The problem here is that we do already know this

I would suggest that the observation (not set up as an experiment, but by chance offering a large scale observation of actual behaviour as if an experiment was intended) is capable of extrapolation. Whenever suppliers are price takers (as in competitive markets they should be) taxes on suppliers will always be paid by suppliers and the suggestion that they are passed on to others makes no sense at all. This is now seen to be true for rents. I think it will be elsewhere.

So the next time you hear some rightwinger argue that tax is not paid by capital but is passed on to consumers or workers just note that what they are actually saying is that there are non-competitive markets in existence and that this fact should be their real focus of concern. But oddly, it never is. Right wingers are the last people who want competitive markets. They do not permit abuse, after all.

He’s confusing “capital pays this tax” with “capital pays all taxes I think should be incident upon capital.”

Ritchie is, himself, insistent that employer’s national insurance is actually incident upon wages. Who pays the tax thus being a question of “it depends.”

Plus he’s missing what the damn point was in the first place. More taxation of landlords will mean fewer landlords, thus fewer places to rent an thus higher rents. Could happen too – and pointing to rents falling doesn’t change that. Because that’s to ignore ceteris paribus, something we never should in economics.

7 comments on “The problem here is that we do already know this

  1. Yes… but rented housing go up but its close substitute freehold housing goes down. At the margin, someone renting because they can’t quite afford to buy may benefit. The people who definitely don’t benefit that are only just scrabbling for their rent in poor quality housing as it is. They are actively harmed by tax induced fewer rental houses and higher rents for what’s left.

  2. From the Guardian:

    In fact, real rents (adjusted for inflation) have fallen by 2.8% in the [last three years]

    Selection bias. The most expensive properties have come off the market, leaving only cheaper properties.

  3. Quote: “Whenever suppliers are price takers (as in competitive markets they should be) taxes on suppliers will always be paid by suppliers and the suggestion that they are passed on to others makes no sense at all.”

    Nonsense, surely? If a tax is imposed on just one supplier, then he will be out of business, because the price he as to take is not at a viable level. But if all suppliers are subjected to the same tax, then the price they all have to take will rise by the amount of the tax.

  4. Landlords who quit the Lanlording game don’t burn down their properties, do they?

    The transfer of property from rented to owned takes someone out of the rental market, thus easing the upward pressure on rents. It all cancels out.

    Now.. where Landlords provide capital for construction you risk less Landlords meaning less construction. But that’s a different problem to be solved. That’s about finding ways to ensure builders don’t get to maintain the same profits by selling less homes at higher prices. And they probably can’t becayse if they could the they would already.

  5. The rule changes will squeeze unincorporated landlords who are highly geared out of the market.

    Or make them incorporate.

    As a number of my clients are currently doing.

    But if you recall, the rule changes weren’t put forward as being about rents, they were supposed to be about chasing away BTL landlords because of their supposed effect of pushing up house prices.

    My view is that any rule change that can result in tax due on no profit is clearly inequitable but then, the government are a bunch of grasping, wastrel cunts, which is why I have no qualms at all about using every legal means I have to reduce the amount of tax my clients pay.

  6. @The Thought Gang
    “Landlords who quit the Lanlording game don’t burn down their properties, do they?

    The transfer of property from rented to owned takes someone out of the rental market, thus easing the upward pressure on rents. It all cancels out.”

    Very true, although this tax change does is even the playing field between landlords and owner occupiers.
    15 years ago if there were a pair of twins who each wanted to buy a house, they would have been much better off to become each other’s landlord rather than be an owner occupier – a crazy idea

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