Earthquakes and Tsunamis

I’ve been following this with a seriously high horror quotient but the following quote from CNN live reduced me to tears:

Since the initial earthquake, there have been 250 aftershocks above 5.0 and almost 50 above 6.0, CNN's Chad Meyers said.

We live in a potentially savage world but that is so afar beyond the pale that I don;t know what to say – even one of those 250 “minor” quakes would reduce this country to rubble and anarchy – and these people have had to withstand hundreds of them.

I sincerely hope it gets better now , rather than worse.

Quack Medication and Professional Ethics

I believe that the multi-billion pound\dollar alt-med "movement" is a real problem that is a shame on our society. Apart from the areas where it accidentally leverages placebo effects it does nothing positive at best, can be hugely destructive at worst and relies on fantasy and a denial of reality as fundamental principle.

As an example, the overwhelming medical research* out there indicates that Homeopathy does not, and cannot, deliver positive medical outcomes. I’m picking on them as an example but like the rest it’s a hugely profitable business based on fantasy. Fortunately, unlike some others (many herbal teas can be toxic in large doses for example), there is also zero risk of direct negative medical outcomes. The opportunity cost, however, can be fatal for those ill-informed enough to put their entire trust in it which is not a trivial consequence. As a business it’s about selling little bottles of water and sugar pills where the raw material costs of the ingredients are effectively zero. All real costs are for packaging, marketing and distribution alone. Even better they can make “stronger” products (ie more expensive ones) by (further) diluting the ingredients. Imagine how you could rake in the cash in any other business if you could persuade your customers to pay you twice as much for half the product. From a purely business perspective, that really is magic, but it needs a lot of effective marketing to convince people to pay for something that does nothing. Most of that marketing comes from effective placements in Pharmacies, because we’re all conditioned to trust our Pharmacists’ professional medical judgements.

That it exists at all may be an insult to rationality, but at some level if people want to be duped then I can’t fault a smart business for chasing that market. However a large part of its continued success stems from the fact that the public perception of its validity is massively inflated by the fact that Pharmacists appear to a casual consumer to consider them as perfectly valid medications.Now I know that many will argue that they are (usually) displayed and labelled in a way that separates them from real medications but I cannot understand how they can fail to acknowledge how weak that argument actually is.

From my perspective the fact that Pharmacists dole out Homeopathic and other “alt-med” quack cures would be like an Electrician who would happily wire up your house with wiring made from wool wrapped in paper. We don’t get duped by wool and paper pseudo-electricians of course but that’s because any fool can demonstrate that some wool wrapped in paper wont power your kettle. With medical issues we need trustworthy medical professionals to tell us whether some possible treatment will do what we need it to do. Proving medical outcomes is hard, requires expertise, and defending the rigour required by those processes in the face of the overwhelming force of the profitability of the quack medication industry is hard. Given the trust we put in Pharmacists I feel that they should be obliged to act ethically in this regard, and they don’t.

Before I go on I probably should also say that I don’t particularly trust the Pharmaceutical Industry as a whole, the companies that make all our (legal) drugs that is. It’s got its own problems, some of them immense, but for the most part their business is to make stuff that has genuine medical effects. For all the corruption that there may be there, they are accountable to rationality at some level and their products are subject to extensive scrutiny with regard to their benefits and harms. They are also profit-seeking scumbags in many cases, but they actually do deliver reality based medications that have transformed the medical outcomes of virtually everyone on the planet. They are subject to license (in most places) and have to act accordingly. 

In Ireland we have a tightly controlled consumer pharmaceutical trade. I cannot buy more than a handful of paracetamol pills at a time (for well intentioned medical reasons), codeine based OTC painkillers are now only available after talking to a Pharmacist (again arguably a valid requirement that helps limit potential abuses), and pretty much any genuine medication has to be purchased through a regulated pharmacy. We give Pharmacies this monopoly because they are rigorously regulated as professionals and that provides benefits to us because they control the distribution of many beneficial but genuinely dangerous drugs.

The downside is that, as with any other monopoly scenario, we pay many times more for common drugs here than we otherwise would. If I recall correctly from my last trip to the US I could buy many common drugs (ibuprofen, aspirin, paracetamol, famatodine) easily in bulk at costs up to 40x lower than here. And if I can buy a couple of thousand ibuprofen pills in the US for the cost of a packet of 24 here then, frankly, the bloody pharmacists should be doing that for us instead and making it obvious to us when we are about to spend €5 on a couple of Neurofen that they could give us 100 generics for €1, or whatever. And by all means be careful about selling 1000 Paracetamol to anyone stupid\depressed enough to try and down them all in one go but don’t use that as a shotgun excuse to extort 95% profit margins from the 99% of the population who aren’t going to do that.

But all of that is a minor business ethics faux pas compared to the medical ethics catastrophe that is their willingness to collaborate with the various quack pseudo medication scams out there. The sight of magic cures sold by Pharmacies and presented as if they were on a par with real medication is a shocking example of profit trumping medical ethics. How on earth can anyone trust a pharmacist's ability to provide competent advice on taking medication when they also sell magic magnetic bracelets, water potions, Flower Power pills and Mr Fruity's Frightfully Useful Unguent. They might as well have displays for Ollivander's Magic Wands, quantum dream catchers, holographic pixie dust, compressed unicorn karma, blue moon crystals and other trans-dimensional snake oils sitting by the till under a sign that says "Guaranteed Cures for all your Ailments".

Frankly in doing this they whoring out their professional reputation in order to delude the vulnerable and make a quick buck. I really find that despicable. I’m sure their businesses are complex, and making a profit is relatively hard overall so in their defence I’d actually be happy enough to let them charge me 40x the cost for a few painkillers if I knew that cost also made their business viable enough that I would then trust their medical judgement when it came to the stuff they sell. But right now there is no way that I can, and I don’t see how anyone could.

As a possible compromise perhaps Pharmacists should be obliged to treat alt-med products in the same way that they deal with codeine based products: Hide them behind the counter and interview all potential customers. After all the purpose with the Codeine rule is to protect people from their own stupidity, so if they took the time to have a chat with anyone looking for magic water pills so as to explain what they actually contained, the real benefits\risks attached and then form a judgement as to whether the sale was going to be helpful to the customer before allowing it, then they could ethically continue to sell them.

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* You know the extensive actually scientific stuff with proper controls**, statistical analysis, peer review and openness about methodology.

** For placebo effects***, age cohorts, other drugs, blah blah.

***Now if Homeopathy was to rebrand themselves as “Placebopathy” and drop the magic water-bashing of minute trace dilutions imparting some mystical quantum molecular memory mumbo jumbo then we’d be getting somewhere.

Questions for our Politicians

I just watched an utterly shameful display of political fuckwittery of the highest order. We had senior(ish) representatives from what are now apparently our four main political parties (FF, FG, SF & Labour) gracing our National airwaves in order to catastrophically fail to explain what their plans would be for tax increases and expenditure cuts if they happen to get into power. They seemed to prefer to call each other names and bang out shrill party slogans with obviously no intention of actually communicating anything substantive.

In the interests of getting this straight for myself (my numbers may be off by a billion here or there, it doesn’t make any difference) I took a look at the numbers.

We are currently running our country by spending €14bn more than we make. We make €33bn. In the long term a 3% (or ~€1bn) deficit is more or less OK so we’re searching for a way to tax more and spend less so that €13bn difference goes away by 2014 or thereabouts. Now this is down from a €17bn problem prior to December if I recall correctly. But that extra few billion will only remain saved if the incoming government does not backtrack significantly on the measures already taken by the outgoing FF crew.

So all of our friends on TV tonight needed to say where they will find that €14bn and none of them could offer up anything that convincingly demonstrated more than a few hundred million worth of ideas. At best they were talking about stuff they might do this year, not how they would actually get us out of this.

To put that number in some perspective, these are the important taxes and expenditures for 2007, 2010 and 2011. Between them they account for about 75% of the whole equation.

	2010	2011	2007 (!!)
Income Tax	11.1	11.5	14.3
Corporation Tax	3.8	4.1	6.7
VAT	10.2	10.7	14.6
Excise\Stamp Duties	5.5	5.9	9.9
Education	-7.9	-8.4	-7.6
Social Welfare	-13.2	-14.2	-7.4
Health Services	-10.8	-10.6	-10.6

 

The 2007 numbers show just how extremely trashed the economy has been by the collapse – at that stage the four main sources of income exceeded the three main expenditure items by a more than 80%. Now income from them is 20% lower than the expenditure on those three alone.

Now ask yourself how any tweaking of the system can find €14bn in there without causing levels of hardship that are sure to cause a revolution.

Nobody is addressing this elephant in the room with any honesty – the numbers can be made add up but it’s got to be a combination of savage cuts in areas that haven’t seen real cuts yet (Education\Health), savage cuts in social welfare along with massive increases in Income tax, VAT and Excise. Corporation tax is a bust much as I would prefer it to be otherwise, any significant increase there will simply lead to offshoring of profits or disinvestment.

The problem with this is that the Irish population simply will not vote for someone who tells them that even if it is true and even if someone actually does manage to go so far as to implement it there will be blood on the streets. Note how outraged people are with the impact of the 2011 Budget, and just look at how trivial those changes actually were in the context of the immediate problem.

The other elephant in the room is that while growth could help make these numbers a lot more attainable the debt and interest burden required to fund ourselves until we get this into balance adds significantly to the problem – we’re running on a treadmill that’s accelerating there. And don’t forget that each €2bn in savings in expenditure translates into at least a 1% reduction in GDP if not more. So that’s another treadmill on top of the debt one that we have to race against.

Until someone puts some realistic numbers on genuine alternatives (wealth taxes that take into account the inevitable flight of wealth as a result, real property taxes, levies on natural resources (those gas fields off Mayo spring to mind) I can’t see how there’s any way out of this.

And I sure as hell don’t believe that any of our politicians have a clue how to do it either.

Then and Now – Running a Country into the Ground.

Any monkey can run a business, or a country, when revenues are rising rapidly. It requires no skill to appear to be successful, because you can hide your mistakes easily and nobody asks hard questions when the money appears to be flowing. What does require skill and wisdom is recognising the danger that presents and acting pre-emptively to ensure that when your luck changes you are in a position to weather the storm.  Clearly none of our politicians have that skill, the promises made in advance of the last election are worth examining now as a measure of how they are all guilty.

• Fine Gael Election 2007 Manifesto (cut taxes and spend more and )
• Labour Election 2007 Manifesto (sort of play with taxes and spend more to be fairer)
• Fianna Fail Election 2007 Manifesto (spend more and cut taxes, oh and aren’t we great)

I’m amazed that it now appears to be blazingly obvious to everyone that the tax base we had at the time was fragile and over exposed to construction. The fact that not one of the above documents gave the slightest indication that building a sustainable, recession proof tax base was on anyone’s mind a mere 9 months before the current disaster started to unwind is a good indication that the same people are not really equipped to get us out of this mess, regardless of party. Whatever options they put forward for consideration this time, they better show some better analysis of both sustainability and actual vision. It gets even worse if you go back further.

And don’t get me started on the Greens. Or Sinn Fein for that matter. At least the bloody PD’s did us all a favour and died out.

Primetime had a few notable numbers that we should all keep in mind with the election looming. Obviously we’re all aware of these, and the even more tangible reduction in net income after the last few budgets but it’s worth remembering that this is how badly screwed we are. And we would still be here no matter who had won the last election…

Despite last Decembers budget we are still running at expenditure levels that are almost 50% higher than revenues and this is before any of the punitive effects of IMF\EU “bailout” funding kicks in.

	2007	2011
Tax Revenues	€48bn	€33bn
Unemployment	158000	349000
National Debt	€38bn	€93bn
Deficit	-€1bn (Surplus)	€14bn (deficit)
Average House Price	€340000	€191000

 

What I want to see is grovelling apologies across the board from all of these clowns and something that will genuinely convince me that they know how to [a] get us out of this and [b] make sure it can never happen again. 

VHI and the drive to Co-Payment

The country has reacted to the VHI’s announcement of increases of up to 45% with a mixture of outrage and shock. Call centres from all three Health Insurers have buckled under the response as people scramble to find a way to either reduce or avoid this hit.

The thing that I find absolutely unbelievable in all of this is the continuous harping on about the burden that VHI’s elderly members put on the system. The amount of complete garbage being thrown about beggars belief. The VHI is apparently suffering because some 20% of their members are 60 or over, and those people tend to claim a lot more. This isn’t a surprise folks, that’s sort of why they have actuaries and all the other expensive risk profiling staff they have employed but even without them it’s blatantly obvious that older members will claim more. For a medical insurance firm to turn around and say that those people are a burden on them that affects their profits doesn’t make any sense – these people have been members for decades, probably all their lives, and were under claiming or claiming nothing for many of those years. If the VHI were properly accounting for the risks their members presented they should have built up reserves to deal with the age profile of their members. I’d have some sympathy for Quinn or Aviva making the claim given the fact that they haven’t been around so long but even so their charges should allow them to meet their expected claims profile, including making assumptions about those members getting older and making more claims.

If the VHI are actually claiming that the claims that older people now represent a 45% higher burden than they previously expected them to be then frankly they are admitting to gross incompetence. I’ve no problem with increases being necessary, medical costs are rising too fast, but the VHI and other providers are in a distinctly powerful position to keep that under control. In any case I can’t believe that’s true at all, it’s just a convenient excuse. The real problem is that Plan B represents a style of plan that the VHI really wants to kill off because such comprehensive insurance is a bad idea because it removes any cost awareness from the members, and ideologically that’s a bad thing if you’re an insurer.

It seems to me that the motivation is that the VHI want to move the population en masse to co-payment based plans, because those are believed to encourage lower overall claims, and to do so in a way that avoids most of the specific debate that would take place about that if they were to do it any other way. Given that the people who have reacted to this are, by and large, younger people on Plan B and its ilk I suspect that it is all pretty much going according to plan and the VHI will be pretty happy provided most people elect to change plans rather than providers. Even if relatively few elderly members switch they will have made significant inroads into eliminating the real problem – the 500,000 odd younger people that they never want to see growing old on a non co-payment plan.

If I’m right then VHI will continue making the same claims about the elderly being a burden , and continue to equate elderly with Plan B participation while they repeat the dramatic hikes on the cost of those plans.

The joys of travel

I’ve just finished a rather epic amount of business related travel (well epic for me at any rate) where I clocked up about fifty thousand km of flying over about 11 weeks – two US trips, about a half dozen hops over to The Netherlands and a couple of other hops to Spain and the UK. All while trying to finish up a major project that required me to spend a lot of time writing, editing and learning a bunch of new technical content for a course that I was developing.

For those of you travelling I have a couple of tips. Schipol Airport in Amsterdam is the best Airport I’ve found to get delayed in – lots of things to do when you’re trapped, plenty of places to crash for extended periods of time in reasonable comfort and some half decent places to eat even when you are stuck in the Departure\transit areas. Bristol Airport (Airfield would be a better description) is a shithole. Madrid’s alright, Austin is pretty good. In Newark you can keep yourself entertained by exiting the departure gate area and coming back in through the TSA security checks as often as you like. It’s amazing how the rules change every time you try this; take your boots off\don’t take your boots off, unpack your laptop or don’t, Is that an Umbrella!!!!. The best fun can be had by repeatedly going through with a bottle of water carefully stashed in your back pack. They love finding them, it brightens up their day and when you get the same screener for the second time in an hour they start to think you’re really a TSA plant who just might be carrying something else that is designed to test their success rate. Hey what can I say when you have a six hour stop over you have to be creative about your entertainment.

I was hoping to find that they would have the new back scatter X-Ray scanners in the US but was disappointed however they just introduced the new back scatter type scanners  in Schipol at the start of December so I got to play with them on my last flight back. Now you are absolutely not allowed to remove your shoes in Schipol, presumably the fancy new machines are certified for all types of footwear. The best bit about the Schipol implementation though is that the displays are on the outside of the machine so once you come through you can grab a nearby seat and watch low res security porn along with the screeners. For the conscientious objectors amongst you I couldn’t figure out if there was any option but to go through the scanner although I can’t say for sure as nobody made an issue about it on my flight.

Thankfully nearly all airlines have now decided that “Flight Mode” on phones actually means something useful but for some reason European airlines still refuse to let you enable phones “until the cabin doors have opened” while in the US it’s OK to turn them on as soon as the tyres hit the ground. In any case it’s an improvement on the recent past when the flight attendants on some airlines (Lufthansa, I’m looking at you) would threaten to turf you off the plane if your electronics weren’t fully powered for the entire time you were on board.

Texas was a laugh. They do food very well for the most part and my personal favourite was a place called Rudy’s that specializes in  Texas BBQ. Rudy’s is a Gas station\BBQ restaurant combination – sort of an up market truck stop. The various options for giving yourself liver poisoning by overdosing on barbecued meat were superb though. This sign on a one of the outbuildings sums it up quite well – and captures my Texas experience perfectly.

I was staying in a pretty basic residence style hotel in Round Rock that had no real restaurant and no bar. Next door was a delightful little eatery called “Joe’s Crab Shack”, part of a chain that’s pretty popular in Texas apparently. Anyway they served food (which was alright but the hefty portions more than made up for my quibbles about the style of preparation) and Joe’s had a Bar which I took as a sign that I should give them some business. It was good fun with plenty of Beer options and a wide range of other stuff including the delightful blue drink they call a SharkBite which comes in a Mason Jar and probably includes insurance cover for getting your stomach pumped later. The highlight of that trip was a conversation I had with “Hi I’m Tabitha and I’m going to be your server this evening”. To be fair to Tabitha she was very friendly and efficient, the beer was kept coming at the rate required and her desert suggestion was superb. However about half way through my meal she sat down opposite me, having noticed that I was reading a book (on my own travelling you see, so I read a lot) and came out with a line that was almost the funniest thing ever. Thankfully she didn’t quite get the quote 100% correct or I would have been unable to avoid collapsing in a heap on the floor, she was just genuinely curious about what anyone would be reading while out for some food. Anyway she sat down and said “What ya’ll readin’?” – At that point in time all I could think of was this bit of Bill Hicks comedy gold, coincidently recorded at gig in Austin.

 

 

I was so entertained that I doubled her tip. In hindsight I suspect she might even have been a Bill Hicks fan and planned that all along.

Property Taxes in Ireland

Or how to alienate all your friends with one blog post.

The prospect of property taxes is getting a lot of coverage here in Ireland of late and I’ve been very disappointed with the tone of the debate. Too much of the “over my dead body”, “I paid my taxes already”, “what about the old folks” and not enough debate about whether it’s a good type of tax or a bad type of tax. Given that we’re all going to be paying a lot more taxes I’d like to see those being good taxes and that we have a decent discussion on what that means.

Good taxes are efficient, equitable, progressive, broad based, sustainable, hard to avoid, easy to collect and immune to external shocks. They take proportionately from everyone at a level that they can afford and provide the government with a predictable and stable income.We’re going to have more taxes – there’s no avoiding that and I would prefer that we got taxes that improved things in the long term. We’ve got a chance now to fix one of the most broken parts of the Irish tax system and we should be making an informed choice about it.

First off let me say that I’m all in favour of property taxes in general and even more of a fan if they are well thought out. As far as I can see they can have most of the characteristics of a good tax if they are properly implemented. The current “Stamp Duty” style of tax on property transactions is poorly structured and has major negative effects in terms of market effects the volatility of the government revenue stream it provides. A regular annual tax on property ownership that was used to eliminate stamp duty would be a much better approach from an economic perspective. I’ll look at the reasons why I think so at the end but first off lets figure out what it might look like and deal with the common counter arguments.

Let’s assume that the property tax will gravitate to a number that is equivalent to the average stamp duty/average time a house is owned so that over a fairly long time period we’re looking at something that is mostly revenue neutral. Let’s assume for the sake of roundness that this equates to an average current homeowner having paid €30k in stamp duty (which is near enough to 9% of the average house price at it’s peak) and people hanging onto houses for an average of 15 years so the tax will be around €2k per annum for an average house. I actually don’t think the tax should be that high, possibly half that smells about right to me but we’ll work with these numbers for now.

An inability to pay is going to be a valid and real concern for many people. The best suggestion I’ve seen for this is to use a system of deferrals – basically if you can’t pay according to some assessment criteria (e.g. it would result in > 50% of your net income being spent on housing) then some or all of the tax due could be deferred against the final disposal of the property (either by sale or inheritance).

Anyway onto the screams of why it wont work.

I’ve already paid my property taxes via stamp duty. True in a limited sense, not true enough though. Yes you have paid a tax already but if property taxes were properly levied based on the economic value of the property on a periodic basis and stamp duty was abolished (because it is a bad tax) then you would be no worse off in the long term. For people selling to trade up (or down) there is now no tax to pay so it will be easier to sell (good) and the cost of your new house will be lower (even better). Provided you hold on to your houses for less than 15 years you will actually be better off under this model. If you are a first time buyer now trading up the same fundamentals apply but you will also benefit from getting a free pass on the Stamp Duty that you didn;t have to pay but was priced into the cost of your first purchase by the market. In effect a first time buyer will be better off provided they sell within 30 years (or thereabouts). The only people who will be less well off in this case are those cashing out totally, or those who exceed those periods. Given how long they are (and the reality will be even longer) I don’t think this is a fair criticism of this sort of tax. Yes you will be paying more money now – but for the vast majority of people you wont be paying more in the long run.

What about the Old folks? And  you can amend this to include the young folks who’s backs are to the wall because they’ve lost their jobs. There are many people out there who are on limited incomes, who scrimped and saved all their lives, braved out the 70’s and 80’s when it was really tough to buy and hold on to a house and are now left with nothing much apart from a house. Many of those will be pushed to, or even over the limit by a property tax. The best approach here is the deferral concept where either all, or a proportion of the tax due can be deferred against the value of the property and comes due when it’s sold or inherited. That’s not ideal from a taxation perspective as the revenue stream benefits of a regular property tax are lost but it means that the tax becomes fundamentally identical to the current stamp duty scenario so the transition can be made relatively painless for those who would genuinely suffer. Over time this will progressively hit older people more though – especially if they live in their homes for longer than 15 years which is currently pretty much what we expect. Then again if this encouraged sequential downsizing and a social transition towards structured private elderly\frail care housing developments then this would be a damn fine thing too for the longer term. I would really like to have that sort of option become practical here and this would encourage it.

Over my dead body/this is my house, I built it with my bare bands/Gerroutofit ye thieving Gummint carpetbaggers. Honestly John Galt appears to have set root in Ireland lately and it’s not pleasant. There are lots of issues behind this type of comment but I’m going to ignore the ones that are mostly about people just not wanting to pay their fair share of tax. That’s something we’ve got no choice about and I’m tired about the whinging - people seem to forget that we have taxes for good reasons as well as the current high profile bad ones and even now most of the money is being spent for good reasons. In any case how and why you got\built or grew your house is irrelevant but you own it and it has both an asset value and it delivers an ongoing benefit to you. Sure you are paying for it (most of you anyway) but it is also returning a regular income to you in the form of rent that you would otherwise have to pay. If you put the money in a bank, generating interest and rented a house then you’d have to pay taxes on the investment income and also pay rent after all. There’s no logical reason to treat the invisible income from an investment in a home any differently from other income, certainly not here where home ownership is somewhere north of 80%. That income may not come in the form of money but it is still income. Just as the benefit I get from having a company car has to be taxed the effective saving a house owner makes from not having to pay rent should be taxed, and property taxes do just that. For those with mortgages that probably should be offset (somewhat) by the mortgage interest payments but the economic benefit of accurately pricing home ownership and rental the same way from a tax perspective are significant.

But I bought this as my retirement fund. Well whoop-de-do. It was a good strategy at the time, by far the most tax efficient thing to do but frankly not economically healthy for the rest of us. And just because it used to be a tax free (or very tax efficient) way of stashing away money doesn’t mean it should remain that way. This is particularly true for the 250k second homes out there sitting idle. The current system encouraged capital to be invested in properties that are now a total deadweight from an economic perspective. Taxing them actively will help prevent that sort of gross misallocation of resources in the future and go some way towards pulling some of those vacant follies back into the productive part of the economy. First, second and whatnot houses should all be treated and taxed the same way – the current second home levy is a bad concept and should be ditched along with stamp duty. Remember if there’s a genuine financial stress issue with this then my earlier comments regarding deferrals is a fair way to deal with that. In the longer term I have little sympathy – my own retire-early-with-a-fat-pension prospects have been substantially scuppered by the mismanagement of the economy by those who fed the property boom so I see no reason why anyone involved, even someone who simply bought a house as an “investment” should be given any particularly special treatment. 

We’ll lose the family home when Mom\Dad dies. Grow up. Seriously. If you’re that worried then do something about that now and help Mom and Pop pay the bill today. If you can’t then you can’t afford the house when you inherit it anyway.

On the plus side:

Immediately delivers a long term stable revenue stream for the government. This is the key benefit – instead of having a massive decade long hole in the public finances the government gets to pull in a tax revenue stream that will remain immune to economic cycles. That’s a very good thing. One way or another the government is going to get that money out of us but this way they get the cash they need now in a way that will prevent them screwing things up repeatedly in future. That’s a win.

It’s progressive and equitable. By definition – if you have a bigger, better house or more of them then you will pay more and you should because you are richer. If you don’t own property (and are by definition poorer) then you don’t pay. It’s a tax that almost everyone will have to pay (or defer) since over 80% of the households in the country own houses but it’s one that will by and large be imposed on the basis of relative wealth. Those who made paper millions by having and holding onto a nice house in a good area since 1980 will be hurt but they should be allowed defer [some of] the payment if it’s punitive and, to be brutal about it, anyone in that position did absolutely nothing to earn the €1.5million that the house they paid €20k for is now worth.

It’s hard to avoid. Again it’s pretty obvious but tax avoidance and evasion are going to be huge issues over the next couple of years and a simple (or relatively simple) property tax code based on real valuations (or good proxies to them) should be relatively immune to abuse.

Its economically efficient. I’m not sure if efficient is the right word but if something is taxed as if it generates income then basic economic forces will lead to more accurate pricing (no more bubbles which is a good thing*) and will help prevent wasteful resource allocation (no more, or fewer ghost estates). To be fair the elimination of all of the dodgy tax-exemptions for building trash pits will do more on this front but having a property tax apply to property as soon as land is zoned for development will go a long way towards making sure that waste is avoided.

 

More to follow – I’ve got to look into the issues of property (and other investment asset) taxes and corporate entities. I think that the same basic principles need to apply but I’ve no idea what the current scenario is.

 

* unfortunately no more bubbles and efficient pricing of the housing market would mean that it will be about 10-15 years before there’s any chance that house prices will recover to 2006 levels assuming we get out of the current mess in a year or two. That would also mean that homes would never gain be a “good” investment. They will be safe and stable and affordable though which is what we really should be looking for, isn’t it?