap second hand car ten years later on :-)
JJ, I await with trepidation :-(
Erm... no one would be worse off with an LVT. Let me say that again in case it was hard to understand:
No one would be worse off with an LVT. Please dont ask again (:
See here for self evidence on the matter:
The Robin Smith Institute: For the umpteenth time... EVERYONE WILL BE BETTER OFF WITH AN LVT
Also lets just go over an aspect of the law of rent one more time for the deaf and blind:
Labour and Capital move automatically to the place where Rent is low in proportion. Because there the relative wages and interest are not robbed by the rentier so much. A law of nature.
If Honda moved here for any other reason they are either very stupid or are getting a big hand out to cover it. I suspect the latter.
RS, as you can imagine, and having bashed the figures back and forth and taken in to account Laffer and dynamic effects and looked at Denmark, Hong Kong, post WW2 Japan etc I completely agree with you when you say:
"no one would be worse off with an LVT."
However, looking at things in depth in a neutral and disinterested way and coming to your own conclusion is no defence against e.g. Flash, who states:
"Ask him to comprehensively tabulate exactly who would gain what and lose what under (his version) of LVT. Most of you will not be pleased."
Let's be honest, 95% of people would just agree with him straight off, we've had these debates often enough with 'normal people' and lost hands down.
It's like most people in London agree that the Tube is 'too expensive' AND AT THE SAME TIME they agree it is 'too crowded'.
The quickest way to make it less crowded is to increase ticket prices. The quickest way to make it cheaper is to reduce ticket prices, then clearly it would be even more crowded.
I strongly suspect that a million Tube users have made their own decisions and that the optimum price/crowdedness trade-off is in fact correct for any price level, whether it's free or costs £20 a day.
Mark: Not that it matters but it was actually Nissan I put forward (because they owned their own land). You were the first to mention Honda. I was unsure about the status of their land, so they were no good for my original purposes.
Everyone else: The car industry subsidy conversation was imported from another blog and it is out of context here. International car subsidies have very little to do with LVT (as far as I am concerned). On the other blog the subsidy issue accidentally morphed out of a LVT connected point I made about Nissan Sunderland owning their own land and it accidentally became the main argument.
There you go. They wont leave because their rent is relatively low. It gets relatively lower still the more land values rise. Land values ALWAYS rise unless civilisation is in decline, about every 500 years in the economic hyper cycle. That might actually be happening in America as we speak.
Mark and Robin: You are being a little simplistic when you say that no one would be worse off with an LVT. There are several secondary effects that you are not taking into consideration. For example, a new imposition of LVT would make many people feel financially compelled to make property decisions that they had not previously though desirable or necessary, under the old tax regime. I am fully aware of the LVT benefits that might offset these perceived costs but if people feel hard done by, then they are hard done by. By the way, I studied LVT many moons ago, as part of an economics degree, so I'm probably less of a 'normal' person than some of you newbies :) It always cost some people/entities more whenever we looked at it in the 80s, so what could possibly have changed now? If some house prices rise because of it, as Mark has previously claimed they would, then the buyers of these more expensive homes might well argue that they were worse off. Also why do LVTers complain so vigorously about the elite being desperate to protect themselves against LVT (even to the extent of starting wars), if they would lose nothing? The whole point of LVT is to stop the rentier class leeching, so it is not credible to say that no one would be worse off. I have always liked LVT but you should be wary of closed loop hubris.
flash',
You are contradicting yourself. "People would be worse off... no hang on, they would be better off." Time to make your mind up please.
I'm confident about this based on self evident truth and have shown it. Your self evidence is not valid exactly as stated in the link I posted above. Have you read it yet? It would have saved you a lot of toil and trouble in the 80's. You describe a classic flawed case.
The Robin Smith Institute: For the umpteenth time... EVERYONE WILL BE BETTER OFF WITH AN LVT
Its OK these objections are extremely well documented and we clarify them daily. It still amazes us but is no longer a surprise.
I often get the "simplistic" response. What is it about the simple that you do not like? Would you prefer something is harder to do than it needs to be?
A little ad hominem creeping in at the end there maybe?
BTW How much land do you own?
Flash, I'm quite convinced that nobody (ie. hardly anybody, FFS, some people were quite well off under the Nazis) would be worse off once the dust had settled and it's all worked itself through.
Problem is, superficially, yes, there would be quite a lot of people worse off (those with high land value to earned income ratio, as I mentioned) plus the HO elite, the bankers, large landlords, farmers with their agricultural subsidies etc.
Further, you have to factor in how genuinely nasty people are. They want to grab the largest relative share and not absolute slice. Look at NIMBYs - they make themselves slightly worse off in order to make other people a lot worse off.
RS, can you try it without the rudeness? Let's leave the rudeness to the Homeys, shall we?
An immature and emotionally erratic answer that failed to answer a single point.
“I'm confident about this based on self evident truth”
But evidently not confident enough to answer a single point.
“You are contradicting yourself. "People would be worse off... no hang on, they would be better off." Time to make your mind up please.”
A complete non sequitur. This comment does not remotely correspond to anything I wrote.
“A little ad hominen creeping in at the end there maybe?”
In light of your emotional and factual inability to cope with even the most gentle of probings from an outsider, I would say that you rather proved the validity of my 'closed loop' advise.
“BTW How much land do you own?”
Quite ironic considering your ad hominen remark.
The great religions often suffer from the same sort of thing that I am seeing here. The original text is wise, balanced and well intentioned but the priests and practitioners let it down badly.
Mark: My post crossed with yours. Thanks for the support. Yes, LVT would only make the most unpleasant of people suffer and that is never a bad thing. However, the well deserved loss these people would suffer gives a lie to the statement that everyone gains under LVT. That's more or less all I was saying and I was therefore taken aback by the somewhat eratic response from Robin. I guess we all have bad days so no harm, no foul. I was also saying that there would be some minor collateral damage caused to a small minority of more innocent folk but that would clear up after a generation and you cant make an omelet etc. Once the collateral damage had worked its way through the system, these more innocent folk would actually gain from LVT. The rentier class would of course be permanent losers.
MW - Do you not even trust your own ideas? I'e been blogging about the LVT movement on this lately. It makes you your own worst enemy. And means you will be supplying infinite evidence(LVT NOT) until you die.
No one will lose out with an LVT. Not even temporarily. Now even you are saying they will. This implies you do not really understand what it means at the bottom or a vested right has got you, even the Matrix. Please No!
There is one exception. I believe Flash falls into that category. It is clearly discussed in the above link. But even then it is a small loss for an enormous gain. The net net of that is??? Gain right?
I can understand why you are protecting your blog in the face of observed facts by allegations of rudeness. But will that produce the best outcome?
Perhaps when you say rude do you really mean I should be more sympathetic to your readers deeper fears. And the ignorance and selfishness that always spring form that? This is true and I agree it is a good approach, I'm working on it.
Next time just say:
Robin, show more sympathy
Flash'
Have you read the link yet? It answers all points exactly. Can you point out clearly why that small ask is immature and emotional please?
Your contradiction is written in your own hand:
a new imposition of LVT would make many people feel financially compelled to make property decisions that they had not previously though desirable or necessary
Next sentence:
I am fully aware of the LVT benefits that might offset these perceived costs
And also stating one "Would" and the next "Might" is an opinion. I remain awaiting evidence please?
The evidence I'm offering you is a gift. Its not my opinion nor am I attempting to indoctrinate you. I am asking you to think about it more carefully. It is self evident truth. I am only its messenger. You can take it or leave it I cannot force you. But it is there all the same. Just like the earth is round. Only an institutional religion would deny these things.
Why is it ironic? I'm only asking you how much land you own. You don't have to answer. It seems revealing that you refuse and the allegations you go on to make though.
Retired home owners, on fixed incomes, intending to pass their estates on to their children who's children are now struggling to find work or homes is certainly something I am sympathetic to. But what is the root cause? We are saying it is exactly this.
Institutionalised religion is politics by another name. Great religion is the remaining wisdom in society. I'm not sure what your point is and how its connected to my message.
Jesus once apparently said: "The poor you will always have with you". What he meant was
If ALL of you lot dont wake up and stop robbing each other, there will always be poverty. And it may be YOU. Why are you surprised?
I'm deeply engaged with holy people. Though am not one myself. Even they are perpetrating all this. This is what Christ was saying we must accept before he went to the cross. That we are all sinners and we must admit that before we can move on and be saved.
F: "I was also saying that there would be some minor collateral damage caused to a small minority of more innocent folk but that would clear up after a generation and you cant make an omelette etc..."
Agreed.
I've never denied there would be 'winners and losers' (albeit, more winners than losers) on Day One. We can invent all the 'relieving provisions' you want once the basic, simple rules have been agreed. For example, I would not be averse to
a) Offering pensioners exemptions, discounts, deferments, much higher Citizen's Pension, or
b) In extremis, the tax office simply buying up all land at current market value (say £2 bn+); applying a slightly higher rate afterwards; and using the extra proceeds to pay off the purchase price.
RS: " And means you will be supplying infinite evidence(LVT NOT) until you die."
Probably true.
Mark: I do believe that we are now entirely on the same page. Thanks for the debate
With LVT:
1. Those who take from a community are taxed.
2. Those who make from a community are not taxed.
It is necessary to understand how the value in land came about.
What amazes me is that the detractors of LVT think it is some half-baked theory. They totally ignore the successful implementations around the world in: Hong Kong, Singapore, Australia, Denamark, USA, etc.....and the prosperity it brings to ALL.
Understanding how the value of land came about is essential. Community activity created that, not the owner. The wealth locked into the land is the community's. The Community reclaims the wealth it created to pay for community services, using LVT. That is very simple.
On the other hand, the community does not take from you what you worked for - no income tax.
Private wealth says private with community created wealth used for community services.
I'm sure the average person can understand that. Once that is understood then all is easy to understand after.
Anon, yes of course. "Render unto Caesar what is Caesar's" is a good maxim.
Problem is that most people say "It's moi laarnd and Oi've paid for it" or "Why should I pay rent on my own land?" or "It's not my fault if house prices went up" and I cannot get past this, not with all the logic, analogies, real life examples and patience in the world.
Mark, they do understand when put to them as I wrote. They do not want to understand it, putting a mental block in their minds. They think they will be at a financial disadvantage if they own a house, so dismiss it.
It is giving them the financial balancing point that will take them along. Assuring them that they would not be worse off. Well that is OK for a young couple, but those near to or retiring? They will not budge. They have been conditioned that the house is their pension.
Relatives of mine 20 years ago bought a house for just over £100,000. It is now worth about 3/4 million. Try telling them they would be better off when just into retirement. As you found out, it is like talking to the wall. They think the house will tumble in price. Yet in Denmark in he late 1950s, land prices went UP, as the economy boomed under LVT.
They get annoyed when they read of taking parts of the value of house to pay for a old person upkeep in home. They say those in council places get it all for nothing when they go into a care home.
I remind them there mortgage was partially paid for via t relief and they did nothing to create the value in the house. They can't separate the house (the bricks, the CAPITAL) from the LAND. They think putting in a new kitchen, and planting some trees, made all that value.
Inheritance tax? They think all the house value should go to the two now ground up kids, cursing those in council housing - who actually leave NOTHING and pay rent all their lives, while they stopped paying the mortgage a long time ago.
"Land values ALWAYS rise unless civilisation is in decline, about every 500 years in the economic hyper cycle. That might actually be happening in America as we speak."
Civilisation is most definitely in decline in the US. What country will kill a "reportedly" unarmed man regardless of how heinous his crimes rather than bring him to trial?
Sorry to be off topic Mark...did you get my email? I don't think it was sent properly, I got an error message, even though it appears in my sent items list.
Thanks.
Well the overall trend in land values is upwards (expanding population ensures that) However in most countries it clearly progresses in boom-bust cycles fuelled by speculation and a credit-monetary system.
Just back to
"no one would be worse off with an LVT."
True but some people would face (not necessarily financial) costs *during a transition* to LVT. In order to get to LVT there has to be a transition and this will continue to be a barrier to an implementation. At the moment a typical pattern is for a person to pay public taxes all their life and pay ecomonic rent for a proportion of their life and collect economic rent for another proportion of their lives. This has become ingrained into the system. The way you then handle preventing people, who may have already paid significant public tax and rent, from collecting future rent is the issue.
Anon, agreed, esp. on point about council tenants probably having paid far more for their house over their lifetimes.
SW, I'm in two minds on that. If a country declares war on another and thousands of people die, how is that not worse that targetting one individual?
JJ, it did arrive this morning, I replied about an hour ago.
DNAse, fair summary, may I amend slightly?
"a typical pattern is for a person to pay public taxes all their life and pay economic rent (mortgage repayments or actual rent) for a proportion of their life and collect economic rent (part in land rents and part in taxpayer-funded old age pension) for another proportion of their lives."
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