Mortgage rates / interest etc

[D_W]

Money is a token that is related to assets. Money without physical assets is akin to me having a bundle of monopoly cash in my pocket. Its the relationship that the token has to the assets that gives it worth.

So, forget about the very mobile token, and tax the asset that it relates to, as they are, generally, considerably less mobile.

My car example was maybe confusing, as cars seem somewhat mobile. Here in the uk, a significant part of our countries "wealth" is in real estate. The clue for that is, quite literally, in the name - REAL ESTATE, not intangible assets.

That's not going anywhere at all.

The bottom line is that, sure, you get things like facebook or whatever that seem like they are ethereal but the money always ends up, somewhere along the line, being tied to actual "stuff", rather than just being a number on a computer monitor. The actual stuff isn't as easy to move to tax havens as the numbers on the screen.


This thread was about mortgages -

A couple of generations ago, people owned their own homes, with one person working and one person normally staying at home. Working fairly standard jobs.
Then it was two people working fairly standard jobs.
Now we have seen massive price inflation in the property market, such that most people working "standard" jobs, without some cash hand-out from their parents, are excluded from home ownership.

Again, the uk, even more so than other countries, holds its "wealth" in real estate. With spiralling wealth inequality, an increasing amount of the bricks and mortar is being held by a smaller and smaller number of people.

It's not easy to move it to Portugal.


As a closing point, if you have doubts about wealth being held in real-estate, id remind you of the 2008 issue, and what caused that. Real estate is not just a little bit of nothing. Its significant. And not very mobile.

The error here is blaming corporations for the increase in residential housing. It is an increase related to the individual. You (not you specifically, but the average citizen) don't live frugally like a one income household a couple of generations ago nor do you live like one a generation ago with two incomes, and the housing quality structurally may have been fine, but it would've been smaller and with much less comfort let alone decoration inside.

Borrowing on top of that and decreasing the housing supply and making it harder to build doesn't help, either.

When individuals stop caring about whether or not they ever own their house, the price will go up - due to the individuals, not someone victimizing them. Once you decide that paying the interest on a loan is just as good as paying off the loan, then the price of the item being bought without unlimited supply will tend toward being set where the price of paying the interest is.

It's no difference here vs. there.

60 years ago, the average house was 2x income. It's not that the houses were so much more affordable, it's that they had almost nothing in them and were smaller. at one point before 2008, that had risen to 11. Houses were probably twice as big on average by then and everyone thinks they need to be a lot nicer with more amenities, and the idea that it's no longer sensical to pay off a loan just drives up the price further because the bogey is being able to make a payment, not to pay with the goal of not making a payment.

 

[sploo]

Let’s follow that through. So, say, Microsoft and Apple wouldn’t be allowed to trade in a country…….well that simply wouldn’t work. That’s just two, and I would suggest every major company engages in tax efficiency. So, in other words the country that went down this road would simply stop.

I can’t remember the details, but the EU did start going down the road of trying to set minimum corporation tax rules, it wasn’t if I recall that successful.

Absolutely. It would need a level of international cooperation that would be staggeringly unlikely to work. Until it is eradicated though, we just continue to see massive corporations use resources in countries to make large profits, and then drain those profits out without paying back their fair share.

 

[deema]

@julianf ,let’s think about taxing property. Your suggestion is along the lines of either the bigger the property the more tax you pay, or the value of the property determines how much tax you pay. So, taking the first, taxing the size of a property. If you have a family you need a larger property than if you are single. But we need children as a society, so we are taxing those who are young and starting out in life as adults as opposed to the elderly whose family’s have flown the nest. The incentive is to live in as small a property as possible. The 1% richest, don’t have a very large proportion of the assets in property. That’s what we the normally people have. You would move the burden of tax on to people with families.

Let’s tax property value. Great, you can either live in say a bed sit in London or a castle in remote part of the UK, both will probably have the same value (a bit tongue to cheek, but you get the idea). Well, that doesn’t work either. As I said the 1% have a very small amount of their wealth tied up in property.

 

[deema]

Absolutely. It would need a level of international cooperation that would be staggeringly unlikely to work. Until it is eradicated though, we just continue to see massive corporations use resources in countries to make large profits, and then drain those profits out without paying back their fair share.

Exactly, but remember the ‘PIGS’ Portugal, Ireland, Grease and Spain, well Ireland’s economy has a dependency on its tax structure to support its citizens. It’s hardly going to vote for a change that affects its citizens adversely.

The problem with changing corporation tax is that in the short term tax revenues decrease, only when company’s see that a tax regime is embedded will they start to change their structures to take advantage of it. In the medium term tax revenues increase. A country has to get through the short term to benefit, equally other countries may react by lowering their corporation tax rates to ‘protect’ their tax revenues.

 

[julianf]

It is an increase related to the individual. You (not you specifically, but the average citizen) don't live frugally like a one income household a couple of generations ago nor do you live like one a generation ago with two incomes, and the housing quality structurally may have been fine, but it would've been smaller and with much less comfort let alone decoration inside.

Its all Netflix and avocados now. Without them, we would all live like kings.

Joking apart, you know that some people do actually blame the current generation's gap between earnings and housing costs on Netflix subscriptions.

Actually, hang on a moment. Isn't that what you just did?

 

[sploo]

I guess if they have other options, what you really need to ask is if your society is better off with them or without them. This is often the claim here in the states, too - that they are not paying enough corporate taxes. They distribute their earnings, and their employees pay payroll taxes. The earnings are distributed to things like private and public pension funds (city government, etc), health benefit funds, etc. The evidence for the real effect here in the states is how fast property values increase when there is a big corporate location being established in a locality. In my opinion, the incentives offered to land these things are problematic, because if they weren't offered, the groups would still establish themselves somewhere. But the cities willing to throw deferrals of costs at them are betting that it won't be them.

All that said, the net effect locally is a benefit, or state wise, or nationally.

They don't (really) distribute their earnings though; which is the problem. They (large multinationals, and the individuals who run them) rack up levels of wealth so high they could never realistically spend. They are (understandably) vested in paying employees the lowest salaries possible for the market; whilst avoiding taxation on their personal and corporate income. The very fact we see (in the UK, the US, and some other countries) such incredible ratios of the net work of the wealthiest to the poorest shows the fallacy of the ideas of trickle down economics and that funding the rich helps make the poor better off.

A quick bit of "google math" tells me that Elon Musk could theoretically give every single citizen in the US over $700. Or, more sensibly, he could have been taxed only half his wealth (he'll have to muddle by on the remaining $120 billion), and give the bottom 10% of the US population $3500 in financial support (either directly, or through better social services). Point being: Musk would still be one of the world's richest people, and 33 million people would be significantly better off.

 

[sploo]

Exactly, but remember the ‘PIGS’ Portugal, Ireland, Grease and Spain, well Ireland’s economy has a dependency on its tax structure to support its citizens. It’s hardly going to vote for a change that affects its citizens adversely.

The problem with changing corporation tax is that in the short term tax revenues decrease, only when company’s see that a tax regime is embedded will they start to change their structures to take advantage of it. In the medium term tax revenues increase. A country has to get through the short term to benefit, equally other countries may react by lowering their corporation tax rates to ‘protect’ their tax revenues.

I assume the 'PIGS' acronym isn't accidental (in terms of the reference to greed)?

 

[julianf]

@julianf ,let’s think about taxing property. Your suggestion is along the lines of either the bigger the property the more tax you pay, or the value of the property determines how much tax you pay. So, taking the first, taxing the size of a property. If you have a family you need a larger property than if you are single. But we need children as a society, so we are taxing those who are young and starting out in life as adults as opposed to the elderly whose family’s have flown the nest. The incentive is to live in as small a property as possible. The 1% richest, don’t have a very large proportion of the assets in property. That’s what we the normally people have. You would move the burden of tax on to people with families.

Let’s tax property value. Great, you can either live in say a bed sit in London or a castle in remote part of the UK, both will probably have the same value (a bit tongue to cheek, but you get the idea). Well, that doesn’t work either. As I said the 1% have a very small amount of their wealth tied up in property.

Where is that 1%'s wealth tied up then? Stocks and shares.... Shares of what? At the end of it all, it comes down to something physical.

I'm a "home owner" but the bank owns a significant portion of the property. And who owns the bank? Investors in the stock market....

You're entirely missing my point if you're counting bedrooms and children in some sort of "council tax" way.

What I'm trying to explain is that the markets are all, ultimately, tied to "stuff". At the end of the long and complex chain there is a "something" that is generally less mobile than some numbers on a screen.

 

[deema]

The world is getting far more complicated to navigate. Unfortunately, about 5.6% of the population has an IQ of 70 or less, they are considered intellectually disabled. They are highly unlikely to ever hold down really well paid job, acquire wealth, or participate fully in society. The division of wealth has many factors that affect it, some of which have no answer, it’s not all about greed.

 

[deema]

Where is that 1%'s wealth tied up then? Stocks and shares.... Shares of what? At the end of it all, it comes down to something physical.

I'm a "home owner" but the bank owns a significant portion of the property. And who owns the bank? Investors in the stock market....

You're entirely missing my point if you're counting bedrooms and children in some sort of "council tax" way.

What I'm trying to explain is that the markets are all, ultimately, tied to "stuff". At the end of the long and complex chain there is a "something" that is generally less mobile than some numbers on a screen.

It could be physical, and taking shares in your example, a balanced portfolio of shares (to mitigate risk) would see shares being acquired in company’s based in say America, Far East, and Europe. Not in a specific single country. You don’t put all you eggs in one basket to coin a phrase. People also speculate on currency fluctuations and also in say Bitcoin which is definitely intangible. Not everything you can invest in is physical.

 

[D_W]

I guess I'm not getting my point across - if the multinational has a local presence, whether it's headquarters or not, and no matter how much their ceo is paid, is it worse for the area for the M-N to have operations there.

For example, let's assume it's walmart in the US and they want to put in a distribution center. None of the taxes will be paid locally other than payroll taxes and property taxes.

My brother in law lives near an interstate. Some giant property fund wanted to establish a distribution center - which meant a lot of truck traffic. They are between routes that go west and NYC and New Jersey and Philly are to the east.

Most people would say "we don't want all of the trucks there". I think those facilities are garish, too. However, they employ at least several hundred people and the deal on the real estate is that the taxes for the facility are so high that ever resident is seeing an offset to their property taxes of around $500 a year.

I'm sure the facility is profitable. None of that profit will be distributed locally. The local economy is still far better off due to property taxes paid and payroll taxes paid by the employees working.

This is a fairly complex thing because often the choice locally isn't whether or not you get a slice of everything, it's whether or not you get something more like my BIL's township. His is also relatively simple because the center is right next to an interstate, so the traffic on the interstate is increased, but other than a connector, nobody else notices.

it becomes more complex, for example, when a lower income borough in NY is looking at getting in something like an amazon distribution center, the local population is heavily taxed, and the borough decides to throw enormous amounts of incentives at amazon to locate there. I don't know for sure what I just said there is perfectly accurate, but my city was in the running to get some mega distribution center vs. just something more typical away from the city, and the amount that amazon was demanding didn't make sense to me in combination with the nature of the jobs and the fact that just by its size, it would drive up some local property values.

That was a case where the city or county still made an absurd offer, but still, fortunately, lost out.

 

[Spectric]

Smoking kills, therefore we should tax it more, because it costs the NHS lots of money. But then again, smoking kills, so we should tax it less because we save on pension payouts... Oh the decisions!!!

A complicated equation is this one, whilst smoking they pay a high rate of duty to the government, if they die before pensionable age then no problems as you have the duty and no pension payout but the stumbling block is that many will reach pensionable age along with COPD and other related illnesses so now you are paying out pension and the cost of keeping them alive. So they need to smoke more to pay more duty and die sooner to be an all round winner for the treasury.

 

[D_W]

I think you guys are in trouble not because you can't get enough tax out of the multinationals, but if you try to, they will leave, and you will be even worse off. The north central part of my state is like that - HQ of companies wasn't generally there, but there was manufacturing and sometimes development there. The areas are really dead, with declining population, loss of business services (like retail) to those remaining, and what's left is mostly older folks with increasing property tax rates because of the lack of income taxes from the loss of jobs.

I think the east and west in the US will be seeing the same thing, and there will be decline in the NYC corridor and LA area, just the same as what we saw in the rust belt here in the US where spending was done based on an expectation of future business, and much of the business ended or went to the southern US where the taxes and public costs are a lot lower.

 

[D_W]

A complicated equation is this one, whilst smoking they pay a high rate of duty to the government, if they die before pensionable age then no problems as you have the duty and no pension payout but the stumbling block is that many will reach pensionable age along with COPD and other related illnesses so now you are paying out pension and the cost of keeping them alive. So they need to smoke more to pay more duty and die sooner to be an all round winner for the treasury.

In most countries, smokers cost less over their lifetime than non-smokers. This is absolutely true in the US where public benefits are highly tilted toward later in life and much of the pre-65 health costs are insured, but I saw a study and posted it here not that long ago for Denmark or somewhere else in continental europe where it was also true despite public health benefits.

The fact that people think Smokers are a burden on society financially doesn't make sense - their life is generally shortened for a period while they're on benefits but not affected before then. But it persists despite reality, anyway, because almost nobody looks at the entire picture. that' makes them a convenient target for additional product or sin taxes.

 

[julianf]

People also speculate on currency fluctuations and also in say Bitcoin which is definitely intangible. Not everything you can invest in is physical.

I've snipped part of your reply, as i really feel that i need to focus on this point.

You mention bitcoin -

Bitcoin is a token. The £5 note in my pocket is a token. One is printed on a bit of plastic, and the other is not. That is the ONLY difference. They're both just tokens.

....and those tokens are tied to real world things.

This is the think that i keep saying, in different ways, but it seems that you are finding difficulty with.

Maybe if i put it another way -

What would be the point of a bitcoin if it was not linked to the physical world? I fear mentioning my monopoly money again, but i will - that is a "token" that is not linked to real "stuff" so it is without value. My point is that the token is always linked to something physical in the end. If it wasn't, really, why would it have value?

"Because you can buy other tokens with it..."

That pushes the question along one more step, but the question remains - why would anyone want any of the tokens, if they couldnt, at some point, be exchanged for real world items?

There is always "stuff" at the end of it all.

Your NFT is just another bitcoin type thing. Its value is always related to the physical world.


...and its that physical world that cant just be whizzed about between tax havens in the same way.


I know this is all seeming very conceptual now, but say we swing an axe and say that any company holding over £100m of UK real estate gets taxed 1% of the estate value, what happens then?

 

[johna.clements]

I guess I'm not getting my point across - if the multinational has a local presence, whether it's headquarters or not, and no matter how much their ceo is paid, is it worse for the area for the M-N to have operations there.

For example, let's assume it's walmart in the US and they want to put in a distribution center. None of the taxes will be paid locally other than payroll taxes and property taxes.

If a multi national is not paying the same taxes as a local business it can out compete the local company.

It is perfectly possible to tax the export of profits from a locality and payment of fees to outside bodies.

 

[deema]

@julianf I fully understand what your saying, but, your assuming that everyone uses their tokens within a short period to accumulate real world things. They don’t. Most people will have some savings in a bank account, it’s a collection of tokens. Most people will be putting money into a pension, they can’t access it until a certain age. It’s not realisable / locked away. Now, let’s assume you have a billion pounds. Just how much will you spend of that in say a life time? Just how many physical assists will you have?
If I own one share in say Apple, just how much physical assets do I have? In reality none. I can’t point to a brick, in an Amazon building and say I own it. If I own 10,000 shares, again the same applies, it’s an intrinsic ownership, it’s not physically real. Now, you may say, the company is real, so you own part of that, let’s tax that. OK, but Amazon is listed on the New York Stock exchange, not within the UK tax regime as a physical entity, so that doesn’t help the UK Tax collectors.

Let’s look at moving any amount of money between two bank accounts that anyone may have. If I move £1 from the HSBC to say NatWest, the bank in the old days would physically move paper money. Now it’s just an electronic transfer of Tokens, it’s not real world stuff. If I’m cleaver, I can move money between say a bank account in Europe, the USA and say the UK and if I do it at the right time in the right order increase the value of the money exponentially due to currency exchange fluctuations. I don’t need to own anything physical to make unimaginable levels of wealth. I can also take positions (in essence betting) on what is going to happen to the value of certain shares without ever owning a share and make money on the fluctuations of those shares. You simply don’t have to own anything to increase your wealth. When you have enough wealth, you will never spend it as it’s more than you will ever need, and you don’t have to have it as physical stuff for it to continue to increase in value.

 

[johna.clements]

@julianf
If I own one share in say Apple, just how much physical assets do I have? In reality none. I can’t point to a brick, in an Amazon building and say I own it. If I own 10,000 shares, again the same applies, it’s an intrinsic ownership, it’s not physically real. Now, you may say, the company is real, so you own part of that, let’s tax that. OK, but Amazon is listed on the New York Stock exchange, not within the UK tax regime as a physical entity, so that doesn’t help the UK Tax collectors.

As I stated above it is perfectly possible to tax the export of profit and fees.

 

[Terry - Somerset]

Multi-nationals can locate wherever suits them in terms of tax, regulation, labour cost etc. Digital services can be delivered from anywhere at close to zero cost, and the costs of container freight low (pandemic impacts excepted)

Even were tax subject to global regulation (unlikely for a few decades), the non-tax differentials would still exist.

The solution may be to change the tax and regulatory regime to minimise the competitive advantage of offshore locations - eg:

• increased sales tax (VAT) offset by reduced corporate taxes
• free trade zones with more limited regulation
• taxing energy consumption, limiting PAYE and taxes on income
• increased import duties to favour local production (risk of retaliation)

The above presupposes that freedom of choice exists for consumers, and that market forces drive corporate and individual behaviours. Policy should be reality driven, not based upon dogma no matter how attractive that may superficially be.

 

[julianf]

@julianf your assuming that everyone uses their tokens within a short period to accumulate real world things.

No, not at all. What i am, however, saying is that all these tokens are eventually linked to real world assets.

Take again bitcoin. It has no value other than what you can swap it for. You might swap it for an NFT. You might swap it for a bit of plastic with a picture of the queen on it. You might swap around in circles for ever.

But, ultimately, its the link to the real world assets that you can swap them for that makes them "worth" anything. Its the "i will pay the bearer on demand" aspect.

The BOE will not pay the bearer their pound of gold or whatever. But, ultimately, someone will give you some physical thing for your token. I'm not saying you want that to happen. But its the ability that it will, in some way or other, that gives the token "value".

What I'm saying is ignore the token, and tax the physical asset. If anyone thinks they can store all their "wealth" as NFTs or bitcoin and somehow escape the physical world, so be it.

Or, put another way, say i become king tomorrow, and impose my tax on wealth by going after the physical assets, rather than the tokens, do you think that no one will want houses any more, but everyone will want bitcoin?