After their savage kicking by the Home-Owner-Ist majority a few months ago, The Intergenerational Foundation have waded back into the fray with A Manifesto for Younger and Future Generations.
One of them is pencilled in to appear on the BBC Breakfast TV show tomorrow morning at 7.20. I wonder what The Daily Mailexpressgraph will/would think of this sort of stuff...
5. Re-balance Housing Wealth
• The massive rise in house prices over recent decades is a key reason behind rising intergenerational unfairness. Many young people cannot afford to buy even a small flat while IF research has shown that over-consumption of housing by the over 60s has risen rapidly.
• The longevity revolution leads to more prolonged demand for housing amongst older owners and tenants. Official policy should therefore help those who want to downsize through provision of more suitable housing and fiscal incentives.
• Tax incentives on buy-to-let properties should be reduced. It is absurd, for example, that landlords do not pay National Insurance on their unearned income, and can fully offset any loan interest off against tax.
• Council tax should be reformed to reflect each property’s true value and to make occupying a large house when you no longer need it more expensive.
6. Fairer Taxation Across The Generations
• The government should overhaul the tax system with regard to intergenerational fairness.
• The current tax system is systematically disadvantaging younger workers where older workers pay less tax (higher personal allowances and no National Insurance) and the light taxation of income from savings and property disproportionately helps the older generation.
• The government should consider reducing or scrapping universal benefits (which are not means tested) such as winter fuel allowance, free prescriptions and free bus passes.
• Pensioners on low incomes already have access to various tax credits and these universal benefits cost the taxpayer well over £6 billion each year.
• At the very least the government should make these benefits voluntary, so that wealthier pensioners may decide not to claim them.
7. Transparency of Government Debt Recording
• The build-up of public debt and liabilities is unfair on younger and future generations.
• All government borrowing should be on balance sheet.
• The government should calculate what the current obligation is for the state pension, and include it in official liabilities so that the burden being passed from one generation to another is more transparent.
A grim document
14 hours ago
33 comments:
"It is absurd, for example, that landlords do not pay National Insurance on their unearned income, "
I agree, why not scrap NI altogether? It is absurd for there to be two forms of income tax levied on the same income. NI lost its point when it ceased to be ring-fenced.
B, I'm a flat taxer, I'd merge VAT, income, NIC and corporation tax into a single flat rate for a very start, as well as scrap most exemptions (i.e. reintroduce Schedule A taxation), tax breaks and subsidies to try and get the rate down as low as possible. Low thirties should be enough to replace the entire tax system excl. duties in the narrow sense.
The answer is not, and never will be LVT. It is having interset rates at a level that reflect the real risk the lender is taking.
I suppose I should add that lending to those unlikely to be able to repay should also not happen, but since there seems little chance of appropriate interest rates being set in the next few years I'm probably hoping too much to add anything to my first wish.
TFB, why don't you take up the LVT issue with those many Economics Nobel prize winners who've advocated it?
You have never come up with a good argument for taxing incomes and/or for not taxing land values. The only problem is politics (the people that benefit most from Home-Owner-Ism are in power and they run the propaganda, to which you appear to subscribe), not economics or logics.
Mark, I agree. Leaving aside the most-politically-beloved-of-all-taxes, VAT, if you are going to tax incomes, why not do just that? Instead of taxing a company's profits, just tax the money as and when it leaves the company and becomes somone's income, with no exceptions. However, I'm afraid this makes far too much economic sense for it ever to be adopted.
TFB, you are right that keeping interest rates too low has got us into this mess, but you are wrong that LVT would not be one way of getting us out, with raising interest rates being another. However the first is too radical a solution for the government ever to adopt and the second too politically painful, so it's all academic really.
B: "if you are going to tax incomes, why not do just that? Instead of taxing a company's profits, just tax the money as and when it leaves the company and becomes somone's income?"
Because that leads to all sorts of further distortions - better to have a flat rate on everything, and as I have said before, corporation tax is only a tax on non-reinvested profits. Whether those profits pile up in a company bank account or are dished out to shareholders or employees is irrelevant.
As to interest rates, hurray for low interest rates, they are good for the economy BUT they pump up land prices, which is bad for the economy. So with LVT and low interest rates we get the best of both worlds - an effective high interest/tax rate on land and a correspondingly lower interest rate and tax rate on the real economy (aka DBC-Reedonomics).
Not sure why the otherwise good IF advocates raising rents as a solution to the housing crisis, as their suggestion of levying NI on rental income would surely do. The supply of rental accommodation would decrease as landlords sell up, and the resulting owner occupiers will, in the balance, under-occupy compared to renters, so not as many renters would leave the sector to become beloved homeowners.
The solution is to tax owner occupation the same as rentals. LVT of course.
M: "Not sure why the otherwise good IF advocates raising rents as a solution to the housing crisis, as their suggestion of levying NI on rental income would surely do."
Nope. There is one tax which everybody says adds to prices and is borne by the consumer, it is called VAT. But all the evidence shows that about two-thirds of the VAT is borne by the producer, because demand is more price elastic than supply (for most VAT-able goods).
Demand for rented accommodation is price elastic, and supply of housing is completely inelastic.
So NI would be borne to 99% by landlords. If, as you expect, landlords sell up, then either to other landlords who snap up the now cheaper housing or to owner-occupiers, who by and large will be younger people. Win-win.
Taxing LL and O-O at exactly the same rates via LVT is much better, but that's a long way off.
Wouldn't raising interest rates hurt hard working families trying to keep an investment, sorry roof, over their heads?
Do I detect the faint hint that TFB advocates this because he has no mortgage and has savings?
R, that is true, there is quite a split in Home-Owner-Ist ranks about whether low or high interest rates are better; the BB's want low, the proper old age pensioners want high.
This all sounds very complicated. My take is that Minimum Wage has contributed massively to "unfairness".
Wages are kept artificially low whilst everything else rises in price exponentially and people wonder why no one can afford this Big-Ticket purchase anymore. It's not really *that* hard to work out, is it ?
Pay people what their contribution to society is actually worth and they can reflect that worth in their purchases.
Nurses, emergency services, serving forces in war zones etc would then be living in mansions and ANY employee whose job is a direct result of political correctness would be in a tent round the back of Tesco.
The rest would be somewhere in between and it would all be fair.
I can dream...
@MW VAT is different to taxing BTL as VAT-able items have limited substitutes. Sure, you can go from ready meals to buying fresh food and cooking yourself, but the only exact substitute is the black market. But rented accommodation has a tax free exact substitute in owner occupation. As you've said before, rented accommodation is far better utilised than owner occupied due to the incentives provided by paying market land rent, so shifting more housing into owner occupied status will mean that housing as a whole will be used less efficiently and prices/rents will rise. Absent LVT of course, which would give people incentives to optimally use land regardless of tenure. Thoughts?
PS I don't have any BTL interest but I am a tenant so have an interest in my landlord not selling up if her tax bill went up. I wouldn't buy our place from her because it's not suitable for my family's medium term needs.
T, did they mention the NMW? Apart from that, I share your dream.
M, yes, good points. Whatever the problem, LVT is usually the best answer, but I don't see how putting NIC on rental income makes much difference either way (in practice).
And your LL probably would not sell up, because LL's expect a certain % yield i.e. net rent divided by selling price. If net rents go down, then do so selling prices so the % yield stays exactly the same.
"Because that leads to all sorts of further distortions"
Please give examples. And I was arguing for a flat rate on incomes, not against it. Currently you have an different income tax rates for income from dividends to that from other sources of income.
B, the government tried this a few years ago, the first £10,000 of taxable profits in a company were exempt. Result: a million small businesses were incorporated, a load of profits sheltered and the scheme was so expensive it was shut down a couple of years later.
If you exempt retained (but not reinvested) profits from tax (reinvested profits are not taxed in the first place), then
a) Companies will be tempted to build up cash piles, which is inefficient (refer to old General Electric Company plc).
b) the overall tax rate on everything else - wages, dividends - will go up. This is A Bad Thing.
c) all currently unincorporated businesses will incorporate, reducing the tax base and increasing the rate on 'everybody else'. They'll have to bring in IR35 rules from Hell to prevent all this and it is not worth the hassle.
And yes, the current system already encourages this sort of behaviour, because corp tax is at a lower rate than most other types of income, and paying out money as wages or dividends triggers additional tax charges. So your suggestion makes this WORSE not better.
It's good that you highlight LVT as just like an Interest rate but for the whole economy...
You can see that one of it's most beneficial aspects is to fight inflation, and thus allow interest rates for proper investment to be lower!
AC1
AC1, ta.
"The government should consider reducing or scrapping universal benefits (which are not means tested) such as winter fuel allowance, free prescriptions and free bus passes."
This section is wrong though.
AC1
AC1, yes of course I don't agree with all of the details, let's not bicker among ourselves. In particular I don't agree with their Green Tomfoolery in Section 4. I just liked the general thrust of it.
"T, did they mention the NMW? "
As far as I can tell...No. It's as if ability to pay for things should have no bearing on whether you buy them or not.
Funny that, innit.
>Nurses, emergency services, serving forces in war zones etc would then be living in mansions
Those jobs are relatively easy to fill i.e. lot's of applicants for relatively low skills. The best way to set pay is market forces (so higher pay entices people who can do the task to do the task, and thus increase the size of the economy).
Since job demand is high and the pool of applicants who can do the job is high, wages will always be low.
AC1
T, what did you want the IF to say about NMW?
AC1, market rate is market rate, and relative to PC non-jobs, the wages for those workers (nurses, paramedics, soldiers, not things which I would be able to do either skillswise or stresswise) would be a lot higher.
I suspect infinitely higher...
AC1
T, what did you want the IF to say about NMW?
Ok I see what you're getting at now. I missed the inference the first time. NMW is irrelevant since it's a fair measure that has already been introduced to help younger people in the workplace. They probably missed the fact it's backfired.
After all, it's not as if any of that manifesto is about fairness at all.
To me it looks to be a very long, convoluted, footstamping whine about how old people have nice things and how young people want them without putting in any of the effort it took those old people to get them in the first place.
They want the same financial considerations, concessions and benefits old people get without ever having had to earn them.
Much easier all round just to take everything off old people and give it to the young. Sod whether *that* is fair to old people.
If successful, they'll submit to such a regime themselves in future, I take it ? Yeah right.
T: "Much easier all round just to take everything off old people and give it to the young. Sod whether *that* is fair to old people."
Funny you should say that - any objective view of the UK economy over the last fifty years shows exactly the opposite:
"Much easier all round just to take everything off young people and give it to the middle aged and old. Sod whether *that* is fair to young people."
There has been a steady transfer of wealth to "baby boomers". Really old people haven't done that well in all, and the young are being completely screwed.
Don't forget that it's today's incumbents who paid much lower NI when they were young, supported fewer and cheaper old age pensioners, bought much cheaper houses (partly because Domestic Rates was much higher than council tax, partly because there was more new construction), had no or lower VAT rates, free uni education, more or less guaranteed job after leaving school/uni, lower immigration etc.
And it's the same lot who have reversed all this, purely to benefit themselves and really screw over today's young people.
"They want the same financial considerations, concessions and benefits old people get without ever having had to earn them."
But it's the system which stops so many of them getting a job; and eighty per cent of young people are working, but they are getting screwed just as much as the young unemployed. And the boomers and pensioners just don't give a shit.
Mark - I don't think the two eras (then and now) are directly comparable at all for many more reasons than we can discuss in a small space. If that makes me un-objective in anyone's opinion then so be it.
Don't forget that it's today's incumbents who paid much lower NI when they were young, supported fewer and cheaper old age pensioners
True, since the pensioners of the baby boomer generation had been drastically reduced (indeed all age ranges) by the joys that two World Wars, rampant disease and poverty bring. The NHS, and welfare systems were providing services at a bare minimum compared to today too.
The bottom line as far as I am personally concerned is something we both agree on, here:
But it's the system.
Times have indeed changed and "The System" needs to change but must still provide balance.
...the boomers and pensioners just don't give a shit.
I disagree and could just as easily say that by the same token todays younger people don't give a shit about how they get their hands on what they want and who suffers for it or how....but I know that's not entirely true.
Personally I do hope the Manifesto is fatally flawed for the simple fact that it sets one generation directly against the other. Then again, perhaps it was meant to and measure is being made of just how many people would go for it without too much question.
If implemented it will ultimately mean it will be perfectly legally acceptable in future to help yourself to other people's stuff just because some people don't have jobs. Yet we condemned rioters not so long ago for that.
T: "...the boomers and pensioners just don't give a shit." I disagree"
The BB's and P's value Hallowed Green Belt above houses for their children and grandchildren, this is a deliberate way of transferring wealth (via higher house prices) from young to old, I rest my case. Today's BBs and Ps were not exploited like this 9see my earlier comment).
Perhaps the IF go a bit too far, so what? What if the 50% of the population which is getting completely done over (young people, productive businesses etc) start ganging up on the rent seekers (BBs, quangocrats, bankers etc) and replace income tax with land value tax?
The BB's and P's value Hallowed Green Belt above houses for their children and grandchildren,this is a deliberate way of transferring wealth (via higher house prices) from young to old, I rest my case. Today's BBs and Ps were not exploited like this 9see my earlier comment).
Green Belt Land is not a consideration for a council that can clear old slums and rebuild and/or regenerate derelict properties.
Nor is it only BBs or Ps who are selling a house at an artificially inflated prices that were partly a result of a credit boom not quite matched in credit bust. Negative Equity has affected so many who bought houses in the last 10 - 15 years that they couldn't lower the price even if they wanted to.
I agree that Ps and BBs were not exploited like this but it's hardly them who is responsible for the exploitation.
Re: the last part of your response I'm not even going to try and answer the question since I don't even pretend to know enough about tax matters to even attempt it. Sorry !
T: "Negative Equity has affected so many who bought houses in the last 10 - 15 years that they couldn't lower the price even if they wanted to. "
Well, I guess nequity mainly affects people who bought in the last 5 years, but this is the Home-Owner-Ist ratchet at work, isn't it?
"Oh dear, houses are becoming a bit more affordable for young people, but the interests of those already on the ladder are paramount - let's keep subsidising housing to make prices go up.
The fact that this primarily benefits bankers and wealthier home owners; landowners who can sell off tiny bits of land at inflated prices; those with a lot of housing equity who can remortgage and snap up buy to lets ahead of young people who can't possibly get a £30,000 deposit together; and creates the feel good factor that keeps the people who happen to be in government from being replaced is entirely coincidental."
They fail to address the simple truths that deliberately making houses more expensive places an ever larger burden on the next generation and it makes it all the more likely that the next generation of buyers get into nequity and so the cycle of poverty perpetuates itself. It's just debts cascading down the generations.
Tax incentives on buy-to-let properties should be reduced. It is absurd, for example, that landlords [..] can fully offset any loan interest off against tax.
Yes, it's simply shocking that a business should pay tax on its profit rather than its turnover, isn't it.
Anon, agreed, they haven't thought that one through properly.
But I'm a great believer in like-for-like comparisons, rather than the diagonal ones so beloved of Home-Owner-Ists, socialists, polemicists and liars throughout the ages.
So let's decide whether being a landlord is more like self employment income or more like being an owner-occupier (which it is, if you take landlord and tenant together).
a) If you say that rental income is the same as other self-employment income, it should be liable to National Insurance as well as income tax, and VAT if the landlord owns enough dwellings.
b) If you believe in taxing substance over form, then the tax bill on an owner-occupied dwelling should be the same as that on a rented dwelling. This then gives us two possibilities:
i. Give owner-occupiers tax relief for interest paid, an idea so beloved of the Homeys, but the logical corollary of that is to also tax them on their non-cash rental income, or
ii. Just tax the rental value of the land or building, disallow the interest expense and ignore any cash rental income.
As ever, the Homeys want the best of all worlds for themselves
- no NIC or VAT for landlords, but full deduction for interest expense
- full deduction for interest expense for owner-occupiers, but no taxation of non-cash rental income.
But feel free to stick with your deluded diagonal comparisons and refuse to grasp logic or anything, you're safely in the majority there.
TFP
I love it when folks say that lenders take risks! When they create more risk than they take in real life and observed so clearly.
Loaning capital, in general, produces a surplus. That is anti risk right? But banks do not "lend" capital nor deposits any more. They "create" money and deposits.
Yeah some idiots(banks) will find misadventure even doing this they are that feckless. But that is because they are not very good at their enterprise, not because they took any risks. Their "risk" is always socialised too. Its risk free to them.
If they were to start loaning for capital formation(non land speculation) then the best would float to the top, the morons would be swept away and the interest rate would be discovered at its natural average level and banks would deserve a small profit for the service of helping the demand for capital meet its supply. Proper banking.
So banks create a "riskful" society when it is inherently safe. This is why we should abolish them in current form.
MW: Government can be funded with 10% of GDP. Flat tax yes. But a direct flat tax. The only one I can think of is LVT or some form or economic rent collection.
Think about it all in terms of what things would be like once the parasites have all been executed. Budget cut by 70%, Production increasing dramatically, rents rising, and the earnings of labour and capital rising in proportion to rents even.
RS, steady with the old bank bashing!
You have to distinguish here, bankERS do indeed take huge risks... with other people's money. The bankERS then take any profits and bank shareholders/bondholders share the losses with taxpayers.
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