Tuesday, 17 October 2017

Fun Online Polls: LVT vs Wealth Tax; the North South divide

The results to last week's Fun Online Poll were as follows:

3% of £80 is more than 0.5% of £100. So what would raise more revenue - Land Value Tax or a general Wealth Tax?

Land Value Tax - 94%
A general Wealth Tax - 6%


Thanks to all 33 who took part, a low turnout but an arcane topic.

I would have thought the maths was obvious, but I got some real grief from two acadamics/communists/Homeys (their stand point was not clear) on Twitter who demanded that I refer them to a 'study'. I asked them what they thought the figures were and they refused point blank to even give a hint as to what they thought the numbers might be. They just insisted I was wrong.

For sure, my numbers are rough and ready, but the principle stands.

1. Land and buildings are at least two-thirds of total household 'wealth'. The net cash is negligible (one man's mortgage is another man's deposit) and the rest is largely shares/pension funds.

2. We know from the French that there approx. 1% wealth tax rate was driving wealthy people abroad, which is why Macron wanted to exempt everything except land and buildings. By exempting non-land 'wealth', he reasonably expected to increase overall tax receipts (to howls of outrage from Homeys and Socialists alike).

3. Politically of course, you can only apply a wealth tax to the 'wealthy' so there is an arbitrary threshold of EUR 1 million or something, pushing potential receipts down much further. Imagine the outcry if they had abolished the threshold and made everybody pay on everything.

4. Applying a wealth tax to cash is madness anyway, there's already income tax on interest income from cash savings (ha!) and a stealth tax on cash savings called 'inflation'. Applying wealth tax to shares is also madness, as dividends are gains are usually taxed. The more cash and shares you have, the more tax (income tax, inflation tax and capital gains tax) you pay. That's quite enough tax.

5. Unlike the critics, I have at least prepared one wealth tax return, back in Germany in the 1990s. Their wealth tax was about 1% p.a. with a high threshold, at the last count it raised about EUR 5 billion a year whereas their very modest Domestic Rates (Grundsteuer) raises EUR 20 billion a year, which is a small fraction of one per cent of what houses are worth.

6. In the UK, the closest thing we have to Land Value Tax is Business Rates, which works out, coincidentally, to about 2% - 3% of what the land and buildings would sell for. Council Tax/the TV licence fee are a distant poor cousin of LVT (being very regressive) and those two between them raise £30 billion a year, less than 0.5% of what houses are worth.

7. The closest thing we have to 'wealth tax' is Inheritance Tax which raises a modest £4 billion a year, assuming a death/inheritance every 40 years that implies an annual rate of about 1% on the value of 'wealth' over a relatively low threshold (£325,000). Those above the threshold own a disportionate amount of 'wealth' (probably at least half of all of it) so an annual wealth tax of 1% on all 'wealth' would raise maybe £10 billion a year.

8. The real world also tells us that most countries have some sort of tax on land and buildings; very few have 'wealth taxes' in the narrow sense, which gives us more clues. Not that academics/communists/Homeys have ever put much thought into this.
--------------------------------------------------------------------
A recent article in The Daily Mail on the North-South divide said that it started when the Vikings invaded in the north east; they got as far as a line from London to Chester, with our greatest King ever (Alfred) holding the line to the south-west. The modern A5 road, which in turn runs along an old Roman road between their two major outposts (pushing the origin back even further) is the modern border. From south-east to north-west, in other words.

That's all news to me. As a born Northerner who's lived in London half his life, I always assumed that that the true north-south divide runs diagonally in the opposite direction, from Bristol to Norwich, from south-west to (slightly more) north-east.

(Watford Gap is pretty much where the two lines cross, giving it extra significance.)

In the south there are more Tory MPs, higher house prices, smug Home-Owner-Ists and rent seekers*, drier and sunnier weather, lovely country lanes for driving on, more arsehole drivers on the motorways, flat countryside with no lakes or mountains, containing London and a few little towns.

The north is the opposite; more Labour/SNP/Plaid Cymru MPs, cheaper houses*, more people with proper jobs, terrible weather, fewer good driving roads (A66 excepted), courteous drivers who stick to speed limits, dramatic valleys and mountains, rivers and lakes, dotted with medium sized towns.

* The BBC published some good stats on inflation-adjusted house prices since 2007 today, the line between 'winners' and 'losers' is pretty much Bristol to Norwich.

So that's this week's Fun Online Poll.

The UK's North-South divide runs from... Bristol to Norwich or London to Chester.

Vote here or use the widget in the sidebar.

If only we could get Jeremy Corbyn The Adam Smith Institute to understand about capital

From here, on the topic of Uber:

Because they've all been making great gaping losses as they start up, meaning that they've needed capital to exist. And that's the problem with cooperatives, the only capital, by definition, that is available to them is what the workers are bringing to the table themselves*. Uber has swallowed however many billions it is and still makes gargantuan losses.

My reply:

In principle you are correct and Corbyn is wrong anyway, but Uber is a very poor example.

Most of the money they raised was spent on advertising (the same goes for all these intermediary companies). Uber's actual app works fine but is just one of many dozen such apps which work just fine. Uber's main spend was on somehow securing a quasi monopoly position (footnote 1) by bombarding us with advertising, which is not capital at all, it is a monopoly position (or 'land' to use David Chester's classifications).

Footnote 1) Clearly, passengers want to use the app with most drivers and drivers want to use the app with most passengers, and it is far more efficient if everybody uses the same app, or marketplace. So being Number 1 gives you a huge advantage. but simply owning the marketplace and skimming off from buyers and sellers is not contributing to the overall functioning of the market, it is hindering it.


Inevitably, a Faux Libertarian wades in:

A 'quasi-monopoly' is not a monopoly at all. Its not even close to a monopoly.

All Uber's done is promote its brand - like every other business that's ever existed.

Sure, advertising is not capital - but the brand is.
1.Uber doesn't 'own the marketplace' for ride-sharing.
2.Uber developed the app - shouldn't they get a share of the wealth that people using it create?
3.Uber maintains the app - so shouldn't they get a share of the wealth that people using it create to support maintaining the app?


(1. Clearly, Uber does own the 'marketplace'. Uber IS the marketplace.
2 and 3, straw men arguments. Return on capital or payment for services provided is different to monopoly super-profits.)

To which I replied:

So you simply refuse to acknowledge the existence of 'agglomeration benefits'? Do you not grasp that Uber's actual capital (their clever software) is no probably better or worse than dozens of competing app's which have fallen by the wayside, simply because there is no point being number 2 or 3 in the market? It is what's called a natural monopoly. I suppose you could short circuit this and deny that any monopoly has ever existed anywhere, because they all required some modicum of business acumen or luck to get them started.

* On the facts, the original argument is weak anyway. Uber has spent $1 billion on advertising over the past few years and has signed up half a million drivers. That's a few $100 per driver per year, a trifling sum compared to what drivers spend on cars, depreciation and other running costs.

Had drivers had the nous or initiative to set up their own app and just all sign up to it, it would not have required any massive advertising campaign. The spend would not have been a few $100 per driver per year, it would have been a one-off cost share of less than $100 and running costs would not be 20% - 30% of fares, it would be 2% or 3%, like any normal payment handing charges.

By default, every passenger would use their app because there wouldn't be anything else. So less 'capital' (i.e. money) would have been spent. What Uber was really spending on was persuading drivers and passengers to sign up to something which they could have done themselves for virtually no cost (had they had the nous and initiative, which they didn't), hoping to harvest the agglomeration benefits for themselves in future.

Saturday, 14 October 2017

Yeah, but whose back garden?

From The Daily Mail:

* Kieran Evans was given keys to 'iKozie' home in Barbourne, Worcester after it was air-lifted into a back garden

*Thee 186sq ft (17.25sq m) space includes bedroom, kitchen, bathroom 'module' and an entertainment zone

* Project, believed to be first of its kind in world, is aimed at solving Britain's homelessness and housing crisis


The article doesn't say. At a guess, it's his parents' back garden and there's more to this than meets the eye.

Car hits house

Couple have lucky escape as reckless driver crashes through side of their house as they slept in their bed

Friday, 13 October 2017

Idiot argument of the day.

While many of his points are sound, Mark Littlewood jumps the shark with this:

...for example, try to imagine government food vouchers being redeemable at McDonald’s.

??? The government issues food vouchers all the time. They are coins and notes, or their electronics equivalent, redeemable in McD's and just about anywhere else.

"A cost effective solution to the nation's ongoing housing crisis". Not.

More glorious nonsense from The Daily Mail:

This stunning tiny 28-foot-long [mobile] house could be a solution to the housing crisis using a space-saving design without losing any home comforts...

Those 'tiny homes' (as beautiful as they are) require a fair bit of land, maybe 50 sq yards. They're only 'cheap' if you buy or rent a bit of land in the middle of nowhere. Try buying or renting 50 sq yards of land where housing is expensive and you are back to square one.

A block of flats with several storeys only uses ten or twenty square yards of land per flat, ergo they are cheaper than 'tiny homes', despite being a lot bigger, once you factor in the price you have to pay for the land.

But that doesn't help people wanting to rent or buy a flat. If you build higher, that doesn't reduce the selling price/rental value of the flats, it just increases the price payable for the land.

Rinse and repeat.

Thursday, 12 October 2017

Daily Mail on to form

GP, 34, who was accused of beating his ex-wife and shoving a DIRTY NAPPY in her face during a heated row in their £569,000 home is given a warning over his conduct

Wednesday, 11 October 2017

Another one of those "vehicle hits house" stories

From The Daily Mail:

A couple had a lucky escape when a van ploughed into the front of their thatched cottage. Val and Steve Fossey were about go to bed when they found the white van embedded in the front of their 16th century listed cottage in Bedfordshire.

The vehicle had careered round a bend before crossing a grass verge, going through a hedge and ploughing into their home. A 34-year-old man was arrested at the scene on suspicion of being unable to drive through drink or drugs and is in police custody.


1. This happens far more often than you think. Top tip - don't live on the outside of a bend or at the end of a T-junction or cul-de-sac.

2. On a philosophical level, is it really a 16th century cottage? It's clearly in the 21st century. In the 16th century, no cottage was ever struck by a motor vehicle.

3. Sadly, the Mail does not tell us the cottage's potential selling price.

Fun Online Polls: Brexit, Catalonia and the French wealth tax reforms

The results to last week's Fun Online Poll were as follows:

Which of the following applies to you...

Pro-Brexit; pro-Catalan independence - 78%
Anti-Brexit; pro-Catalan independence - 7%
Pro-Brexit, anti-Catalan independence - 11%
Anti-Brexit; anti-Catalan independence - 3%


Good, I'm with the intellectually coherent majority on this. Thanks to all 99 who took part.
---------------------------------------------
Re my post of yesterday, this week's Fun Online Poll is about maths and logic:

"3% of £80 is more than 0.5% of £100. So what would raise more revenue - Land Value Tax or a general Wealth Tax?"

Vote here or use the widget in the sidebar.

Tuesday, 10 October 2017

The New Economics Foundation land value database

They've ground out the sales figures published by HM Land Registry to come up with this.

All it needs is your postcode and it will tell you an approximate selling price per sq m of land where you live.

The estimate for mine came up within +/10% of my own estimate, so well done! Not sure how much use it is, but it does illustrate that valuing urban residential land is pretty easy.