Purpose.         This note was initially prepared for the UK Liberal Democrat Party’s  Tax Commission. The author had heard that Sweden incorporates an element of property taxation within its income tax system and also has a very modern, map-based property tax and local income tax (LIT). The Party currently favours LIT but also wishes to develop its longstanding policy of land value taxation (LVT) by modernising existing property taxes. The reason for studying Sweden is that both its Tax Board and Land Survey Department are internationally renowned for the efficiency and transparency with which their land information and property tax systems work together. This note is based on an earlier version specially prepared for the Tax Commission: a more technical and theoretical discussion of the subject can be found shortly at www.landvaluescape.org

Summary.      The Swedish tax system operates with a highly centralised administration. Direct taxation involves a single annual tax form each for individuals and companies but all taxes – including property taxes – can be paid off through earnings. Almost everyone pays local income tax (which averages 29%) whereas only people on above average earnings pay state income tax of around 20%.

Like most 30 somethings with a substantial HECS debt and an addiction to avocado on toast, I am an aspiring first home buyer. I’d love to buy the home I currently rent: a daggy 1960’s ‘six-pack’ flat on a main road in Footscray. It’s currently valued around $360,000. To put down a 20% deposit, I’d need to save $72K. A daunting figure for a single woman on a not-for-profit’s payroll.

Much less daunting is $18K. This is the 5% “genuine savings” I require to apply for the government’s shiny new shared equity scheme, HomesVic. HomesVic enables first home buyers to access 25% equity funding towards residential property. Government-backed shared equity schemes have existed in W.A and S.A for a number of years. The initial pilot will include 400 first home buyers, buying new or established homes in strategic locations specified by the government. Footscray is on the list.

Public Revenue Without Taxation.

Introduction

It is now widely recognised that the free market system provides a self-organising process that enables a more efficient allocation of a society’s resources than alternative arrangements based on the implementation of pre-conceived plans by central authorities. At the same time the market system offers much greater individual economic freedom and the opportunities for individuals to fulfil their potential in society.

In a free market, transactions are voluntary and are undertaken between a willing buyer and a willing seller. There are many independent buyers and sellers who can compete on quality of service and price. Prices are the outcome of the law of supply and demand, and the overall outcome under a prevailing set of conditions is a condition of stability and optimal allocation.

And yet, when it comes to the provision of public services, which in a modern economy can account for around half of the total economic activity, an entirely different mechanism is used which in many respects is the antithesis of the market system. Goods and services are often made freely available and corresponding costs are met mainly by taxation: “a compulsory contribution imposed by a public authority, irrespective of the amount of service rendered in return”.[1] For these services there is now no willing buyer or seller, no competition and no price mechanism. If one traces back the origins of these arrangements and, in particular the varied and complex methods of taxation employed to collect revenue required to pay for the services, it is found that they are rarely due to the application of sound economic principles and more often are the result of short term political expediency.

Mason Gaffney has written a new book “Nature, Economy and Equity — Sacred Water, Profane Markets”, published in November 2016 issue of the  American Journal of Economics and Sociology.

Ed Dodson has created a power point presentation to introduce the book, highlighting the important points.

The second presentation by Ed Dodson is an analysis of the U.S. residential property markets.

The Cat and Dick Twittingham

Once upon  a time there  was a cat and his master,  Richard Twittingham.

Dick  was determined  to make his fortune in London and planned to set off on the long walk from the Forest of Dean where he lived. But …

Outside a tavern in the year 1367, the first year in the reign of King Henry IV of England.

“Have you seen the cat?” asked Dick of the innkeeper.

“Do you mean THE cat?” enquired the innkeeper. “I don’t  understand,” said Dick.

“Ah, well, either you see THE cat or you don’ t,” said the innkeeper, going about his business.

“Of course I can see my cat when he is here,” snapped Dick, “he is black and white with four legs and a tail and goes by the name of Tom.”

“Ah,” said the innkeeper. “Whither are you bound with your cat, then?”

“London, of course,” exclaimed  Dick, “I’ve heard tell the streets are paved  with  gold.”

“So they are,” said the innkeeper, “so they are for them what can see THE cat.”

With 2.791.8101 Square Kilometres of surface Argentina is one of the largest countries in the world and with 36.223.9472 inhabitants one of the comparatively less populated. The actual ratio of inhabitants per Square Kilometres, 13, is one of the lowest in Earth.

In spite of being as a whole an almost empty country, the population is mostly concentrated in an about the city of Buenos Aires and some other few large cities like Córdoba and Rosario (about 12.000.000 people).

Being a country with such an abundance of land and so few inhabitants, nevertheless large sectors of the population live in slums surrounding the big cities, with no access to land.

This situation moved the Catholic Church to issue recently an Episcopal Document about the land problem in the country, proposing different solutions. In the foreword to this document Monseñor Carmelo Juan Giaquinta points out that the relation of the Argentineans with land “is maybe one of the worst in the World”.

The following sad story appeared in the Daily Mail of 21 May 2001:

“When offered contract work, my firm went through the costings, cashflow and forecasting exercise. We judged  there would  be a fair return  on the investment and decided to go ahead. However, the figures starting going through my mind and the following emerged : net profit to the firm — £18,598; net profit to the government  — £24,767.

Why?With National Insurance, PAYE,  VAT, fuel tax, insurance  tax, land fill levy, road fund licences, operators’ licence, personal tax liabilities, loss of interest on cash flow and other hidden taxes, the government will gain more from this investment than the company. In addition, ifwe took on three employees for this new job and they came off benefits, it would save the government another £23,400 a year, leaving the government a gain of more than £48,167  in the first  year — 259% more than the  risk-taker.

Why should I risk everything for a government that has accepted contract prices 30% lower than last   year?

[An address delivered at the Henry George Club, Sydney NSW; 16 May, 1932]
Although the sciences, generally, are rightly regarded as nature studies, there is an unfortunate tendency to consider economic science to be a set of complicated man-made schemes, continuously amended by even more complicated man-made laws – a hopeless tangle about which there can be endless difference of opinion and which only the very wise and learned may hope to understand.

The following is an endeavour to show that this is not so, but that, on the contrary, economic science (or as it is sometimes termed “economics” or “political economy”) is a simple nature study, that the economist is as much a naturalist as any other scientist, and for him also, there is significance in the well-known lines of Longfellow:

Nature the old nurse, took
The child upon her knee,
Saying, “Here is a story book
Thy Father has written for thee.”

“Come, wander with me,” she said,
“Into regions yet untrod,
And read what is still unread
In the manuscripts of God.”

It would be foolish to describe the current situation in the UK housing market as a “crisis,” as  this suggests some unforeseen events which suddenly come to a head and which the government has to deal with urgently.

Far from it, the state of the housing market is the inevitable result of quite deliberate changes in UK government policy over the last thirty years or so, which we are feeling the full impact of now.

Government policies

If we go back to the period between 1945 and the 1980s, what is remarkable is the rate at which owner-occupation levels increased. The share of owner-occupier households rose from 30% to 60%; the proportion of social tenants increased from 20% to 30% and – in a development which has received much less attention – the share of households renting privately fell from 50% to 10%.