Scrutable

Fluctuating incomes are also a massive problem, because you constantly need to renegotiate your repayments.

Also people sometimes enter into formal debt arrangements that creditors aren't necessarily happy with and if your creditor is e.g. your landlord, that can spell trouble.

lpm wrote: ↑

Thu Feb 04, 2021 12:45 pm

The nezumi answer is the best one. Getting an honest day's pay for a day's work gets people out of debt, but people are getting less than an honest day's pay.

How do you decide how much it is and who pays for it? Maybe we need to go back to the 90% income tax of the sixties to level the playing field.

Herainestold wrote: ↑

Thu Feb 04, 2021 3:32 pm

lpm wrote: ↑

Thu Feb 04, 2021 12:45 pm

The nezumi answer is the best one. Getting an honest day's pay for a day's work gets people out of debt, but people are getting less than an honest day's pay.

How do you decide how much it is and who pays for it? Maybe we need to go back to the 90% income tax of the sixties to level the playing field.

I'd hate to tax income too much, I'd be more inclined to tax wealth, particularly offshore wealth. 90% of that would do quite nicely. It doesn't belong to them anyway, all money is borrowed from the state and the state has the right to repatriate it.

Edit: to add, I'm under no illusions, if I went into politics I'd be assassinated in about 5 minutes flat.

nezumi wrote: ↑

Thu Feb 04, 2021 3:43 pm

Herainestold wrote: ↑

Thu Feb 04, 2021 3:32 pm

lpm wrote: ↑

Thu Feb 04, 2021 12:45 pm

The nezumi answer is the best one. Getting an honest day's pay for a day's work gets people out of debt, but people are getting less than an honest day's pay.

How do you decide how much it is and who pays for it? Maybe we need to go back to the 90% income tax of the sixties to level the playing field.

I'd hate to tax income too much, I'd be more inclined to tax wealth, particularly offshore wealth. 90% of that would do quite nicely. It doesn't belong to them anyway, all money is borrowed from the state and the state has the right to repatriate it.

Edit: to add, I'm under no illusions, if I went into politics I'd be assassinated in about 5 minutes flat.

You might or might not find this interesting or useful but I recently listened to an LSE podcast about a wealth tax. Specifically, the speakers recommend a one off wealth tax as a way to raise revenue quickly to deal with the current er, situation, so the discussion is mostly around that rather than say an annual wealth tax, but they do discuss some of the advantages and pitfalls of that kind of tax along with other taxes. It's here: https://www.lse.ac.uk/Events/2020/12/202012091000/tax (links to download etc towards the bottom).

Fab thanks Disco

I'm queuing up a few things to watch when my MH has recovered from the last week so I can't cope yet but deinitely bookmarked.

Cool (well not the dodgy MH but you know what I mean!). I quite like the LSE podcasts generally. Hope you are starting to feel a bit better.

discovolante wrote: ↑

Thu Feb 04, 2021 4:36 pm

Cool (well not the dodgy MH but you know what I mean!). I quite like the LSE podcasts generally. Hope you are starting to feel a bit better.

See Relaxation Station for details

I dont know if it happened in the run up to 2008, but I remember around late 1980's low start mortgages were all the rage. (As were investment backed interest only ones - cant remember what they were called now. Endowment Mortgages?). It was common to be offered a 100% mortgage, low start but rising to 5x salary or more (a lot back then) on the basis that house prices would always go up so you could "flip" the house before the full rate hit.

When house prices stopped rising things were tricky for a lot of people. (Including me as it happens and I didnt do any low start or other fancy offerings).

A little anecdote to lighten things up for a second.

The man who lives next door to my dad is hated on their street because it's street of bunglaows occupied by pensioners, and he runs his scrap metal business from his driveway, put up a probably illegal extension and left a massive camper van to rot for a decade on the drive.

It has come to my attention that this man, who also happens to be personally unpleasant has his house on an endowment which he bought in the 90's(!) which is going to fall so far short as to be laughable.

We don't know what is going to happen, but it's a lovely dose of schadenfreude, nontheless.

Imrael wrote: ↑

Thu Feb 04, 2021 5:54 pm

I dont know if it happened in the run up to 2008, but I remember around late 1980's low start mortgages were all the rage. (As were investment backed interest only ones - cant remember what they were called now. Endowment Mortgages?). It was common to be offered a 100% mortgage, low start but rising to 5x salary or more (a lot back then) on the basis that house prices would always go up so you could "flip" the house before the full rate hit.

When house prices stopped rising things were tricky for a lot of people. (Including me as it happens and I didnt do any low start or other fancy offerings).

yeah, would have been an endowment mortgage - my dad had a 95% one in 1990, which turned out to be a pretty bad idea, although doubt my parents would ever have got a house otherwise tbh. Weirdly, i think the credit crunch helped there. The interest rate dropped, but he kept the payments up as they had been before, and ended up gradually paying off the shortfall. Now, crappy and dusty and cold as it is, he does at least own it.

Stephanie wrote: ↑

Thu Feb 04, 2021 6:13 pm

Imrael wrote: ↑

Thu Feb 04, 2021 5:54 pm

I dont know if it happened in the run up to 2008, but I remember around late 1980's low start mortgages were all the rage. (As were investment backed interest only ones - cant remember what they were called now. Endowment Mortgages?). It was common to be offered a 100% mortgage, low start but rising to 5x salary or more (a lot back then) on the basis that house prices would always go up so you could "flip" the house before the full rate hit.

When house prices stopped rising things were tricky for a lot of people. (Including me as it happens and I didnt do any low start or other fancy offerings).

yeah, would have been an endowment mortgage - my dad had a 95% one in 1990, which turned out to be a pretty bad idea, although doubt my parents would ever have got a house otherwise tbh. Weirdly, i think the credit crunch helped there. The interest rate dropped, but he kept the payments up as they had been before, and ended up gradually paying off the shortfall. Now, crappy and dusty and cold as it is, he does at least own it.

Ditto for us, who bought in '86
We were on a 'low cost' endowment, which technically might have been 'mis-sold', but the low growth in the endowment was parallelled by the low mortgage interest rate, so by keeping payments at the same rate we managed to reduce the capital amount by almost 50%, so rather than having a shortfall, we had a balance reimbursed at the end.
We were sent letters saying how we could claim compensation for mis selling, but it seemed grasping to claim money when we actually benefitted from the situation.

But as I recall, low rates had been an issue for a while before the 2008 crash.

I took out my first mortgage in1992. Took some time to find someone to give me a capital and interest mortgage as endowments were still being heavily pushed.

Herainestold wrote: ↑

Thu Feb 04, 2021 3:32 pm

lpm wrote: ↑

Thu Feb 04, 2021 12:45 pm

The nezumi answer is the best one. Getting an honest day's pay for a day's work gets people out of debt, but people are getting less than an honest day's pay.

How do you decide how much it is and who pays for it? Maybe we need to go back to the 90% income tax of the sixties to level the playing field.

The top rate of Super Tax was 95%. (Hence the lyric in the Beatles song Taxman: "There's one for you, nineteen for me".)

discovolante wrote: ↑

Thu Feb 04, 2021 4:27 pm

You might or might not find this interesting or useful but I recently listened to an LSE podcast about a wealth tax. Specifically, the speakers recommend a one off wealth tax as a way to raise revenue quickly to deal with the current er, situation, so the discussion is mostly around that rather than say an annual wealth tax, but they do discuss some of the advantages and pitfalls of that kind of tax along with other taxes. It's here: https://www.lse.ac.uk/Events/2020/12/202012091000/tax (links to download etc towards the bottom).

Piketty also advocates for what he calls an 'exceptional tax on capital' as a way of dealing with the public debt. E.g.

Piketty, Capital in the 21st century wrote:How can a public debt as large as today’s European debt be significantly reduced? There are three main methods, which can be combined in various proportions: taxes on capital, inflation, and austerity. An exceptional tax on private capital is the most just and efficient solution.

I assume the covid situation only reinforces his opinion on this. He also discusses some previous applications and attempted applications of such taxes, e.g. in France in 1945 and Cyprus in 2013.

secret squirrel wrote: ↑

Fri Feb 05, 2021 2:09 am

Piketty also advocates for what he calls an 'exceptional tax on capital' as a way of dealing with the public debt. E.g.

Piketty, Capital in the 21st century wrote:How can a public debt as large as today’s European debt be significantly reduced? There are three main methods, which can be combined in various proportions: taxes on capital, inflation, and austerity. An exceptional tax on private capital is the most just and efficient solution.

I assume the covid situation only reinforces his opinion on this. He also discusses some previous applications and attempted applications of such taxes, e.g. in France in 1945 and Cyprus in 2013.

The biggest problem with trying to pay off a national debt is that it's like someone who owes $40,000 on their credit cards trying to figure out how to pay them off. If they magically acquired enough money to do so (e.g. a leprechaun gave them a pot of gold) they would take this as an indication that the debt wasn't really a problem and go straight back to running up another debt. If a nation looks like it is paying off debt, this is taken by both voters and politicians as a reason to spend more, so ultimately it can never be paid off.

And as for tax on capital, I haven't seen a good worked example that shows how it could be achieved. For example, what would happen to Jeff Bezos, the first person to have a net worth exceeding $200 billion. What tax would he pay on that $200 billion and how?

discovolante wrote: ↑

Thu Feb 04, 2021 4:27 pm

Specifically, the speakers recommend a one off wealth tax

The speakers sound like they're a bit lacking in knowledge of human nature. There's no such thing as a successful one-off tax as if it is successful it gets repeated. A good example of this is income tax which was introduced as an exceptional measure to finance war and quickly got the government addicted so that despite attempts to get rid of it, it kept returning and we're now stuck with it.

Millennie Al wrote: ↑

Fri Feb 05, 2021 4:17 am

discovolante wrote: ↑

Thu Feb 04, 2021 4:27 pm

Specifically, the speakers recommend a one off wealth tax

The speakers sound like they're a bit lacking in knowledge of human nature. There's no such thing as a successful one-off tax as if it is successful it gets repeated. A good example of this is income tax which was introduced as an exceptional measure to finance war and quickly got the government addicted so that despite attempts to get rid of it, it kept returning and we're now stuck with it.

You might want to listen to the podcast, because this is addressed. You might not be satisfied with their response but they also make it fairly clear what their remit is which is to recommend a tax which would be technically effective, not get involved in the politics.

Millennie Al wrote: ↑

Fri Feb 05, 2021 4:17 am

discovolante wrote: ↑

Thu Feb 04, 2021 4:27 pm

Specifically, the speakers recommend a one off wealth tax

The speakers sound like they're a bit lacking in knowledge of human nature. There's no such thing as a successful one-off tax as if it is successful it gets repeated. A good example of this is income tax which was introduced as an exceptional measure to finance war and quickly got the government addicted so that despite attempts to get rid of it, it kept returning and we're now stuck with it.

A bad example is Gordon Brown’s windfall tax on private utilities, which happened once.

Woodchopper wrote: ↑

Thu Feb 04, 2021 12:36 pm

lpm wrote: ↑

Thu Feb 04, 2021 12:26 pm

In the US personal insolvency rates are even higher due to medical debts.

Yes, big difference there as people who aren't insured and are unlucky can very quickly end up with tens or hundreds of thousands of dollars in medical debt.

That said personal bankruptcy is even easier in the US. So its not like people are saddled with the debt for a lifetime. Though their credit rating gets f.cked.

I don't have up to date information, but did get into an email correspondence with Dr Deborah Thorne who was a coauthor on one paper that estimated that 75% of medical bankruptcies in the US were for people who had had insurance at the start of their illness.

Not having listened to Disco's pod link yet I'm curious about what a (one-off or otherwise) wealth tax would be. Seems likely to me that a large chunk of personal wealth is in a single large asset - a house - and it's not obvious what an old couple who have a bungalow and little cash would pay their wealth tax with. A re-mortgage?

Martin Y wrote: ↑

Fri Feb 05, 2021 12:22 pm

Not having listened to Disco's pod link yet I'm curious about what a (one-off or otherwise) wealth tax would be. Seems likely to me that a large chunk of personal wealth is in a single large asset - a house - and it's not obvious what an old couple who have a bungalow and little cash would pay their wealth tax with. A re-mortgage?

I assume there would be allowances, and some items disregarded. There would be objections to everyone having to list their assets and keep figures updated.

Gfamily wrote: ↑

Fri Feb 05, 2021 12:42 pm

Martin Y wrote: ↑

Fri Feb 05, 2021 12:22 pm

Not having listened to Disco's pod link yet I'm curious about what a (one-off or otherwise) wealth tax would be. Seems likely to me that a large chunk of personal wealth is in a single large asset - a house - and it's not obvious what an old couple who have a bungalow and little cash would pay their wealth tax with. A re-mortgage?

I assume there would be allowances, and some items disregarded. There would be objections to everyone having to list their assets and keep figures updated.

Typically in tax law there are different rules for primary residences - e.g. in capital gains tax on property value increases (US), deductions for energy efficient improvements (US), council tax assessments, etc.

Also, it'd be a very expensive bungalow that triggered any kind of wealth tax, as most proposals here have set a threshold in the hundreds of millions.

Ah. I seem to have had a wildly wrong notion of what "wealth" might mean in this context.

Martin Y wrote: ↑

Fri Feb 05, 2021 1:13 pm

Ah. I seem to have had a wildly wrong notion of what "wealth" might mean in this context.

You could impose an n% tax on the net assets of the entire population, but that would get really messy around mortgages and people having to give up houses to pay the tax. Not to mention that it could crash house prices, leaving vast swathes of the population in net debt and so not paying the tax anyway, and you having to spend money to sort out who owes taxes now.

Which is why a threshold is sensible.

The other net asset that has to be considered are retirement investments, btw, which are probably the biggest non-property assets for big lump of the population.

The speakers/commission don't recommend a particular threshold or percentage but do suggest e.g. payment over a number of years and specifically mention the 'granny in a bungalow'. Didn't entirely solve the problem but it hadn't gone unnoticed.