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| CASTLE HOWARD - "GET OFF MY MANSION" |
It is difficult to pack into a letter that a newspaper might publish, enough information to make a balanced argument. In a short letter, there is the danger of appearing to be bigoted, biased and one-sided. This is Politics by Sound Bite and is of no use to man or beast.
My letter below on the currently proposed Mansion Tax – i.e. “Let’s tax houses worth £2 million or more…” is punchy but too brief. My position is that I have studied and discussed Land Value Taxes (LVT) for some years – and see a place for them in liberating waste land, derelict factories and other neglected sites. This is what LVT has been successfully applied to in the USA and elsewhere, to kick-start failed economic black-spots. LVT is a way of forcing landowners to do something rather than nothing. It increases investment into dead areas and brings them to life. I have gone as far as making a marvellous calculator to figure out the LVT rate.
I am waiting for LVT enthusiasts to suggest what rates will apply to which types of land or property.
However, the endlessly resurrected old dead idea that land and houses should be taxed annually, regardless of them being bought or sold – which generates cash-flow – is flawed and dangerous. None of the proposers have paused to think it through and to calculate the consequences for a nation like the UK .
In the 1930’s to 1960 many large houses, the mansions of their day, became such liabilities to their owners that they were forced-sold or sometimes given away – simply because the owners had too little income to repair them. In the 1920’s /1930’s US Depression, entire farms and estates were similarly abandoned for lack of maintenance, investment, labour and cash-flow.
The enthusiastic and simplistic idea that because a street of, say 20 houses, has a market value of £20 million and can therefore “afford” to pay say £2 million a year in capital tax – or even £200,000 a year – is infantile economics. The majority of homes have been bought on 25 year mortgages at say 7.5% and annual repair costs of 2.5%, the owners are cash strapped for the entire time – and when the mortgage is cleared, the owners are usually retired with a marginal income. The “market” value – usually pegged to current building costs – is only real if and when a sale is made at that value. If the whole street suddenly tries to sell – the value evaporates as suspicious, nervous buyers withdraw. This can be seen in districts in America where half-witted bankers and government throw families onto the streets – and board up their homes – for mortgage or rent defaults – and everyone loses. There is no asset value to tax.
The deluded Mansion Taxers have not the wits to see that all mansions subject to such taxes will rapidly lose their “market” value. Only people with large incomes, who like paying taxes, will buy the mansions; but at knock down prices. Extrapolate such taxes to ordinary homes and commercial properties and the entire built environment will become worthless. The value is only there now because families can visualise and be confident of affording to occupy and maintain the building – or land. Destroy the asset base of a nation and all commerce will stop. It is the destructive mad bad bankers’ dream – to monetise and liquidate everything. As long as you are a banker or government – controlling cash flow and money supply – you can buy everything at almost zero prices. If you think it is lunacy to sell off the family silver – it is suicide to so burden land and property with fixed costs that nobody can afford.
At the base of these delusions of fixed “wealth” – always of other people’s wealth – is a complete lack of understanding of the Real-Economy and the Money-Economy. Both depend wholly and utterly on confidence – on faith – on goodwill – on never panicking into a downward spiral – of sufficient money-supply - on people remaining calm – doing their duty – cooperating - and never looking down. Money is not real – it is merely a paper or electronic representation of real things – it is a confidence trick. Test the reality of values in the Real-Economy – test them to destruction – and you will rapidly revert civilisation to bartering meat and potatoes and living off one-third of an acre – with a cow, a pig and a few hens.
Rather than destroy the whole of our carefully constructed society and its mysterious economic systems – Mansion Taxers should press for Tax-Haven assets to be repatriated. That is where most of the surplus cash, $21 trillion, is hidden – and it is already liquid; so rapidly collectible.
Like the crazy UK current fascist Big Brother Bedroom Tax, throwing families onto the streets if they have a ten by ten foot room not used for an Authorised Government Approved Purpose – any taxes imposed have to be payable; which is why most taxes are on current cash transactions – like wages, sales-taxes, etc.
You cannot get blood out of a stone – or out of a house brick.
Letter to The Guardian 13 Mar 2013.
The understandable desire to tax the apparent trillions locked up in mansions and estates, (Mansion Tax debate, Andrew Sparrow, Guardian 12 March 2013) in the absence of a cash sale is like the Window Tax, in that it ignores cash-flow and is doomed to failure. The alleged taxable value is an illusion. Taxing fixed assets annually has been tried and failed in many countries many times. We tried Development Land Tax in the 1970’s and that halted home building.
The UK UK
But what is missing from the equation is: (1) where on Earth do the taxed home/land owners beg, borrow or steal the £250 billion to pay the tax? Within 10 years all the value has gone – millions of distressed homes are forced to sell – with no buyers – and there is nothing left to tax. And (2) Work must be done. The basic land only has value if it is farmed or developed. Buy an acre of sodden, sullen woodland; take your spade on a grim winter’s morning and wring 5% value in cash from the wood and soil, year on year – then you might own £5,000 of land. Without the cash-flow and daily human maintenance, effort and ingenuity, taxed-fixed-assets are crippling liabilities. There are many examples of this in our recent economic history.
Noel Hodson
According to the CIA World Factbook (https://www.cia.gov/library/publications/the-world-factbook) the UK comprises 243,610 square km (of which 241,930 sq. km are land). Since 1 square km is equal to 100 hectares, the UK covers an area of about 24 million hectares.
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