This is wondrous

Compare, for example, a land value tax (LVT)and the current English and Welsh council tax. To some degree (albeit approximately, and poorly at that) the council tax is a transaction tax. It has implicit within it a charge. That is why, for example, it is capped.

What’s the transaction which takes place? Breathing or summat?

Another is in terms of rate of return: in the modern, imperfect, economy rates of return to those with significant wealth have been much higher than those to people of lesser wealth because of tax abuse, market control through exercise of monopoly power and other reasons. A wealth tax corrects for that.

Next, there is an opportunity cost. As Brooke Harrington has explained in her book Capital Without Borders, a characteristic of modern capital accumulation has been it’s extreme risk aversion, which is a trait accentuated by the role of professional trustees and risk managers in the management of many modern portfolios. This has reduced the amount of capital exposed to entrepreneurial activity, with implications all too obvious in the world economy where, as I suggested in my book Dirty Secrets, this risk aversion is killing capitalism from within.

How can you actually believe both of those things?

And perhaps last for now (although I am very open to persuasion that there are issues I have not listed) is the fact that those with wealth have, come what may, lower marginal propensities to consume meaning that society cannot be indifferent to the distribution of wealth beyond certain limits if it is interested in maximising well-being.

Yes you idiot, they go and invest it to the benefit of society. Sheesh.

47 thoughts on “This is wondrous”

  1. they go and invest it to the benefit of society

    Candidly Tim, you are utterly wrong: they hoard their gold in vaults and occasionally slide down it, like Scrooge McDuck.

  2. Do they?

    To pick a Dragon out of the air, where, for example, is Theo Paphitis’ capital? Aha … invested in shops.

    Does Lecturer Murph actually present any evidence for his claims about capital exposed to risk being reduced?

  3. Aha. I see that the Prof is enough of a self-regarding prick to call his personal ideas on tax for a separated Scotland a “White Paper”.

    Wonderful.

  4. Surely taxes on owning property are better than ones on buying property. I don’t want to pay any tax but I can understand the justification in me paying more tax than someone else because I have a bigger home.
    I don’t see why I should pay more because I move more.
    (Actually I almost never move, but I might do if it were not so expensive).

  5. Yes you idiot, they go and invest it to the benefit of society. Sheesh.

    Anything not spent is wasted.

    Only spending counts.

    Though NB consumerism is bad.

  6. “rates of return to those with significant wealth have been much higher than those to people of lesser wealth because of tax abuse”

    That’s nonsense too. With ISAs and now the savings and dividend allowance, you need to have significant savings before you pay any tax on your investment return.

  7. Odd, it’s Green Tuesday so I expected something about ‘excessive’ consumption or splurging billions on subsidising people who own implements for catching sunlight.

  8. In the council tax the transaction is ‘hand over your money or we take you to court’. Which is pretty much all taxation. So Snippa is just messing with the language as usual.

  9. The transaction in question is presumably the purchase/sale of a house.

    So it’s quite impressive, in one quick burst he demonstrates that he doesn’t understand either what LVT is, or what a transaction tax is.

  10. “As opposed to the perfect economies of the past.”

    Or indeed the perfect economies of the USSR, Eastern Europe 1945-90, North Korea, China 1949-89 etc etc.

  11. @Dave – given that it’s the occupier (and not the owner if the two are different) who are liable for council tax, in what way is it a tax relating to a transaction?

    Could it be that he doesn’t understand how council tax liability arises either?

    It’s most akin to a service charge…

  12. This has reduced the amount of capital exposed to entrepreneurial activity, with implications all too obvious in the world economy where, as I suggested in my book Dirty Secrets, this risk aversion is killing capitalism from within.

    I love the way the Spuddatollah poses insincerely and unconvincingly as the friend and saviour of capitalism.

  13. Resurrect Thatcher’s Poll Tax. I’ve neighbours living in a similar sized property that has triple the residents, all of whom make full use of the services provided (public sector), and yet – because they haven’t been assessed since doubling the property’s original floor space – pay barely half the service charge I do.

  14. His starts with his recycled assertion that most taxes are lived on transactons. No they are not, only a minority are. He was told this in very clear terms by Pellinor a couple of years ago and he then.went quiet on it for a while. Now he’s back with it.

    This is his modus: make deft and ignorant assertion. Eventually have assertion utterly discredited. Rehash it a couple of years later with ever more grandiose claims to have been the first person ever to grasp this etc etc.

    I’ve said before, the truly successful conman first needs to convince, con, himself. Murphy is on his way to being truly massively successful.

  15. “To some degree (albeit approximately, and poorly at that) the council tax is a transaction tax. It has implicit within it a charge. That is why, for example, it is capped.”

    Surely he can’t actually mean transaction tax? That just wouldn’t make sense with it being capped. His three sentences bear no relation to each other; it is as if he had said: “My bicycle is brown; it has implicit within it the sound of seagulls; that is why it is fitted with bookshelves.” Not only is he wrong, as he usually is; here he doesn’t even make any sense.

    Does he perhaps mean “fee for services” rather than “transaction tax”? (or, as abacab suggests, a property service charge?) That would at least make it coherent (the talk of an implicit charge and capping would have some relevance), even if still wrong.

    That still means he can’t tell the difference between a transaction tax and an occupier’s service charge, which are completely different things; that is worrying in a professor who is a supposed tax expert.

  16. “Richard Murphy says:
    August 8 2017 at 4:40 pm
    I have a tin hat

    I think I may need it

    Reply”

    Foil surely ???

  17. Theo

    Given its supporters include the appalling Carol Wilcox I am of similar mindset. However, Tim does back it – what’s the reasons for opposing it (other than it is backed by proto Pyongyangites like Murphy)

  18. @BernieG – you make the error of coupling council tax to the services from which you benefit. In any council accounts adult social care and children’s services account for 2/3rds of the spending from council tax receipts and these are not going to benefit the sort of households who are paying the standard amounts. You’re unlikely to use a library either, and if Sky or the water company could organise your bin collection and street lighting then council tax would be pretty well decouple completely from the people who pay it.
    You could though always put in a request to the VOA to visit and revalue your neighbours property.

  19. VP
    My main reason for disliking LVT is its proponents – our host excepted – so often are obsessives and/or authoritarians. My next door neighbour, a Limp Dick activist, is fanatical about LVT, as is the Green nutjob at the end of the street. And then there’s our Dave, who probably thinks opponents of LVT are anti-semitic. So, granted, not altogether rational on my part, but as a rule of thumb…

  20. @Theo

    I don’t know which annoys me more, the usual shyte ideas which Murphy brain vomits onto his blog every day or the occasional, very, very occasional time he says something about tax that I agree with.

  21. The key for me is that taxing income flows is difficult. The Acts regarding Income and Corporation taxes are enormously long – 3 times the length of War and Peace. That is just way too much info for tax payers to deal with.

    LVT could be covered in 5 pages. You either own land or not. Land exists, even if you create more of it as in the Netherlands. Bang go the jobs of tax barristers, accountants and the tax collectors. As a thought experiment, how much GDP goes into working out liabilities to income and corporation tax? 40% would be my estimate

  22. @ Diogenes
    LVT is on the value of unimproved land which can only be measureds in terms of its ability to produce crops/feed animals [before installing drainage ditches, irrigation systems, hedges for windbreaks – ploughing, weeding, fertiliser is OK but value-added is net of that and cost of seed and labour].
    So maximum LVT is less than 5% of GDP. Government spending is more than 40% of GDP.

  23. @john77

    “LVT is on the value of unimproved land” – yes, but isn’t zoning taken into account in most suggested implementations? So for an urban plot with planning permission, it’s not going to be assessed in agricultural terms.

  24. John77, read the extensive literature. You have already been corrected on this topic on this site. Why you think that LVT would apply in Westminster as if the land were agricultural is something that only you can explain. Should the owner of Hyde Park get taxed on the same basis as the owner of the Dorchester? According to you, both should get taxed as if they were in Lincolnshire. You make DBCR seem sane.

  25. “Should the owner of Hyde Park get taxed on the same basis as the owner of the Dorchester? According to you, both should get taxed as if they were in Lincolnshire”

    But he’s right. If LVT is a tax on the ‘unimproved value of land’ then only its intrinsic productivity gives it any value. So an acre in Lincolnshire is quite productive, but an acre of Snowdonia isn’t, so they’d have different values. I suppose an acre of land with gold ore in it would be quite valuable, while an acre thats about to slide into the sea wouldn’t be.

    Everyone who envisages an LVT seems to think that the unimproved value of land includes the value of the proximity to other people’s improvements. Which makes no sense. If the unimproved value of a house in Mayfair doesn’t include the value of the actual house, why does it include the value created by the proximity to other people’s Mayfair houses?

    Its the improvements that create the value. Take that away, and all you’re left with is the agricultural value, or the mining value, or indeed some locational value, such as a natural harbour for example.

  26. Let me get this straight: whatever the system, the same one-half of the country will continue to pay for both themselves and the other half of the country.

  27. “unimproved value of land includes the value of the proximity to other people’s improvements. Which makes no sense.”

    That’s specifically and exactly the thing that we are trying to tax. The value of your land created by what other people have done around it.

  28. To my mind the problem with an LVT, as with Council Tax and the old system of Rates, is that the value is an assessed value rather than a real ‘wot-someone-actually-paid value. So there will be lots of jobs to assess it, and dispute it, not to mention political meddling to create special cases and concessions.

  29. @Bernie G.
    “Let me get this straight: whatever the system, the same one-half of the country will continue to pay for both themselves and the other half of the country.”
    Under LVT some people would move from one side to another (both ways) probably quite correctly.

  30. Bloke in North Dorset

    Maybe LVT is the wrong term but there’s plenty of instances where the increased value of land needs to be taxed. Two examples spring to mind:

    1. When the Puddletown bypass was built house in Puddletown prices shot up. What’s more those same people then fought like crazy to stop new houses being built. If the State is going to compensate people whose life is blight by, say the building of a motorway eg people in Stokenchurch when the M40 was extended those who benefit need to cough up.

    2. Landlords who are near Crossrail stations will be able to increase rents for businesses and houses.

  31. @ Diogenes
    Read the definition of LVT.
    If you want to talk about rateable value, say so. It’s a whole different debate.

  32. If someone (A) buys some land (a house), and other people then improve the value of the lamd surrounding it, I can’t see any justice in an LVT that increases for A through the result of that change (until that land/house is later sold).

    An elderly person (for example) having lived somewhere for years should not be “priced” out of their own home (through LVT) simply because others in the meantime did stuff around them (and probably against their will to boot).

    If that is what LVT does (I don’t know?), then it should be strangled at birth (imo).

  33. @ PF
    That is not what would happen under Land Value Tax but only under the proposals of “Land Value Tax Campaigners” (who should be called “”Land Value Tax” Campaigners” because they are NOT campaigning for a tax on the unimproved value of the land).
    But I fully agree that there is no justice in it.

  34. “That’s specifically and exactly the thing that we are trying to tax. The value of your land created by what other people have done around it.”

    Then its not a tax on the unimproved value of land. Its very much a tax on the improved value of land, the value of the improvements of people rather than your own maybe, but improvements nonetheless.

  35. John 77 – That makes sense, thanks.

    Jim – Agreed.

    Even assuming that there was any strong political will (and which I don’t believe) I personally can’t see how this “practically” gets implemented, unless it’s by stealth (tiny %’s to start with) and over a significantly long period that the likely practical anomalies are minimised?

  36. @ Jim
    So the Grosvenor Estate in Mayfair woulds get taxed on its farming value (without the benefit of drainage and irrigation) but any leaseholder who buys the freehold of his house gets taxed on an empty plot of land in Mayfair (which would be valued as if an expensive car park, being the most profitable use for an empy plot of land in Mayfair).
    Someone living in a block of flats pays nothing.
    Someone living near a prison gets a massive refund!
    IQs and shoe sizes?

  37. “So the Grosvenor Estate in Mayfair woulds get taxed on its farming value (without the benefit of drainage and irrigation) but any leaseholder who buys the freehold of his house gets taxed on an empty plot of land in Mayfair (which would be valued as if an expensive car park, being the most profitable use for an empy plot of land in Mayfair).”

    No, not at all.

    What I said was there is no locational unimproved value of land anywhere, other than the agricultural or mineral values. All values are created by improvements, either your own or someone elses. So if you are valuing land as unimproved then you have to assume that the neighbouring land is unimproved as well. Hence there is no premium for land in Mayfair, as its the value of the improvements that create any additional value over agricultural.

  38. @ Jim
    You have misunderstood what I was trying to say.
    If the tax is on ” The value of your land created by what other people have done around it.” then the Grosvenor Estate does nor benefit from what other people have done around it since *it* built the roads and squares, but anyone else would have to pay for the value created by the Duke of Westminster’s ancestors.

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