Killer Arguments Against LVT, Not (394)

An earlier variant of KLN 393, from here:

… while the land value tax is paid over time, the burden of the tax (its incidence, in economics jargon) falls entirely on the person who owned property at the time the tax was instituted. The value of future taxes gets immediately priced into the value of real estate. For those who buy property after the tax is instituted, the higher property taxes are offset by lower mortgage payments.

True so far… here comes the crap...

In other words, the economic efficiency of the land value tax comes from the fact that it operates by confiscating wealth accumulated in the past rather than taxing the accumulation of new wealth. This, too, is unfair. Society benefits when people defer gratification and save for the future. People justifiably expect that if they save today, they’ll enjoy the benefits of that accumulated savings in the future.

Of course, people who generate income from their accumulated wealth should pay their fair share of taxes. But a land value tax goes way beyond that point, depriving owners of one particular asset class of the benefits of decades of thrift.

That's clearly quite self-contradictory bollocks which flies in the face of facts. Note also the use of the words "confiscation" and "depriving" when talking about taxes on land values, whereas taxes on other things are referred to merely as "taxes".

If you are one of the original landed gentry, inherited the land or took out a BTL mortgage, it required no "decades of thrift" whatsoever to acquire the land - quite the opposite, you have been able to spend more than you earn (at the tenants' expense). 99% of owner-occupiers who bought with a mortgage will have paid considerably less in cash terms than somebody (of the same age) who has been renting all his life; it is tenants who really have had to "do without".

But enough of my musings, by coincidence, Ralph Musgrave emailed me a link to this bit of academic research shortly after I re-discovered the KLN above:

Our original interest was to enquire whether the introduction of land into a growth model might account for a “virtuous” circle in which saving-up for land (or housing) generates growth and higher land prices, generating further increases in saving, and so on.

Such an account is sometimes proposed for high saving rates in East Asia, where mortgage markets are limited or absent. Our analysis does not support such a story. The user cost of land reduces the resources available for consumption of reproducible goods, so that the introduction of intrinsically valuable land into a growth model lowers the equilibrium stock of capital and raises the equilibrium interest rate.

On the asset side, the presence of land causes life-cycle savings to be reallocated away from productive capital towards land. The social optimum in such a model is for land to be nationalized and provided at zero rent. Land markets, far from generating saving and growth, are inimical to capital formation.

Captain America: Civil War of The Roses

From Wiki and Wiki:

Lawyer Gavin D'Amato is in his office discussing a divorce case with a client. Noticing the man's determination to divorce his wife, Gavin decides to tell him the story of when Hydra sent the brainwashed Bucky Barnes to kill a motorist and steal a case full of super-soldier serum from his car.

Approximately one year after Ultron's defeat at the hands of the Avengers, Oliver Rose, a student at Harvard Law School, meets Barbara at an auction, where they bid on the same antique. Wanda attempts to levitate away Rumlow as he detonates a suicide bomb and Barbara misses her ferry home. The explosion destroys a building and she and Oliver end up spending the night together at a local hotel. Eventually the two marry and have two children, Josh and Carolyn, killing several Wakandan relief workers.

At the team's headquarters, Secretary of State Thaddeus Ross informs the Avengers that Barbara has found an old mansion whose owner has recently died. Tony Stark supports oversight because he feels guilty for creating Ultron but she purchases it and devotes her time to making a home there, leading to the later destruction in Sokovia,

Unable to convince Rogers to support the accords, Romanoff attends their ratification in Vienna, after which a bombing kills King T'Chaka of Wakanda. At this point, Oliver and Barbara begin spiting and humiliating each other in every way possible, even in front of T'Chaka's son, T'Challa, who vows to kill the bomber, whom security footage indicates is Barnes. Both begin destroying the house furnishings; the stove, furniture, Staffordshire ornaments, and plates.

Despite Romanoff's objections, Rogers and Wilson track Barnes to his hideout in Bucharest and attempt to protect him from the police and T'Challa. Another fight results in a battle where Barbara nearly kills Oliver by using her monster truck to run over Oliver's prized sports car, a classic Morgan 4/4.

Barnes is soon released by Colonel Helmut Zemo, who uses Hydra's trigger words to question Barnes about the 1991 mission, then sends him on a rampage that allows Oliver to accidentally run over Barbara's cat in the driveway with his car.

Rogers stops Barnes and sneaks him away; when Barnes regains his senses, he explains that Zemo is responsible, and is heading to the Siberian facility. When Barbara finds out, she retaliates by trapping Oliver inside the in-house sauna where Barnes was held, ostensibly to unfreeze the other Winter Soldiers created with the stolen serum, where he nearly succumbs to heatstroke and dehydration.

Vote for me!

If you live in Buckhurst Hill West ward, you can vote for me in the locals. I did.
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From City AM (print edition):

"Polish prince" John Zylinski is an outsider with odds of 100/1 to win today's [London Mayor] election, but he's already planning to run in 2020 and tells us he's forming his own political party.

The property developer is critical of Sadiq Khan's proposed rent controls, but last night he let slip he has an ulterior motive for going into politics.

"It's every developer's dream to become mayor. You can grant your own planning permission."

Too honest for his own good, the rent seeking twat.

Nobody move or the forecast gets slashed!

From The Guardian:

In another blow, the European Commission has just cut its forecast for UK growth this year.

The EC now expects Britain’s economy to expand by just 1.8% this year, down from a previous forecast of 2.1%, inching up to 1.9% in 2017. It blames the uncertainty created by June’s EU referendum -- echoing the slump in UK factory output.

The commission says:

“Risks to the outlook are tilted to the downside, reflecting less favourable external demand and uncertainty in the lead-up to the June referendum. Net exports are forecast to continue to detract from growth although less markedly in 2017.”

Well they would say that, wouldn't they?

Personne ne bouge ou vos éleveurs de bovins l'obtiendront!

Emailed in by MBL from The Daily Mail:

Mr Lamy, a Frenchman who headed the World Trade Organisation between 2005 and 2013, said that the rest of the EU would drive a 'hard bargain' in the event of Brexit...

"My own country will probably be among the hardest to negotiate with. Imagine how eager French farmers will be not to have your beef or lamb on our supermarket shelves. And no one will show any love for the City of London.

"If it fails to get a deal, there is a real risk that the UK would have to fall back on WTO rules. Some in the Leave campaign have said this would not be a bad option. As the former head of the WTO, let me be clear: this would be a terrible replacement for access to the EU single market.

"Though tariffs have fallen, they are still high enough to hurt businesses and therefore jobs: 10 per cent for cars, 12 per cent on clothes, 70 per cent on some beef products.

So, a bit like during the period 1996 - 2006, then? Distressing for British beef farmers (who do a very good job) but hardly a disaster for the economy. We'll just have to eat more of the stuff ourselves and we'll be able to go to McDonalds with the warm glow of having fulfilled our patriotic duty.

Fun Online Polls: Sports car attire & Labour's "anti-semitism problem"

The results to last week's Fun Online Poll were as follows:

What is the correct mode of attire when driving an open-topped car on British roads (assuming not done satirically)?

Leather jacket/aviator jacket - 26 votes
Driving gloves - 23 votes
Sunglasses - 22 votes
Goggles - 20 votes
Jaunty silk scarf - 18 votes
Leather helmet/headscarf (m/f) - 12 votes
Leather steering wheel cover - 12 votes
Other, please specify - 11 votes

I forgot to add "peaked cap" to the list. Going by the comments, that would have got a lot of votes. I also bought myself a super-grippy steering wheel cover from Halfords (with the ghastly silver stripe turned away from me).

Which is all very reassuring, because I do the first three items on the list (Mrs W even bought herself a matching biker-style black leather jacket to complete the look), I'm wavering on the peaked cap.

Top comment: newageingman

Given the current weather, I am wearing long johns, thermal jumper, thick insulated padded coat, topped off with petrol station supplied £4.99 Insulate gloves and hat set. All in addition to standard clothing requirements for us non naturists.

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This week's Fun Online Poll:

"Is Labour's "anti-semitism problem" just the politically correct term for "too many radical Muslims"?"

Vote here or use the widget in the sidebar.

Thoughts on Europe and Peace

From the BBC

Author Michael Morpurgo - best-known for his children's books such as War Horse - believes the UK should stay in the European Union.
"I do know my history, and I know we've been at peace for all these years - and that has something to do with Europe," he says.

I know my history too. I know that Germany never really had any interest in France in either war, and that both invasions were because of factors outside the EU - the alliance between France and Russia in WW1 and the alliance between France and Poland in WW2.

The start of WW2, and what drove a lot of support for Hitler was his policy of lebensraum, of taking over bits of Eastern Europe to ensure food security after WW1 blockades. After the Germans invaded Poland, France and Britain declared war on Germany, leading to the invasion of France.

What's really created peace in Europe is the tractor and other agricultural improvements. No-one is going to invade bits of Polish or Czech arable land any longer. It's just not worth the costs. The tragedy is that the mass adoption of tractors started in the mid-1930s, and if that'd happened a few years earlier, things might have turned out differently.

I'm someone who believes that the EEC once worked because it was the "right-size" organisation for what we needed in the early 70s to the mid-90s, but it doesn't now. We trade with places like China, Vietnam and Africa in a way that we didn't back then. And we don't need a superstate. We've got organisations like the WTO to do global trade.

Nobody move or Planet Earth gets it!

Ed Miliband has taken exaggeration and hyperbole to its inevitable conclusion.

Probably the Most Annoying Article of the Week - in soooo many ways.

Here.

It's getting mighty wearisome dealing with all this shit, but here's what I can be bothered to say.

Exhibit 1

Last month the Prudential Regulation Authority at the Bank told lenders to do more to make sure BTL landlords will be able to pay the bills if interest rates go up. The planned rules tell lenders to test borrowers’ finances to see how they can cope with the tougher of a two percentage point rise in interest rates, or 5.5pc.

WTF? Dude? These are supposedly commercial decisions by professional borrowers. Why do they need hand holding? It's 'capitalism'. Y'know. Risk and reward?*. Or more probably its the Bank telling the banks that they need to check their own carelessness.

* Yes. Yes. I know. I know. It's really landlordism, but You Know What I Mean.

Exhibit 2

They [Owner occupiers] cannot sell their property as easily should interest rates rise, when landlords can sell, raise the rent or use other income to pay the mortgage.

What? How? Eh? And, not a problem then?

Exhibit 3

He [Nigel Terrington] believes the latest worry is a case of mis-measurement by regulators who have far less data on the BTL sector than on the rest of the market.”

Never! Really? Well, I am surprised. Not. A bunch of bureaucrats being ignorant…

Exhibit 4

"Sceptics worry that regulators, having failed to spot the financial crisis coming, are simply playing a game of whack-a-mole in which sudden growth in any market is immediately deemed to be a risk, regardless of its cause.”

Yes, well. I'd agree with the 'whack-a-mole' analogy. And the cause is..?

Exhibit 5

Bank analysts are also on the lookout for bubbles, but right now they are relatively relaxed.”

Are they really?  AFAIAC that's a signal to run for the hills. Most of them were saying the same thing in 2007.

Exhibit 6

Yay!!!

If problems do emerge, they might lie elsewhere. Terrington argues the Bank of England should keep an eye out for the activities of currently unregulated lenders rather than banks or building societies.

“In the BTL market you can become a shadow bank and step outside of the rules,” Terrington says “Where are they, and how much do they lend? “That is part of the problem.”

Shadowy indeed – just the sort of mysterious spectre to send more shivers down the spines of your dinner party guests.”

I just knew that they'd get round to the 'unregulated meme sooner or later.  Listen chaps, it was the 'regulated' bit that failed in 2008.  D'you think that there might be a causal relationshiop there?

Exit stage right back to the shed. Mumbling.  "Death's too good for them..."

Killer Arguments Against LVT, Not (393)

Spotted by Ben Jamin' at Doug Bamford's blog:

In a blog earlier this week I explained how changes to the tax regime can create windfalls or immediate costs to owners of the types of property affected by the change. For example, a tax on housing will hit the owners of housing at the time the tax is announced as their asset will immediately drop in value in line with the newly increased tax.

I’m sure those of you who have read my previous post explaining the LVT can all work out where I am going with this. If an LVT is introduced it will reduce the expected income on rented land; more of the rental income than expected will be lost to the tax. Similarly, for people who own and use land their cost for continuing to use the land will immediately rise.

Buyers will not be willing to pay as much as they will now expect to pay the tax in order to enjoy the use or investment income from the land. These future owners will not pay anything as the result of the introduction of the tax, nor will the past owners who sold up before the announcement.

Seems like a fair summary, whether existing landowners are "hit" or not all depends on which other taxes are reduced; with a sensible tax shift, most would be paying less tax overall.

But here comes yet another variation on The Poor Widow Bogey (Fred, in this example):

Anna, Bernie, Celine and Daryl all receive a significant inheritance (in an unjust society where inheritances are entirely untaxed), while Enid and Fred are diligent savers investing for their impending retirement. Anna and Bernie inherit a large amount of land while Celine and Daryl inherit money. Bernie sells his land to Fred and invests in other things, while Daryl decides to purchase land with his inheritance. Enid, meanwhile, invests in the stock market. Then the government suddenly announced an impure LVT.

Anna, Daryl and Fred face an immediate loss in the value of their investment. Meanwhile Bernie, Celine and Enid are entirely unaffected. This imposes a wealth tax on those who are unlucky enough to have chosen to invest in a particular kind of investment. Some of those taxed were economically fortunate, but Fred was not. Furthermore, some of the most fortunate people are unaffected, even if their good fortune arrived in the shape of gifted land. The introduction of the impure LVT is like a game of musical chairs, whereby those left holding the land at the time in question lose out.

So he is suggesting that we should perpetuate the iniquities of the tax system (taxing earnings and output instead of land values) merely for the benefit of our hypothetical Fred and at the expense of all future generations. In his highly artificial example, Fred's loss is Bernie's gain, therefore, he says, it would be better to impose a general wealth tax (gah!).