Thursday, Dec 10, 2015

Tax land cheaper and more house building

FT: Tax reform is key to solving housing crisis, Lords told

“Our housing stock isn't used terribly efficiently in this country, we have a lot of under-occupancy for example, particularly in the owner-occupied sector.

Posted by pete green @ 01:04 AM (4516 views)
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1. pete green said...

Thursday, December 10, 2015 01:04AM Report Comment

2. judgandury said...

They are forced to invite representatives from as many viewpoints as possible. But no one pays any attention to the less practical fantasists like Martin Wolf. Most of then nod off when its his turn.

This is what the Shelter policy unit has to say about LVT and similar taxes aimed at reallocating space (it can be found under the heading "Silver Bullet Syndrome")

"Taxing spare bedrooms in the private sector or introducing a land value tax could mean an increased tax burden on the majority of the electorate. Remember, the intention of the policy is to make the tax so onerous that people will be forced to leave their homes. While popular support can be raised for targeted council tax changes or targeted capital gains taxes on property speculators, could a punitive private bedroom tax across the population really gain political traction? I'm not convinced that any of these silver bullets would hit their target. In fact, I think some of these commentators are being unhelpful by suggesting policies that are close to impossible politically while dismissing pragmatic, socially useful things like affordable home building"

And that is it in a nutshell. What is the point in talking about something that has no chance of ever gaining traction? What is the point in wasting time discussing a policy that would be reviled by the majority of the electorate and would therefore need to be enforced at gun point? What it amounts to is poseur time wasting at a time when practical action is desperately needed. There is real suffering going on whilst selfish poseurs like Martin Wolf drone on with the sole purpose of enjoying himself speak. As per Shelter, he is being "unhelpful".

Thursday, December 10, 2015 07:04AM Report Comment

3. pete green said...

Sixth form common room sophistry does little in any grown up debate and Martin Wolf is probably the most respected economic commentator in the country.

What is the point of criticising something constantly without real logic or reason when it has so much to tell us about our current problems and solve the problem at its roots. At the moment building more homes seems equally implausible and the reason for that is high land prices and nimbyism, both a outcome of land monopoly. Getting land prices lower would do more for house building than just rabbiting on about building more homes which has been equally unsuccessful in recent times, and will not solve underlying economic issues of allocation of capital and productivity which cheaper land prices will.

Thursday, December 10, 2015 09:05AM Report Comment

4. judgandury said...

You need to read my post more carefully especially the comment from Shelter. It is a waste of time even talking about it because for the reasons given, it could never happen.

Anyone who thinks that building more houses is a pipe dream must have had their head in a bucket for the past few months. The government has just allocated 7 billion to building houses (7 billion!!) and is as we speak putting through the new Housing and Planning Bill 2015/16 which will dramatically liberalise the planning system. Real work, real research and real pressure from pragmatists has hit the target and all the main political parties are now making it a main plank of their manifesto. More to the point real money and law has now been committed which always trumps words. There is no room for posturing dreamers when real work has to be done.

Thursday, December 10, 2015 09:44AM Report Comment

5. pete green said...

No it is you who must read my comments more closely and understand the underlying reasons: economic, social and political as to why we are not building more houses and that is squarely due to the the vested interests supporting land monopoly.

The allocation of 7 billion will not solve the problem that much because it is not properly focused on building more homes and most of it is really aimed at keeping the price of land high. The pressure on Governments of all types seems mostly directed at this objective due to the vested interests of existing land owners and the financial sector.

There is no room for posturing dreamers when real work has to be done. Yes - so take a long hard look at yourself because posturing is what you do best.

Thursday, December 10, 2015 10:17AM Report Comment

6. icarus said...

judge - did you read the comments under that Shelter article?

The author of the Shelter article seems to be talking about a property tax, not a land value tax. For the difference see the Wikipedia article on 'Land Value Tax', which is generally in favour, and quotes a Nobel Prize winner (author of the Shelter article....who he?) as being in favour (see the 'Efficiency' section of the article).

Thursday, December 10, 2015 11:56AM Report Comment

7. judgandury said...

"The allocation of 7 billion will not solve the problem that much because it is not properly focused on building more homes"

Gibberish. You do realise that words are supposed to mean something? It is only focused on building new homes.

2.3 billion is going directly to developers to build houses and 4 billion of it is going to housing associations and local authorities to build houses. Many years were spent lobbying for exactly this.

The radical new Housing and Planning Bill 2015/16 (going through now) takes away many of the barriers to planning permission which will, amongst other things, free up swathes of currently out of play developable land thus reducing the current premium on such land. Again, many years were spent lobbying for this.

There's an awful long way to go but the tangible achievements above and the tremendous success we've had in achieving almost complete 'buy in' encourages everyone involved to keep up the pressure.

"There is no room for posturing dreamers when real work has to be done. Yes - so take a long hard look at yourself because posturing is what you do best"

Ok, I've taken a long look and seen that I've committed several years of volunteer work and driven my own car into the ground in the process. What precisely have you done to help with the housing crisis?

I'll repeat Shelters words:

"I think some of these commentators are being unhelpful by suggesting policies that are close to impossible politically"

Amen to that. Write to you MP, take photos of the dire consequences of the housing shortage and publish them, hand out food, firmly tell NIMBY protesters what they are causing, offer a relevant skill to a housing charity, give money. Just don't get in the way with unworkable nonsense because it can be diversionary and harmful.

Thursday, December 10, 2015 12:19PM Report Comment

8. judgandury said...

icarus, it does specifically reference land value tax in the third para. Shelter has nothing against LVT as a concept (nor do I for that matter). The point made in the 'silver bullet syndrome' is that as things like it couldn't get past the electorate, there is no point in talking about it. Shelter lives and breathes the housing crisis and its intense knowledge on the subject leaves it more panicked about it that most. It therefore feels that it is imperative in a democracy to only commit resources to ideas that have a chance of getting support from the electorate. When something tangible has to be achieved in a hurry, you have to stay focused on pragmatism.

Regarding LVT. One of the planks of it is that the main tax target is immovable. That was largely true in the 1800s but as per my other posts, it is not true now. Let's put some rough probabilities on this.

The % chance that out largest corporations would be happy to take on more of the tax burden: 0%
The % of these large multinational corporations that could and would relocate elsewhere: Somewhere between 60 and 80%

That leaves us with a huge hole in our economy, unemployment and a reduced taxable base. The tax burden would then have to shift onto the people you originally promised to relieve. Nice idea but not practical in this age. You'd have to water it down until it lost its identity and became just another part of a labyrinth tax regime

Yes I did see those comments. The LVTers have taken to spamming a housing charity. Classy. One of them thinks that there would be enough money left over to pay everyone in the population a dividend (as usual no numbers given). I bet the large corporations would think that it was such a good idea that they'd be only too happy to pay dramatically more tax. Cloud Cuckooland

Thursday, December 10, 2015 12:51PM Report Comment

9. icarus said...

judge @8 - blaming LVT spammers is no substitute for dealing with their arguments. How do you deal with this one - "If the top 1% of households own 50% of land by value, how the hell is majority of the electorate going to be worse off?! And that's not even taking banks/landlords into account." (The article did say that LVT leave the majority worse off.)

LVT has been implemented elsewhere, so it's not politically impossible in principle - so the question is how the UK differs from other jurisdictions where it's been tried. (But you're probably right about the political impossibility specific to the UK, given the powerful families, the City and the Crown Estates who between them have made billions from the public development of London simply by owning the land under the central part of it, and, of course the influence of the powerful UK/US banking sector - some have argued that finance has taken over from landlords as the major recipient of 'economic rent'. Political impossibility derives from power, media control etc.)

Why would LVT hit large corporations? There is no presumption that the total tax burden would increase, so it's a question of redistributing the burden. Income, profits and consumption taxes could all be greatly reduced if government income derived from land values. That would reduce the cost of doing business. The LVT (really a rent with the state as landlord) is on unimproved land, so if a corporation develops a car factory it gets the benefit of that development (although public money probably went into the infrastructure and grants and this could be factored into the company's tax obligation).

I can see your point that there are other things to be done to provide required housing than to argue about silver bullets but that's no reason to repudiate the LVT debate.

Thursday, December 10, 2015 03:40PM Report Comment

10. judgandury said...

"If the top 1% of households own 50% of land by value, how the hell is majority of the electorate going to be worse off?"

I didn't say anything about the majority of the electorate or am I just being asked to comment? I suppose they would be indirectly once the big corporations relocated and the tax had to focus on them instead. This is not the 1800s. You cannot raise sufficient revenue from old toffs on their crumbling estates, large gardens, and farms that need subsidies to survive. We no longer live in the world surveyed by Henry George. Today it is the large corporations that would have to bare the brunt and they wouldn't play ball. You mention the City of London land but once the inhabitants had cleared off to a delighted Frankfurt (they are frantically incentivising such a move) there wouldn't be much revenue there either. It's all down to this 'immoveable/moveable thing. The tax base couldn't move in the 1800s but it can move now.

"But you're probably right about the political impossibility specific to the UK"

There is not a shadow of a doubt that its a political impossibility. It's not just the list you gave. Try talking about the concept to a normal householder. They'd set the dog on you. Ask any LVTer

"Why would LVT hit large corporations?"

I've explained this a few times over the last few days. Take a look at the large threads. Income tax receipts currently dwarf corporation tax receipts. So according to the LVT claims, most people would be better off even after LVT on their property. So bearing in mind this current 'dwarfing', if almost everyone was better off even after LVT, then corporation tax would now have to dwarf the tax that regular people pay. If the ratio reversed, the corporations would obliviously have to pay a few multiples of what they pay now. They would not accept it and our competitors would happily pay their relocation costs. That leaves us with a hole in our economy, unemployment and a smaller tax base.

I of course understand your point about unimproved land but a large corporation doesn't care about the technicalities of what they are being asked. They just rapaciously look for ways to minimise their tax bill. You have to believe me when I say that I really wish we could force the bandits to pay triple the tax (because that would be fair) but they have us over a barrel because our competitors want them at almost any cost and sadly so do we.

Fair play East. That was the most solid bit of debating I've seen for a while

Thursday, December 10, 2015 04:26PM Report Comment

11. icarus said...

@10 If I'm East (Harry East from TB's Schooldays?) you'll have to be Flashman. You can't have it both ways.

The wiki article to which I referred earlier gives examples of jurisdictions which have some form of LVT and aren't suffering from the 'race to the bottom' you describe. Hong Kong was a bombed-out city of beggars in 1945. They worked on the principle of "instead of paying rent to a landlord and tax to the state, why not pay rent to the state, and no taxes?" - or thereabouts.

The householders you describe are defensive because they are under siege and go for 'the devil you know'. The argument goes something like this - Banks create credit and charge interest and most of this credit is for buying property or otherwise gaining rent-seeking privileges.They look simply at what can be pledged as collateral on which they can foreclose. It's easier to buy a privilege to extract interest and charges without producing anything or making a real investment. Banks back the ability of their customers to pay up without such productive investment, and the easiest way to do this is to make loans for real estate at increasingly debt-leveraged, bank-inflated prices. Buyers pledge their rental income (or imputed rental income) to pay interest to the banks. The more the tax collector shifts taxes off land onto wages, profits and sales, the more rental income is available to pay banks, which can then make even larger loans. Not taxing land maximizes the economic rent that can be paid as interest.

Thursday, December 10, 2015 05:26PM Report Comment

12. judgandury said...

I can't remember anything about 'Scud' East's character but I know he pops up in the Flashman papers as well as TB's School Days.

HK has gone through economic crises and long deflationary periods like many others. They now have growing street protests at the growing inequality in their society. The big 'occupy' protests are a movement dominated by students "who worry they may not be able to afford a home or support a family". So much for LVT. The financial secretary of Hong Kong said this in a relatively recent budget statement: "With an increase in the number of the elderly, a shrinking working population, reduction in the number of taxpayers and decelerated economic growth, I expect that the growth of government revenue will drop substantially. Meanwhile, expenditure on welfare and health care will soar. We may not be able to make ends meet".

Now, very little of the above dire picture is down to LVT, just as very little of anything good that's happened to them is down to LVT. I'm sure you take my point. In any case, they don't really have LVT. History, geographical location and their cultural mix has as much to do with their successes and failures as anything else. By the way have you been to HK? I used to go to the HK 7s. It's personal preference of course but I think its an absolute sh*thole. Look up "Hong Kongs cubicles and cage homes" or "HKs housing shame". If I was a LVTer, I would not put the place forward as an example.

I take all your points but it doesn't change anything. To implement proper LVT in Britain (with the claimed benefit to the people), you'd have to put a much bigger burden on corporations and the biggest ones wouldn't stand for it. They would decamp to the welcoming, inducing arms of a competitor country leaving us in economic tatters. I have to stress again that in Henry George's Britain, his targets couldn't get away but now they can. It goes without saying that we put up with the rapacious tax dodgers because of the wages they pay and the investment they bring (and quite a lot of taxation despite them paying far less than they should). As I've explained on earlier posts, they especially wouldn't put up with a tax that by design charges them regardless of losses or investment cycles. I've owned a few businesses and I must say that I would find that egregious in the extreme. I absolutely guarantee that all businesses would think the same.

I think there is quite a lot more to householders resistance than devil you know. British people feel down to their toes that if you bought it, you own it. Once LVT is explained to people, the common refrain is that it's confiscation by instalments. No matter the truth or otherwise of that sentiment (there is undoubtedly some truth to it), that's how the vast majority of the population feels and in a democracy there is little point pushing policies that are anathema to the electorate.

I haven't got it to hand but a quote from one of the biggest land ownership surveys in decades went something like this "the biggest change in the last 100 years is that the cities now finance the countryside rather than the other way around". I'm sure I've mangled that a bit but you get the gist.

Thursday, December 10, 2015 08:30PM Report Comment

13. icarus said...

I think he was called 'scud' because he was fleet-footed, so thanks.

Must admit I didn't care for HK but it did grow economically very quickly after WWII (but then so did others). The point is that some form of LVT is not as absurd as you make out. As I say, some form has been used in various places without decampment of big companies.

Companies decide to rent/buy according to the value of land. LVT reduces land values by reducing speculation and by users/renters discounting the tax burden when they buy or rent. A land tax is therefore not passed on to the tenant as an increased cost of production, thus forcing him out of the country. The incidence of the tax is on the landholder (or a long lessee on a fixed rent) who cannot pass on the tax to the user for economic/competitive reasons. The losers are economic rent seekers such as landlords and banks. And the electorate has cheaper houses. How that plays out between the older owners and the younger renters (mostly the sons and daughters of the former) is a matter for negotiation. It's not the electorate or productive companies that are the natural enemies of LVT but the power of banks and landlords.

The average person has always instinctively understood the 17th century rhymester who wrote

They hang the man and flog the woman
Who steals the goose from off the Common:
But let the greater criminal loose
Who steals the Common from the goose

Thursday, December 10, 2015 09:42PM Report Comment

14. judgandury said...

I knew that Flashman was a mate of East so there was certainly no derogatory intent in calling you East. You were the first and only person here to twig the source of the joke and its characterisation, so hats off.

LVT has hardly been used anywhere and certainly not in its proper form in a country that remotely resembles ours. Australia is often cited as an example of a large modern country but they are actually very different to us. They are a commodity driven country whereas we are a service driven country. The implications of this different make-up is very significant for LVT implementation (back to the moveable/unmoveable thing). Even more significantly they raise less that 5% of their revenue through LVT.

The fact remains that we have a gigantic service industry and a full compliment of multinational corporations headquarted in the UK. There is absolutely no getting around the economic makeup of our country and the fact that its constituent parts are inherently more able to decamp. In my analyst days I have had a back-row seat in several meetings where middle ranking board members treated senior ministers like naughty children. You, above anyone else here have highlighted the power of these corporations and we've all heard the public threat of decampment issued by them when a mild tax change is mooted. Cameron has to go and renegotiate with Europe just so we can avoid any extra tax on the blaggers. Now maybe we should have a ground zero policy where we tell them all to do one and we rebuild a new economy almost from scratch. It might take 20 years or so and we'd probably end up with no fish in the Thames again but maybe its worth it?

Friday, December 11, 2015 08:27AM Report Comment

15. judgandury said...

I like the rhyme by the way. Compact and stuffed with meaning

Friday, December 11, 2015 08:54AM Report Comment

16. icarus said...

judge - it's been good wrestling with you but a busy day ahead has to put a stop to it for me. And where's that pete green, who started this and kept quiet while we went head-to-head?

Friday, December 11, 2015 09:28AM Report Comment

17. judgandury said...

Have a good one.

Friday, December 11, 2015 11:58AM Report Comment

18. icarus said...

You too

Friday, December 11, 2015 06:23PM Report Comment

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