Make big companies pay tax? A joke.

[Cormac]

Here's an idea Ireland. Tax the fucking corporations that use your country for a tax shelter.

We tax them according to international tax laws.

We are also happy with the income taxes we generate from their presence here, and so on.

[Jason]

Uh-huh.

[Cormac]

... that the development of early capitalism also created a tension with the aristocracy and monarchy.

Smith clearly identified that the hereditary landowners extracting rent and the monopoly privilege of credit creation extracting interest were costs to production and not costs of production. While not an argument against private property he makes the case that such profit making were anomalies amounting to a free lunch, so much so he advocated taxing these profits away, judging they were the least harmful to free trade i.e. not a consumption or income tax affecting the cost of living.

These views were generally shared by the early economists, couple that with the ongoing poor law debates, the angle or justification is provided to make the evolutionary leap, rightly or wrongly, to get from taxing away the free lunch from the inheritors of private property to considering property as belonging to the state.

There is a distinction between property held by the landed aristocracy, and property that was earned in the modern world. It seems valid to me that the individual owes something to the state that creates a stable environment in which he or she can convert effort or ingenuity into something fungible, anduse that to acquire other forms of property.

The former was, more often than not the result of a literal theft, for example, in Britain and Ireland, the confiscation of land from the incumbent and the granting of that land by the monarch to a dependent aristocrat. In such cases very very few actually owned their land outright, but held it at the sufferance of the monarch. Nonetheless, such lands were invariably acquired as the spoil of some conflict or other - i.e. theft.

It was, to an extent justifiable to make arrangements to ameliorate the negative impacts of monarchic and aristocratic property. However, in my view, the state delegitimises itself when it assumes ownership of property, precisely because the state had always previously been the owner. It was and is a shelter against despotic power that the state is limited in its range of action in relation to private property.

An interesting manifestation of this is in the contrast between English and Irish law nd how arrangements are made fo compulsory purchase of property.

In England "Crown Prerogative" still exists, but has been reserved to the state. This power effectively means that the state can forcibly confiscate your property and cannot be limited in this action by the judiciary.

In Ireland, the government was shocked to discover that it did not inherit "Crown Prerogative" and is in fact subject to.review and control of th judiciary. They proceed by way of compulsory purchase order, which is a tightly controlled process subject to citizen oversight.

I by and large agree with this view, where for the private individual property ownership is a reward and a result of ones own productivity.

Where I disagree with the current system and where I think it breaks down is when property is used as an investment strategy during the inflation period of a boom. The reason the property is increasing in value is directly attributable to the free lunch to be gained from the inevitable bigger fool who will purchase it (out with routine inflation or a property's perceived exclusivity or an infrastructure investment in the area).

The proof that this is a flawed system can easily be shown; if we took a property built in 2000 and assume it has been flipped a number of times making each flipper a substantial profit for no greater effort than it takes to acquire a mortgage. All of that profit and then some exists today in the form of interest bearing debt held by the person with the current mortgage for the property with a value that bears no relation to the mortgage on it.

So I recognise the difference as you describe it between feudal landowners and modern property owners but the net effect to productivity is the same and it is negative, as identified by Smith. Similarly the response should be the same as Smith's - tax away the flipping profits, today, that should be done in lock step with lower income or consumption taxes, thus directly reducing the cost of living.

Regarding compulsory purchase orders - there is a recent example of this here in Scotland, where a planned by-pass to alleviate city grid lock has been held up through the courts for 10 years with a number of understandably upset and distressed home owners faced with loosing their homes. Our Supreme Court has recently given the green light for the by-pass to go ahead and CPO's will be issued.
Much as I'd hate for it to happen to me, so long as there is a transparent due process, and local support for a much needed infrastructure improvement, on the face of it I don't have an issue with CPO's.

Property bubbles inflate because of the oversupply of cheap credit for too extended a period.

In Ireland, our bubble occurred primarily because we lost control over our interest rate. Germany, in order to export its recession and kickstart its then struggling economy had the ECB reduce interest rates again and again when we needed an increase to interest rates.

This occurred just at a time in Ireland when a baby boom hit its late 20s.

Flipping of properties is a symptom of a failure in monetary policy. I have no problem with people making profits in those circumstances. The fault lies with the supply of cheap credit.

[Cormac]

Uh-huh.

And incidentally, don't be under any illusion that France and Germany don't offer other forms of inducements to those companies or engage in surreptitious protectionism.

The existing tax laws, to which all Western countries have signed up, are fine, as long as they benefit a country. All that is wrong with France and Germany is that those companies have located here, not there.

[Seth]

Well there is no inherent right to private property.

Wrong. It's not only inherent, it's natural, derived from the natural and organic behavior of every living creature, all of which will seek out, take possession of and defend, to one extent or another, those resources necessary for survival. This is the most primitive iteration of a "right" to private property. By logical extension, the human right to private property is based in our organic need to seek out, take possession of and defend against intrusion those resources necessary for survival.

The right to private property is only guaranteed by the state.

No, the right to private property is protected by the state, in some cases. The right pre-exists the formation of government, therefore government cannot be the source of the right. Just as the right to eat an eland lies with the leopard that can seek one out, reduce it to exclusive possession and use, and defend it against intrusion by others, the human right, which is nothing more than a freedom of action that can be defended against intrusion by others (humans or animals), is "guaranteed" (to the extent possible) by the physical ability of the human claiming the right to defend it against intrusion by others. In the case of private property, a man's ability to defend what he owns against attempts to remove it from him by others is the most basic expression and defense of that right.

Civilization, or government, is simply a more complex method of arbitrating disputes over the possession and exclusive use of resources by individuals. But the "right" to seek out, acquire, use, enjoy and defend resources (private property) exists independent of government and predates it.

It's the state that gives legal and enforceable protection to private property.

Wrong. It is the state that either respects the right to private property and defends the owner's exercise of that right as his proxy or it is the state that uses brute force to steal what belongs to the individual and give it to someone else. It's a case of the ability of the individual to defend his property with the assistance of the state as his proxy or it's a case of the government becoming the biggest and most powerful bully and thief around that can expropriate the private property of the individual for its own uses.

Just and legitimate government recognizes, respects and defends the individual's right to seek out, take exclusive possession of, use and dispose of, and defend property.

Unjust and illegitimate government is just a bigger, stronger thief that can take by force that which is rightfully the property of the individual. How it goes about it, using naked force (Like Genghis Khan) or using more "civilized" expedients like Marxism (which has actually killed millions more people than Khan ever did) as a rationalization and excuse to take what is not rightfully its property.

Likewise with the right to trade and profit from capital, through laws and a legally protected currency. Those rights are only granted on condition of taxes being paid (from everyone in the system in general; but if they wanted the could legislate otherwise, then see who starts paying their taxes). What the government collects in taxes and how they spend the money raised doesn't have to be redistributive; that's a mater for democracy and should be decided purely at the ballot box, not based on who is paying for their influence.

Wrong. The right to acquire property (capital) and dispose of it for profit (or loss) is not "granted" by government, it exists as a natural component of Man's reasoning faculties and his need to acquire resources for survival. Trading in resources is how sentient creatures survive when the necessary resources cannot be obtained by the individual.

All that legitimate government does is to police free-market transactions between individuals to prevent fraud or exported harm. The state does not grant a right to trade, that right pre-exists by many hundreds of thousands of years any form of government.

If private property wasn't guaranteed by the state, then you'd have Seth's favourite fantasy where he defends his private property with his guns. Except he wouldn't really like the results because most people would decide to work together, and would easily take his property from him, and probably his freedom too.

Government exists not to "guarantee" private property and it certainly does not issue or grant the right to acquire private property, it only acts as a proxy for individuals in defending the exclusive possession and use of resources by the individual.

Lawsuits, for example, are nothing more than a "civilized" form of the balancing of competing rights and claims that used to be resolved by single physical combat. It's just a sophisticated and relatively bloodless form of ritualized combat over who may maintain dominion and control over a resource.

The court exists to adjudicate who may exercise exclusive dominion and control over a thing, not to distribute resources according to its judgment.

My defense of my property with my guns is merely the most basic exercise of the right to the exclusive use and possession of a resource. Whether I can succeed in vindicating that right depends, in the end, on my physical ability to defend that right. The fact that society may set up complex rules for adjudicating disputes over resources does not change the fundamental concepts involved. Yes, the collective is usually capable of overpowering the individual who is attempting to defend his property, but that doesn't give the collective any moral or ethical standing to do so, it merely expresses a "might makes right" iteration of the fundamental premise, which is that property belongs to he who is able to find it, take it, use it, and defend it against the claims or actions of others.

Just because there may be many members of a collective who desire to seize and use the resources of the individual doesn't give the collective any superior claim to the resources. However difficult or impossible it may be for the individual to defend his property against the massive force available to the collective, he certainly can claim and exercise the right to seek out, take exclusive possession of, use, enjoy and dispose of anything that he can physically reduce to his possession.

[sabell]

... that the development of early capitalism also created a tension with the aristocracy and monarchy.

Smith clearly identified that the hereditary landowners extracting rent and the monopoly privilege of credit creation extracting interest were costs to production and not costs of production. While not an argument against private property he makes the case that such profit making were anomalies amounting to a free lunch, so much so he advocated taxing these profits away, judging they were the least harmful to free trade i.e. not a consumption or income tax affecting the cost of living.

These views were generally shared by the early economists, couple that with the ongoing poor law debates, the angle or justification is provided to make the evolutionary leap, rightly or wrongly, to get from taxing away the free lunch from the inheritors of private property to considering property as belonging to the state.

There is a distinction between property held by the landed aristocracy, and property that was earned in the modern world. It seems valid to me that the individual owes something to the state that creates a stable environment in which he or she can convert effort or ingenuity into something fungible, anduse that to acquire other forms of property.

The former was, more often than not the result of a literal theft, for example, in Britain and Ireland, the confiscation of land from the incumbent and the granting of that land by the monarch to a dependent aristocrat. In such cases very very few actually owned their land outright, but held it at the sufferance of the monarch. Nonetheless, such lands were invariably acquired as the spoil of some conflict or other - i.e. theft.

It was, to an extent justifiable to make arrangements to ameliorate the negative impacts of monarchic and aristocratic property. However, in my view, the state delegitimises itself when it assumes ownership of property, precisely because the state had always previously been the owner. It was and is a shelter against despotic power that the state is limited in its range of action in relation to private property.

An interesting manifestation of this is in the contrast between English and Irish law nd how arrangements are made fo compulsory purchase of property.

In England "Crown Prerogative" still exists, but has been reserved to the state. This power effectively means that the state can forcibly confiscate your property and cannot be limited in this action by the judiciary.

In Ireland, the government was shocked to discover that it did not inherit "Crown Prerogative" and is in fact subject to.review and control of th judiciary. They proceed by way of compulsory purchase order, which is a tightly controlled process subject to citizen oversight.

I by and large agree with this view, where for the private individual property ownership is a reward and a result of ones own productivity.

Where I disagree with the current system and where I think it breaks down is when property is used as an investment strategy during the inflation period of a boom. The reason the property is increasing in value is directly attributable to the free lunch to be gained from the inevitable bigger fool who will purchase it (out with routine inflation or a property's perceived exclusivity or an infrastructure investment in the area).

The proof that this is a flawed system can easily be shown; if we took a property built in 2000 and assume it has been flipped a number of times making each flipper a substantial profit for no greater effort than it takes to acquire a mortgage. All of that profit and then some exists today in the form of interest bearing debt held by the person with the current mortgage for the property with a value that bears no relation to the mortgage on it.

So I recognise the difference as you describe it between feudal landowners and modern property owners but the net effect to productivity is the same and it is negative, as identified by Smith. Similarly the response should be the same as Smith's - tax away the flipping profits, today, that should be done in lock step with lower income or consumption taxes, thus directly reducing the cost of living.

Regarding compulsory purchase orders - there is a recent example of this here in Scotland, where a planned by-pass to alleviate city grid lock has been held up through the courts for 10 years with a number of understandably upset and distressed home owners faced with loosing their homes. Our Supreme Court has recently given the green light for the by-pass to go ahead and CPO's will be issued.
Much as I'd hate for it to happen to me, so long as there is a transparent due process, and local support for a much needed infrastructure improvement, on the face of it I don't have an issue with CPO's.

Property bubbles inflate because of the oversupply of cheap credit for too extended a period.

In Ireland, our bubble occurred primarily because we lost control over our interest rate. Germany, in order to export its recession and kickstart its then struggling economy had the ECB reduce interest rates again and again when we needed an increase to interest rates.

This occurred just at a time in Ireland when a baby boom hit its late 20s.

Flipping of properties is a symptom of a failure in monetary policy. I have no problem with people making profits in those circumstances. The fault lies with the supply of cheap credit.

You are correct and that is hugely significant, but that is not really the whole story.

Since UK financialization in the 80's fiscal policy has developed to actively encourage speculation in several key ways, local taxation does not reflect rental value, interest payments are tax deductible and capital gains are lower than income tax rates or corporate tax rates (Pre crash).

So if you are a Bain style capitalist who does a leveraged buyout of a company's shareholders and uses the companies own profits to payback the interest on the company's new loan (tax deductible) and then the overheads are slimmed down to make it appealing before floating it on the stock exchange for a capital gain or alternately breaking it up for the same result.

It is the same mechanism for the property speculator, rent to repay interest (tax deductible) - asset inflation to extract capital gain.

Fiscal policy is skewed in favour of debt financing on existing tangible assets to extract economic rent in the form of interest, instead of investment in people and ideas and the creative entrepreneurs resulting in old fashioned production Profits (big P).

This is at the heart of the matter and can not be dismissed as simply a secondary effect of monetary policy.

[pErvinalia]

"natural rights" is just a species of theology. Basically nonsense.

[mistermack]

Cormac, I think there's a lot more to a property bubble than a low interest rate.
We have historically low interest rates in the UK now, but nothing's selling. Because nobody's lending.

A bubble is down to careless lending. Lending only because the bubble is inflating. And bonuses for short term inflationary gains.

Basically, it's because of criminally poor regulation of the banks. The state, backing the banks with taxpayers money, but leaving them to their own devices.

It's like throwing in a week's supply of feed to the pigs, and expecting them to just eat a little each day.

[Svartalf]

"natural rights" is just a species of theology. Basically nonsense.

Ungaua, grum has natural right to bash white man's head in, like black man's and ape man's.

[Jason]

Yep. In reality there are no rights, only what you can do and take by force or cunning.

[Svartalf]

There also are laws, where there is a society to enact and enforce them.

[Jason]

Right. But getting down to basics, those laws are in place by force. Same principle writ larger.

[Cormac]

Cormac, I think there's a lot more to a property bubble than a low interest rate.
We have historically low interest rates in the UK now, but nothing's selling. Because nobody's lending.

A bubble is down to careless lending. Lending only because the bubble is inflating. And bonuses for short term inflationary gains.

Basically, it's because of criminally poor regulation of the banks. The state, backing the banks with taxpayers money, but leaving them to their own devices.

It's like throwing in a week's supply of feed to the pigs, and expecting them to just eat a little each day.

At root, it is a number of issues:

1. Interest rates too low.
2. Complete failure to understand uncertainty and probability throughout the entire banking system
3. Banking regulation is founded on this failure.
4. Incentives are short term in nature
5. Banks have automated so much, they have taken human intelligence out of the process
6. The elevation of rating agencies into their role as the fulcrum of the entire market, when they have a conflict of interest

All of this led to reckless lending, which is a symptom, not a cause.

[Cormac]

You are correct and that is hugely significant, but that is not really the whole story.

Since UK financialization in the 80's fiscal policy has developed to actively encourage speculation in several key ways, local taxation does not reflect rental value, interest payments are tax deductible and capital gains are lower than income tax rates or corporate tax rates (Pre crash).

So if you are a Bain style capitalist who does a leveraged buyout of a company's shareholders and uses the companies own profits to payback the interest on the company's new loan (tax deductible) and then the overheads are slimmed down to make it appealing before floating it on the stock exchange for a capital gain or alternately breaking it up for the same result.

It is the same mechanism for the property speculator, rent to repay interest (tax deductible) - asset inflation to extract capital gain.

Fiscal policy is skewed in favour of debt financing on existing tangible assets to extract economic rent in the form of interest, instead of investment in people and ideas and the creative entrepreneurs resulting in old fashioned production Profits (big P).

This is at the heart of the matter and can not be dismissed as simply a secondary effect of monetary policy.

I accept some of this, but don't really have a problem with leveraged buy outs per se.

It is true that this generation in particlar has been put into hock by bad economic policies and poor banking practices.

Fundamentally this goes back to a failure to understand uncertainty. From a banking perspective, a key moment was the failure of a Germsn bank in the early 70's which ultimately resulted in the Basel Regulations. The belief that risk can be modelled, and thatregulatory capital can be optimised based on those calculations drove things heavily. Regulatory capture occurred at various points, including banking regulations, accounting rules, economic policies, and so on.

[Cormac]

Debt is a fantastic tool, but is not a magic tool. The thing about debt is that it ultimately has to be paid off. Household debt, apart from mortgages are, in general, to be avoided.