Mark Wadsworth

This is a spare 'blog in case my main 'blog at markwadsworth.blogspot.com isn't working

The Pryce Is Right

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Permanent Vacation

From The Sun:

TRAILER parks have traditionally been seen as home to the dirt-poor living on the poverty line in rundown American suburbs. In the UK, as families struggle in the recession, they are fast emerging as a cheap and cheerful alternative to bricks and mortar.

More than 200,000 Britons – among them the parents of Chelsea star John Terry – now call static caravans home. And experts reckon the numbers are rising every year as more people see trailers as a high-value, low-cost route on to the property ladder. There are now more than 1,000 residential parks nationwide – many so popular they have long waiting lists. They can provide modern, comfortable accommodation – and a sense of real community – at a fraction of the price of traditional homes.

Trailer expert Jon Boston, a consultant for British Holiday & Home Parks Association, said: “Residential parks have the atmosphere of a little village back in the 1950s where everyone knows everyone and you can leave your door unlocked. Most have beautiful surroundings in prime areas with a worry-free living environment. Prices, whether buying or renting, are much lower than in traditional housing. Often a park home costing, say, £50,000 will have similar housing outside the park gate for four or five times as much. Park homes are virtually maintenance free – no worrying about gutters, for example – and almost invariably fall into the lowest band for council tax.”

Trailer homes typically start at around £20,000 with most falling in the £30,000 to £80,000 range. An equivalent traditional house just 100 yards away might cost as much as £400,000 depending on the region…

OK, let’s call it;
– £35,000 all in per caravan, to include the caravan, roads, utilities, sewers etc.
– 1.6 million households on council house waiting list, most of them claiming Housing Benefit
– total Housing Benefit paid to private landlords £7 billion a year

Why don’t we just build enough caravan sites for 1.6 million households, that’s a one-off cost of £56 billion, so let’s borrow the money and pay it off over eight years using the £7 billion which would otherwise have gone into the pockets of private landlords?

We’d probably need far fewer than 1.6 million static caravans. There’d be fewer tenants competing for each privately owned home, and no subsidy setting a floor under rents, so rents would fall to a level where more people can afford it, they wouldn’t need social housing.

Killer Arguments Against LVT, Not (148)

Just to show that the idiocy goes right to the top, here are two paragraphs from HM Treasury’s “Tax policy making: a new approach” as reported in Hansard:

11. In this inquiry, we received many submissions advocating radical change to the tax system, such as the imposition of a land value tax. (1) The supporters of such a tax consider that it would tax economic rent rather than economic activity and would meet the OECD criterion that recurrent taxes on immovable property were the least harmful tax. However, as the CBI notes, “the OECD acknowledges that it is politically difficult (2) for governments to shift the tax base onto property.” (3) The ICAEW warned “Our initial conclusion is that, even if such a move was desirable economically (4) and let alone whether it would be politically acceptable,(5) it would involve a major rebalancing of the UK tax system which would take time to achieve (6) and risks introducing considerable distortions and behavioural changes.” (7)

12. Not only are there political difficulties: practical matters, such as the way in which such values would be assessed and the extent to which such a tax should take account of the current or the potential use of land, would also need careful consideration. (8) We also note concerns that “While such a tax system would avoid distortions in economic behaviour, (9) it would be highly unlikely to yield sufficient revenues to fund socially useful expenditure (10) without producing substantial inequity.” (11)

1) Oops. I think I missed that one.

2) It is only “politically difficult” because the government and the powers that be generally have spent decades brainwashing people into thinking a) that taxing economic activity and wealth creation is a reasonable way of doing things and b) that house price rises are good for us.

3) I wish they’d say “land and buildings” to make it clear what they are talking about. In any event, the CBI ought to be speaking from the point of “British Industry” who are perfectly accustomed to paying Business Rates, which are so close to Land Value Tax as makes no difference.

4) It’s “were” not “was” and actually it “is” and they must know that.

5) See (2).

6) Everything takes time, it all depends which taxes you replace first. So let’s start by rolling all existing taxes which relate to residential land and buildings or ‘wealth’ generally into a flat tax on residential land values. The only real constraint on how quickly we did this is how quickly people can be de-brainwashed.

7) No! It’s the current system which creates “considerable distortions”, the fact that people would behave differently if there were no taxes on economic activity and only taxes on economic rent is an argument in favour of the latter.

8) They already have two models – Business Rates for commercial land and buildings and Domestic Rates in Northern Ireland. All the info we need is already held by HM Land Registry or on the Council Tax register after that it’s just a question of bunging in the [current tax rate + a percentage of current selling prices] in each defined area to get a fair approximation of the rental value of land in each area, you tot these up to give you the rental value of all residential land in the UK (the tax base, Y); you then decide a figure for how much tax you want to raise (X), divide X by Y to give you the tax rate, apply X/Y to [the local rate x size of each plot in each area] and we’re away.

It’ll never be scientifically perfect, but any over- or under-estimates will iron themselves out, but so what anyway? Does the rate of VAT automatically adjust itself down so that marginal businesses are kept afloat, does it automatically adjust itself up on businesses which appear to be making super-profits (banks, from 2000 to 2007 or thereabouts)? I think not. Would it not be better to have a tax which allows the markets to decide the rates?

9) That’s not what they said at (4), is it?

10) Wot? Do they not realise the circularity involved?

a) Even under current rules, the residual rental value of UK land is about £150 billion per annum. If we taxed that at 100% we could get rid of VAT and National Insurance and be left over with a flat income tax of about 20% – 25%. Would that not be “socially useful”?

b) Shifting from taxes on activity to taxes on rents gets rid of the dead weight costs caused by the former, and this extra growth goes £ for £ back into higher rental values, so it’s a virtuous circle.

c) Forecast total tax revenues for 2011-12 are £531 billion (excluding booze, fags and fuel duty), that works out at an average £20,000 per household (including taxes borne by ‘businesses’ which are indirectly borne by households). If the average household no longer has to pay £20,000 in income tax, VAT, NIC etc, there is no reason to assume that they wouldn’t be able to pay that much in LVT.

d) Then there is the invisible half of the Laffer Curve which few people talk about. Although income tax revenues would be zero if the income tax rate were zero per cent, by how much would the economy grow? A tenth? A fifth? A quarter? There’s only one way to find out! Most of that growth would go into higher land rental values, so in effect, the land value tax would pay for itself, and a household’s average net income would increase by something approaching £20,000 per annum.

11) Even if it’s only half that, well it’s not to be sniffed at, is it? Deliberately depriving every household of £10,000 or £20,000 income every year out of political cowardice seems like “substantial inequity” to me.

Giant Sinkhole Of The Week

Spotted by Pavlov’s Cat at the BBC.

Killer Arguments Against LVT, Not (147)

Accountancy Age did a brief write up of the Telegraph’s brief write up of the OECD’s tax simplification proposals.

The comments open with this:

With the majority of the more expensive properties in the UK being owned by people who have or are about to retire(1) (assuming any of us ever do retire that is) a tax based on the market value of a property would hit anyone on a fixed or low income very badly.(2)

Also, when interest rates go up what about people overstretched when times were good and who now find themselves in a negative equity situation.(3) They won’t be able to sell (4) and will probably only just manage to afford the mortgage repayments, how would they cope with a large increase in any form of tax?(5) Would they just hand the keys back before the house was repossessed? With the housing market barely limping along, this idea would probably finish it off.(6)

1) At least she brazenly admits that the Baby Boomers have bagged all the housing for themselves and have no intention of letting young people ‘get on the ladder’ without paying a massive ransom first.

2) The first paragraph is fairly plain vanilla version of the Poor Widow Bogey (concepts like “Give them exemptions or discounts or just increase the State Pension” are far too complicated for their tiny little minds). The PWB is fundamentally a huge great lie of course: they always wail about the tax hitting ‘people’ but it’s not a tax on people it’s a tax on land values, so if you don’t want to pay it, you’ll just have to live somewhere smaller or cheaper (most people would be able to find something within a few hundred yards of where they live now) etc.

3) The Homeys like to show how kind and caring they are, so they choose diametrically opposed examples [old, low income, expensive house, no mortgage] with [young, high income, smaller house, big mortgage] to illustrate that such a tax would hurt both, which is nonsense, it’s like smokers whining that tobacco duty hits non-smokers as well. Crocodile tears.

4) Who says? You can sell anything if the price is right.

5) A sensible borrower budgets for the fact that interest rates might increase by a few per cent in the first few years of the loan. The taxes which the OECD proposed to replace (Council Tax, SDLT, IHT, CGT) would average out at about one per cent of the value of every house, so for a sensible borrower this is no big deal – it’s like the interest rate on the mortgage going up by one per cent but OTOH, he no longer has to pay Council Tax. So that’s more crocodile tears. And if young people with a big mortgage and possibly young kids can afford the tax, why on earth can’t older people – with no mortgage and the kids our of the house – afford it?

6) Does this woman have any idea what ‘a market’ is? It’s where people come together to buy and sell things. Housing transactions have more or less ground to a halt, because what sellers think their houses are worth is about a third more than what FTBs can realistically afford. This is not ‘a market’. Turning up the heat a little bit on the smug and complacent Homeys might just give them the nudge to drop their price and sell; the FTB can by definition afford the tax as he will adjust the price he pays up or down accordingly. So more transactions and a more active market, everybody ends up paying as much or as little tax as he wants. The tax would be good for the market.

Animal Victimhood Poker

Spotted by Dick Puddlecote, this is brilliant.

These people are sort of thinking about campaigning against the badger cull, but they’re not actually sure one way or another whose side they’re on – cow or badger. They went on the safe side and called it the “No to badger campaign”, which is delightfully ambiguous – is it the campaign which says “no” to badgers, or are they saying no to the “badger campaign” [i.e. cull]?

So please pop over to their Fun Online Poll and help them make up their minds.

Guess the film

Shark attack headlines in today’s Daily Mail

Trailing second to last in this week’s Fun Online Poll

P!nk – Jewish? Cute? Both? You decide:Nominated by John B, who once reckoned that in an ideal world, girls would be genetically engineered to look like Natalie Portman (who is not a pop star and hence excluded from the poll).

Killer Arguments Against LVT, Not (146)

From The Daily Telegraph:

Mr Padoan argues he should scrap many VAT exemptions – including food, passenger transport and domestic fuel – and abolish council tax and stamp duty in favour of “a property tax based on market values.”

… Instead of HM Revenue & Customs taxing property via stamp duty land tax (SDLT); inheritance tax (IHT); and – in the case of second homes – capital gains tax (CGT); annual liabilities would be calculated, based on estimations of house prices. But Mr Padoan argues that his reforms would “dampen fluctuations in house prices” and are essential to put the British economy on a more stable long-term footing.

I can’t find the actual OECD report, but there’s a brief summary of it here.

Jolly good, that list of taxes to be replaced will look familiar to regular readers. And then the Home-Owner-Ist shit storm is unleashed; in quick succession we get “would hit house prices”, “unpopular”, “tenants would face higher costs”, “the need to value every property”, the “Poor Widow Bogey” (“Any plans to increase the bands for council tax or introduce wealth tax are always accompanied by an outcry about elderly ladies living in large houses on limited incomes”).

Yawn, been there, dealt with those.

Then the Homeys shift up a gear and start gibbering “… the more you tax something, the less you get of it. Taxing people’s homes would discourage home ownership and all the benefits that go with that”, merrily ignoring the fact that the Home-Owner-Ist policies (heavy subsidies to and light taxation of owner-occupation or rental income) pursued by the UK government over the last ten years has led to a dramatic fall in the number of owner-occupiers (down from 72% to 69% if my memory serves correctly). The flipside is more buy-to-let landlords, more second homes and more vacant homes – homes which would become owner-occupied again if we had such a tax.

But the fun part is the very first comment, it appears that Homeys suffer from a terrible variant of dyslexia which prevents them from being able to take in the list of Bad Taxes which the OECD said should be replaced, and they launch straight into this:

For F**KS sake! More taxes? We’re already massively over taxed. We pay tax from the second we’re born to the moment till after we’re dead. It’s utterly disgusting. I’m sick of this endless BS form the state. It costs a f***ing fortune, provides bugger all and is next to incompetent in the dictionary.

I wonder, do these people go into a shop to buy something, do they just accept the goods and then start effing and blinding when the shopkeeper demands payment? Are their short term memories so bad that they forgot that they have just been given something which they wanted and are now being asked to provide something of equal value in return?