Standard lefty idiocy

The obvious solution is a wealth tax on the richest 10%, which we first advocated a year ago. Now the head of the biggest bank in Italy, Corrado Passera, is also promoting the idea, saying that Italy\’s $2,750bn debt could be resolved by a tax on Italy\’s private wealth. This is five times the size of its debt. It also shows how misled we are by media and political commentary on \”countries going bankrupt\”, when what is actually being described is a cash flow problem.

\”Italy\” does not have any private wealth . By definition, wealth that belongs to \”Italy\” is public wealth.

That people who happen to be Italians have private wealth is a rather different thing.

Forgetting this difference between what belongs to the individual and what belongs to the State is the cause of much vileness. From conscription (\”your life is for the State to lay down for you\”) to this absurd idea that your granny\’s wedding ring is to be sold so that the politicians can carry on pissing the money away.

Greg Philo is a Professor of Sociology specialising in Media Studies.

24 comments on “Standard lefty idiocy

  1. Oi, Tim! You should consider Wadsworth’s beloved LVT. Though how much could be raised by taxing Luncheon Vouchers must be open to some doubt.

  2. Philco needs f******g up the a**e with a barbed wire wrapped fence post & see how much he likes having his private property interfered with.

  3. On the other hand, would that tax fall on wealthy Guardian journalists with villas in Tuscany?
    Sorry, changed my mind. Clever lad Philo. Can we make it 100% 110%?

  4. Italian households have relatively low debt compared to other developed countries. According to this Spiegel article, “Italian families own real estate worth €4.832 trillion, of which only 7 percent is burdened with mortgages.”
    “Were more Italians to take out mortgages on [20% of] their houses to buy government bonds, for example, Italy could eliminate its interest-payment problem.”

    Or to put it another way, a mild Land Value Tax would also raise sufficient revenue.

    http://www.spiegel.de/international/europe/0,1518,792385-4,00.html

  5. Obviously, all that wealth is sitting there in cash.

    I spend night after night sitting in my strongroom counting my gold, over and over again and laughing at all those poor bu**ers who only earn a wage.

    I wonder if he feels like handing over the painting his father left him, his house or the money he has saved for his old age.

    Do people have no idea where investment comes from and who does the investing to create jobs that actually create wealth and pay taxes. State jobs are the politicians spending our money. They consume our wealth. If it goes on my dustbinman or the nurse who gives me my flu jab or the doctor who is a cancer specialist then OK. Other things (like 2, yes, 2 bloody airports in Spain finished and with NO flights) don’t make me happy and I don’t want to pay for them.

    Who are these rich that are causing the crisis by not anteing up a load more money.

    I had €150,000 hanging around, but unfortunately I put it in a business and taking it out would kill the business. Don’t worry only 30 people depend on the business for their living and they can have unemployment pay.

    The simplicity of thought, the ignorance and the arrogance make me want to throw up. He needs to go and work in the productive economy running a company.

    Arghhh! It’s my birthday and I refuse to get any angrier. I’m going to drink a 1997 bottle of Rioja CVNE reserve. It’s worth a couple of bob, but at least he can’t have it.

  6. It’ll never work in Italy – they have an unrivalled contempt for the taxman. Good luck with trying to find that “private wealth”.

  7. Land Value Taxes are actually a great idea IN THEORY for a few reasons. One is that the amount the state would be able to raise if they only had a land tax would be much lower. And I am convinced that a land-tax would be truly non-distortionary.

    The problem is that, *in practice*, land taxes are impossible. How can the land be valued? It can’t. It is impossible to separate the value of the land from the property on it in order to estimate the value of just the land. The best one could do is a land-and-property-on-it tax, using self-assessment of value, which is not bad but not quite the same.

  8. Though that’s got me thinking about self-assessment just-land taxes.

    The way a self-assessment land-and-buildings-on-it tax would work is by self-assessment. The government says what the tax rate is (say 5%) and that they will pay 1.5 times the value if they want to exercise eminent domain. You say what you think your property is worth, but the government will forcibly purchase your property if they think you’ve valued it significantly below market price. An alternative design would be you say what your property is worth each year, but *anyone* is allowed to force you to sell at that price.

    So how would a self-assessment land-only tax work? You would set the “value” of the land, but anyone would be able to force you to sell the land to them at that price. But you would keep the buildings. Then they would charge you rent on the land. If the rent got too high, you could sell the building? No, that wouldn’t work. They could charge infinite rents, your house market value would go to zero and they would be able to effectively confiscate your house.

  9. Any other ideas for “non-distortionary” taxes? The problem with a house-value-tax is that it discourages you from improving your house. A hypothetical “unimproved value of the land” tax could be achieved if we had a hard currency and the nominal amount of the tax was fixed. Then there would be no disincentive to improve anything, because you would never pay more tax.

    But part of the rational of a land tax is that the government captures some of the value it creates by making its territory more attractive by implementing a better legal system than elsewhere. So the government should be able to capture some of the increases in value of land. Perhaps a land tax where the nominal value increases with GDP? (This would of course give the government an incentive to lie about GDP figures.)

  10. I always find the anger you have in these posts at odds with your advocacy of governments deliberately trashing the value of their currencies to help the export sector?

  11. “Greg Philo is a Professor of Sociology specialising in Media Studies.”

    Knows what he is doing then. Got himself published, but I can’t say it was worth reading.

  12. “Were more Italians to take out mortgages on [20% of] their houses to buy government bonds, for example, Italy could eliminate its interest-payment problem.”

    WHAT THE FUCKETY FUCK? Who came up with that? Where will the magic money come from to take all that equity out of the housing market? Are the Italian banks sitting on €300bn of idle reserves? They could be “politely asked” to invest it in some high-equality sovereign bonds, if they are. I hear there’s a good yield on those Italian govvies, the BTPs.

    So probably 10%+ of that “private wealth” is in fact ownership of those very same BTPs. Maybe the Italians would “politely agree” to a debt jubilee.

  13. A lot of credit should go to mr. Berlusconi for vehemently opposing this crap – it may well be true that he’s a nutcase but he’s right when he’s saying that Italy governed by the opposition would be a complete disaster

  14. Well we can survive without conscription. Most of the time. We can survive without Death Duties. But States have to have taxes.

    If Italy needs money, then one way or another it is going to get it from people’s private wealth. There is no other source of money for governments. So what is wrong with pointing that out?

    Sure, there is a case that the State should only do so when it is worse to shoot Grandma in the head. Which is nowhere near the case in Italy. But every State has to and every State does.

  15. SMFS: Correct me if I’m wrong, but isn’t there a distinction between wealth and wealth generating activities? The state gets most of its revenues from tax on wealth generation – income, sales, that kind of thing. This is talking about taxing people’s store of wealth. For one thing, that wealth has already been taxed (in theory).

  16. Matthew – “Correct me if I’m wrong, but isn’t there a distinction between wealth and wealth generating activities? The state gets most of its revenues from tax on wealth generation – income, sales, that kind of thing.”

    How about Council Rates? Surely they are a tax on the property that people own? Their private property. Car licence fees?

    “This is talking about taxing people’s store of wealth. For one thing, that wealth has already been taxed (in theory).”

    Yeah. That makes it stupid and unfair, but they will do it anyway. It is always a mistake to stand between a politician and a bucket of money. If Italians have some money saved their own local kleptocrats will have at it come what may. At least this is not as stupid as seizing of the Argentinians’ pension funds. I would like to see that factored into any discussion of Argentina’s default – in terms of long term effects on impoverishing Argentina. I assume that Italians look on their houses as a type of pension so there are parallels.

    States simply have to raise money some how. I don’t see why people’s houses ought to be exempt. For many they are revenue raising, income earning instruments anyway. Brown had at our pensions come to think of it.

  17. Oh sure, I wasn’t suggesting that the state doesn’t tax stored wealth. Just that most of the tax revenue comes from taxing wealth as it’s created. There’s another class of taxing when it’s transferred (Tobin tax, inheritance tax) and a third class of taxing it while it sits there innocuously doing nothing (council rates, as you say).

    Interesting what you say about how people look at houses as revenue raising, income earning instruments. What’s the story there with capital gains when you sell a house? Here in Australia you can nominate one house as your primary residence, which makes it exempt from capital gains tax. Any others, you pay tax on the profit you make when you sell it.

    Not sure about license fees though. Aren’t they more a right to use the road? You can own a car and not pay a cent if you don’t take it off your property.

  18. Hugo – “The problem is that, *in practice*, land taxes are impossible. How can the land be valued? It can’t. It is impossible to separate the value of the land from the property on it in order to estimate the value of just the land. The best one could do is a land-and-property-on-it tax, using self-assessment of value, which is not bad but not quite the same.”

    Well it may be possible. Suppose we had a Torrens-style system where the State had a register of all property titles. Every time a property was sold, the register would change. Record the value of the sale. Take the difference between the new value and the old value – or better yet, some percentage like half. If you want to be really clever, allow a deduction for all improvements done to the property since it was last purchased.

    Why wouldn’t that work? You don’t need to assess everyone’s house every year. Just when they sell it.

  19. Matthew – “Just that most of the tax revenue comes from taxing wealth as it’s created. There’s another class of taxing when it’s transferred (Tobin tax, inheritance tax) and a third class of taxing it while it sits there innocuously doing nothing (council rates, as you say).”

    Or as I would put it, wherever the thieving little bastards can put a hand in your pocket, the thieving little bastards will. They shouldn’t but they will. Given they will, is there really any reason for preferring one method over another except efficiency and minimising distortion?

  20. The value of the property can quickly be got by its replacement insurance value.

    Good God, no. The rebuild value of my house is something like 4 times its actual value (1860’s stone.)

    If the house burned down, insurance company would give me their assessed rebuild value and allow me to use modern construction, I could have a small mansion on the site. (Note: I don’t want 1 to happen, and I strongly suspect 2 & 3 are mutually incompatible.)

  21. “Greg Philo is a Professor of Sociology specialising in Media Studies.”

    “Greg Philo is a useless parasite typical of modern Western society”.

  22. Clearly, there is plenty of private wealth in Italy. The housing stock is in demand by foreigners, who would, on the whole, take out mortgages to buy Italian property to a greater degree than existing domestic owners.

    So either Italy has to leave the Euro, devalue and let foreigners buy using half-borrowed funds from Italian banks (a profitable business line and expanding domestic money supply in an otherwise deflationary situation); or there needs to be a transfer of property from existing owners to a state-owned body that would organise via the private sector its sale at market clearing prices to foreigners, proceeds being used to reduce the national debt.

    Theft, yes, but otherwise the domestic debt lent by Italians to their government instead of paying taxes in the past, has to be retired (defaulted). If you need to be poorer by repaying debt, selling your largest portfolio asset to willing buyers is a good idea.

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