This is why he’s not been around

Political discussion in the UK should henceforward stick to the propositions advanced by Larry Elliott. “Liberalising markets did not lead to economic nirvana; instead the orgy of speculation led to the financial crisis of 2008 … The record shows that the managed capitalism of the cold war delivered better results than the unmanaged capitalism since.”

So Managed capitalism should therefore include a land value tax to control property price inflation which got out of control in the liberalised markets immediately prior to 2008, although LVT was the stabilising element in the laissez-faire system proposed by Adam Smith in The Wealth of Nations in 1776. People will eventually rumble that increasing the money supply only makes matters worse if it just inflates land values and, by taking undue rents and mortgage payments, diminishes demand for goods and services that people produce.
DBC Reed
Northampton

17 comments on “This is why he’s not been around

  1. The 2008 crash was largely caused by years of ultra-low central bank interest rates and political interference in the housing market, notably in the US. Certain factors such as too big to fail bailouts and deposit protection added to the problem. LVT would not have stopped this.

  2. “managed capitalism” – as in managed by who? We don’t like rent-seeking but I thought a feature of LVT was that we don’t need interventionism.
    The only bit that I get is that someone at the Guardian read it, thought it made sense because it contained some words about capitalism being bad, so put it in the paper.

  3. There’s been a very interesting discussion on LVT over at Mark Wadsworths blog (a very pro LVT place of course) in which they’ve admitted that under LVT rents would rise, and indeed so would house prices. This being because although LVT would raise taxes on property, the loss of other more economically destructive taxes would increase growth, increase personal incomes and thus mean more money was available for people to spend on property, both buying and renting.

    So it seems that even the arch proponents of LVT don’t consider that it would make housing any more affordable than now – people would pay a roughly similar proportion of income in housing costs to today. Their entire argument is that everyone would be overall better off due to additional economic growth and higher incomes. Which is fine, yet if true means that the people like DBC above are going to be a bit pissed off when their lower house prices and rents fail to materialise if an LVT was introduced.

  4. ‘Managed capitalism’ = fascism.

    “Liberalising markets did not lead to economic nirvana”

    They haven’t been liberalized. But what is the REQUIREMENT that ‘economic nirvana’ has to be achieved, or we are going back (sic) to managing you?

    “instead the orgy of speculation led to the financial crisis of 2008”

    The crisis was caused by government, as JP notes above. This is what ‘managed capitalism’ produces. Capitalism must produce nirvana; managed capitalism can screw over the world, and it’s okay.

    “The record shows that the managed capitalism of the cold war delivered better results than the unmanaged capitalism since.”

    Again, the demand that capitalism produce some kind of result. Free trade between people IS the result.

    The U.S. Federal Register has nearly 100,000 pages. Yet the fascists declare that they aren’t controlling enough.

  5. The wonderful thing is that DBCR is unable to show that the 1950s were in any way better than the world today. Everytime he is asked to show it he starts one of his endless accounts of pretend history

  6. DBCR is simply a Nazi, requiring that trade between people must be managed, terms directed by third parties, content approved by third parties, and the benefits of the trade accrued to third parties as directed by third parties.

    Government’s job being to decide what’s ‘good,’ then directing it happen.

  7. @Jim
    “…people would pay a roughly similar proportion of income in housing costs to today.”

    If there’s a demand & a restriction on the supply side, price will rise to the limit of ability to pay. That’s how markets work. Unless there’s an increase in the supply of housing, doesn’t matter what you do to the tax system, the amount buyers will fork out will be the same.

  8. Still, his rugby side did rather well today. (I’ve only just discovered that Channel 5 sometimes broadcast Premiership matches on Saturday arvo.)

  9. LVT is just about the worst of all possible taxes (indeed any tax on ongoing ownership rather than exchange is), and it hands the state a breathtakingly subjective ‘management tool’ to ensure that people have to use their property in ways that suit the (literally) rent-seeking state.

  10. PdH

    Although I have not troubled myself to dig through any intricacies there may be in the argument for LVT, I must say that I wholeheartedly agree that any tax which isn’t directly linked to one’s revenues is evil.

  11. The proponents of LVT assume that they’ll pay less tax and some other poor saps will end up paying more.

  12. “The proponents of LVT assume that they’ll pay less tax and some other poor saps will end up paying more.”

    This in spades. What proponents of LVT forget is that annual taxes can only ultimately be paid out of income. Yes they could be paid out of capital for a while but basically everyone runs out of savings eventually, you can’t sell 2% of your house every year, so fundamentally you have to pay the tax out of your income. And as the tax is based on your house size (or value) and your income is relatively fixed, you’ll have to change your house (and its LVT) to fit your income rather than the tax changing to fit your income (as happens with income taxes).

    So ultimately, when the new system has settled down, everyone will live in a house with an LVT that they can afford out of their income, and everyone will pay roughly the same proportion of their income in LVT as they do now in income tax. In fact it might end up be rather more regressive than today, as the wealthy will probably pay a lower % of their income in LVT than income tax and the poorer will have to pay a slightly higher % to compensate.

    LVTers should be careful what they wish for, they might just get it and find its the exact opposite of what they thought it would be.

  13. Its also just occurred to me that one of the unforeseen effects of an LVT based tax system is that it gives the power to the individual taxpayer to choose their tax rate, by choosing their house. As income is not taxed, but houses are, if you have a high income and are prepared to live in a lower value house than your income would allow, then your tax rate goes down, and there’s nothing the tax man can do about it, on an individual scale. Whereas at the bottom of the income scale you can’t do that because everybody has to live somewhere so there will be a floor in the value of houses and thus the minimum level of LVT that anyone would have to pay. And for every wealthy person who downsizes below their income level, that lost revenue must be made up by increasing LVT rates across the board, which means the poorest pay more.

    There’s also the fact than an LVT system is a flat rate system, unlike the progressive rates of income tax. I doubt many of the proponents of LVT (particularly the DBC Reed types) would be very keen on a flat rate income tax system, yet thats pretty much what they are proposing……..not only that, its a flat rate system that allows the wealthy to pay less tax if they want to.

    I’m beginning to like it. Where do I sign up???

  14. ‘And for every wealthy person who downsizes below their income level, that lost revenue must be made up by increasing LVT rates across the board, which means the poorest pay more.’

    What lost revenue?

  15. I’ve only just discovered that Channel 5 sometimes broadcast Premiership matches on Saturday arvo.

    I only relatively recently discovered that all the Premiership games are available to stream on the league’s website the day after they’re played. There’s also a Kodi plugin that dinnertime knocked up in a few hours after I asked on the forum to show these legal streams.

  16. “What lost revenue”

    Under LVT all house prices will have to mirror the income distribution of the people capable of buying them and paying the LVT. If there are 100 people in the country with £100m incomes, there can only be 100 properties with LVTs that an income of £100m can pay, and so on and so forth across the entire population.

    If one of those £100m income people decide they’re going to move out of their huge country pile and buy a nice little house in a country village instead, and pay less tax, then suddenly there’s a large estate on the market, but no-one who can afford that level of LVT, so the price will have to be reduced until the LVT is affordable to the next person down the income scale who wants to live in it. While the price of country cottages will slightly rise to compensate for the additional demand. Thus there is a loss of revenue from the high end houses (which have dropped slightly in price) which is moved down onto the lower value houses, which have risen slightly. This will occur all the way down the income/house price scale, as people attempt to lower their LVT by down sizing.

    LVTers imagine that ‘the rich’ will pay LVT on their expensive houses at current values and that will provide all the revenue required without the middle and low income having to pay more. In fact what will happen is that the value of houses will squash into far more tightly compressed bands at currently middle income prices – the low end houses will rise in value, the high end house will fall in value. There will be a transfer of tax from the rich onto the poor(er).

    It will be a rather regressive income tax when its all settled down.

  17. Rather contrived, Jim.

    Rich guy buying cheaper house, he sells the old house, and the new owner pays the tax. No change in revenue.

    In the U.S., where property taxes are common, real property assessments are not annual. I.e., tax amount doesn’t change with new ownership, it only changes with new assessments every few years.

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