Thursday, 29 May 2014

2014 Index of Economic Freedom

From The Heritage Foundation:

Free (score 80/100 - 100/100)
1. Hong Kong
2. Singapore
3. Australia
4. Switzerland
5. New Zealand
6. Canada

What do the first two have in common, apart from being Chinese-populated city-states, harbours/trading posts and former British colonies..?

Well, in both, the government owns the freehold to all or nearly all land and merely grants long leases (usually 30 years in HK and up to 99 years in the case of Singapore). Both governments collect a significant chunk of land rents arising, either as true rent, leasehold sales, annual land value taxes/business rates, building licence fees, stamp duty, taxes on property developers etc.

As a result, income tax rates for everybody else are pretty low and sales tax more or less non-existent.

It is true that neither pays out much cash as welfare payments, but those are not really necessary. Apart from having more of a work/family ethic, the lower taxes on output and employment means that there is, er, more output and employment.

Just as importantly, there is a ready supply of low-cost social housing (to rent or buy) so there is an implied welfare system - instead of paying top whack unregulated rent/mortgage and getting cash welfare, you just pay a lower net rent/mortgage.

In principle, it comes to the same thing, only the Western system is visible transfers and the HK and S systems are invisible transfers, but they are very real transfers nonetheless*.

So for when these Faux Lib's say that HK and S are such success stories because they have low rates of income tax (hooray!) and no welfare system (ho-hum), you can politely tell them that they are fucking idiots who are missing about two-thirds of the true picture.

* It's a bit like the Homeys complaining about social tenants claiming Housing Benefit. That is visible, but not actually a net cost to the taxpayer. They could make this cost invisible by simply dropping social rents to a few quid a week, hey presto, that's £12 billion off the DWP welfare bill (and a reduction of £12 billion in rent receipts recorded by local authorities and Housing Assocations).


DBC Reed said...

Texas doesn't levy an Income Tax plus seven other American states. This bloc tends to whack corporations.
People from Louisiana are moving over the state border apparently.

Paul Lockett said...

I hadn't realised until this week (when I ended up doing a bit of research, following the trend-bucking Lib-Dem landslide), that Gibraltar has a similar approach to land tenure to Singapore; small pockets of historical freehold exist, but government policy is to make land available on leases of no more than 150 years.

It would be interesting to see how a separate assessment for Gibraltar compares to the UK.

DBC Reed said...

You have to wonder how much Ricardian theory was in play in Imperial circles.JS Mill's "Political Economy" was required reading at Haileybury (and he was ensconced at the India Office)and there is evidence of officials in India quoting "landlords profit even in their sleep" at each other.There seems to have been a definite school of thought that the best system for India was state ownership of land with peasant proprietors paying rent directly to the State.JS Mill seems to have thought the same system should apply to Ireland. Since Admiral Tirpitz was steaming out of Tsingtao Harbour high on Georgist land tax, it may be that action on rising land values was on the Imperialist agenda.
It may be that the land tax wave has been and gone, rather than being forever in the future.

Mark Wadsworth said...

DBC, I checked, Texas doesn't have state corporation tax either.

PL, Gib land ownership and tax systems are surprisingly similar to HK or Singapore, i.e. fairly Georgist.

DBC, yes, but if an imperialist wants to get as much out of his colonies as possible, declaring your self the owner of the land and charging rent/LVT is the way to do it.

DBC Reed said...

@MW Quite, but it is no worse than letting Indian princes and large local landowners squeeze the rent out of the ryots/peasants then see them get up armies to rebel.Fortunately, these armies were highly mercenary so could be bribed to stop fighting, as Clive managed at Plassey.
Progress/Prosper (Australia?) calls Sir Stamford Raffles one of its "Geoists in History".He was steeped in East India Company doctrine.