Economy, spending and taxation

[Lurid]

TO SOLVE A PROBLEM OF BANKS – without a regulatory burden
Wealth production in its primitive form takes place when labour works on land unaided. In practice, as soon as development takes place, some of the wealth produced is not dedicated to immediate consumption but is diverted back to assist in the productive process and is known as capital. Now labour, working with the aid of capital, is producing wealth in greater quantity and with greater ease, but still of course on and from land. Of the three factors, labour and capital are, within reason, in flexible supply; but land is fixed in quantity and in location. Thus when the good times roll, and land is in increasing demand, all that happens (all that can happen) is that its price goes up and up. This makes it an ideal object of speculation. Everybody is feeling good and confidence is soaring as the boom takes off. Land prices rocket spectacularly beyond the land's value in current use. Balance sheets are being adjusted to take account of updated valuations of company assets. Individuals bother less about saving as rising land values seem to be doing their saving for them. Banks are presented with glowing assurances of new riches now being offered as collateral for loans to support expanding businesses and to fuel joyous lifestyle expenditure. Loans look profitable, and the banks want in on the act. Both banks and clients are intoxicated by the same unrealistic froth of rampant land speculation. It cannot last, and it does not. Eventually the bubble bursts and the ensuing slump drags down improvident lenders and reckless borrowers alike.
What of the collateral? Nowadays the banks have a lien on the real estate pledged, consisting of (i) the realistic value of the land plus (ii) the value attributed to its element of speculative froth plus (iii) the value of the true capital assets (the man-made developments on or in the land). This is where LVT, fully and correctly applied, comes in. Collecting the land-rent leaves nothing behind to support land speculation. Homeowners and business proprietors may still proffer their houses, business premises, and the crops growing in the fields as collateral if they wish (i.e. the development value only, not the site value). This prevents a bank deceiving itself over the value of its collateral. Problem solved. What is all the fuss about?

from www.landvaluetax.org/practical-politics-2011/view-category.html - Practical Politics No. 191 - July 2011

I'm a firm believer in Land Value Tax and I feel that it is only poor publicity for it that keeps it out of the political agenda.

The Land Charter:

1. Nature provides free (with no cost to production) this planet on which we live.
2. All human beings have an equal right to use what nature provides.
3. When any individual, group of individuals, business or other association requires exclusive use of a part of the land surface of the planet they should compensate all others for the use of this exclusive privilege by paying the full rental value to the wider community through their government.
4. An annual levy on every site at the full economic rent of land would be considered an adequate method for achieving the aims of (3) above, together with the replacement of equivalent taxation on production.

This replacement of equivalent taxation on production could be a cut in VAT and/or Income Tax. Although I think Council Tax should be the first thing cut, there would be more cuts available to the tax burden as the Land Rent Value is so high. Imagine how this would stimulate the economy on a permanent basis. Less capital sunk into spurious land values, more for investment. Less volatility in property values without the speculative froth.

Since charging for the land rent value that has remained uncollected for so many years will impact on the sale value of properties it would have to be introduced gradually.

The value of land is in the state that rules it and develops infrastructure upon it. The education and health of the local populace, the peaceful trading and production environment and security arrived at by the armed forces and national treaties. Any other value is of the planet itself. Not something the titleholder can claim as theirs. Theirs is the building(s) upon it and the right to build there.

The title should only convey rights of development and mineral extraction as the planning rules permit. The financial benefit of investment in the infrastructure and people should fall to the state and people. This is no economic disaster as all land rent rightfully paid to the state rather than the titleholder means less in taxes on jobs, production and trade.

Just so 'free market' Tories know where they stand on this monopoly , here are some Guardian items on it:

www.guardian.co.uk/theguardian/1999/sep/13/guardianletters?INTCMP=SRCH

www.guardian.co.uk/politics/2005/dec/03/debtrelief.development

www.guardian.co.uk/uk/2005/dec/05/budget2006.budget?INTCMP=SRCH

www.guardian.co.uk/money/2007/jan/08/tax.business?INTCMP=SRCH

www.guardian.co.uk/commentisfree/2011/may/06/land-value-tax-david-cooper

Not even the cleverest tax lawyers can avoid it - that's why it's gaining more and more support
...
LVT is more efficient than income tax. Taxing wages or profit discourages workers and entrepreneurs from useful economic activity, reducing competitiveness. There is a myth that LVT would lead to higher rents, as landlords strive to recoup the cost of the tax. But since landlords already demand what the market will bear, this can't happen.
...
David Cooper is secretary of Liberal Democrats Alter (Action on Land Taxation and Economic Reform)

* red flag to John Bull *

Liberal Democrat Manifesto, Page 26
"Reform business rates, creating a fairer system where rates are based on site values rather than rental values and are the responsibility of local authorities."

Co-operative Party Manifesto , Page 7 and 17
"There is significant evidence to suggest that the shortage of homes in the UK has been artificially created by a poorly functioning property market. This has had the effect of substantial growth in house prices, with the market rewarding those with property assets at the expense of people seeking places to live.In order to prevent similar problems emerging in the upturn, the Government should use taxation to change incentives within the property market, ensuring that it incentivises the productive use of land rather than expected capital gains in an upward market. The Government should replace council tax and national non-domestic rates with a land value tax."

The Green Party Manifesto, Page 15
"...we favour moving to a system of Land Value Tax, where the level of taxation depends on the rental value of the land concerned."

www.labourland.org/manifesto/index.php
www.labourland.org/downloads/Labour_Land_Manifesto_2011.pdf

Real free market Tories: Milton Friedman endorsed Land Value Taxes.

I'd imagine the LVT would have to transition over 40 years to make it fair. 1% of land rent value in 2012, 100% in 2052. Plenty of time to sell up and buy stocks and bonds if that looks a better deal to you. I understand that gold is attractive at present. Land owners have a stake in the country. If they paid a proper tax on it, I'd be happy to see them profit on any developments built. This might warrant an exemption from capital gains tax. Some similar deal for farmers might be in order. Although renting farmland is not that expensive compared to building land. Especially hill grazing.

[Jerry1971]

Lurid - why don't you re-wind the clock and only offer the vote to landowners? I'd be up for that!

[Tom Shaw's Fist of Rage]

tl;dr

[Lurid]

Aug 16, 2011 8:29:47 GMT Jerry1971 said:

Lurid - why don't you re-wind the clock and only offer the vote to landowners? I'd be up for that!

Well the house of Lords is up for reform. If land owners paid close to 100% of Land rent value to the state I might see some merit in it. They would, after all, have more stake in the success of the state and environment than some in the universal franchise. A pro rata weighting to votes (like the union's block vote system) for the value of land owned could act as a sink on some of the cash that currently seeks to corrupt/sway/lobby the Commons. I would be concerned if the political value of land outweighs the commercial value as this would inhibit the drive for optimum development.

However, since when has there been any limit on the corrupting and selfish influence of money? We need all the checks against this that we can get. Those far enough up the slippery pole to have land aren't necessarily motivated to see the country as a whole do well. It is far more often the less fortunate that appeal to unity within the state. Tories seem to assume that anyone interested in factors of life quality other than profit are no longer interested in profit and the ways that that can benefit people. Such people just need more options because the 'rat race' isn't enough. Either to sustain them or to fulfil them.

It has been conclusively proven that equality throughout life is impossible to achieve. I think Labour removing clause 4 from their constitution acknowledges that. What is possible is a fairer start. Up until we leave school and enter the 'free' market, we are in a controlled system. Fair access to education and a good learning environment should provide this country with a greater choice of researchers, artists, entrepreneurs and employees. It is reasonable that employment laws should stop restrictive practices like monopolies, cartels, fraud, class or religious prejudice, sexism and racism. This is what is meant by equality of opportunity. A fair start and a fair crack at getting on.

So if there will always be losers in open competition, why support them? Well supporting a failing business without sign or hope of improvement makes little sense, but people aren't like that. They aren't businesses and their actions and influences aren't constrained by the market and the rules of business. A safety net for those that are losing badly suits everyone. A minimum quality of life is required to keep a person civil and safe. Desperate people do desperate things. Ill health has an unfortunate habit of spreading from the poor to the rich. Hardly a moral argument, but then not all capitalists are moral people, even by their own standards. You can add moral arguments on top of these and be the richer for it.

[Lurid]

Aug 16, 2011 16:42:17 GMT Tom Shaw's Fist of Rage said:

tl;dr

Literally, "Too long; didn't read" Said whenever a nerd makes a post that is too long to bother reading.

Too short. Didn't make sense.
Why start reading a thread with a title like Economy, spending and taxation and expect the views to fit in a tweet?

Too Long; Didn't Read

Literally translates to: That was too long to read.
Really translates to: I'm too lazy to read the entirety of what you said, but I still want to say something.

Now, instead of just dropping capitals the modern internet communicator also drops tiresome reading! The time savings will be incredible.
Person A: Hi, do you know anything about where Jamie and Brad are?
Person B: tl;dr
Person A: Uh... How should I have said that?
Person B: do u no where jamie n brad r
Person A: AGH... It burns!

[Lurid]

So is it that there are no interested parties in a macro economy discussion? Is George Osborn doing a great job? (dear god no)

[Lurid]

UK is the 50th in the world by the size of its government debt compared to its GDP.

The clock I'd like to see wound back.

www.usdebtclock.org/world-debt-clock.html

www.debt-clock.org/

[Lurid]

www.bbc.co.uk/news/uk-scotland-11461293

Just 3.16% of land value is enough to replace council tax and business rates. I wonder if they mean 3.16% of the rent value for that year or total capital value.

A land value tax of 3.16p per pound would generate enough cash to replace council tax and the uniform business rate, the Scottish Green Party says.

New research commissioned by the party suggested Scotland's land, ignoring developments, was worth £120.3bn.

The Greens said LVT would make 75% of Scots households better off and would deter speculative land holding which it said "stifled enterprise".

It would also provide a new method for funding major public building projects.

Capital land value is a relatively poor measure as it fluctuates more with market distortions than the rent which reflects the underlying value better.

Green MSP Patrick Harvie said it meant communities would benefit from infrastructure investments, which currently only gave "windfall gains" to landlords.

"For generations, property based local taxes have hit the poorest hardest and stifled enterprise," he said.

"Our tax revenues are invested in the community, providing improvements to the environment, infrastructure or local services.

"As the amenity of an area increases it is landowners who benefit most as the value of land increases.

"This is one of the causes of land speculation, and for too long this kind of unsustainable commercial behaviour has been allowed to distort our economy."

I couldn't agree more with this. If Scotland can gain from this, imagine what it could do for England with all that prime real estate.

Councils would have something to aim towards and build on as real increases in land rent value would be rewarded with higher consequent tax income to spend in subsequent years. A proportionate reward for a job well done.

[Lurid]

The 'Misery Index'* (inflation plus unemployment %) is now at 13. Stagflation has set in.

* = the estimates suggest that people would trade off a 1-percentage-point increase in the unemployment rate for a 1.7-percentage-point increase in the inflation rate. So maybe the index should be (inflation plus 1.7 x unemployment %). That would be 18.

www.zerohedge.com/sites/default/files/images/user5/imageroot/bernanke/Screen%20shot%202011-03-22%20at%209.04.15%20AM_0.png

We haven't been this miserable since 1992 (Last Tory government)

Adherents to the Austrian School maintain that creation of new money ex nihilo benefits the creators and early recipients of the new money relative to late recipients. Money creation is not wealth creation; it merely allows early money recipients to outbid late recipients for resources, goods, and services. Since the actual producers of wealth are typically late recipients, increases in the money supply weakens wealth formation and undermines the rate of economic growth.

The banks are holding on to new money rather than lending it to wealth producers in the wider economy. They are exercising a partisan economic policy. Effectively they have chosen to sacrifice the national economy to benefit the City.

A patriotic treasury would be lending directly to businesses in profit after excessive interest rates have been taken out of the equation.

[Lurid]

www.atimes.com/atimes/China_Business/MJ05Cb01.html

As freeholder, the government could declare a new ground rental on the unimproved value of Hong Kong land and then base the Hong Kong dollar on this value simply through the creation and issue of credits redeemable in payment for HK$1.00's worth of rental.

The first fiscal effect of this ground rental would be to reduce speculative development pressure. Secondly, the resulting HK Rental Pool may then be distributed equally to all Hong Kong citizens as a land dividend. The effect of this would be of a net fiscal transfer from those with above average exclusive use of Hong Kong's scarce land to those with below average use.

Finally, under suitable management by service providers and supervision by the Hong Kong Monetary Authority, this new source of HK public credit would be available to finance new infrastructure. Such public investment would increase the ground rental value of the relevant land and enable the public credit to be retired and recycled out of the increase.

This land dividend would reduce the financial pressure on Hong Kong's poorest citizens and would do so through a pre-distribution of future wealth rather than a re-distribution of existing wealth. Properly executed - and Hong Kong's executive are more likely than most to succeed - this fiscal policy should be win/win: the rich would in future receive a smaller share of a larger pie.

The monetary effect of a land-based HK dollar would be of a currency with exchange control hard-wired into it. Overseas holders could exchange the HK dollar for other value with HK residents and businesses, but they would never be able to redeem it against HK rentals unless they resided in Hong Kong.

Pegging currency to land rent values.

[Lurid]

In a complete U turn on policy laid down a year ago, the Coalition are funding a loan to Forgemasters in Sheffield for a new larger forge press. A loan originally agreed with the Labour government to promote manufacturing jobs at a time that private banks (even nationally owned ones) were reluctant to back British industry. The banks are still not investing in growth. The cuts aren't paying off debt (not even reasonable investment debt). There are only two forge presses large enough to make reaction vessels for the next generation of Nuclear power stations (energy independence from Arabia and Russia plus reduced carbon emissions). One is in Japan and the other is to be built in Sheffield at Forgemasters. A monopoly purchase avoided with a chance of contracts going to British workers (that pay taxes here). This should have been done a year ago.

[Lurid]

Thinking on the tax havens that funnel profits abroad before they can be taxed.

These often hold a patent that must be paid before any profit is declared. How about UK patents only have any authority if they reside in the UK? Any profit made off a patent that applies to the UK would then have to pay tax on any profits.

I don't think the tax office and treasury are really trying to pin evaders down.

Sadly I can't see this changing until democratic debate focuses on the issues rather than which politician should be PM for the next five years. Democratic input is at the wrong point in the governmental process.

Media talk of the UK being a democracy is overselling the point. We have very limited control of what becomes law.

Rather than burning down or breaking your neighbourhood I suggest writing to your MP, local paper and pressure groups to be a much more constructive use of your time.

Only by overloading this broken system with too many demands for reform can we truly prove that the 'democratic' system itself needs reforming.