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The LVTC blog, by Henry Law

The comments in the LVTC Blog are a personal view of our Hon. Secretary Henry Law and do not necessarily reflect the official policy of the Campaign.

This is a place for personal observations and comments on politics, economics, current affairs, on-going discussions on the potential for LVT to remedy some of the current ills, and the impact on Society of any of the above. 

Please read and enjoy, and feel free to respond to Henry if you have any thing you would like to add.

More missing the point

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There is a lot of point-missing going on this morning. Is there something in the air? This article talks about the fact that cheap money has driven up house prices, but the author fails to understand that if interest rates were raised, housing would still be just as unaffordable. Prices would drop but monthly repayments would stay the same as it is these that fix the price levels. The primary value of real estate is its annual rental, not the selling price.

Low interest rates have indeed sustained a bubble, but the way to deflate it is through effective property taxation.


Willfully missing the point

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Today's Guardian hand-wringing session on the "Panama Papers" includes this piece, called,  "Panama Papers: 10 ways for the UK to get its house in order". One of the ten is the following.

"Root corrupt money out of the UK property market and reveal the true holders of the keys to UK homes." The files include the details of 2,800 secret companies, or "vehicles", linked to 6,000 title deeds worth more than £7bn in the UK. Historical data from UK law enforcement has confirmed that anonymous companies like these are the main vehicles used by corrupt individuals to launder illicit funds into the UK property market. Overseas companies should declare who really owns them before purchasing UK property."

This is interesting in that it does at least refer to title deeds. But it ignores the fact that residential property in central London, ie in the boroughs of Westminster and Kensington, and Chelsea, is subject only to Band G Council Tax, a trivial amount in relation to its value.

If this property was taxed at realistic rates, preferably on the basis of the value of the land it is standing on, the land titles would be of no interest to anyone unless they wanted to live in it. Given effective property taxation, the offshore funds would stay away. It is successive UK governments that have created and sustained the real tax havens, which are not in Panama but in the middle of London. It is a pity that the Guardian journalists, in this case Ed Vulliamy, cannot see what ought to be blindingly obvious. One has to ask why, and why, too, and strikingly, no article on this subject is open to comment.


Comment is not free

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Until it changed its name in 1959, The Guardian was the Manchester Guardian. A century ago its editor, and later, its owner, was the renowned radical, C P Scott (1846-1932). He used the slogan "Comment is free, but facts are sacred" to sum up his championship of honest reporting and freedom of speech. The contemporary Guardian boasts the slogan on its news web-site. However, the number of articles on which comment is allowed has dropped sharply over the past month. Since the comments are often more worth reading than the articles, and the commentators better informed and better able to present an argument than the journalists who get paid to write them, the effect is to impoverish the web site to the point that it reflects only the Guardian's predictable line. The web site is now hardly worth the bother of a visit. Given the Guardian's investment in, and committment to, its web site, the only effect will be to reduce the number of mouse-clicks on revenue-earning links.

This has been noticeable since the release of the Panama Papers, which have been a principal, and frankly, boring, part of the newspaper's offerring for over a week now. It is striking that not a single one of the articles on the subject has been open for readers' comments. The conclusion to be drawn is that there must be something the Guardian management does not want talked about.

Once the Guardian had dug up the information that the "offshore" investments were substantially in high-end London residential property, much of the rest was irrelevant information.

The real tax havens are not the offshore islands but the streets of the capital. Any journalist worth his salt would have drawn attention to this, from which point the possible solutions are obvious and do not require international action.



Piketty still hasn't a clue

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Piketty still hasn't a clue. His comments in today's Observercalling for international action, demonstrate the point. The Observer itself is worse, with a call for United Nations action in a piece headed, "The Observer view on how to clean up a squalid world financial mess".

Both pieces appear in the Observer/Guardian's section laughably called "Comment is free", I say laughably because most of the articles in the section are not open for comment. Free comment closed down several weeks ago, presumably because the newspapers' pro-EU stance and advocacy of open-door immigration policies are met with a chorus of derisive and usually well-argued comments demolishing the authors' arguments.

As far as the tax avoidance issue is concerned, there is no excuse for missiing the point because the Guardian itself published a piece, referred to on this website earlier in the weeek, that catalogued prime London residential property owned by offshore funds. If there was any real desire to deal with the problem, the hand-wringers would be arguing for increased taxes on property which is not going to be taken off to any tax haven anywhere; a simple way to pick up a bit of the lost tax would  be through reform of Council Tax bands, including a national component which could be used to boost the revenue of local authorities in places where property values bump along the bottom and are untouched by any boom. I am not advocating this but it would be a move in the right direction and go a little way towards dealing with the problem. One might expect the hand-wringers to come up with some such suggestion. That they do not indicates either that they are incapable of joining-up their thinking or that the whole thing is humbug.

You might ask why bother to visit The Guardian's news website at all? Occasionally it comes up with a few nuggets, but the main thing in its favour is that most of the better British newspapers - the FT, Times and Daily Telegraph - have put themselves behind paywalls. That makes it pointless to link to any articles in them as visitors to this web site will not be able to read them unless they themselves are subscribers.





Humbug in perspective

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A correspondent sent me this yesterday, apropos the Panama "revelations"

"I paid £200k for my house in 99. Now its worth £600 big ones. How much work did I do? None. How much tax did I pay? None. How much benefit did I receive? Rather a lot - All the increase in price plus improved location value. Now, multiply that by 23 million home owners and you have a nation of benefit scrounging tax avoiders who make Amazon Google and all the wealthy and powerful together look like minnows in comparison. And this nation of regular folks elected every single government who make it all legal. I'm not saying its right or wrong. I'm merely pointing it out for the 'living' among us to observe and shed a blinding light on."


Proposed high speed rail alternative - and a funding model

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High Speed UK is the greener, well-connected alternative to HS2, write Colin Elliff, Andrew Coulson & Stephen Stretton - and it would save taxpayers billions. Financed by taxing property owners in connected cities on their windfall gains, HSUK would create a low fare, high capacity, interconnected railway network which would generate huge long-term profits for the nation.

Our interest in this is the proposed funding model - through enhancements in land value. Unfortunately, although it is not clear exactly what is suggested, it seems to be some system for capture of windfall gains in land value. What a pity the authors of the scheme have not heard of classic land value taxation.

 See full article in The Ecologist.


A dialogue of the deaf

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In response to an article on housing policy in the Observer, which needless to say did not mention LVT but came up with a list of tinkering measures

ME: There is no solution to the housing problem without land value taxation - that is a prerequisite.
Without LVT, all the measures listed in the article are just useless tinkering. With LVT, most of them would not be necessary

REPLY FROM Lune13: Zzzzzzz

ME: You do not conceal your towering intellect, do you?

Lune13: Not ever. You are a fanatic who believes an extremely minor single taxation change would have a huge impact. It won't. it is also comically out of line with how most new business generates wealth. Clue- it does not involve land.

ME Fanatic? What word describes someone who comments on something they obviously know absolutely nothing about? There is so much material around on the subject that I am not going to waste time explaining here.

Well, Mr Genius, perhaps you would care to explain why the price of it keeps on going up and up when nobody wants it or needs it any more?

Lune13: How much land do the following highly profitable companies use, and could you possibly tax them on it the same as CGT?

Shell; BP; All the banks; Vodafone; Google; Apple; Etc The answer is- you can't The only valuable thing that LVT can be applied to is peoples houses. The biggest vote losing proposition ever formulated.

  • ME: Shell; BP - Nearly all of their revenue consists of resource ie land rents. "Land" in economics means the entire natural world apart from man ie the surface of the earth, radio spectrum, minerals in the ground, fish in the sea, virgin forest.
  • All the banks - Banks own vast amounts of land through their secured mortgages. A mortgage is a device whereby the lender creates money at next to no cost for the purchase of real estate. The borrower is the bank's tenant for the duration of the loan. What is labelled "interest" is in reality "rent".
  • Vodafone - Redio spectrum is classified as "land" in economics
  • Google; Apple - Google and Apple cannot operate in locations where land values are low - although they do their best. They need well-serviced sites where labour with the right skills is available. In this case a lot of their revenue flow is from intellectual property rights ie like land, they are a monopoly granted by government, analogous to land titles. The first thing their highly-paid staff do is to purchase valuable real estate.
  • The only valuable thing that LVT can be applied to is peoples houses - In valuable central business districts like London and New York, more than 80% of the rent paid represents land value. The dukes who own most of central London are not living in penury by having to rely on the land value of their property.

Lune13: 80% of the land value of the UK is in residential property. You do know that, right? So, tell me again, how is LVT going to replace any other taxes.

ME: What is your source for this claim? Please show your calculations based on LAND RENTAL VALUE, not selling price, and allow for the fact that some land value is already collected through the UBR and Council Tax.

You have forgotten to take account of Ricardo's Law of Rent, from which it follows that all existing taxes are at the expense of land rental value ie a cut in tax of £1 billion will lead to an aggregate increase in land value of about the same amount. If you can disprove Ricardo then you will get a Nobel Prize in Economics. I will make the journey to Stockholm to congratulate you.


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