Michael Hudson on Land, Banking and Socialism

[loafer123]

edh said:

Of course IP is another significant area of rent seeking activity... patent trolls being the worst I guess. Limited IP protection is necessary I'm sure.

So if I invent a widget after years of graft which saves thousands of lives what sort of IP protection should I get?

What about a bit of gaming software?

[drainbrain]

loafer123 said:

The flippant answer is because we are animals.

The more important point is my previous question...why stop at your children? And even if you do, surely people will just spend their wealth, rather than give it away through tax on their death?

Basically, I think your principle sounds lovely in theory, but wouldn’t work in real life.

Yes. We are animals. But most animals instinctively ensure their children' well being only until the children are able to attend to it themselves. Perhaps we have something to learn from that.

Yes spend the wealth by all means. On the needs of yourself (and your spouse if you have one as you are 'one flesh'). And in the ideal - reaching to improve what is current- anything beyond needs is spent attending the needs of others.

And I totally agree that this lovely theory wouldn't work in real life. However if an alternative financial mores - a different way of thinking about (to start with) inherited wealth - was engaged then it could become easily workable.

And that, imo, is a 'better', more lasting and ultimately more effective way to address positive change rather than tinkering with taxes.

[loafer123]

One flesh? Seriously?!

You just lost me...

[edh]

loafer123 said:

edh said:

Of course IP is another significant area of rent seeking activity... patent trolls being the worst I guess. Limited IP protection is necessary I'm sure.

So if I invent a widget after years of graft which saves thousands of lives what sort of IP protection should I get?

What about a bit of gaming software?

I have no idea how long is optimum. Not something I know much about I'm afraid. I'm not arguing for the withdrawal of copyright protection.

There does appear to be a lot of daft IP activity, particularly in the tech sector. Seems to be used to attack competitors, not protect their own ideas / products.

IP of AI and automation will be an interesting one. Huge profits to be made.

[JagLover]

W124 said:

Isn't it just a question of degree though? It doesn't have to be all or nothing. A modest tax on assets, a modest LVT, not some swinging leap into class war.

Exactly

It is about restoring a balance that has been steadily eroded.

[anonymous-user]

edh said:

I have no idea how long is optimum. Not something I know much about I'm afraid. I'm not arguing for the withdrawal of copyright protection.

There does appear to be a lot of daft IP activity, particularly in the tech sector. Seems to be used to attack competitors, not protect their own ideas / products.

IP of AI and automation will be an interesting one. Huge profits to be made.

Copyright is distinct from patent. Copyright protects, broadly speaking, original works in assorted media (music, books, films, TV). Patents protect inventions and are used in tech and pharma and so on. There are also things such as trade marks to protect brands, registered design rights to protect designs and processes, and so on. This is not intended as an exhaustive description of all forms of IP. IP rights are an aspect of a developed economy (China needs to have a think about this), but they can of course lead to rent, and they can be used unfairly.

[JagLover]

turbobloke said:

As I'm sure you realise there is some nonsense in it also!

Firstly there's the question of how to disentangle the intrinsic value of land from what we see and semi-automatically associate with it: the transaction values when people buy/sell property on land.

At the point of introduction, a person landed with a LVT bill may have made no contribution to the value of their land (or the property on it) and depending on the point in time, may have owned it for mere weeks or months and therefore not been in ownership when its value increased markedly; the value will then go up or down largely outside their control. They will have already paid SDLT.

If levied locally there are bound to be vested interest-type concerns surrounding planning permission decisions, not least given the first point I raised above.

As a result of all of these points, a significant degree of arbitrariness is likely.

Edited by turbobloke on Monday 23 October 21:32

LVT should replace SDLT as well as a portion of income tax. Transitional schemes could apply such that you can offset SDLT already paid against the LVT until you have fully recouped what you have paid.

[turbobloke]

JagLover said:

W124 said:

Isn't it just a question of degree though? It doesn't have to be all or nothing. A modest tax on assets, a modest LVT, not some swinging leap into class war.

Exactly

It is about restoring a balance that has been steadily eroded.

Agreed in principle, if designed skilfully then implemented thoughtfully and wisely. Then we must consider the flavour of practical politics that would have an appetite for it, whether their politicians routinely demonstrate skill and wise thought, even when measured along the politicians' scale for these qualities.



On that basis, it's a non-starter.

[loafer123]

JagLover said:

turbobloke said:

As I'm sure you realise there is some nonsense in it also!

Firstly there's the question of how to disentangle the intrinsic value of land from what we see and semi-automatically associate with it: the transaction values when people buy/sell property on land.

At the point of introduction, a person landed with a LVT bill may have made no contribution to the value of their land (or the property on it) and depending on the point in time, may have owned it for mere weeks or months and therefore not been in ownership when its value increased markedly; the value will then go up or down largely outside their control. They will have already paid SDLT.

If levied locally there are bound to be vested interest-type concerns surrounding planning permission decisions, not least given the first point I raised above.

As a result of all of these points, a significant degree of arbitrariness is likely.

Edited by turbobloke on Monday 23 October 21:32

LVT should replace SDLT as well as a portion of income tax. Transitional schemes could apply such that you can offset SDLT already paid against the LVT until you have fully recouped what you have paid.

I think the fundamental problem with LVT remains that it is aiming to bring down house prices and tax wealth and yet whole swathes of people who have prudently saved and bought houses in expensive markets, and who have little disposable income, including most of Greater London, will be the most punitively affected leading to substantial negative equity and distress.

That is what makes it unimplementable.

A wealth tax has the same problem - wealth does not equal income, and a wealth tax favours those who spend and fritter and punishes those who save and invest.

[edh]

loafer123 said:

I think the fundamental problem with LVT remains that it is aiming to bring down house prices and tax wealth and yet whole swathes of people who have prudently saved and bought houses in expensive markets, and who have little disposable income, including most of Greater London, will be the most punitively affected leading to substantial negative equity and distress.

That is what makes it unimplementable.

A wealth tax has the same problem - wealth does not equal income, and a wealth tax favours those who spend and fritter and punishes those who save and invest.

I agree it's a big issue. I'm not too worried about notional losses on windfall gains though. Recent buyers who have been sucked into the bubble would be worst affected & would probably need help. An even bigger problem is the survival of the banking system, who would need to massively write down their property loan book

We managed to print money following 2008, it would probably be the answer again in some shape.

[edh]

turbobloke said:

As I'm sure you realise there is some nonsense in it also!

Firstly there's the question of how to disentangle the intrinsic value of land from what we see and semi-automatically associate with it: the transaction values when people buy/sell property on land.

I don't see why this is a problem. We have a whole profession whose job it is to value land and buildings. Every house insurance policy has a rebuilding value. Every year there are tens of thousands of houses sold, giving us masses of data - comparing similar houses in different areas across the UK gives us an indication of land values

turbobloke said:

At the point of introduction, a person landed with a LVT bill may have made no contribution to the value of their land (or the property on it) and depending on the point in time, may have owned it for mere weeks or months and therefore not been in ownership when its value increased markedly; the value will then go up or down largely outside their control. They will have already paid SDLT....

Edited by turbobloke on Monday 23 October 21:32

This is the principle of LVT - you don't have any control over land values and therefore you benefit from their increase & pay additional LVT that year, and when land values fall your LVT falls. I don't see it as a problem

LVT helps bring marginal land into use. Consider low income / de-industrialised areas of the UK. Any business is still hit with rates, which can be a significant element of their costs. Any improvements to premises can result in an increase in their rates. Under LVT they would be likely to have a much lower bill, theoretically zero. This might make the difference between a viable business and not. This employment, and the multiplier effect, helps regeneration, and is much simpler and less liable to gaming than enterprise zones or similar IMO.

[edh]

In broader terms, returning to the mooted crisis in capitalism, I'm sure there's a re-think needed.

When we see stuff like the RBS GRG scandal, the capture of govt by financial interests under new Labour, the failures of Serco/G4S and the rest, the recent asset stripping of schools by a MAT, something needs to change. Government is working to serve the interests of this crony capitalist class, not the people.

Fundamentally we may also need to question the assumptions that growth is good.

I work less than I did 15-20 years ago, and earn less, but have a much better life. I'd thoroughly recommend it. How much is "enough"?

Then there's the challenge of AI and either job losses on a massive scale, or an even more polarised society between the people who own the AI IP and the masses. The Tech companies seem to be touting UBI as a solution, but how do we pay for this if we don't tax the wealth of the 0.1% (or maybe 0.01%) who are sucking it all up. I'd suggest concerted action on tax havens / profit shifting and dodgy accounting is needed as "only the little people pay taxes".

[turbobloke]

I'm equally sure...that reads like a Party political broadcast.

[loafer123]

At the risk of repeating myself, the problem is that income (and therefore the ability to pay tax) and captial are not necessarily correlated so an LVT can't work.

Far from encouraging regeneration, it also discourages people from bringing forward planning applications as they would increase their tax bill without necessarily having the revenues to pay it until much later when and if the consented scheme get's developed.

You appear to believe the hype that developers choose not to build out permissions for nefarious reasons. My experience is that developers love to build and make profits, but need funding, stable construction prices, willing buyers to buy houses, repay their construction loans and move on.

[Johnnytheboy]

loafer123 said:

At the risk of repeating myself, the problem is that income (and therefore the ability to pay tax) and captial are not necessarily correlated so an LVT can't work.

In the short term I can see lots of people like me having to sell their houses, not necessarily being able to, and a mini-housing slump being caused.

It would almost by definition reduce the value of land.

[edh]

loafer123 said:

At the risk of repeating myself, the problem is that income (and therefore the ability to pay tax) and captial are not necessarily correlated so an LVT can't work.

a. It is used in some countries / cities, so can work
b. We used to have domestic rates, a much more progressive form of property tax than current council tax. They worked.
c. There are well understood options for old people in big houses to roll up LVT payments.

loafer123 said:

Far from encouraging regeneration, it also discourages people from bringing forward planning applications as they would increase their tax bill without necessarily having the revenues to pay it until much later when and if the consented scheme get's developed.

Please explain why my example above would not encourage regeneration?

There is a lot of land with permissions already granted. Lots of brownfield sites. Lots stay empty or unused for years. LVT incentivises optimum use.

As for new builds LVT might well increase the tax bill but would also lower land costs. Might reduce costs incurred before sales revenue arrives.

loafer123 said:

You appear to believe the hype that developers choose not to build out permissions for nefarious reasons. My experience is that developers love to build and make profits, but need funding, stable construction prices, willing buyers to buy houses, repay their construction loans and move on.

I wrote that "The monoculture of large housebuilders will never build faster than the rate which maximises their profits. Why would they?" I didn't accuse them of being nefarious, just rational as land supply is finite.

But we also have been told on a past PH thread that builders own ~50% of the land bank, the rest is owned by property speculators, sorry "investors".

[edh]

Johnnytheboy said:

loafer123 said:

At the risk of repeating myself, the problem is that income (and therefore the ability to pay tax) and captial are not necessarily correlated so an LVT can't work.

In the short term I can see lots of people like me having to sell their houses, not necessarily being able to, and a mini-housing slump being caused.

It would almost by definition reduce the value of land.

A reduction in land values (and an end to our obsession with making money from property) would be no bad thing.

[loafer123]

edh said:

loafer123 said:

At the risk of repeating myself, the problem is that income (and therefore the ability to pay tax) and captial are not necessarily correlated so an LVT can't work.

a. It is used in some countries / cities, so can work
b. We used to have domestic rates, a much more progressive form of property tax than current council tax. They worked.
c. There are well understood options for old people in big houses to roll up LVT payments.

loafer123 said:

Far from encouraging regeneration, it also discourages people from bringing forward planning applications as they would increase their tax bill without necessarily having the revenues to pay it until much later when and if the consented scheme get's developed.

Please explain why my example above would not encourage regeneration?

There is a lot of land with permissions already granted. Lots of brownfield sites. Lots stay empty or unused for years. LVT incentivises optimum use.

As for new builds LVT might well increase the tax bill but would also lower land costs. Might reduce costs incurred before sales revenue arrives.

loafer123 said:

You appear to believe the hype that developers choose not to build out permissions for nefarious reasons. My experience is that developers love to build and make profits, but need funding, stable construction prices, willing buyers to buy houses, repay their construction loans and move on.

I wrote that "The monoculture of large housebuilders will never build faster than the rate which maximises their profits. Why would they?" I didn't accuse them of being nefarious, just rational as land supply is finite.

But we also have been told on a past PH thread that builders own ~50% of the land bank, the rest is owned by property speculators, sorry "investors".

I'll give you a practical example.

I dealt with a large site for over 300 flats on the south coast. Despite a live and valid planning permission, it was not viable to build and is unlikely to be for some time because of the lack of buyers.

Now you could argue that as a result it had a nil land value, but there were also many ways of arguing it had a value. In those circumstances, why would a landowner take the risk to get a permission in the likelihood that they would get charged LVT if the value of the land was argued and, even at the point that it had a minimal value, that LVT would be payable for some time before it was worth developing?

[markcoznottz]

edh said:

Johnnytheboy said:

loafer123 said:

At the risk of repeating myself, the problem is that income (and therefore the ability to pay tax) and captial are not necessarily correlated so an LVT can't work.

In the short term I can see lots of people like me having to sell their houses, not necessarily being able to, and a mini-housing slump being caused.

It would almost by definition reduce the value of land.

A reduction in land values (and an end to our obsession with making money from property) would be no bad thing.

No bad thing to YOU presumably. Most middle class housing stock is old, the only reason it is kept in good nick is transference of opportunity to next generation.

[edh]

loafer123 said:

I'll give you a practical example.

I dealt with a large site for over 300 flats on the south coast. Despite a live and valid planning permission, it was not viable to build and is unlikely to be for some time because of the lack of buyers.

Now you could argue that as a result it had a nil land value, but there were also many ways of arguing it had a value. In those circumstances, why would a landowner take the risk to get a permission in the likelihood that they would get charged LVT if the value of the land was argued and, even at the point that it had a minimal value, that LVT would be payable for some time before it was worth developing?

a few thoughts - obviously I don't have any info on the back story

1. LVT might have stopped you spending lots of time and effort on a speculative planning application for a scheme with no buyers (at the price you wanted to charge)

2. The scheme didn't get built, LVT or not. That wasn't really the issue.

3. The permission by itself might have satisfied the land owners objectives i.e. an uplift in land value.

under LVT, assuming you had the planning permission, you would have the following options

1. Hold on to the land and speculate that your scheme would come good and pay LVT, which is designed to capture planning gain, so working as intended.

2. Devise a new scheme that had buyers, maybe taking a lower profit? Putting the land into use for housing - good outcome

3. Sell the land to a buyer who would do 2. - again a good outcome