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[00:00:00] And again, you know, we're hearing it across the board about the new Labour government bringing in inheritance tax on farms. The majority of these farms are small family farms and, you know, the real asset is the land.
[00:00:21] Now, if this government puts inheritance tax on that, I will tell them straight, you will see farms being sold. You know, they'll have to sell half their land off.
[00:00:34] Now, you can look at a farm and think, you know, they've got a lot of money. They're asset rich but very financially poor.
[00:00:44] This is the Debunking Economics podcast with Steve Keen and Phil Dobbie.
[00:00:51] Well, the UK's new Labour Party wants to introduce an inheritance tax on the value of farming land until now farms have been protected.
[00:00:58] But from now on, only the first million pounds on land value will be protected.
[00:01:03] Now, the idea kind of makes sense because there are massive, sprawling estates, stately homes and vast tracts of land with just a few sheep on them that are calling for agricultural relief.
[00:01:14] But the level of one million pounds to try and stop those people seems crazily low, doesn't it?
[00:01:21] How many farms are worth more than one million?
[00:01:23] So the right idea, badly implemented perhaps, or a broader question, do we need inheritance tax?
[00:01:30] Lots of countries don't have it and good accountants seem to find their way around it.
[00:01:34] So are farmers and others milking inheritance?
[00:01:38] That's this week on the Debunking Economics podcast.
[00:01:48] So inheritance tax is a tricky one, isn't it?
[00:01:51] Well, look at the problems it's created for the UK's Labour government in their latest budget in a moment.
[00:01:55] So to an inheritance tax, I feel like, Steve, we need one because there's got to be some way to stop wealth being passed on from generation to generation
[00:02:03] because that creates a society of intergenerational haves and have-nots.
[00:02:08] But it's all a question of degrees, isn't it?
[00:02:10] Because I want to build my wealth because I want to give my kids something.
[00:02:15] So, you know, there's this motivation, isn't there, to have a bit that you want to pass on.
[00:02:20] So hopefully by the time I'm off this planet, I've given them a bit of a leg up.
[00:02:25] So where do you stand on inheritance tax, Steve?
[00:02:27] In Australia, of course, they don't have one, do they?
[00:02:29] No, they've abolished it, yeah.
[00:02:30] And that's probably part of the reason why money is trapped in housing from one generation to the next.
[00:02:35] Yeah, I mean, the interesting thing, if you look at conventional economic theory, like the stuff that Milton Friedman used to spout,
[00:02:42] and that it's still in the textbooks, everything comes down to your income being based on your marginal productivity.
[00:02:47] Actually, what you do is work.
[00:02:49] Absolutely nothing in the conventional model is about you having income from wealth.
[00:02:53] What they see instead is the income from capital.
[00:02:56] And that basically, you know, personifies the capitalists as the machines the capitalist owns.
[00:03:03] But there's no acknowledgement of the situation that somebody can be born into enormous wealth.
[00:03:13] And therefore, it's not their productivity at all.
[00:03:15] It's their ownership that gives them their income source.
[00:03:18] And I'm not sure of the, I think it's the L'Oreal brand in France.
[00:03:23] And the owner of that is one of the world's wealthiest women who's never worked a day in her life.
[00:03:29] Doesn't need to, obviously.
[00:03:31] And therefore, what you get in a sense, and this is what we spoke about this in a sense with Janus on the techno-feudalism front.
[00:03:38] There's a, if you have the level of inequality we have now and you can pass it on to the next generation, then you get a form of feudalism evolving out of capitalism.
[00:03:50] Because people who are simply born into wealth, that's what is their income source while they're alive.
[00:03:57] They need to contribute nothing worthwhile to society at all.
[00:04:01] And yet the way they're justified by neoplassical economic theory is they're contributing the marginal product of the machinery they indirectly own, that they might ever even see.
[00:04:11] So, there's an argument in conventional economics, in other words, to say that there should be a taxation that ensures that wealth, the accumulated wealth is not passed on to the next generation of the person who generated it, but passed back into society, at least to some substantial degree.
[00:04:33] Otherwise, all the meritocratic defenses that you get in mainstream economics of capitalism disappear.
[00:04:39] So, does that happen at the point at which you die?
[00:04:43] I mean, which is, you know, rather unkindly called a death tax by those people who are against it.
[00:04:48] I mean, that's the argument, isn't it?
[00:04:49] It's a death tax.
[00:04:50] You're trying to tax money that I've earned income on and I've paid tax on already.
[00:04:56] Well, actually, that's not true, is it?
[00:04:58] A lot of that is probably actually passing on, I mean, the house, obviously, you've paid tax on, but also you're passing on your pension.
[00:05:06] Your pension probably was a tax write-off.
[00:05:08] You're probably overpaid, you know, your tax contributions to try and reduce your tax in many cases.
[00:05:14] So, that gets passed on.
[00:05:16] I mean, there's this drive, isn't there, to try and push money aside to save because you might need it, but also if you don't need it, it gets passed on to the kids.
[00:05:25] So, that is the motivation.
[00:05:26] Yeah, but I think the trouble is people project this right down to income levels that, you know, ordinary people earn and levels of wealth that ordinary people have as well.
[00:05:36] So, when you have inheritance tax on the family home, then – and I'll give the example of my mother who never – she didn't have to leave her home and we sold it after she died.
[00:05:47] But if there was tax on that family home and there was a tax accumulated on its value over time, she would have been forced to move out because there was – she's not earning any income.
[00:06:02] And the people who are – they're asset rich and income poor.
[00:06:06] And if they're affected by our wealth tax, then you end up, you know, destroying communities in that sense because the people who – the older people who aren't earning income anymore have to sell and move.
[00:06:17] And I can understand people's resistance to wealth taxes when they hit at that level.
[00:06:23] So, I think we should call it a 1% tax or a 0.1% tax.
[00:06:28] And when you get to that level, then there would be a taxation levied on the value of your assets, which could – it potentially require you to return those assets to a public pool.
[00:06:41] And therefore, the public pool, the income from those assets would go into what we these days would call pension funds or superannuations that everybody benefits.
[00:06:50] Because the whole idea that people have that they're the sole reason they earn the income they have, ignoring the extent to which the education system, the transport system, the enforcement of laws and so on and so forth was necessary for them to make that wealth in the first place.
[00:07:10] And, you know, I've also – you also see people like Warren –
[00:07:14] So, you're saying if my net worth house and shares and whatever else and pension is a million pounds –
[00:07:20] No, a hundred million pounds.
[00:07:21] All right.
[00:07:22] Okay.
[00:07:22] All right.
[00:07:23] Okay.
[00:07:23] I wouldn't lock it in anywhere near an income level that affects people earning wages.
[00:07:31] I mean, it has to be something where, you know, the wealth you've accumulated is one or two orders of magnitude what can be earned in a lifetime by even a highly paid wage worker.
[00:07:47] So, that's the negative press that it gets when you'll say you're going to lose your family home or your mom's going to be kicked out, et cetera, et cetera.
[00:07:54] That's part of what's caused the right-wing reaction to tax over time.
[00:07:57] So, you're saying at a very high level you don't get anything, basically.
[00:08:02] It all just gets put back into the public purse.
[00:08:04] No.
[00:08:04] No, I wouldn't say that.
[00:08:06] I wouldn't say – again, I mean, you'll see people like Warren – I think Buffett mentioned it and a few other of the billionaire class saying they're not giving their kids anything.
[00:08:16] They want their kids to learn the same way they did.
[00:08:19] I can imagine some pretty angst-ridden family conversations over that.
[00:08:23] I wouldn't like to be in the Murdoch family, for example.
[00:08:28] But I would want something which enables you to pass on some substantial wealth to your children because that's part of what motivates people in capitalism in general.
[00:08:40] But not to the point where we get an incredible concentration of wealth and people who do nothing for the rest of their lives earn outrageous incomes compared to average people.
[00:08:51] And inheritance is fundamentally something which contradicts the capitalist ethos that you – the Ayn Randian style ethos that so many people defend capitalism on.
[00:09:03] If that's what they're true, so will you think you should be in favor of 100% inheritance tax?
[00:09:07] Yeah.
[00:09:07] I don't think many of them would like that argument, but that's the extrapolation of their thinking.
[00:09:11] Right.
[00:09:11] And at their top level, maybe that's the way to go.
[00:09:14] But there's another thing, isn't there, which is down below that level, sort of like the levels at which normal people like you and me live and people who are struggling to get by, which we're not.
[00:09:24] But there are people who are really struggling, but they may also be trying to get a house.
[00:09:28] And they see their future as investing in assets which hopefully will accumulate value.
[00:09:34] And we want to stop that happening, don't we?
[00:09:37] So the fact that so many people go, well, I'm going to get a house because that is going to go up so much in value in my lifetime that that is my security and that is what I'm going to pass on as my inheritance.
[00:09:48] So you're not just buying a house as a house.
[00:09:49] You're buying – you're speculating on a house in the hope that that's going to get passed on to your kids.
[00:09:55] So there's that speculation element because that's your driving force ultimately.
[00:10:00] It's what am I going to pass on?
[00:10:02] Yeah, and also the belief that house prices always rise.
[00:10:07] And that's led to the reality of them actually rising because of allowing so much borrowed money to be driven and drive up house prices.
[00:10:14] So I want to break that nexus definitely because it's an incredibly corrupting force.
[00:10:19] And I remember when I was warning about the financial crisis back in the early 2000s or mid-2000s and talking about what would be necessary to change the political debate away from favoring rising house prices towards making them affordable.
[00:10:37] I thought it's just not going to happen until the baby Burmars are no longer the majority of the population.
[00:10:43] And now you can see this trend starting to happen certainly in Australia politically.
[00:10:48] The breakdown of the usual support for the young people voting, Labor or Liberal.
[00:10:56] They're thinking, I'm going to vote for a party which might actually do something.
[00:10:59] So they're voting for the Teals instead.
[00:11:01] In the UK, the same sort of thing.
[00:11:03] The breakdown of the legitimacy of both major parties.
[00:11:05] And I think this is because if you think about the situation of a young person starting life now, what do they do?
[00:11:12] They've got to go to university to get a good job.
[00:11:15] Oh, like in the UK, I've got to pay, what is it now, £10,000 a year.
[00:11:19] So you might graduate with £30,000 or £40,000 in debt.
[00:11:23] America, forget it.
[00:11:24] The debt levels are off the scale.
[00:11:26] Australia, I've seen now Albo as the Australian prime minister is campaigning.
[00:11:31] In fact, he's going to cut student debt by 20%.
[00:11:33] This is all stuff I was saying is going to come and bite you at some time in the future.
[00:11:37] Because if you start with that level of debt, you've got to service your student debt.
[00:11:41] You can't even consider to buy a house because you've got to get your debt down to reasons where you'll be taken seriously as a credit risk by the banks.
[00:11:48] And of course, the prices are out of reach as well.
[00:11:51] So all this stuff is going to, I think, is leading to a generational political revolt.
[00:11:55] Yeah.
[00:11:55] Well, my nephew, I think he said he's just finished an architectural course.
[00:11:59] I think he said he's come out £50,000 in debt at the end of it.
[00:12:05] And then that debt is calculated, the interest on that.
[00:12:07] And it kicks in quite early in terms of how much you pay back.
[00:12:11] And the interest in the meantime is calculated as the retail price index, not CPI.
[00:12:17] Let's take the retail price index because that's normally higher, plus I think about 3%.
[00:12:21] It's just phenomenal.
[00:12:22] I mean, it's a very bad interest rate that you're paying.
[00:12:27] And yet you'd be thinking if the government was doing it to support students, if they had to go down that road, why would they be allowing the commercial sector to get in there and clip the ticket?
[00:12:39] Why wouldn't they be saying, well, OK, it's just going to be linked to inflation and that's it?
[00:12:44] Why profit on a bad situation?
[00:12:49] Yeah.
[00:12:49] And it's appalling.
[00:12:51] So, I mean, the other extremity of the wealth accumulation we've got is the debt accumulation of people who, you know, the poor in this society, the debt that they get in covered with as they go through school or university and have debts from education.
[00:13:07] Then they look at the price.
[00:13:11] They've got to pay rent, which the rent has become impossible.
[00:13:14] I can just see – you can feel partly why the level of angst that exists in society today is occurring because people are becoming debt slaves before they even start working.
[00:13:24] Well, to make matters worse, the problem that the Labour government has – the next mess that the Labour government have got themselves into in the UK because they wanted to do something about going after the inheritance of major estates.
[00:13:38] And, of course, many of those major estates would claim, well, you know, we're agricultural businesses because they might have a few sheep here or there.
[00:13:45] You know, so a vast estate with a grand staley home and a couple of sheep, so they call themselves a farm.
[00:13:51] So they've capped the value at £1 million.
[00:13:55] Beyond that, you will pay half the rate of inheritance.
[00:13:58] So if the inheritance tax is 40%, farmers would pay 20%.
[00:14:02] Now, £1 million, I'm sure there's millions of farms or hundreds of farms which are worth more than £1 million.
[00:14:07] All of a sudden, that farm gets passed on to the kids.
[00:14:10] The kids have been taught how to work the land, possibly the only people who could run that farm, you know, from the techniques they've picked up from their fathers.
[00:14:19] All of a sudden, they have to pay 20% of the value of that farm when the income, no, is a one-off inheritance payment.
[00:14:28] So if you've got a property which is worth £1 million, a farm which is worth £1 million, dad dies, you're still trying to run the farm, you've got to pay £200,000.
[00:14:37] Yeah, I mean, that's true.
[00:14:39] Which you won't be able to afford because the farm is…
[00:14:41] In my opinion, too low a level.
[00:14:43] Because when you're talking £1 million, I mean, if you've got a 10% return on your capital, you're talking £100,000.
[00:14:50] You're not likely to get that anyway in farming.
[00:14:53] So it's hardly a major source of wealth.
[00:14:56] Again, I'd be upping it by an order of magnitude.
[00:15:00] You have to get it to the point where ordinary people, and that means like 80% of the population at least, preferably 90%, realise they're not going to be affected by the inheritance taxes because they're not wealthy enough to warrant them in the first place.
[00:15:15] So if it's a wealth tax, you tax the wealthy.
[00:15:18] You don't tax the middle class at those rates.
[00:15:20] The question is, where do you set the limit, I guess?
[00:15:23] I mean, you've just got to find where do the big stately homes kick in and where do the farms stop?
[00:15:29] But I just wonder actually whether…
[00:15:31] Actually, I've got another solution as well, which we'll come to after the break because I think this is…
[00:15:36] The tax system is broken.
[00:15:37] We've got to fix it.
[00:15:38] And, you know, I feel like there's some easy wins.
[00:15:41] But just in Australia, if you inherit a house, you have to pay capital gains if you sell the house or you get taxed on the income if you rent it out.
[00:15:50] And then you get capital gains tax, admittedly, at half level when you sell it.
[00:15:55] But rather strangely in Australia…
[00:15:57] This is the bizarre thing in Australia.
[00:15:59] I quite like the idea that you don't pay a capital gains tax.
[00:16:03] Most people don't pay it.
[00:16:04] But if you try and flog the house that you've won through the inheritance…
[00:16:09] Won's probably not the word because you've just lost your parents.
[00:16:13] But you've gained a house.
[00:16:15] If you stay in the house, if it's the family house, then you shouldn't get taxed out of it.
[00:16:20] But if you sell that house, then why is that not a capital gain?
[00:16:26] You know, because it's something you didn't have before.
[00:16:27] You got it for nothing.
[00:16:28] You're selling it for a million in the case of Australia, probably two or three million.
[00:16:33] Why wouldn't you pay capital gains on that?
[00:16:35] I mean, it would mean that you'd sit on the house rather than sell it, which is fair enough.
[00:16:40] But if it's a gain for you, then why not?
[00:16:43] Which is sort of the way Australia works.
[00:16:46] So you don't have an inheritance tax, but you are getting taxed on the benefits you make through an inheritance.
[00:16:52] In some ways, that's a simpler system, isn't it?
[00:16:54] Except for the fact…
[00:16:56] And they ruin it by saying, but if you sell it straight away, like within a year or two, you won't pay capital gains.
[00:17:04] So I don't understand why that would be, apart from helping the very wealthy.
[00:17:09] I think that's called a lurk, isn't it?
[00:17:11] Yeah.
[00:17:11] Why do they do that?
[00:17:12] Why don't they…
[00:17:13] There should be Australia…
[00:17:14] You know the old saying, be alert, Australian needs more lurks?
[00:17:18] Yeah.
[00:17:18] This is be a lurk.
[00:17:19] Yeah.
[00:17:19] Australian needs more lurks.
[00:17:21] I mean, that's crazy because the logic…
[00:17:23] It defines the logic, doesn't it?
[00:17:25] Because the idea that, yes, you just, you know…
[00:17:27] Are you speaking logic out of tax rules?
[00:17:28] Yeah.
[00:17:29] Well, we should be, shouldn't we?
[00:17:32] We should, but, you know, welcome to real politics.
[00:17:35] Yeah.
[00:17:35] Yeah.
[00:17:36] So anyway, there we are.
[00:17:37] That's the way the Australian system works.
[00:17:39] But it would be simpler, wouldn't it?
[00:17:40] If you just said, yes, you'd just get taxed on the assets when you flog them?
[00:17:44] Yeah.
[00:17:44] The capital gain.
[00:17:45] Again, what did you pay it for?
[00:17:47] What did, you know, what gain have you made over time?
[00:17:50] I mean, all this stuff is fraught because this, when we understand that government doesn't fund
[00:17:57] itself through taxation but reduces the amount of money it puts into the system through taxation,
[00:18:02] then you change your attitude to, you know, how should tax be levied?
[00:18:07] How should the money, if the government creates, be taken back out of the system?
[00:18:10] And I'd like to get as far away from income tax as we can on that front because, again,
[00:18:16] people see the government putting its hand into their pockets to take taxes up.
[00:18:21] They don't see the impact of government spending greater than taxation, boosting the amount of
[00:18:25] money in their accounts in total.
[00:18:27] So we get this right-wing shift in politics coming out of the focus upon income tax as a way of
[00:18:35] enforcing the currency or a way of reducing the amount of money creation.
[00:18:38] And, you know, it is just such a destructive way politically.
[00:18:42] It might work economically, but politically it's destructive.
[00:18:45] So what about this then as an idea to try and keep it simple?
[00:18:51] For houses and properties that gets passed on, if you do sell it, the income gets treated as
[00:18:57] income tax.
[00:18:59] And, you know, so if you're very wealthy-
[00:19:01] The capital gain.
[00:19:02] Maybe it doesn't get treated as capital gains.
[00:19:04] Maybe it gets treated as income tax.
[00:19:05] So it's, you know, let's forget capital gains.
[00:19:08] Let's just say if you sell something that's worth a million, you get a million.
[00:19:12] And so you get taxed at the top rate.
[00:19:14] Maybe you'll spread that over, you know, you're allowed to spread that over five years or whatever.
[00:19:18] But the likelihood is it's going to push you into the top rate of tax.
[00:19:21] So 40, 45% tax or whatever.
[00:19:24] If you keep it, no tax until you do sell it.
[00:19:27] And if you're creating income from rent, then you're getting taxed on that as income tax.
[00:19:34] But also have a land, to stop people hoarding this, have a land value tax, which is based
[00:19:43] on the value of a property.
[00:19:44] So say 5% of the value of the property each year has to be paid as a land value tax.
[00:19:51] And that becomes a more predominant source of income for the country.
[00:19:55] So we can actually reduce income tax.
[00:19:57] That would mean that less reason to speculate in property, less reason to hang on to big
[00:20:03] houses if you don't need them, because you'd be trying to reduce your tax.
[00:20:07] Well, this is one of the arguments Henry George League makes.
[00:20:10] And like I've read some Henry George, but I haven't read the whole of Progress and Poverty.
[00:20:13] Maybe it's time I sat down and did that completely, but their argument always is to tax land rather
[00:20:18] than tax income.
[00:20:20] And part of the proposition is that a large part of the improvement, increase in value
[00:20:24] of a property comes out of population growth itself.
[00:20:27] So if you buy a house on the sticks and you pay a trivial amount of money for it, and then
[00:20:34] the city expands and the sticks becomes the suburbs and the train station is put right next
[00:20:38] to right near your house, your house value rises because of the train station, not because
[00:20:43] of what you did to the property itself.
[00:20:45] They're saying that gain should go back to society or rather, well, maybe this again
[00:20:51] comes to what does tax actually do.
[00:20:53] But the increase in value shouldn't be hoarded by the individual who owns the property because
[00:20:58] the increase in value of that particular block of land has come out of the expansion of
[00:21:04] the city over time.
[00:21:05] Hard to argue against that, isn't it?
[00:21:07] It is.
[00:21:07] The question, how do you do it in such a way that you don't force communities to break
[00:21:10] up all the time?
[00:21:11] So I've seen this again with people, aging people.
[00:21:15] Again, my mother bought the home in 1957 and sold it and it sold after she died in 2021.
[00:21:25] So all that time just lived in the one property and there was no intent to do it, to hang on
[00:21:33] to and accumulate the wealth over time, just where she lived.
[00:21:35] And she was part of that community and a very important part.
[00:21:38] So you don't want to break the communities up.
[00:21:40] You have to have a way of levying the tax that doesn't force people to move while they
[00:21:44] are still living in the property.
[00:21:46] So alive.
[00:21:46] So the government could say, well, OK, you've got to pay 5%.
[00:21:48] But by the way, you know, that can come out of the value of the property.
[00:21:52] So in other words, you know, it's almost like what do you call it when you're taking money
[00:21:58] out of you?
[00:21:58] You'd be deferred.
[00:21:59] Yeah.
[00:22:00] Yeah.
[00:22:01] So it's 5% per year.
[00:22:03] There might be nothing.
[00:22:03] If you live for 20 years, the house is worthless because it's all owed in tax.
[00:22:09] You can go again for a tapering system.
[00:22:11] I mean, you do have to balance the combination of the collective benefit of society and decide
[00:22:19] the way in which collective benefits benefit those that become multi-billionaires and entrepreneurs
[00:22:24] and so on.
[00:22:25] But you don't want to extinguish the objective of making a gain in a capitalist economy.
[00:22:34] Whether it's sustainable or not at the time, you know what I think about that.
[00:22:38] But still, you would need that incentive.
[00:22:41] Those incentives do matter to some extent for people to do the creative stuff that makes
[00:22:48] capitalism a special social system.
[00:22:50] OK, we are well over halfway, so it's not going to be two halves.
[00:22:54] It's going to be two thirds followed by one third on the podcast today because we're going
[00:22:57] to take a break.
[00:22:57] When we come back, I want to explore this idea of a land tax a bit more and how it might
[00:23:03] help to solve this problem about what is a stately home and what is a farm, because
[00:23:08] I think there's a very logical explanation on this.
[00:23:10] Also, though, I just want to get your take on this idea of a land tax, what that does to
[00:23:15] property speculation as well when we come back on the Debunking Economics podcast.
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[00:23:53] This is the Debunking Economics podcast with Steve Keen and Phil Dobby.
[00:24:04] So, Steve, this idea that we had that, you know, you have a land value tax, nothing new
[00:24:10] to that.
[00:24:10] Of course, as you say, Henry George has been talking about it a long, long time ago.
[00:24:13] But what does it do to property speculation?
[00:24:17] Presumably it throws that out the window, which would be a good thing, wouldn't it?
[00:24:20] Yeah.
[00:24:21] And this is, you know, partially one of my problems about just the straight land tax idea
[00:24:27] from the Henry Georges in general is that if you did make that taxation a large part of
[00:24:34] the revenue source, particularly for local governments and state governments that can't
[00:24:39] create money and therefore you're not putting up on the fact that federal systems can create
[00:24:45] their own money, if you made it a large revenue source for local councils and state governments,
[00:24:51] they'd actually encourage rising house prices that actually want to see because otherwise
[00:24:55] they don't get the revenue.
[00:24:57] So I've, again, I want to see, you know, my attitude has always been attacked with the
[00:25:03] problem at the root.
[00:25:04] And the root is what causes house prices rises.
[00:25:08] Partially it's the stuff that George just talked about, which is the expansion of a city
[00:25:12] and the development of services, utilities over time that improve the value of your land,
[00:25:19] even though you've done nothing yourself to change that valuation.
[00:25:23] So that's one source of increasing house prices.
[00:25:26] But the other is banks being allowed to lend as much as they like against housing.
[00:25:31] And that is the real, when you look at the dynamics over time, that is by far the factor that's
[00:25:36] driven most of the ridiculous increase in house prices compared to consumer prices compared
[00:25:43] to wages.
[00:25:44] So I wouldn't want to just go with the one.
[00:25:46] I'd want to go with another set of controls that stop banks lending for property speculation.
[00:25:52] So it's a combination of the two.
[00:25:54] So, and we'd hopefully be able to reduce income tax as well through all of this, which,
[00:25:59] you know, most people would like to see and fund more government programs through it all
[00:26:04] as well.
[00:26:05] And let's not get into the discussion about whether we need the money to fund the government
[00:26:07] programs.
[00:26:08] We've covered that one.
[00:26:09] But anyway, you know, in most people's minds.
[00:26:11] So let's go back to the idea of the farm then and this problem that the Labour parties
[00:26:15] put themselves in with this £1 million value for a farm, which is way too low.
[00:26:21] Way too low.
[00:26:21] But what about, and if we had this idea of a land tax and say it was 5% of the value of
[00:26:29] the land, that's no better for farmers.
[00:26:32] Say a farm is worth $10 million and it creates only, or pounds, and it only creates half a million
[00:26:40] pounds in revenue.
[00:26:43] Then having to pay 5% tax is going to be a problem for them.
[00:26:47] But you could put a threshold.
[00:26:50] So you could say a property can be worth 20 times the revenue it generates.
[00:26:55] If it generates less, then that 5% annual tax applies.
[00:27:00] So a farm worth $10 million that only generates $0.4 million in revenue can either pay that 5%,
[00:27:06] which means they pay half a million, which means they pay more in tax than they're earning,
[00:27:11] or they can sell the farm, or they can be more productive.
[00:27:16] Now, I would argue that if they have a land value that's worth $10 million and they're
[00:27:21] only creating $400,000 in revenue, they're not very productive.
[00:27:24] I mean, the figures, you can set the figures wherever you want, but the theory set it at a
[00:27:29] level where it helps drive productivity.
[00:27:32] So the farm would then say, well, okay, we've got to get more money in.
[00:27:36] We've got to put up greenhouses or do different crops, or we've got to change the way we've
[00:27:41] been doing things for generations.
[00:27:43] So we get a more productive output from this land.
[00:27:46] Or you could say, well, actually, we can't do any more because we're working the maximum
[00:27:53] value out of this land because it's not very arable land, in which case the value of the
[00:27:58] land presumably would be diminished.
[00:28:00] So I feel like there's got to be some balance found between the productivity of the farm and
[00:28:05] the value of the land.
[00:28:06] But so long as you're having that discussion and you get the level right, at least you're
[00:28:11] looking at a proper farm, not a stately home with a few sheep on it.
[00:28:14] Yeah, but again, farming is a very difficult example to use because a lot of farms are done
[00:28:24] in some way, not a lifestyle thing, but people, you know, I come from a family that was landed
[00:28:30] gentry in the Walgut region 100 years ago.
[00:28:35] And a large part of it is just the lifestyle that goes with it.
[00:28:40] They're not necessarily trying to make a fortune.
[00:28:42] Some of them certainly are.
[00:28:43] But what you do is you force commercialization on land.
[00:28:48] And I do know a substantial number of people who are doing, you know, what do they call it?
[00:28:56] Sustainable farming.
[00:28:58] I've forgotten the term right now.
[00:29:00] But their intention is to make it a self-sustaining system, but not one that is caught up in making
[00:29:07] a profit.
[00:29:08] So again...
[00:29:09] Like organic farming.
[00:29:10] Organic farming, there's a particular term, I've just forgotten it for the moment.
[00:29:17] But that form of...
[00:29:20] Again, I think we have to set these levels much higher.
[00:29:23] I mean, if you go up to the scale of, again, talking of the country area I came from, a
[00:29:27] huge part of that's been converted into cotton farming.
[00:29:30] And that obviously is commercial and you'd want to tax that.
[00:29:34] You'd have income levels and so you'd want to tax on that land itself.
[00:29:37] But if you put the pressure on it immensely, you force everybody to get into commercial
[00:29:42] farming.
[00:29:43] And you start getting the industrial farming, which is part of the ecological problems we
[00:29:49] have right now.
[00:29:50] So you don't, you know, you don't want to...
[00:29:54] But don't we want every bit of land in the country?
[00:29:58] I mean, it's a different story in Australia where there's obviously huge tracts of lands.
[00:30:02] But within Europe, don't we want every bit of land, particularly as, you know, we're fighting
[00:30:07] the question of food security, don't we want every bit of land to be as commercially viable
[00:30:12] as it possibly can?
[00:30:13] And we don't want hobby farmers if they're not produced because hobby farmers could be,
[00:30:18] you know, then we're getting to hobby farmers versus...
[00:30:20] Yeah, I am a hobby farmer.
[00:30:21] Oh, that's quite a nice big house you got there.
[00:30:23] Oh, yes, 42 acres and I've got four sheep.
[00:30:27] I'm a farmer.
[00:30:28] You know, it's...
[00:30:30] See, you want that land to be as productive as possible, don't you?
[00:30:33] So trying to get something that is going to say, yes, make it productive.
[00:30:38] The moment you are not productive, we're going to tax you for the land because that land's
[00:30:42] not being used for what you say it's being used for.
[00:30:44] Yeah.
[00:30:44] I mean, good luck to the people that have the draft laws that actually balance those objectives.
[00:30:51] But it's a lot better than saying if it's worth more than a million, you're going to
[00:30:55] pay inheritance tax when the farmer dies.
[00:30:58] That's dumb.
[00:30:59] I mean, you know, I mean, I cannot believe someone to stop coming out of the UK Labour Party.
[00:31:05] It just takes my breath away as to how dumb it is.
[00:31:08] And this is another example of the same.
[00:31:10] You know, how to alienate your constituents.
[00:31:13] Let's freeze a few thousand pensioners over wintertime.
[00:31:17] Let's increase the cost of bus fares by 50%.
[00:31:20] Oh, and let's hit anybody with a farm worth more than a million pounds with enough to
[00:31:24] make them hop in their trackers and come and demonstrate outside Whitehall.
[00:31:30] It's almost a Tory wet dream that Labour's behaving this way.
[00:31:33] So, you know, obviously anything which has any sophistication whatsoever is better than
[00:31:40] saying a million quid farm you've got to pay us 10% tax per annum or 10% tax.
[00:31:46] That's a while.
[00:31:47] Yeah, yeah.
[00:31:48] Just, just, you know, I just shake my head.
[00:31:52] I really can't believe how bad this Labour Party is.
[00:31:55] Well, let's look at America though because...
[00:31:58] Oh no, please, I'm already here.
[00:32:00] It's bad enough.
[00:32:01] Having you eat the food, let's not look at the country.
[00:32:03] So they've got, they've got lots of American listeners.
[00:32:06] We think it's a fabulous country, but look, there's no inheritance tax at the...
[00:32:10] It's fabulous.
[00:32:11] I've got to throw in a line for my ex-wife of mine.
[00:32:14] This was actually, she was a stage, a stage actor, a New York stage actress.
[00:32:19] And she was in, either she or one of her friends is involved in a star show called
[00:32:22] What's a Nice Country Like You Doing in a State Like This?
[00:32:28] Well, you know, there's lots of, lots of good and bad points to America, aren't there?
[00:32:31] I like there are, lots of other everywhere.
[00:32:33] I just think there's becoming, unfortunately, the balance is tipping.
[00:32:35] I suspect most Americans would agree with that as well.
[00:32:37] But look, in America, there is no inheritance tax at the federal level.
[00:32:42] There is an estate tax.
[00:32:43] You'll love this.
[00:32:44] So there's a tax on the transfer of the estate and it's pretty high, 40% on the transfer of the estate.
[00:32:52] But there is a threshold for that.
[00:32:54] And that threshold is per individual who receives the estate, that receives from the estate.
[00:33:00] Can you guess what that threshold is?
[00:33:02] This is per person.
[00:33:03] So if you've got five kids multiplied by five, can you figure out what the threshold is?
[00:33:07] Or when I have a stab in the...
[00:33:09] Well, it's not quite that bad.
[00:33:10] That would be ridiculous, Steve.
[00:33:12] 13.61 million per person.
[00:33:15] Okay.
[00:33:16] Well, that's the sort of level I'm talking about.
[00:33:17] That's the level that's so far above what most people earn as an income that they'll be aware that's never going to apply to them unless they get incredibly successful, in which case, who cares?
[00:33:27] It's a small amount of a huge amount I wasn't expecting to get in the first place.
[00:33:32] So that's actually...
[00:33:33] They're two heads off.
[00:33:34] That's better than the UK.
[00:33:35] So, okay, score one for America.
[00:33:37] So here's another thought just to leave with.
[00:33:40] What about this?
[00:33:42] What about we abolish inheritance tax?
[00:33:45] Now, you're going to hate this next part.
[00:33:47] Make buying a house tax-free.
[00:33:50] And the reason for that would be so that younger people can get into the housing market earlier.
[00:33:55] But tax the full value of the sale of the house.
[00:33:58] So I can buy a house earlier in tax-free dollars, earlier in life.
[00:34:01] When it comes to selling my house, say it's worth $500,000, the house will get taxed based on income tax, basically, for the value of that.
[00:34:11] But, you know, maybe spread over a few years.
[00:34:13] But probably you're going to pay tax at 40%.
[00:34:15] So I will have paid $200,000 in tax on it.
[00:34:19] There's three benefits, I think, to that.
[00:34:20] Or four.
[00:34:21] One is it's going to make it easier for first-time buyers because they're not paying tax on the house.
[00:34:24] Two, it's going to stop speculation in its tracks because you actually won't want the value of the house to go up because it'll just mean more tax.
[00:34:32] Three, it'll provide no advantage to foreign buyers who are probably not, you know, using it as a tax write-off through their own country to buy properties.
[00:34:40] They'll have no advantage over local people.
[00:34:43] And, yeah, if I inherit the house, I can keep it and pay land tax or I can sell it and it's treated as any other income.
[00:34:51] That just seems like simplicity and it's all skewed towards helping people earlier in life rather than – because, you know, inheritance is useless to most people because you don't get it until you're 45.
[00:35:02] You've got a house by then, hopefully.
[00:35:03] Yeah, I mean, to me, the great danger of taxes, the way at which income tax or wealth tax set at low levels like a million pounds for a farm,
[00:35:15] is that it twists the whole political system to be anti-recognizing the collective elements of how we develop wealth in a society in the first place.
[00:35:24] And you can encourage sort of right-wing Ayn Randi and approach to the state and seeing the state as robbing you rather than seeing the state as providing part of the money that we actually enable commerce to occur through in the first place.
[00:35:39] So I want to get anything that gets taxed out of people's income into transactions or into wealth accumulation at levels of wealth accumulation that most people know they're never going to even experience anyway.
[00:35:53] So the fear factor and the shifting – you wouldn't be creating, you know, what do you call them, red Republicans?
[00:36:01] The working-class people who vote for the right-wing party.
[00:36:05] That's what we've actually generated out of the system we have now.
[00:36:07] And I think that's probably a bigger problem than our tax system in general.
[00:36:11] But how do you get over the issue if you are looking at wealth just finally then?
[00:36:15] How do you get – because the farmers are an interesting example, aren't they?
[00:36:18] Because they are the big landowners who generate very little income versus the big landowners who've got a stack of – an obscene, a vulgar amount of money, but they're not making any money from their land.
[00:36:31] I mean, you'd be thinking, you know, they are sitting on valuable land in a world where, you know, that land could be used.
[00:36:38] I mean, it's very nice seeing a stately home as you drive past it until, you know, you reach the part where the walls are too high so you can't see in.
[00:36:46] But it's, you know, it's not doing a lot for the economy, is it?
[00:36:50] And it is just sitting on wealth.
[00:36:53] So you'd want to break that down.
[00:36:55] But how do you do that?
[00:36:57] And, you know, which is what Labour's struggling with.
[00:37:00] How do you do that and differentiate it from a farmer?
[00:37:02] Yeah.
[00:37:03] Well, I think a million pounds is an utterly wrong level to begin with.
[00:37:08] And you have to look at people who are using land for, you know, sustainable reasons rather than for a profit from commercial use of land.
[00:37:21] And the other thing about the UK, I mean, the extent to which the UK imports its food right now is terrifyingly high in current circumstances.
[00:37:28] Well, that was my reason for trying to make farms more productive.
[00:37:31] That was the whole reason, say, if you're using the land and you're not getting a return from it, you need to be more productive so that we have more food created within our country.
[00:37:41] Well, I'd make a carrot a potential substitute for the stick in that case and say that if you start, you know, installing greenhouses, etc., then we're going to reduce the rate of tax.
[00:37:52] But something about it which encourages the land use for what land is actually mostly required to do and produce food for humans, that is the direction the UK has got to go to.
[00:38:05] And pronto, because I think we're going to see food shortages turning up in the next decade in the UK.
[00:38:10] It's an absolutely appalling situation.
[00:38:14] If they can't import food, then there's going to be starvation.
[00:38:17] And that is not what I call a well-managed society, whether it has wealth taxes or not.
[00:38:23] Well, I think everywhere in the world we are facing the question, aren't we, about tax reform.
[00:38:27] It's needed.
[00:38:27] The system we've got at the moment is wrong.
[00:38:29] And so do you think, just finally then, that land tax is part of the map going forwards?
[00:38:37] It's part of the mix, but you've got to be intelligent about how you apply it.
[00:38:43] And, you know, a blanket one million pound level on farming land is showing the UK government isn't doing it intelligently, which is no surprise given everything else they're doing.
[00:38:57] Yeah.
[00:38:58] All right.
[00:38:58] Very good, Steve.
[00:38:59] But the problem is, of course, you know, if you're very rich, irrespective of what you do, you're going to find ways around it.
[00:39:04] So even though –
[00:39:05] Oh, yeah.
[00:39:05] You can afford the lawyers and the accountants the rest of us can't hire.
[00:39:08] And then all of a sudden you find those lawyers and accountants are all partial owners of that massive property that you've got.
[00:39:14] How on earth did that happen?
[00:39:15] That's right.
[00:39:16] And they seem to be very generous towards your children somehow.
[00:39:19] What a strange thing.
[00:39:20] Yeah.
[00:39:20] Anyway, all right.
[00:39:21] Very good.
[00:39:22] We'll catch you again next week.
[00:39:23] Well, look, you are in the United States at a time.
[00:39:25] We're recording this when we don't know the result of the U.S. election.
[00:39:28] So next week we obviously need to talk about who's in, what happens next.
[00:39:31] We'll do that next week.
[00:39:32] Good to talk, Steve.
[00:39:33] Okay.
[00:39:34] Bye-bye.
[00:39:34] Bye-bye.
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