Friday, 27 November 2015

Killer Arguments Against LVT, Not (379)

Somebody set up a blogger account this month in the name of Paul with the sole purpose of leaving a KLN over at the KLN blog (ironically enough):

So Mark... Tell me how LVT and a flat rate of income tax are going to help reduce income or wealth inequality. What exactly is it that drives your moral crusade for LVT? By the way, leverage is used routinely by businesses to expand and drive economic growth so I don't see why private individuals shouldn't be encouraged to use the leverage that mortgages provide to grow wealth too. It works.

and then following some goading by me

Have you considered whether or not LVT might just increase income inequality and not reduce wealth inequality either? High earners would use their increased income to buy non-housing assets instead and thereby increase wealth inequality in a different way. You should also consider that home owners on modest incomes use the increased equity value of their homes as a way to share in the general prosperity generated by the high earners of society.

In a flat income tax and LTV world the poor could never escape being poor because they would always be low earners and could never benefit from any unearned wealth (capital gains). The tax breaks of home ownership give modest earners the chance to build the equity they need to become wealthy asset owners over time. Home ownership thereby encourages social mobility. Margaret Thatcher turned some of the working class into property owning middle class when she encouraged people to own rather than rent.

That is all Homey one-sided bullshit, of course*, but I wonder about the mental state of these people.

Clearly he doesn't even believe a word he is saying himself, and he must know that I know that and won't be swayed by his arguments because I have already dealt with them somewhere on the KLN blog.

His arguments are like a stone skipping across water. Everybody knows that it will bounce a few times, but sooner or later friction and gravity will take over and the stone will sink. The thrower knows that, the observer knows that.

The simple answer is, the stone will sink. There's no point somebody pointing out if you throw the stone the right way, it will bounce. We know it can and will. It might even bounce several times, but each bounce gets smaller and in the end it sinks.

He knows that, we know that. Why do they bother? Who are they trying to convince?
* Turning to his substantive argument, that is easily demolished.

Back in the days of 'Georgism-without-LVT' which the UK had until the 1980s, i.e. rent controls, high taxes on rental income, caps on mortgage-to-income ratios etc, there was a rapid increase in owner-occupation rates and hence much greater 'wealth equality'.

This also showed up as greater equality in disposable incomes after housing costs. Very few people had to pay rent and didn't pay much when they did, and rental income collected privately net of income tax was 0.1% of GDP rather than 3%.

Case closed.
Who cares about 'wealth inequality' anyway, it's disposable income after housing costs that matters. If some bloke has countless Ferraris and original Picassos in his basement, so what? That doesn't suck wealth out of the working man's pocket every month, does it?

And what is this disdain for 'the working class'? Why is it only the magic of land ownership that can elevate them into 'the middle class'? If you ask me, there are too many middle class people in this country and not enough working class people. Surely, it would be far better to have fewer people doing non-jobs and better pay for people doing proper jobs.

For example, what about these junior doctors working all hours God sends (albeit for a tasty salary) but who are probably all still renting? Are they 'working class' or 'middle class'?