Guest Blog by Fred Harrison, Land Research Trust.
Austerity has caused deep anguish for people across Europe. They did not cause the depression that followed the financial crisis of 2008, but they are paying the price. Scotland’s government has announced its determination to cushion the austerity effect by spending more money on low-income people. But where is the money to come from?
Governments from Ireland to Greece think that, by selectively raising some taxes, they can increase welfare spending. In reality, that strategy compounds the trauma. Tax increases, whether on high-end properties or top incomes, inflict yet more costs on everyone. Those governments claim to be democratic. And yet, when it comes to taxation, they ignore the principles of transparency and accountability. They refuse to disclose the scale of the damage they inflict on people at large.
That damage can be audited. Taxes on wages, and on the profits of enterprises, destroy jobs and reduce national income. Governments try to disguise these effects by spreading the burden widely, hoping that people do not notice. But people are not stupid, which is why distortions have measurable effects on the economy.
In the US, for example, Prof. Martin Feldstein at Harvard estimated what would happen if marginal taxes were raised by 10%. Government would receive extra revenue of $21 billion, but the loss to society as a whole would amount to $43 billion. A bad trade-off! (1)
But there is an anti-austerity strategy that can fund itself. That is the outcome from switching to raising the same amount of revenue with a different composition of revenue-raisers. By raising the revenue from pure economic rent, which is the value of the services provided by nature and by society.
The net gain to national income stem from the “better than neutral” effect, in the phrase of Nicolaus Tideman, an American professor of economics. By reducing revenue from taxes on wages and/or profits, the damage done by these taxes is reduced. And by replacing that revenue with income from rent, no distortions are imposed on the economy.
Tideman and his colleagues calculated this effect for the US. They wanted to know what would happen if government raised $1 from land taxes instead of the same dollar from existing taxes on wages and business profits. The extra gains from that switch ranged from about $1.25 (substituting land taxes for Social Security taxes) to about $2.25 (substituting land taxes for property taxes levied on the value of buildings). (2)
So it turns out that we can have our cake and eat it! We can run a revenue-neutral budget while expanding the aggregate income available to be shared between the public and private sectors. In Scotland, that would result in more jobs while providing government with extra resources to help the vulnerable sectors of society.
How to construct such a strategy will be explored at a conference in Glasgow next Wednesday, which is open to the public. Evidence from two professors of economics – one from Strathclyde, the other from California – will reveal the enormous gains that the people of Scotland would enjoy if Holyrood embarked on a real anti-austerity programme. In fact, it’s the only anti-austerity plan in town.
(1) Martin Feldstein (1995), “The effects of Marginal tax Rates on Taxable Income: a panel study of the 1986 Tax Reform Act,” Journal of Political Economy 103 (3).
(2) Nicolaus Tideman et al (2002), “The Avoidable Excess Burden of Broad-Based U.S. Taxes,” Public Finance Review 30 (5).
If the banking crash of 2008 caused our problems does anyone know what %GDP the annual bale out was?Poll;y Curtis(Gaurdian) estimate about£6billion/year which is about0.75% of a GDP of £800billion.So this amount should have been absorbed no problem.
Fascinating Mr Harrison thanks
yes, Fred has done a great job here and all of us who have been banging for years about the need to replace suppressive/depressive taxes on labour and buildings with the collection of publically-created land rental values ( see also Roger Sandilands article on the SLRG website) to stimulate economic activity and support social justice, owe him a debt of gratitude.
If I’ve understood the author correctly, he argues that increasing taxes doesn’t help the poor. He specifically mentions taxes on high-end properties and top incomes.
For an alternative view I would recommend that people watch Prof. Robert Reich’s documentary “Inequality for All”, in which he demonstrates that economic growth in the US was highest when the upper tax levels were as high as 91% and when large amounts of tax money was fed back into society (Roosevelt’s ‘New Deal’ the prime example). He exposes the myth that the people currently being paid the obscenely high salaries are the “jobs and wealth creators” (companies like Amazon have destroyed far more jobs than they have created) and argues convincingly that it is the hollowing out of the middle classes (from which most of the entrepreneurs come) and the exporting of jobs to cheap labour countries elsewhere that is the main cause of America’s current woes. Under our benefit-the-rich tax regime and the ability of those with money to use it to generate more without actually creating anything of benefit to the wider society (and then to hide it in offshore accounts or with HSBC without paying tax) the UK economy is also being hollowed out and the majority suffer under stagnant wages and inadequately funded social services. Germany, by contrast, prospers because it has always ploughed large amounts of money back into R&D and social welfare. It should not be forgotten that the UK national debt is around $2.5-2.6 trillion and is not far off 100% of GDP, similar to France.
America’s is over $18 trillion, with annual interest of $525 billion ($16,668 per second). Despite this, President Obama has just asked for a new record high of $534 billion for this year’s Pentagon budget – with a ‘top-up’ of $51 billion for ‘war funds’. Japan’s national debt as a percentage of GDP is much higher than that of Greece at a staggering 198%-226% of GDP (depending on the source). Why is Greece struggling? Only because it can’t print its way out of debt like the US, UK and Japan with their central banks.
What kind of a world is it which can force Greece and other countries into permanent debt and widespread poverty while countries like the US and UK (£45.6 billion on ‘defence’) throw their weight around in the world (including supporting terrorism) and pose as models of freedom and democracy?
I think you’ll find that Fred and other members of the SLRG are not friends of the fiat currency regime, the service it provides to predatory land-monopoly capitalism, its tax avoidance evasion scams and its bankster associates
The drive is to secure a source of public revenue that cannot be avoided, does not suppress labour and enterprise and is socially just. The answer proposed is to collect societally generated land rental values to replace suppressive/ depressive taxes on income from labour/enterprise and man made infrastructure( houses, factories etc).
It is the rich who are best placed to hire tax avoidance consultants, to transfer money out of the country and indeed to become nondoms. It is also the rich who own the sites with the highest land rental values or vast areas of land ( eg Scottish Highlands) with low rental values. Land however cannot be hidden or transferred out of the country and unlike taxes, the collection of land rental values cannot lead to less of the item or service being created or delivered.
So, Ron Greer, under your slrg policies, what taxes would high-earners pay on their incomes from sources other than land then? None?
None–the same as everyone else. Why should we collect income tax in the first place. How much of the $70 million movie franchise J.K.Rowling eventually obtained for those books she wrote whilst on JSA in a bedsit, do you think we should take from her? Would 49.9% be too little, 50.1 % too much and 50% just right—and why?
J K Rowling relies on privileged property rights over the ‘creative commons’ – ie Copyright – in order to maintain her income.
I have no difficulty with that in principle. But I think that she and everyone else currently earning gazillions from intellectual property (IP) should pay – through the clearing system – an IP levy of a %age of gross sales in the country where the sales are made.
I would also apply a levy on the use of non-renewable resources (which some classify as ‘land’) ; and another – on gross corporate revenues – on the privilege of limited liability. Then there’s credit……
The idea of a ‘single tax’ on a single factor of production would inevitably lead to distortions in the same way that concentrating taxation directly and indirectly on Labour leads to distortions.
In summary, taxation of unearned income from privileged property rights is unequivocably a good thing. But there are plenty more sources of economic rent than land.
I agree debts and FIRE economy attacks via austerity are part of the problem, and I agree with the MMT crowd on that. But from my viewpoint Harrison is not arguing against tax exactly, but rather against the faulty ideology of progressive taxation. But surely we need taxes, and we need to take them from those able to pay? Every tax has administrative costs, every tax has avoidance risks- now more than ever in our global economy. The other cost of tax is the ‘deadweight cost’, the economic activity that would have occurred would the tax have not been levied. Each tax carries it’s own cost, dependent upon conditions in the economy and at what level it is levied.
There is a better fairer way to tax (or better defined as a levy), by distinguishing between passive incomes and productive ones. Taxes upon economic rents such as land and natural resources differ from taxes upon labour (income tax) or consumption (Vat) in that they carry a negative deadweight cost, in other words they encourage economic activity to occur that wouldn’t occur were they not levied. A land tax is better than a property tax because it does not discourage capital improvements, but taxes the communally created value. To take a famous example think what happens to your property value should a station be built, it will rocket up 20% overnight. Your resale value has been increased through no effort on your part , via passively earned capital gains, but what if you are not a homeowner and a renter? Your rents are likely to increase over time by that 20%! This is a two tier system that land taxes address directly by making sure the communal value as expressed in land values. A tax on ‘incomes’ cannot touch this passively acquired wealth, what is more how much of an income is earned or unearned? How much is ‘rent’?
But, even accepting these ‘taxes’ as theoretically best how much could be taken by such methods? This is a debatable point, but it is already higher than many suspect. Further there is the slightly deceptive effect of current taxes upon rents to consider. If as a renter you are taxed on your income and on your consumption, that means you have less at the end of the month ie less surplus. Landlords can only take from that surplus, so you pay lower rent as a result! So on some level taxes are already taking from economic rent, so where is the problem? Because these taxes carry deadweight losses, further they do not take the rents directly or fully enough (this is the ATCOR principle as identified by Gaffney). By focusing in on economic rents we can take far more of these passive detrimental incomes, creating more economic activity and crucially removing speculators from the land market, a chief cause of the boom bust cycle as Harrison clearly identified (predicting the 2008 crash in 1997, the 89 crash in 83), bearing in mind about half of the worlds billionaires are landowners, it is not unreasonable to suggest land and natural resources rents would amount to about 1/3 of GDP .
But would other inequalities occur despite this focus? If a capital creator becomes exorbitantly rich but cannot put this wealth into passive parasitic rents is still a problem? And could progressive taxes play a role here? I would suspect to a degree yes, because no tax (or levy) is perfect. But the shift in focus is essential.
I note that Professor Gaffney’s paper is being “presented by Fred Harrison”. Does that mean that only one of the economics professors will actually be there?
so what if he isn’t, he wrote the paper?
I’m all in favour of removing the burden of taxation from money actually circulating in the economy.
Far better to have some sort of transaction tax on high-level financial transactions — but I’m unclear where the burden would fall when “raising the revenue from pure economic rent, which is the value of the services provided by nature and by society” – I guess all will be explained at the conference!
I also like the idea of levying a tax on the use of raw natural resources at the point where they come into the human economic stream. It would encourage the virtuous cycle of “reduce, re-use, recycle”.
Far better to have a transaction tax? Hmm the problem goes far deeper than a Tobin tax can hope to touch but Michael Hudson argues for both.
‘Also to ward off repetition of the Bubble Economy, the Treasury could impose the “Tobin tax” of 1% on purchases and options for stocks, bonds and foreign currency. Critics of this tax point out that it can be evaded by speculators trading offshore in the rights to securities held in U.S. accounts. But the government could simply refuse to provide deposit insurance and other support to institutions trading offshore, or simply could announce that trades in such “deposit receipts” for shares would not have legal standing. As for trades in derivatives, depository institutions – including conglomerates owning such banks – can simply be banned as inherently unsafe. If foreigners wish to speculate on financial horse races, let them.
Financial policy ultimately rests on tax policy. It is the ability to levy taxes, after all, that gives value to Treasury money (just as it is the inability to collect on debts that has depreciated the value of commercial bank deposits). It is easy enough for fiscal policy to prevent a new real estate bubble. Simply shift the tax system back to where it originally was, on the land’s site-rental value. The “free lunch” (what John Stuart Mill called the “unearned increment” of rising land prices, a gain that landlords made “in their sleep”) would serve as the tax base instead of burdening labor and industry with income taxes and sales taxes. This would achieve the kind of free market that Adam Smith, John Stuart Mill and Alfred Marshall described, and which the Progressive Era aimed to achieve with America’s first income tax in 1913. It would be a market free of the free lunch that Chicago Boys insist does not exist. But the recent Bubble Economy and today’s Bailout Sequel have been all about getting a free lunch.’
have appreciated your thoughts and input and I ‘m especially so of your eventual mention of ‘land’s site rental value’. This is the only value land has, as land had no production costs, it was not man-made and neither God or the Big Bang issued any invoices for it. Land therefor has no capital value and no tax can be levied upon it. The site value, the Land Rental Value, is 100% societally generated and its 100% return to the society that generated is not a tax, and it’s a return that is far more unavoidable than any tax on labour, products and services.
Tax, is a 3 letter word for bad. There is no such thing as a tax that encouraged people to make, distribute and sell. The opposite is the normal result. A tax on sales or transactions is just as daft as any other; the sale is either not made or concealed, the former depressing manufacture and latter depriving the Treasury of revenue. Taxing buildings ( rates, council tax) and improvements/upgrades is especially daft as well, in a country with one of the poorest quality of housing relative to climate anywhere in Europe, with all the implications this has on winter mortality/accident rates and consequently for the NHS budget, Not taxing buildings/upgrades would lead to better buildings and employ a whole range of artisan and professionals in the process.
In the end it boils down to this: we do not need tax, we need public revenue. We can get that revenue from an unavoidable, permanent source, that cannot, unlike taxes, lead to a reduction in that source. We can get it in a way that actually encourages labour and enterprise. The optimal scenario is a 100% collection of Land Rental Value( no land tax involved) and a 0% figure for income tax, UBR, corporation tax and council tax. How we get to that scenario is the interesting question.
Ron, I note you’re careful to say “a 0% figure for income tax, UBR, corporation tax and council tax.” Does this imply that other taxes such as VAT, NICs, fuel duty etc. would be remaining in force?
These are the baseline non- negotiable ones that we have half a hope in hell of doing something about under the improved devolution proposals. I’d like to see the end of VAT too, as it’s basically just a sales tax, but as long as we are in the EU—-. Still making up my mind on NICs, both in principle ( after all it’s a form of tax) and in nature. Not too fazed about duties as they may have their social and environmental good points.
Land value and resource value taxes are progressive. Much of the excess wealth of the 1% and 10% is due to their speculative participation in the FIRE sector or the appropriation of resource rents. Serious application of the tax reform proposed by Mr. Harrison would do a lot to level the playing field. I can’t get into the technicalities here but if LVT type taxes were the main or only tax, it would also provide much more bargaining power to labour. Production would shift to methods that leveraged the skill and knowledge of labour and conserved materials rather than methods that replace labour and waste material. Less so-called capital would go to simply holding onto “hogging” land and resources or moneylending and more to investment in productive endeavours.
Agreed, keep up the good work and best of luck on Wednesday.
Thanks Mark. We are currently bathing in the warm afterglow of a successful meeting. More to follow.
Sorry, idiot question here – do land value taxes replace corporation taxes as well as income taxes and NI? i.e. if you’re a service company which in this day and age can work remotely, can you buy an office somewhere inexpensive and pay relatively little tax overall despite perhaps having incredible revenues? Of course, I recognise that this promotes companies expanding out of city centres, which is great – but say Person A is consultant who spends 70%+ of his/her time working from clients’ offices and the rest working from home, would they only pay the land value tax on their home and keep all of their income?
V. interesting ideas here, I am enjoying working my way through the blog posts here. Andy will gladly get my vote in 2016.
income will not suffer from a ‘fine’ from the state in the form of tax at an arbitrary rate. If you sit in a bedsit on JSA and write a novel which leads to a $ 70 million movie franchise, you get to keep it all. I have mixed feelings about NI, especially in its current manifestation. I would imagine that a consultant doing as you outline will be living on a very high LVR site. I suggest you keep an eye on the Scottish Land Revenue Group site for further updates following the recent conference.
Question.When a business borrows against any land/property it has and this devalues by half? after LVT and the mortgage co either withdraws overdraft and or mortgage facilities,many business will fail,how will a government cope with the rise in unemployment and lack of revenue?This happened to selfbuild house builders about 4 years ago when houseprices dropped a lot and mortgage firms revalued the home build at 50% to 75% of original valuation after work had started.I also know someone who had their mortgage withdrawn altogether after a proposed wind farm close to his home.
Well it cannot borrow on the basis of land capital value, as land has no capital value. Such borrowing is the phantasm that resulted from speculating on a fixed supply entity with a societally created LVR and is a phantasm that was the basis of the financial disaster of 2008. On the other hand, houses and buildings have a capital value and this, plus any upgrades leading to increased capital value, will not be taxed. So the collateral will shift to what people do and make.
was it the house prices that dropped, or the ‘nominal’ value of the land underneath them? What happened to the atomic structure of the bricks and mortar to cause a price drop?
Its a straight question and I don’t understand your answere.Am I to assume I am correct in thinking that a business in this position(and there will be many) is finished then,yes or no?
TF, as Ron lives in a different universe where land has no capital value and people don’t borrow against it, he doesn’t understand your question so I’ll answer it for you: the answer is “yes”.
More specifically, if you are borrowed from your bank up to a highish percentage of the value of your farm and LVR is introduced and has the effect of lowering its value (Duncan Pickard talked on the other thread of his farm being decreased in value by £3m which suggests it’s either a very big farm or it’s average but the falls in value are going to be eye-watering), then you can imagine banks taking fright and stopping overdrafts (or worse) with consequent negative effects on business.
There are proponents of LVR who do live on this planet and understand that we Earthlings are not deceived by implausible denials. Some of them will say that the transition to LVR will be designed to mitigate these effects whilst others will no doubt claim it’s just tough that there has to be some collateral damage along the path to Nirvana.
Ah from whence does land get this ‘capital value’? Please outline the production and delivery costs as incurred by God or the Big Bang. Have you procured an invoice from an ancient Sumerian text?
Eight years ago, good land was worth £2,000 per acre, today the same land is worth £8,000 per acre.
If a staged introduction of LRV came about, land may drop to £4,000/ac.
If that happened, most farmers would be fine as their borrowing will not exceed £1,000/ac as the 50% figure of loan to value is imposed by the bank.
If on the other they have gone crazy since 2007 buying land, range rovers, lexions etc and donating huge sums in rent for extra land to landlords, they only have themselves to blame if insolvency comes knocking.
I wonder what capital value land hand during the era of Pangaea and Gondwanaland?
Thanks Neil King,it would decimate many small operations borrowed for a better future hoping thinks go up/forward in their job to pay loans etc then.
Hector you are just plain wrong.I gave the example of selfbuilders having their mortgage stopped or reduced so they cant finish the intended build,they were stuffed 4years ago and the same would happen now.Try floating it past your bank ,for a rural business to loose half the value of say a diversification project or a builder doing a steading redevelopement they don’t “only have themselves to blame” they will just loose the mortgage,I know this,I have seen it happen ,borrowing now is very tough compared to 10years ago.You could have worked 80hours/week your whole life and not “bought rangerovers …etc” and this would ruin you.
If this is a price worth paying then please step up and just say it clearly but it will finish a lot of hard working frugal little local SMEnterprises.Most people may agree with LVT ,it looks good on paper I agree but it will destroy the above mentioned people,and believe me banks now will stop a mortgage overnight if they get nervous.
Mr Fraser, property is going to crash anyway, just ask any economist. This govt sponsored ponzi scheme fuelled by printed money cannot go on.
The peasants in london are getting restless as they are priced out of their homes by runaway landlordism , with some councils exacerbating the problem by demolishing council estates to sell to developers.
LRV will need to be phased in to minimise disruption, but will be in everyones long term interest, unless you are a landlord or ponzi scheme banker.
The mass mortgage system was devised nearly 100yyrs ago to guard against communism, but is now having the opposite effect, with mortgages far more available for buy to let than those needing a home.
You are correct. The crash comes every 18 years or so and the next one is due in the mid 2020s. It is driven by speculation on the false premise of land having capital value in a financial system that creates and distributes money on the basis of ” eye of newt and leg of toad, into a bank some money load” This is the kind of money that could be used to make the Emperor a whole new wardrobe of clothing.
Last crash was 1994, the next one is overdue.
I thought we had a crash in 2008
There was no crash in 08 because the banks were bailed out.
Property should have halved in 2008, but it only dropped 10% if that.
but a crash would have resulted if the bail out had not happened.
I’d appreciate some advice regarding a friend who is an alcoholic. He can see that, on paper, not being an alcoholic offers a great many advantages. He can see that the advice given to him from non-alcoholics is sound, but during bouts of the DTs he merely regards them as interfering teetotallers, with no appreciation of his condition. Deep down, though, he’d rather not be an alcoholic. Sadly however he took a loan from an apparent friend, who is a licensed victualler and purveyor of strong liquor, to cover his purchase of a small business with inhouse accommodation. The terms of the loan state that he must continue to buy alcoholic beverages from this apparent friend or else the loan will be called in. Any ideas for a resolution?
Maybe everybody proposing this must have no mortgage on a business,maybe they could state this before arguing.Its like saying I have plenty of food so we propose stopping foodbanks bescause it does not affect me.
But that is the reason you have a mortgage, property is too dear.
In the 1980,s mrs thatcher ruined millions of businesses with her high interest rates, and she didnt blink an eye.
She also accidentally(not) made anyone with cash in the bank or property fabulously wealthy.
LRV will have winners and losers too.
At least you accept there are going to be losers hector instead of this implausible “everyone’s a winner” claim you hear in certain quarters.
Let’s be honest. LVR probably is a win-win if you don’t own property but is a threat if you do. As property owners outnumber the rest by roughly two to one, then – on the basis of what I’ve seen so far – it’s electoral suicide and therefore going nowhere (beyond a possible replacement for rates/Council Tax).
Everyone will be a winner eventually, except landlords ,land speculators and banks.
The tax free real economy will boom, for the benefit of all.
Hector have you had to take out a mortgage to firther your business/secure the future of your family/employees?Most business would have to at some point unless they were given A.The business/premises or B.The tenancy(if farming perhaps).If you are given/have a farm tenancy I suspect a bank is not bothered on land values so LVT will not bother those in this position.Those supporting LVT who will not loose a penny could maybe compensate fully those who will through no fault of their own other than wanting to progress their business/survive.If you were going to be fair about this then you would support full compensation.If there is no compensation the SME business the backbone of the UK economy is finished.(Of course the UK is already insolvent)
You’re absolutely correct to question the banking and finance implications of a switch to LVT. It is likely to be potentially disasterous. Ron may not think land has a capital value but the rest of the world does and as a consequence banks do not differentiate between land value and buildings / equipment value when using it as security. Seeing the total value of property drop by x% because the land element is taxed away will breach banking covenants left right and centre. And theres no point people saying the banks and the speculators deserve it becuase the mayhem will encircle everyone. We all need banks.
I remain sceptical of the ability to lump all the taxation needs of a nation onto one asset class but to prove that I’m wrong perhaps someone could share the modelling that has been done to illustrate what the indicative tax woudl need to be on some example land types. Shall we say some 1. open hill; 2. grade 4 pasture land; 3. grade 2 cropping land; 4. sub-urban house plot of say 0.1 acre; 5. Townhouse plot in central Edinburgh. We know what national financial spending currently stands at – say £60bn. And can we not go made please and assume we only need to raise a bit becuase all those tax free folks will go out and generate billions of extra revenue. They may but they may not so we need to be prudent and plan to raise our needs. Thankyou in anticipation.
no, I asked the audience at the recent SLRG conference, many of whom were not supporters of LVR, if they thought land had a capital value. Not a single hand was raised. Can you tell us when and how land obtained its capital value, was it during the Carboniferous or Cretaceous era, the Neolithic or Bronze Age? What were the production costs of a south facing aspect with deep loam compared to a north facing aspect with base poor glacial till?
Why don’t you run this past the RICS who have valuation standards for the UK which accord with accepted international practice. To the best of my knowledge there’s no reference in any of those standards which is the free good of land. Valuation practice does not try to unpick which element is worth what.
Lets use an extreme example. the top of a hill. It’s not been altered so can be considered to be in as close to it’s natural state as is possible in the UK. It still has a value of £100-200/acre. No improvements, no buildings, no fixed equipment – just the land.
We can argue about who should own a portion of the value of an acre of land that is attributed to it’s natural state – I say the owner – you say society – but the idea it has no value appears to fly in the face of the evidence.
Who made the top of the hill and what is the profit margin on £100-200 per acre after the production costs were paid?
I should have added that land would only have obtained a value when mankind worked out what it could do with it and from that point on it’s natural productivity and shortage would have either led to fighting over who had it or more latterly the price one might pay to have exclusive occupation of it.
The RICS teaches, and examines, surveyors in Australia and New Zealand; whose professional skills are applied to valuing land for tax purposes.
the fact remains, that humans did not make the land in the first place. Therefor it has no capital value.
yes, that’s the point in time when societally created Land Rental Value came in to being—you’re getting there gradually.
As no one was answering my question about modelling the likely numbers I had a look at Andy’s paper on LVT for Scotland. It reports that the tax yield at 100% of the economic rent is £12bn pa. Somewhat short I think of what we spend!
I also noted the example of the dairy farm which would end up with a bill of £30,000pa. Andy suggests falling prices of land would help as less debt would be required. That may help the next owner when the current one’s gone phut which I’m sure that will be a great comfort.
So looks like income tax etc also needed or am I still missing something?
And no Ron, I’m not getting here. First rates aren’t a tax and now capital value of land is somehow differnet to societally created land rental value.
Fred – point taken. Land value can be assessed – it would appear by residual method. Though I was interested in Andy’s assessment of land values in residential areas. They seemed high appearing to understate build and infrastructure costs – the latter of which these days are often funded by the builder and from our current projects I can confirm they can be very material indeed.
Mr Fraser, i am well aware of the costs of state intervention in my business.
Mrs thatcher quadrupled my interest payments on overdraft which nearly ended the business.
John majors ill advised govt reduced the value of my cattle by 70% in one day in 1996.
Compensation was not paid on either occasion, why should you get any for LRV?
Hector I am totally at one with you on this post especially BSE. This is when my pension fund disappeared so if the goverment have to look after me in my old age its only fair compensation. NFU could have got a much better package with glaring mistakes made by so called Government experts. The scars of that day in 1996 will never go away made worse by the fact that all my cattle got was home produced feed . Cannibalism in any species is a definite NO.
Really going to wind you up now, several large estates across Scotland disposed of their cattle in November/December 1995. Coincidence?
Did those goverments plan these measures years out from implementing them?like you are proposing,I don’t think so,they were reactions to events.Did the values readjust back to what they were?I f I know you are going to decimate most SME business through LVT then right through the UK no one could invest knowing what was coming.Not compensating SME would destroy your own economy.It is one thing to have looses through weather or intrest changes but quite another to deliberately destroy an economy.I realise then you would loose nothing through LVT and neither will anyone else proposing it,something the proposers could mention when trying to persuade people.
The economy will not be destroyed, it will boom.
Thatchers interest rates were carefully planned to destroy capital intensive businesses like farming. She was only interested in the city and property and look where that has got us.
Come with me when I explain to our bank that my values will plumet and help me convince them not to stop the mortgage.You have admitted though that we will just be a casualty and that’s life.Great thing democracy.Chilling to see the language involved.Do you think you are the only one had business misfortune in the past?Everbody has but I didn’t realise some would wish business devastation on others just because they had it tough in the past.
I dont wish devastation on anybody, with a few large exceptions.
The system we have is flawed and needs changing, LRV in my view is the way to go.
In any case, banks always trumpet the line that it is the ability to repay that is important, not the security.
You could a double whammy for farm businesses. A significant new tax which for some producers may exceed the savings in other tax (and my point above suggests those taxes will need to stay in large part anyway) and falling capital values. AMC may tell you where to go.
Switch to AMC on a 25yr fixed repayment if you are concerned.
Falling capital values will drive the estates to bankruptcy, which has to be good news all round.
Falling capital value makes no difference to us as we don’t trade property to crystalise gain. Any impact would come from whether the new LVT exceeded the other taxes we currently pay. Proponents of LVT seem to suggest it would replace all other taxes yet Andy’s paper suggests £12bn pa which means almost all other taxes have to stay even if some lowered a bit. So this looks like value extracted from agriculture which can ill afford it. You seem focussed on big estates but remember the vast majority of productive farmland is owned by owner occupier farmers. I think you’ll be off a few Christmas card lists if you get this through!
I am with AMC ,they would want their money protected fast,somehow,or else. No compensation for borrowed SMEs then and yet this blog is alwayse going on about compensation for land improvements etc.But anyway,my eyes are opened,the ruining of so many SMEs I,m not sure is it hard Right Wing or Hard Left Wing?
On a 25yr mortgage, they cant touch you unless you default.
Which you might if someone’s just taken thousands of extra tax of you. You can’t try to biff the big landowner without biffing the small ones as well unless you only levy on people with posh accents who wear tweed jackets and not boiler suits.
What a good idea.!!!
What a good idea!!!!
What if I get a tweed boiler suit?
Well I suppose it is easier on the eye to see you cycling in a tweed boiler suit as seeing you in your black Lycra .
Ouch! Tweed a bit warm for cycling.
I would like to take up cycling too, but i am too busy working day and night to feed rent to the cuckoo landlord in the nest.
If I may be so bold – if you swapped your time on contributions to this blog for cycling you’d be in Team GB by now!
I knew it !! .
There is even a class system in boiler suits on the estate so that you know the pecking order .
Only those and such as those can wear them .
Back in the real world, on the point about AMC not being able to touch you while your 25 year mortgage is running so long as you don’t default on your repayments, is it possible that, while sold as a 25 year deal, there might be a clause in the small print allowing them to call up the loan at any time if they takes fright due, for example, to the borrower’s ability to pay being prejudiced by the imposition of a new tax (for Ron’s benefit: a new rent) and/or the value of their security being prejudiced for the same reason? I’m not saying this is true of AMC (depends on their small print) but it is true, I believe, of RBS domestic mortgages, for example.