tag:blogger.com,1999:blog-2830084253401570472.post5953754020192894221..comments2024-03-28T09:22:36.967+13:00Comments on Offsetting Behaviour: Cars, phones, and dirigiste policyEric Cramptonhttp://www.blogger.com/profile/15831696523324469713noreply@blogger.comBlogger5125tag:blogger.com,1999:blog-2830084253401570472.post-69460007591502112372014-03-22T09:09:05.609+13:002014-03-22T09:09:05.609+13:00I'm inclined to agree with Seamus' point c...I'm inclined to agree with Seamus' point c - that there should be no capital gains tax (or the optimal rate of CGT is zero on a system with one) - but I'd like to open up another question related to the taxation of capital gains on a specific form of wealth - the family home.<br /><br /><br />There is a conventional argument (I think Seamus mentions Gareth Morgan's restatement of it somewhere ) that somehow a capital gains tax would correct for an alleged distortion created by failure to tax income from owner occupied housing. Personally I think the two ideas here ideas are very distinct and trying to say one is a distortion correction for the other is, well just naive..<br /><br /><br />I can see in National Accounts that , because owner occupied housing is such a massive component of the flow of services actually produced (but not transacted in arms length market transactions) , it makes sense to "correct" the accounts in some way by making estimates (albeit on naive partial equilibrium assumptions about transaction prices for rental units being the same whether or not the existing stock of owner occupied housing were to be supplied on the market and existing owner occupied demanders were to rent in the market).<br />But what I can't see is how anyone in there right mind can actually think that in terms of NET rental INCOME there actually is any taxable profit at all in owning and renting out a second house - or that there would be any net income from the imputed rents to owner occupied housing. I'm pretty sure that a cursory investigation of IRD tax filings would show that most "mom and pop" rental houses return losses on an annual basis, using IRD permissible deductions for expenses. (I know that investment analysts thrash this point to death when they try to advise clients about returns in property markets vs returns in broad based equity markets - even after allowing for nominal "capital gains" net of inflation ), Ie the "marginal" rental unit in market transactions makes no net economic income at all. Thinking of trying to figure out net income (not jut net rental gross value) that might be imputed to owner occupied housing I am positive that the net flow returns - valued at any credible appraisal of the labour inputs extensive home production for maintenance services - would be negative. The moral hazard problems associated with renting vs owning would only reinforce this point - since renters don't have the incentive to and don't take care of valued improvements to property the way owners do, if the marginal market rental creates zero net income then the marginal owner occupied imputed rental will have negative imputed income.<br /><br /><br />I guess the general point I want to make is that when conceptualizing, calculating , estimating imputed service values from an asset don't ignore the issues of home production of "value". The CGT sympathizers don't seem to recognize this point - home production matters, a lot, and the tax system cab distort this- seriously. I seem to recall a paper by Walley arguing something like this when discussing optimal (distortion minimizing) taxation rules - households vs individuals. Taxing individuals at different marginal rates distorts choices in home production between primary and secondary workers and that distorted choice can overwhelm any alleged efficiency gains from taxing primary and secondary workers in the household at different rates (because of differing labour supply elasticities).<br /><br /><br />Thoughts??<br />ps nice to hear from u John Small!John Fountainnoreply@blogger.comtag:blogger.com,1999:blog-2830084253401570472.post-16788758058417622452013-10-29T10:47:17.189+13:002013-10-29T10:47:17.189+13:00John. There are many different ways a CGT could be...John. There are many different ways a CGT could be structured, and the problems with each would be different. My view is that the only CGT that avoids all of the problems is a broad-based value-added tax. But my bottom line would be the following: <br />a) To the extent to which any other form of CGT removes an existing distortion between two activities, it exacerbates some other distortion.<br />b) In particular, to the extent to which a CGT raised revenue, it would be adding an extra level of taxation to capital, which is already taxed three times in some cases (once as original labour income, once as the tax on real interest, and a third time from the inflation tax on principal).<br />c) There are large economic and political costs to finely tuned complex tax systems, so while Ramsey looks good on paper, we should have a uniform rate of GST on all goods; while the optimal tax rate on capital income is zero, we should tax it at the same rate as labour income; and while you can make a case for some exquisitely finely crafted CGT, the optimal rate is zero.Seamus Hogannoreply@blogger.comtag:blogger.com,1999:blog-2830084253401570472.post-77682535171642702022013-10-28T20:39:30.016+13:002013-10-28T20:39:30.016+13:00I'm still waiting for the Homer Simpson design...I'm still waiting for the Homer Simpson designed car to hit the market. That would save me far more distraction than anything around cell phones.Eric Cramptonhttp://offsettingbehaviour.blogspot.com/noreply@blogger.comtag:blogger.com,1999:blog-2830084253401570472.post-69693540028112741592013-10-28T17:16:39.700+13:002013-10-28T17:16:39.700+13:00Typical health advocate - lets try and ban an acti...Typical health advocate - lets try and ban an activity first before we think about how technology could make the problem go away. The passenger vs driver example you give is a classic example of this type of muddled thinking.<br /><br /><br />As it happens Apple and the major auto manufacturers are busy developing systems to integrate Apple's Siri voice recognition system into cars.. hands free calling may well be the first step... hands free texting, Twitter updates, Facebook posts are all in line as would be voice control of music or podcasts. Voice activation of maps is also quite possible.<br /><br /><br />So by 2018 it is quite possible that most new cars sold in NZ would have some form of Siri type voice (hands free control) over a number of in car activities.... <br /><br /><br />Nick Wilson is clearly not thinking things through - his first reaction is to ban something - instead of looking and seeing how technology today is actively finding solutions...boristhefrognoreply@blogger.comtag:blogger.com,1999:blog-2830084253401570472.post-60406426542793579742013-10-27T20:51:20.795+13:002013-10-27T20:51:20.795+13:00Hey Seamus. I just read one of your old posts on c...Hey Seamus. I just read one of your old posts on capital gains tax and got the impression that you considered it double taxation - i.e. taxing the same income twice. Is that your view or did I misinterpret?john smallnoreply@blogger.com