An interesting and correct way to do housing taxation

As Henry George pointed out to us all the art of land value taxation is to tax the unimproved value of said land. Another way to say the same thing is that we're trying to tax the value that society adds to the land, not what the owner has added themselves. Land in the centre of London has a higher value than much land elsewhere just because it is surrounded by London. It seems reasonable enough that some of that value created by London should be taxed to pay for London.

This is of course not how we currently do it. If we, the owner of a house say, improve the house then we can expect to pay more tax upon it. This is a disincentive to increase said value - not what we want to be doing at all. 

Thus this in Portugal is interesting:

People buying a home in Portugal that has unspoilt sea views or faces the sun may be hit by a 20% increase in property tax, under fiercely contested fiscal changes which became law on Monday.

Those with a place overlooking a cemetery or water treatment plant may enjoy a tax reduction of up to 10%.

Someone always does end up next to society's disposal systems so why not? 

Given that one of us does in fact pay this tax we would note that the system is not perfect. For they also increase the tax when you improve the house itself.

But the basic idea has merit. Those who currently, in our native Britain, insist that nothing should ever be built anywhere near them for fear of spoiling the views probably should be taxed on the value of those views. Even if they still won't allow the building at least they're paying for their pleasures under such a system. 

Mark Boyle is rejecting this modern world - Hurrah! for Mark Boyle

We do not think that this is a wise idea nor is it something that we ourselves shall be doing (given that it's panto season keep those cries of "Shame! Shame!" coming from the back) but we do admire on part of this rejection of the modern world from Mark Boyle. Which is that he's being thoroughly liberal about it all.

We don't even think that he's correct in his analysis:

From Wednesday, I’m rejecting the world of complex technology entirely. That means no laptop, no internet, no phone, no washing machine, no tapped water, no gas, no fridge, no television or electronic music; no anything requiring the copper-mining, oil-rigging, plastics-manufacturing essential to the production of a single toaster or solar photovoltaic system.

Having already rejected these industrial-scale, complex technologies, I intend to move fully towards what is pejoratively called primitive technology. Insofar as engaging with civilisation allows, I’m also trying to resist the modern domination of what Jay Griffiths, in Pip Pip, calls clock time – and failing daily.

Such things destroy our humanity apparently. We tend to think they allow us to exercise it.

He does state that he's going to retain his pencil which allows us a cheap jibe about how that it most definitely not a rejection of technology. But we are still going to give Mr. Boyle our wholehearted support.

For he is, as we say, being admirably liberal about this. At least so far as we know he is not arguing that government must force others to do the same. He's not, again so far as we know, proselytising that all should follow him into that medieval night. He is just stating that this is what he wishes to do and that this is what he is going to do.

Which is of course the liberal ideal. The entire point of the socio-political order, of our even having an economy, is so that the maximum number of people can live their lives as best suits them. And as Mill pointed out that right extends to all, and all lifestyles, right up to the point where  the exercise of it limits the same rights of others.

We just wish that rather more of those who claim to be liberals would follow this example. Stop telling us all that we must do as you say and go off and do as you wish would you? That is, if you would claim to be a liberal could you actually act like one?

Once again more than a little misleading from Shelter

Shelter tells us that all those nasty building companies are just buying land to sit on it. To watch it rise in value without their having to do any actual building of houses. Landbanking that is:

The UK’s 10 biggest house builders are sitting on 14 years’ worth of land, on which almost one million homes could potentially be built, Shelter has claimed.

Research carried out by the housing charity found that the listed firms control 404,000 plots through their current land banks, and a further 558,000 plots in so-called “strategic land banks”. 

Much of this land does not have planning permission yet, but will have been chosen in areas likely to gain it. Strategic land banks are not always owned by the house builders, but held with ‘Option Agreements’ with the landowner, which gives the builder the exclusive right to buy the land when they are ready to do so. 

So, it's not in fact 14 years of land at all.

There is a basic logic problem with he initial allegation of course, which is that a company needs income and income is gained here by actually building a house that someone then buys. There won't be any profits or dividends unless something is actually sold.

The number to look at properly here is that current land bank number. At the (total, not just these large companies) completion rate of perhaps 130,000 houses a year this is some four or five years supply of land with planning permission. And it can, and often does, take 5 years or so to be able to move land without planning permission into being land with planning permission. 

Yes, of curse, there are those 8 week targets for the council to decide and so on but that's absolutely not the actual time elapsed between asking whether some houses can be built on previously unbuilt land and being allowed to do so.

The stock of land therefore seems to be, around and about, sufficient to cover the time it takes to gain more land upon which to build. Just as if it takes a factory a week to gain more of a supply then it will tend to hold about a week's supply of that thing.

However, let us assume that landbanking is actually a thing. People really are holding land with planning permission off the market in order to speculate upon price rises. If this is so then what should we be doing about it?

Issuing more planning permissions of course. The increased supply will mean the speculation doesn't work and thus people will build not speculate. That is, the solution to our housing woes is, as it always is, simply to issue more planning permissions.  

 

We thoroughly approve of this action by The Observer

A week ago we were somewhat dismissive of Carole Cadwalladr's attempts to be allowed to censor Google search results. Today we must praise her actions upon the same subject:

And still, anyone searching for information about the Holocaust – if it was real, if it happened, if it was a hoax, if it was fake – was being served up neo-Nazi propaganda as the top result.

Until Friday. When I gamed Google’s algorithm.

.....

How did I achieve this impossible feat? Not through writing articles. Or shaming the company into action. I did it with the only language that Google understands: money. Google has shown that it will not respond to outrage or public sentiment or any sense of morality or ethics. It does not accept that leading people with a genuine inquiry about whether the Holocaust happened to a neo-Nazi website is grossly irresponsible or that it demeans the memory of the six million Jews who died. But it was prepared to take my cold, hard cash.

This is excellent. Of course, Ms. Cadwalladr rather spoils it all by going on to demand that something must be done. Missing the point that she has already achieved what must be done.

She desires that the world be a slightly different, and by her lights slightly better, place. We may agree or not with her desired end state, as we may or may not agree with the desires of anyone else out there. But we entirely agree with he method employed here. You want the world to change then off you go, using your own resources, and change it. Rather than demanding that the resources of everyone else are consumed through the medium of the State, or regulation, or the law, to alter it to your desired shape. 

And the very best of British to you and all who sail in your particular little ship.

Your resources are indeed yours to deploy as you wish--as ours are ours and as theirs are theirs. And think how much better The Observer would be as a newspaper if all their solutions accorded to this principle? That this problem or other should be solved by me doing something rather than by my demanding that them over there have to pay for it? 

We're amazed at how this works really

We were entirely unaware that there was some impending collapse in the education budget of the country. So imagine our surprise when we hear that budgets are to be cut by 8%. We're really sure we would have heard about it if it were true.

But we're told it is true in the pages of The Guardian no less

But what does “winning” mean when school budgets are facing real-term cuts of £3bn by 2020? This is what the National Audit Office, rather annoyingly for Greening, announced on the same day she unveiled the new formula. All schools will need to reduce funding per pupil by 8% over the next four years as a result of teacher pay rises, pension contributions and national insurance.

Err, wait a minute here, paying teachers, and pensions and national insurance are part of total compensation, is part of the education budget. And thus part of the funding per pupil of course. Thus there is no real terms cut here. Can't we ask the Guardian to stop spreading fake news like this? 

And of course there's the other point here, the relevance of this to such things as minimum wage rises. A reallocation of current budgets from non-wage activities to wages does indeed mean, in the absence of pay rises or firing people, that there is less money available for those non-wage activities. Thus is we raise the wages of sandwich makers, just as with teachers, we either get fewer sandwich makers, more expensive sandwiches, or less money to spend on hte ingredients of the sandwich.

Puzzling that this isn't pointed out in The Guardian's discussions of the minimum wage really. But then we guess that's the fake news business.

The truly worrying thing about this fake news eruption

The comment page of The Guardian is a useful place to watch the latest alarum and mass delusion to which we humans are distressingly subject take form. The one so taking form at present being the outcries over the false news which so obviously won the election for Trump (or Brexit, The Italian referendum, Beppe to be, Le Pen and, well, select from whatever will annoy those who write the Guardian's comment pages).

The truly astonishing thing about it all being the alarming lack of self knowledge on display. Because of course fake news is nothing new at all, indeed it's been a standard tactic of various on the left for some time now.

Take, for example, something from climate change - no, not the subject itself, but a particular detail. James Hansen has been widely quoted as stating that a carbon tax should be up at the $1,000 a tonne level. This is not so - Hansen showed that using certain assumptions then a carbon tax should perhaps be as high as that level. The truth is might, to say should is an untruth.

We might think that is minor but here's how today's page is panning out:

We’ve been calling this “post-truth politics” but I now worry that the phrase is far too gentle, suggesting society has simply reached some new phase in its development. It lets off the guilty too lightly. What Trump is doing is not “engaging in post-truth politics”. He’s lying.

Worse still, Trump and those like him not only lie: they imply that the truth doesn’t matter, showing a blithe indifference to whether what they say is grounded in reality or evidence.

We could replace "Trump" there in Jonathan Friedland's piece with "climate change" again and note that what The G continually tells us, that this is an imminent catastrophe and we must change our very civilisation immediately to deal with it is an untruth. The actual science, the IPCC and so on, says that future actions might indeed lead to a serious problem but a modest continuation of what we're already doing, that work on solar power and so on, is likely to leave us with a modest remaining problem, if that.

On those same pages Matt Laszlo tells us that:

That doesn’t start with stoking more distrust in the nation’s media. It starts with praising the enduring glory of the nation’s First Amendment and reinstalling trust in the nation’s press corps, many of whom did a fantastic job of covering the election.

That's the American media that was so far in the tank for Hillary that there were open calls to simply shout that Trump's a liar and be done with it? 

Mark Thompson:

What about publishers? Well, we’re not perfect either. Professional news organisations like the New York Times, where I’m the president and chief executive officer, screw up from time to time and we have to learn from our mistakes.

That's the New York Times which has been repeatedly asserting that higher minimum wages do not affect employment? It is indeed possible to have the most lovely arguments about how much a higher minimum affects whom but the assertion that there is no unemployment effect is simply an untruth. 

And closer to home here think of the UK Uncut saga. The story about Vodafone and the £6 billion tax bill. There never was such a bill, there was no deal to cut it and yet that isn't what our media has been telling us, is it? Richard Brooks, the originator of the story in Private Eye, has actually explained to us how the figure was reached. If tax law was different then more money would have been owed. We're sure that's true but there's a certain promulgation of not quite an entire and whole truth to move from that to an insistence that £6 billion was owed, no? Or the campaign about Boot's tax avoidance, something they achieved while obeying every jot and tittle of the law about what people should not do to avoid tax.

At least one of the perpetrators of that little, umm, piece of truthiness, has openly agreed that it was all about creating the narrative, exact details were not the point.

Or even the continued wails that inequality is rising to unprecedented levels. Global inequality is falling and within country inequality is nothing at all like the levels of the historical past - we've welfare systems explicitly designed to make sure that it isn't. The spread of food banks - is this evidence, as claimed, of massive need? Or evidence of an always extant need now finally being met?

We're going on a length here because this is an important issue. Yes, indeed, there is fake news out there. But what is going to be uncomfortable for a lot of those complaining about it is that a close examination of "truth" is going to leave an awful lot of supposedly established facts about our modern world looking terribly exposed.

We believe in free speech, free speech unalloyed by any restrictions other than the libel laws and incitements to violence. However, we would have a great deal of fun if some system of determining fake from true news were indeed brought in at a statutory or other level. For we'd have a system to force corrections upon just about every economic suggestion emanating from anywhere to the left of us.

The ASI's Best of 2016

Sam Bowman, Executive Director

Song: A tie between Floridada by Animal Collective and Monopoly by EasyFun and Noonie Bao.

Album: Dangerous Woman by Ariana Grande, unless Emotion: Side B by Carly Rae Jepsen counts as an album (but overall it was a very poor year for music).

Musician: Grimes (her Art Angels album came out in 2015 but I really got into her this year).

Movie: 10 Cloverfield Lane. Creepy!

TV Show: Stranger Things (it’s on Netflix).

Book: Inventing the Individual: The Origins of Western Liberalism by Larry Siedentop. I thought this was an original, well-sourced and highly informative history of the Church that made its case very persuasively.

Restaurant: Silk Road, Xinjiangese food in the heart of Camberwell.

Article I wrote: I'm a neoliberal. Maybe you are too.

Article others wrote: Scott Alexander’s review/digest of Albion’s Seed. I don’t think I’ve ever learned as much fun or interesting information as in this post.

Political moment: The stock market surging after Donald Trump’s election victory, and Trump’s nomination of Wall Street megabankers to his cabinet. Neoliberalism always wins!

Person: Peter Thiel, for leading the fight against revenge porn online.

 

Ben Southwood, Head of Research

Song: Super Natural - Danny L Harle and Carly Rae Jepson

Album: Tuluum Shimmering - Flower Dance Song (my full best of year list here

Movie: Fences (Starring and Directed by Denzel Washington)

Book: A Canticle for Leibowitz by Walter Miller

Restaurant: Temper or Kiln, both in Soho 

Article I wrote: Sajid Javid will make British cities great again

Article other wrote: Neoliberalism, Social justice and Barbie’s New Hair by Rory Ellwood

Political moment: Madsen's correct prediction of the presidential election—yet another in a seemingly unending streak

Twitter Account: @densifyingHOU

 

Flora Laven-Morris, Head of Communications

Song: Nothing new, it’s all been underwhelming. Barry and Freda - Victoria Wood. 

Musician: Bruce Springsteen, for playing a 4 hour show and managing not to die this year.

Book: The Shepard’s Life, James Rebanks – like acupuncture for your brain, slow starter but watch out for graphic description of lambing season toward the end. 

Restaurant: I spent my lunch money on the theatre – go see Our Ladies of Perpetual Succour if it ever reruns, (and watch out for Dawn Sievewright) best thing the National’s done in years. 

Article: ‘We’re the only plane in the sky’, on being aboard Air Force 1 during 9/11, it reads more like a book and is about the same length. 

App: Pocket - Kind to aging eyes and very convenient.

Political Moment: It could only be this.

YouTubeYes Rhythmic Gymnastics is a sport.

 

Sam Dumitriu, Head of Projects

Song
: Landslide by Britta Phillips

Album: Luck or Magic by Britta Phillips

Movie: Nocturnal Animals by Tom Ford

Book: His Bloody Project by Graeme Macrae Burnet

Restaurant: Chick 'N' Sours

Article I wrote: London Mayor is Punishing the Wrong Kind of Taxi

Article others wrote:  Crony Beliefs by Kevin Simler

Political Moment: Ken Livingstone hides in a toilet

Person: Alan Auerbach. He's single-mindedly pursued Corporate Tax reform for 20+ years and he seems to have got his way with the House tax cut plan. Someone willing to speak to both the left and the right - and able to find common ground.

 

Amelia Stewart, Gap Year Intern

Song: Place to Be Home (Nick Drake)

Album: 22, A Million (Bon Iver)

Musician: Selena Gomez because, having read her Wikipedia page, I’ve decided she’s a great person

Movie: The new Jason Bourne movie could have been awful but I would have loved it anyway

Book: Written On The Body (Jeanette Winterson) and my favourite poem was No Art (Ben Lerner)

Restaurant: I had some really nice chocolate and banana waffles from Benugo but for some reason I’m drawing a blank on restaurants today

Article: The Absurd Courage of Choosing To Live (Jennifer Michael Hecht)

Political moment: George Galloway retweeting the ASI account (yay!) and how proud my parents were after when I told them…

Person: The Dalai Lama - for his book on happiness and maybe being a CIA agent

TV Show: The Killing on Netflix

 

Oliver Riley, Gap Year Intern

Song: Beautiful by A.G Cook (credits go to Sam and Ben for introducing to PC music)

Album: Joytime by Marshmello

Book: Progress by Johan Norberg, showed me that it’s not all doom and gloom

Film: 21 Cloverfield Lane (so much thrill)

Restaurant: CAU – I had my first expensive steak here and I will never be able to look at a cow in the same way again

Article: Boris Johnson’s poem to the Spectator about President Erdogan

Political moment: Boris Johnson then becoming Foreign Secretary

Person: Chris Froome

On that £50 billion EU bill for Peter Mandelson's pension

Michel Barnier, the Frenchman negotiating for the EU over Brexit, has told us that Britain will be faced with an exit bill of £50 billion upon leaving the European Union:

Britain will be presented with a £50 billion “exit bill” by the European Union as soon as Theresa May triggers Article 50, the chief negotiator for Brussels is warning.

Michel Barnier has told colleagues that the UK must keep paying “tens of billions” annually into the EU budget until 2020.

The bill would include the UK’s share of outstanding pensions liabilities, loan guarantees and spending on UK-based projects.

Some of this is not sensibly to be included - loan guarantees are payable when loans fail for example, not before. It's also a terribly interesting accounting - this is what the EU already costs us, without the actual running costs of it on an annual basis. The accruals of amounts already owed that is, without the further payments that would be made if we stayed in. 

Which puts that £350 million a week claim in an interesting light, doesn't it? 

However, the general concept seems sound enough. When you give up a lease on a flat you do indeed pay the last bit of the electricity bill, the gas and so on. We might think that we can manage, perhaps even decide upon, Peter Mandelson's pension ourselves (and that is very definitely included in this sum) but let's not allow personal taste to intrude upon such matters.

However, when you do leave such a lease you also get paid out on any improvements you have made to the capital value of the property. And over our decades of membership a number of improvements have been made. There's a substantial landed estate for example, various parliament buildings dotted around, agencies in many major European cities, embassies in most major world capitals. All of these are owned by the EU and have been paid for from the various payments into it by the national governments.

Britain has also been one of the very few such national governments consistently making net payments into the system too. We thus have an argument that a substantial portion of that capital estate is ours and needs to be returned to us.

And it will really be very interesting indeed to find out whether the tail end of the running costs, which is what is being demanded, is larger than the capital value of the estate we've already paid for. For if it is then that's a statement that the EU is simply a drain on us as we pay for it. Only if that capital value is larger than the running costs can we say that the system is a net wealth builder - which might be useful in portraying the EU as worthwhile but it would then mean that we would be net recipients of funds upon leaving.

How should we pay for social care?

Council tax bills may rise to fund care for the elderly, Sky News reports, as the hole to pay for it grows. It’s a very difficult problem to solve: if the state could credibly commit to letting people sink or swim based on whether they’d saved for themselves, there would be a strong incentive for people to save for themselves, but since it’s inconceivable that we’d actually let old people go without care there’s a strong element of moral hazard at play.

Council tax rises wouldn’t be the worst way of raising tax, because they hit landowners who are probably older on average, rather than renters. That might seem counterintuitive, because it’s whoever is actually living in a property that actually hands over the money for council tax, but the economic theory and empirical evidence is pretty clear: when council tax bills rise, rents generally fall in proportion to that, so in actual fact it’s the property owner who pays. I explain why here.

Still, since council tax is a tax on the property value rather than the land value it disincentivises investment in properties (building denser or higher quality units, for example), and it’s also a straightforward expropriation of landowners which is less than ideal.

Median income by age: 2007–08 to 2015–16 (2007–08 = 100) (IFS)

Median income by age: 2007–08 to 2015–16 (2007–08 = 100) (IFS)

If the state is going to shoulder a large part of the social care burden it makes sense that other benefits to the elderly should be cut to help pay for it. The triple lock, in particular, forces us to divert funds to people who in many respects are quite well off – over-60s have actually seen their incomes rise since 2007, unlike every other age group, as the graph above shows. And with inflation at just over 1 percent, the triple lock requires at least a 1 percent real terms increase, when all other areas of government spending are being cut. It doesn’t make much sense apart from as a vote-buyer, and it’s expensive.

If it’s cost-effective to means test things like free bus passes and the winter fuel allowance, that might be another way to make sure we’re not wasting money on wealthier pensioners, but all means testing that looks at assets (like the size of your pension pot or the value of your home) is a harmful disincentive to saving, which makes us all poorer.

This goes to the root of the problem with paying for social care. The simple approach would be to make it so that those who can pay do, but because pensioners are living off assets what this really means is that means testing will give people a reason not to save or invest their income for their retirement. One often-mentioned ‘solution’ would see pensioners who own their homes or have other savings required to mortgage or sell them to pay for their care, with those who don’t covered by the state. But this gives people a big reason to consume their income instead of investing it before they retire, which is bad overall (investment drives growth) and pretty unfair on the poor sods who aren’t wise enough to game the system this way.

It might be that reducing barriers to saving would reduce this problem – cutting capital taxes and giving people unlimited ISAs so returns to investment are taxed as little as possible.

But I suspect a social care savings account scheme might also be needed, like Singapore’s health savings account policy. If we required people to save for their old age care now, topping up the contributions of people on low incomes, we could make sure that as people get older they have a pot of savings dedicated to their social care. It’s their money – if they don’t need social care and they have money left over when they die, it goes to their children (tax-free, of course). As with Singapore’s health system, we’d probably need an insurance system as well, to cover the costs of those whose needs are exceptionally high – that, or accept that there will always be a pretty large role for government paying for people in their old age. I’m not sure anyone in government has the appetite for reforms of this scale, but I can’t see any other long-term solution to social care funding that would work.

Talk about getting the wrong end of the stick here

The Times has a piece from Alice Thomson which manages to get matters entirely the wrong way around:

Surrogacy rules treat babies like objects

No, not really, that's the one thing that the surrogacy rules don't do:

The 30-year-old Surrogacy Arrangements Act, and the system of parental orders under the Human Fertilisation and Embryology Act, is a bizarre anomaly. Even Mary Warnock, the author of the 1984 Warnock Report which formed the basis of the legislation, now says the law is wrong.

The legal parents of a child at birth are the surrogate and her spouse rather than the biological parents. The baby is viewed as an object to be kept or given away rather than as the most important consideration.

Again, no, the very problem is that the baby is not treated as an object. For we can make contracts about objects in a manner that we cannot about human beings. The sale of one human from one to another is also called slavery and we're really pretty sure that we don't in fact like that sort of objectification of a human. This is why we don't, do not and probably cannot, have binding contracts upon surrogate parents.

Simply because if we are to do so then we've got to declare that the child is indeed an object which can be subject to such contracts, an object that we can force someone to deliver up.

We are vocally in favour of organ and gamete donation being sullied by filthy lucre. As we are of paid surrogacy contracts. We're deeply, deeply, unsure whether such surrogacy contracts will ever be thought to be truly, in extremis, binding, rather than a looser laying out of general expectations about what is to happen. 

But we are entirely certain here that this particular problem is that the baby is not an object and thus cannot be subject to contractual, err, terms of delivery.