The IF's fine report gets the usual "lies and distortion" treatment in today's City AM:
Let's start with the headline: "Don’t give house room to illiberal spare-bed taxes"
So it complete lies and misinformation right from the off. The report called for no such thing, it merely pointed out that housing is very badly allocated in the UK; there are single pensioners in three-bed houses they can't afford to heat; and young couples crammed into one-bedroom flats. The report used 'number of spare bedrooms' as a measure of over-occupation and to illustrate the point.
At no stage does the reportid they propose a tax on 'spare-bed taxes', their actual very modest suggestions are on page 28 for anybody can be bothered to read them.
Then we stumble as far as the first lines of the article itself:
A MISGUIDED charity has called upon the government to take action against elderly people who live in large homes. In its outrageous report Hoarding of Housing, the Intergenerational Foundation (IF) takes aim at 25m "unused"” bedrooms in England...
F- off, no it hasn't, no it didn't (see above).
Pensioners have their pressure groups and charities (fake or otherwise) and they get a lot of 'help' from the taxpayer (£100-billion odd in cash pensions + half of NHS spending, for example), for sure, they don't all live in the lap of luxury (the Baby Boomers saw to that), but they've paid less tax and will collect more pension than today's young people.
Baby Boomers have their pressure groups and charities (National Trust, CPRE) and they actually run the country for their own benefit, they have ruined the economy with Home-Owner-Ism; they have ruined the national finances with deficit spending and trample all over the interests of the young (i.e. their own children).
Is it so terrible if a charity-cum-pressure group dares to stick up for young people, who are truly getting a shit deal in terms of unemployment, education, housing, opportunity to start a family, anything really? Why is sticking up for yourself automatically "misguided" or "outrageous"?
The article then peddles more Homey-Faux Libertarian shite, which I might return to later.
A grim document
9 hours ago
32 comments:
Floru wouldn't know a "liberal" policy if it bit him on the arse.
We now have two basic proposals on the table and up for debate.
1. build more houses with help from planning derestrictions.
2. Use current housing stock more efficiently via various "nudge" policies.
A bit of both would seem sensible (in the current economic climate #2 might actually be easier to achieve). However, broadly, it is the same section of the public (older people with big houses) who are railing against both policies
and effectively promoting the status-quo!
QP, I suspect that the truth is it's the Baby Boomers who are most against this, as they hope to be next in line to inherit, they are also the biggest cheerleaders for getting 'somebody else' to pay for care home fees so that pensioners 'aren't forced to sell their homes'. Ditto NIMBYism, it's stronger among the BBs than the really old.
It does seem ridiculous for the same people to say that their home is their pension pot and then to say that they aren't prepared to turn their pension into cash in order to live while not earning.
Also, any change would be incremental so howling about old people being literally turfed out of their houses is OTT. What would happen in practice is that when (let's say) the first wave of higher land taxation kicked in a small number of people at the margins would decide to downsize. As the economy moved from being more heavily taxed by land and less heavily taxed by income a few people at a time would choose between being a bit poorer or living in a smaller house.
The opponents do like to raise false spectres of a major stampede, don't they?!
BE, yup, the Homeys are world champions at one sided economics.
And they have very short memories, it's only twenty years ago that they finally managed to get rid of Domestic Rates (which is what enabled them to buy houses to cheaply themselves), I'm not aware that there was mass pensioner-homelessness prior to 1990.
Yes when I say "older people" I really mean baby boomers who have done well out of housing and hence see either policy as an assault on their position.
I often point out to my father (baby boomer) the contrast with the number of new houses built in my lifetime against the number built in his lifetime up to my age. And the errosion in propery based taxes over his life time. That said he's making very efficient use of his spare bedrooms, renting them out to language students!
but they've paid less tax and will collect more pension than today's young people
Hardly an argument - pensions stolen, prices out of control. Sure young people would have it bad if they were that age but there's a long way to go until they retire.
JH:
1. The tax system did not steal anybody's pension, for sure, Mr G Brown reduced the tax breaks by a tenth or so*, but they are still MASSIVE. The people who did for the funded pension schemes are the greedy/inept sponsors and administrators etc.
2. Prices out of control = this is the inevitable result of Home-Owner-Ism, raid the savers to bail out borrowers. Old folks with savings are collateral damage in all this, but they are the ones who've made vast paper gains on housing which they refuse to realise by trading down.
* In exchange, he cut corporation tax by 3%, people never mention that bit, do they?
I want a big house now and a small house when I'm old. Why am I so odd?
I want the house that I have bought and paid for and I want everyone else to keep their noses out of my affairs.
Let me try and make sense of this. LVT suggests that owning your own home is wrong. All property and land should be owned by the state and you are allocated space by need or ability to pay. Sounds like socialism to me.
Anon 17.04, sensible people like you or me are a minority in this country.
Anon 20.14, yes, but remember that young people think like that as well and are being right royally exploited in the process.
Anon 20.24, nope, LVT says on the one hand that taxes on earned income are bad, and on the other hand that land owners are given monopoly privileges at everybody else's expense.
And as matter of logic and fact, taxing land values tends to lead to an increase in the number of owner-occupiers - there is a limited amount of desirable locations and if it's taxed properly, people won't grab as much as they can at younger people's or poorer people's expense, they'll just take what they need. So LVT encourages the widest possible spread of owner-occupation.
Therefore, if we tax land values instead of incomes, people will get out of the system what they are prepared to put in. It's proper capitalism not the socialism-corporatism so beloved of the Home-Owner-Ists. And why do you think that proper Commies hate the idea of LVT?
Anon 20.24, I've just noticed that you are actually deliberately lying and distorting like a typical Home-Owner-Ist:
All property and land should be owned by the state and you are allocated space by need or ability to pay.
i. The state will own nothing, it will merely tax land rents.
ii. it would have NO claim over any other 'property', in particular no claim over the most valuable asset of all - people's skills and labour.
iii. The state does not allocate anything, not by ability to pay and certainly not by 'need' - it's you Home-Owner-Ists who wail on about 'need'. The government merely taxes the rents which people themselves decide, i.e. market rents, and people then choose how much land they want to own in whatever location and what to do on it.
I am not lying and resent the accusation. I was merely trying to understand what you were saying and that was the way it appeared to me but it's your blog and if you wish to deliberately misconstrue and insult then that's your privilege.
You say 'rents', that suggests people should have to rent and not own and by critising home ownerists you suggest owning your own home is wrong. That begs the question who should own your home? If you do own your own home how much tax would you pay? If you don't own it do you pay any tax? I am trying to understand your position and make a judgement myself, or should I just take your word for it and blindly accept?
Anon, the LVT-CI economic model is deadly simple.
The land owner would continue to own his land and have the same or better legal rights as now, it is just that the rental income (actual or notional) would be taxed (instead of wages and profits being taxed) at a fairly high rate (between 60% - 90%).
The government spends a little bit on the core functions of the state and dishes out the rest as a Citizen's Income/Citizen's Pension.
So by definition, the average household is neither net taxpayer nor net welfare claimant, those in very small/cheap housing get a modest net payment from the government, the vast majority pay or receive a couple of thousand pounds a year either way, and the top ten per cent or so who live in mansion pay a lot (but probably less than they pay now in income tax).
If a landowner chooses to rent out his buildings, then quite how the tax is split between tenant and landlord is up to them to decide as dictated by market forces, this is a complete non-issue.
That's how it works.
PS, I believe that owner-occupation is A Good Thing, the wider the spread of owner-occupation the better (except for young people who don't particularly want to settle down). The higher the taxes on land ownership, the higher the levels of owner-occupation, that's easily observed or explained.
PPS, taxation does not deprive people of ownership or control of land. As a crude example, I clearly own my car, the fact that I have to pay tax if I want to drive my car on the road (i.e. pay fuel duty) does not mean I do not own my car and does not mean that the government tells me when or where to drive.
Conversely, taxation of incomes clearly does deprive people of their incomes. That is theft. Charging me rent for the use of road space or charging me rent for protecting my right to live in a nice area is not theft, it is rent. it's payment for something of equal value in return.
Surely the higher the taxes on land ownership, the less likely anyone would want to own land? What am I missing here?
"I want everyone else to keep their noses out of my affairs."
What, like finding out how much money you earn?
"All property and land should be owned by the state"
Under the law all land is already owned by the state. Freeholders are simply tenants that "hold" the title to the land "for free", i.e. pay no rent.
Anon@21:34 wrote:
Surely the higher the taxes on land ownership, the less likely anyone would want to own land? What am I missing here?
Quite right but of course it is not the whole story. What you are missing here is that the higher the price of land ownership, the less likely anyone would want to own land too.
Now higher land tax causes lower land price. Thus while the higher tax makes people less likely to want to buy, the lower price makes them more likely to want to buy. And the two effects cancel out.
If you look at it rationally you either pay up front through the price or pay up year by year through the tax (or the mortgage if you had to borrow the money to pay the price). So the increase in land tax makes no direct difference to whether people want to buy property or not.
It might have an indirect effect though. Because HMG would raise more revenue via land tax, it could afford to cut VAT and various other taxes, thus leaving more cash in people's pockets. As a result more people could afford to buy houses than currently can.
The only losers would be the banks who would be lending people smaller mortgages and thus wouldn't be earning so much interest. What a shame. They'd have to start lending money for more useful purposes instead.
Anon, the logic is simple:
1. There is a fixed amount of land in each location, some locations are more desirable than others.
2. People who have the money are willing to pay more to live in a nice house in a nice area (whether renting or buying), the same goes for businesses, they are happy to pay more rent to be on the high street because they'd never sell anything if they traded from a back alley.
3. Whatever you do with taxes, neither rules 1 nor 2 can change.
4. If you have low or no taxes, then the incentive is for some people to grab as much land as they can, more than they need for themselves, and then rent it out to others who missed the boat (i.e. young people).
5. If you tax land at something close to the market rental value, then there is no incentive to own more than your family or your business needs. There is less potential profit in being a landlord and certainly nothing in the way of capital gains. But there is every incentive to make best possible use of your land - there'd be no derelict sites because the tax is the same whether the site is derelict or has offices or shops or houses on it.
6. The tax is on market rents. If the most that people are prepared to pay to own a residential plot on Street X is £10,000, well then that's what the tax is. If Street Y is a bit crap, well the tax on that street is £5,000 and it all evens out. And if Street Z has lovely mansions on it overlooking the park, well obviously it is worth £20,000 (or whatever).
Of course if the tax is set, by mistake, at > £5,000 on Street Y, then house selling prices on that street would fall to below selling costs, which is a warning sign that the tax is 'too high' but administratively, this is not at all difficult to get right.
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So much to the logic, now to real life:
We also observe in the UK until 1989 when they got rid of Domestic Rates (which was like a low-level LVT) that owner-occupation levels were rising, i.e. more people owned smaller bits of land rather than a few people owning large bits.
Since 2003 when home-owner-ism went mad under Labour, council tax is falling as a % of tax receipts and house prices are rising, levels of owner-occupation are falling again, down from 72% to 69% in about seven years.
B: "What, like finding out how much money you earn?" Nice one.
D, ta for back up. Your explanation is better than mine.
I see, the amount of tax payable is the same as the value of the property or rent payable. So how does the transition take place. If I have say a house worth £300k and a mortgage of £200k, does that mean I now owe £300k a year tax? Or if the value now plummets to say £30k I now owe £30k tax and am still left with a £200k mortgage. Either way, even with no further taxation, I can't afford to live in my house. I can't now sell as I would still owe a fortune, so will the bank be forced to take the hit or repossess the house? I am not being pedantic I am just not familiar with this idea and need to understand fully the argument.
Anon@22:22, I would say that if you buy a house worth 300K with a mortgage worth 200K that you and the bank share ownership. That may not be the case legally but, in my opinion, it is the case morally.
Thus if I were implementing LVT -- and other LVT advocates might disagree with me here -- and assuming that LVT was 6%of the Land Value I would ensure that you pay 6% LVT on 100K and that the bank pays 6% LVT on 200K. As you increase your equity and the bank reduces its equity with the repayment of the loan, the share would adjust of course until you pay the whole amount.
As for your scenario where the value plummets to 30K, the bank basically owns your house since you have now lost not only your entire 100K equity, you effectively have negative 170K in equity. So to my mind the bank is now liable for the entire 6% of 30K.
You may still lose your house through foreclosure by the bank but that has nothing to do with LVT. That's just the way mortgages work.
Of course that's just how I would implement LVT. Other people might have a different way of doing it. And would have different ways to handle the 30K scenario. For instance under the LVT+CI implementation, you would most likely still be able to afford the tax because your unchanged CI would more than offset your reduced LVT.
Anon@22:22, on re-reading your comment, it occurs to me that you were under the impression that the drop in price to 30K might be caused by the introduction of LVT whereas I was discussing the case where the drop had been caused by other causes such as the building of a pig farm next door.
So first to set your mind at rest. When LVT replaces other taxes, its effect on land prices is more likely to be to increase them at first. Not so much because of the introduction of LVT but more because of the removal of the other taxes. It's only once all the other taxes have been removed that increases in LVT will definitely cause the price of land to go down.
At that point if you want the price of land to remain stable you need to introduce a Citizen's Income payment (CI for short) to offset the LVT.
Basically LVT and CI compensate for each other as Mark has described in his explanation above.
So land prices will not plummet because of LVT, provided that it is implemented in a sensible manner.
6% is certainly better than the 60% - 90%, Mark was advocating earlier! Or did I misinterpret? That' s why I suggested the value would plummet, nobody could afford that rate unless very very rich or land prices went through the floor.
How does the CI work then? How much would this be? Why should I receive anything from the state unless in dire need? And if CI offsets LVT why bother with paying civil servants to administrate it? I can see your argument for a 6% tax but as prices drop so would wages. No doubt the percentage tax rate would also rise as the state tries to squeeze more money out of us.
Anon@23:32, yeah, slight confusion on the LVT rate there. Mark was talking about 60-90% of the notional rental income from the house whereas I was talking about 6% of the notional sale price of the house. It's two different ways of assessing LVT on a property.
They actually come to about the same thing since rents tend to be between 5-10% of sale price in a healthy market. Mark's method of assessment is actually more accurate but mine is simpler to understand (although if used in practice it can over-estimate the tax due, so Mark's is the one to go with).
Anon@23:43, Mark has already covered all these questions in really good detail in previous posts and I would recommend that you read them. Search for his posts with the "Land Value Tax" tag to get a host of solid quantitative answers. So I'll content myself with a quick answer to your philosophical question; "Why should I receive anything from the state unless in dire need?"
One answer is that in the good old, bad old hunter gatherer days, you were entitled to anything you could find or catch while wondering around the planet. It wasn't an easy life. By modern standards everyone was dirt poor but strangely, the poorest person in a hunter gatherer society is actually better off than the poorest person in a modern society (in the absence of welfare payments) because they need not starve.
Then agriculture was invented and suddenly you could no longer wander any where you liked, because some people had started using certain bits of land to grow stuff and they got annoyed if you wandered over it damaging stuff they'd worked on -- or more than annoyed if you started eating things you found on land that they said was theirs.
Now at one time that wasn't too big a deal because you could find your own land and start working on it, becoming an agriculturalist yourself and telling other people to keep off. But eventually all the good land had been taken and all the people who hadn't bought into agriculture were in trouble. Especially people who hadn't been born yet.
Whereas they had been able to make a living from naturally occurring plants and animals, they no longer could, as a result of the agriculturalists monopolising the land off which every one used to make a living. Even worse, the agriculturalists started introducing laws, and a state to enforce those laws. A landowners state enforcing landowners laws. Too bad if you weren't a landowner.
Now I don't mean to imply by the above that landowning is a bad thing. On the contrary I think that it is an absolute necessity for our modern world. I'm a small-time landowner myself. But I do mean to imply that there is a case for the landowners compensating the non-landowners and for the big landowners compensating the small landowners for the loss of access to the planet. And the most sensible way to do it is through the state since that has already been set up to handle the land registration, the laws and the punishment of lawbreakers.
Basically the state owes you compensation for denying you access to the bounty of the natural world. At the moment that compensation is provided via state welfare payments. However the bureaucracy required for the means-testing and distribution is a nightmare and means that the taxpayers pay a lot more than the poor actually receive.
The LVT+CI alternative would ensure that you get taxation/compensation proportional to your access level. If administered by the Inland Revenue through a PAYE-like system it could be done far more effectively than the current system.
Anon 23.43, Derek has given you one answer, but just as important is the answer that LVT would (ideally) replace all other taxes.
If you just bought a house with a £200k mortgage, chances are that you earn £50k, so you pay , generate or bear about £25k a year in taxes (depending on what type of business you work in). If the LVT is approx. 6% - 7% of current house prices, your LVT bill is about £20k, so you are actually £5k a year better off.
Freeholders are simply tenants that "hold" the title to the land "for free", i.e. pay no rent.
It should be stressed at this point that this no-rent arrangement of land tenure has dire economic consequences, which almost universally evokes one of two reactions:
1) Denial (A awful lot of people think freehold is the natural order of land tenure, indeed people even think of freehold/alloidal title as being synonymous with the free market)
2) Socialism (Socialists, not understanding why the dire economic consequences have happened, try all manner of schemes that target the work people do with dire economic consequences of their own)
The LVT/CI argument is that the root cause of the problems is no-rent land tenure because it is anti-free-market, and thus reestablishing rents is a key to fixing the economic problems we face (and a few other things besides).
"amount of tax payable is the same as the value of the property or rent payable."
Wasn't that once called rateable value? Been there, done that.
As for these socialist idiots trying to make me feel guilty because I have a nice house they can go away and fornicate with themselves. Our present house cost every penny we could afford to buy it and every minute of the day for some years to renovate it. Our family home was (and is) for us a higher priority than new cars, foreign holidays and large Tv screens - all of which we have done without for most of our lives.
We don't have a large income, nor a large pension pot so we can't travel around much, thus our home is vitally important because it's where we will spend most of our time now we are retiring.
Now the kids have left we have two spare bedrooms. So what? One has become the home office I have prayed for for some 20 years, the other has become a workroom so Mrs can finally and after many years, have space to enjoy dressmaking again.
So when some jumped up socialist pseudo-charity with a patronising over-entitlememnt attitude comes along and tries to make me feel guilty because I might just finally get to enjoy something I have worked for over some 40 years then how should I react?
Of course we will downsize when we need to, we are not imbeciles, but this slimy insinuation that I should feel guilty for finally, after 40 years, having some 'extra' private houseroom and should be nudged or taxed into moving just makes me very angry.
So Mark do you sometimes. You keep refering to pensioners as 'them' - as though they are a different race - everyone including you will turn into one one day, it's not a 'them and us' situation. When it happens you may find your attitudes change.
W42, yes, it was called rateable value, and if you are old enough, you will have been able to buy a house more cheaply than otherwise because the rates bill depressed the purchase price. And then the nascent Home-Owner-Ist movement got rid of rates, threby locking in a significant profit because they can sell on their houses at a correspondingly higher price.
As to 'them' and 'us', sure I will be a pensioner soon enough, but I am honest and accept that while pensioners rely 100% on young people and would die without them, young people do not need pensioners in the slightest and, frankly, would be better off if there were none.
So I am pre-emptively returning the favour which young people will be doing for me in a decade or two.
"young people do not need pensioners in the slightest and, "
They needed them when the pensioners were parents and spent much of their time and money raising them. Don't you think that throwing them away as soon as their usefulness is over is rather harsh on parents?
W42, sure, they needED them, past tense, they don't need them any more, present or future tense. That's a simple fact.
Returning to the issue in hand, why do older people think it's OK to enslave their own children with massive taxes, whether publicly or privately collected? Do you, for example, want your children and grandchildren to be able to afford to buy their own home?
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