HISTORY & READINGS at Brian Ripley's Canadian Housing Price Charts & Plunge-O-Meter

Tech Talent and Real Estate

11/30/2019

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The CBRE Group, Inc. trading on the New York Stock Exchange under the symbol “CBRE.” is the world’s largest commercial real estate services (2018). Their recently released study "Scoring Canadian Tech Talent" provide insights into how the growth in demand for tech talent is impacting cities and real estate markets across Canada.

CBRE Report Snippets

Record commercial and residential real
estate demand and an office construction boom in several markets.
High-Tech sector GDP growth = 3x the pace of the overall economy over last 5 years.
Tech industry accounts for 17.1% of major office leasing activity since start of 2018.
Immigration policies have produced an abundant, accessible source of tech talent.
Top Canadian universities produce highly educated tech workers in specialized fields eg: AI research and multimedia production.
U.S. companies can tap into high quality talent at a less prohibitive cost when accounting for the discounted CAD$.

For years I have been highlighting the demand in Canada for tech workers. The October 2019 employment data is typical of the obvious trend: Professional, Scientific and Technical Services employment is up +7.4% Y/Y while Service Producing is up 3% Y/Y and Goods Producing is up 0.1% Y/Y.

Yes, the information revolution is producing new data consumption markets at the corporate level, but what about our social contract and our environmental needs? We need to direct capital and labour towards complex issues like environmental remediation, infrastructure, education, health, wellness, and electoral and taxation reform.

Tax reform should be taken on by the tech sector, because the political institutional approach towards taxation is built upon generations of carrot and stick incentives which end up benefiting one voting constituency over another.

If we are to take on the the greatest challenges to our well being, the Automated Payment Tax developed by Edgar L. Feige, Professor of Economics Emeritus at the University of Wisconsin-Madison would indeed kick start stubborn 20th century institutional thinking into a progressive 21st century that the new tech sector generation dreams of. How?

The APT (Automated Payment Tax) is a micro tax taken at every financial transaction where each side of the transaction gets debited a small amount of capital that is credited to the government in a revenue neutral algorithm. Professor Feige's team modeled the U.S. economy from late 1990's data and realized that it would take less than 2% of every financial transaction to produce a revenue neutral state where all the government's fiscal objectives were met.

The APT would eliminate the need to file tax or information returns. That in itself should provide enough incentive to read the 41 page PDF study by Feige.

The foundations of the APT tax proposal—a small, uniform tax on all economic transactions—involve simplification, base broadening, reductions in marginal tax rates, the elimination of tax and information returns and the automatic collection of tax revenues at the payment source. The APT approach would extend the tax base from income, consumption and wealth to all transactions.

Think about the desirability and feasibility of replacing the present system of personal and corporate income, sales, excise, capital gains, import and export duties, gift and estate taxes with a single comprehensive revenue neutral Automated Payment Transaction (APT) tax.

In its simplest form, the APT tax consists of a flat tax levied on all transactions. The tax is automatically assessed and collected when transactions are settled through the electronic technology of the banking/ payments system.

The APT tax introduces progressivity through the tax base since the volume of final payments includes exchanges of titles to property and is therefore more highly skewed than the conventional income or consumption tax base.

The wealthy carry out a disproportionate share of total transactions and therefore bear a disproportionate burden of the tax despite its flat rate structure.

The automated recording of all APT tax payments by firms and individuals creates a degree of transparency and perceived fairness that induces greater tax compliance. Also, the tax has lower administrative and compliance cost.

If we want to take on the challenges of the 21st century, ie: the urgent generational "moonshots" facing us, then tech sector - take on the challenge of tax reform.

Simon J. Thorpe agrees in his 12 page PDF:
A Flat Rate Financial Transaction Tax to replace all taxes?

What an excellent idea! Shame that more people didn't take notice - there are just 17 citations to his (Edgar Feige's) paper in Google Scholar. It's about time he got the recognition he deserved- and about time his forward thinking ideas got taken seriously.

Advantages of a Flat Rate FTT (Financial Transaction Tax) October 2010 by:
Simon J. Thorpe, CNRS Research Director (DRCE), CerCo (CNRS-UT3), TMBI (Univ. Toulouse), BrainChip Inc

A Flat Rate FTT is fair.

A Flat Rate FTT is cheap to implement.

A Flat Rate FTT would be virtually impossible to avoid.

Removing conventional taxes would make tax havens largely irrelevant.

A Flat Rate FTT would provide a level playing field.

A Flat Rate FTT taxes those actors in the economy who can pay.

The abolition of taxes on profits would be a major incentive to the economy.

Increased incentives to short production supply chains.

Increased incentives for local exchanges.

Read the full argument.

"The global financial crime wave is no accident Financial crime is a feature of our global financial system not a bug." said pioneering economist Susan Strange. November 28, 2018 by Naomi Fowler

Financial Secrecy Index - 2018 Results

Canada ranks 21 out of 112 jurisdictions after Switzerland (1), the USA (2) and the Cayman Islands (3).

“Canada and the U.S. are the two most lax jurisdictions in the world when it comes to the rules for preventing the incorporation of anonymous shell companies. What’s more, corporate service providers operating in those two countries are less compliant than those operating in Ghana, Lithuania, or Barbados, and follow laxer rules than those in Malaysia or the Cayman Islands.”

Death & Taxes

7/29/2016

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Last week I spotted Ted the 40-year-old Vancouver man at Jonathan Rogers Park (West 8th & Manitoba St) who has been parking his $300 Craigslist shed on wheels in various Vancouver parks along with the rising number of homeless people. July 22, 2016 Metro News

"OSFI tells some banks to test for sharp drops in Vancouver, Toronto housing markets" July 26, 2016 CBC News

“B.C.’s 15% tax on foreign homebuyers could drive money to other parts of Canada” July 26, 2016 Financial Post

"Tory won't rule out a tax on foreign real estate buyers in Toronto" July 28, 2016 Toronto Sun

"Chinese-language media up in arms over B.C. foreign buyer tax" July 28, 2016 Globe & Mail

“Does this set a dangerous precedent in the minds of foreign investors across Canada?" July 29, 2016 Mortgage Broker News

It must be my age, but when I see politicians trying to solve problems via blunt taxation, I move even closer towards being a grumpy old man - death and taxes - they suck, literally. Here are a few ideas while we wait for the July housing numbers to come out next month.

PART I - The Need for Tax Reform

In November 2011, I came across the idea of the APT, the ‘Automated Payment Transaction Tax’ which eliminates the need to file tax or information returns. A year later I posted links to the APT and since then I have continued to encourage media, politicians and potential influencers to at least look at the thesis.

To my dismay I have had insignificant response. I think this is because we have too much tax and are immersed in its complexity and we have not enough death of tired old ideas that should be retired with every generation.

The Automated Payment Transaction Tax

In its simplest form, the APT tax consists of a flat tax levied on all transactions. The tax is automatically assessed and collected when transactions are settled through the electronic technology of the banking/payments system.

The APT tax introduces progressivity through the tax base since the volume of final payments includes exchanges of titles to property and is therefore more highly skewed than the conventional income or consumption tax base.

The wealthy carry out a disproportionate share of total transactions and therefore bear a disproportionate burden of the tax despite its flat rate structure.

The automated recording of all APT tax payments by firms and individuals creates a degree of transparency and perceived fairness that induces greater tax compliance. Also, the tax has lower administrative and compliance cost.

Think about the desirability and feasibility of replacing the present system of personal and corporate income, sales, excise, capital gains, import and export duties, gift and estate taxes with a single comprehensive revenue neutral Automated Payment Transaction tax.

Implementation of this elegant and simple idea in Canada would allow Canadians to create an original, authentic social organization that would eventually be copied by other nations. Let's apply the power of the internet to get this Automated Payments Transaction Tax idea into the public square of discussion and then into application.

Canadians, write your Member of Parliament." Foreign readers take this idea back to your jurisdiction and spark the conversation there. Some country will be first in the implementation of the APT thesis.

In my opinion the APT or a variant of it will happen one day as sure as Uber, Airbnb and Torrents have arrived and driverless freeways will eventually emerge. It’s a peer to peer thing; it’s the internet, it’s inevitable. “Software is eating the world.” Marc Andreessen.

A micro tax on all financial transactions reduces the burden on all individuals and allows our governors to manage our spending requirements in a transparent progressive way. The APT thesis calculations were based on U.S. taxation revenues and expenditures from the late 1990’s. The potential tax base has increased significantly since then; think of the machine initiated equity, fixed income and commodity exchange transactions that go on day and night. Here is a snippet from the 41 Page PDF authored by Edgar L. Feige, Professor of Economic Emeritus, University of Wisconsin-Madison:

The APT tax rate from the original study publication in 2000 achieved the goals of replacing the present system of personal and corporate income, sales, excise, capital gains, import and export duties, gift and estate taxes with a single comprehensive revenue neutral Automated Payment Transaction tax of only 0.15% on each side of the transaction for a total of 0.3% on any financial transaction.

The APT tax proposed is designed as a revenue neutral replacement for the present tax system. It is emphatically not intended as an additional source of revenue. It proposes to broaden the tax base by eliminating all implicit tax expenditures, all exemptions, deductions and credits while adding to the tax base the enormous volume of transactions representing exchanges of property rights to real and financial assets and liabilities. The flat rate tax required to maintain revenue neutrality is estimated to be in the neighborhood of 0.6 percent if total transactions volumes fall to half of their current levels.

PART II - The Need for Policy Reform

Clearly, a 15% provincial tax on Vancouver housing purchases by foreign buyers will simply move what little demand there is from this sector to other jurisdictions. Hot speculative money whether clean or dirty is transnational.

Look at Canada’s record of Federal Direct Investment; in full year 2015 there was a huge spike in FDI OUT such that for every $1 of FDI coming into Canada there is $1.31 going out to get a better return on Capital and Labour. In short, our Canadian investor class, like most other global players, looks for leverage and arbitrage opportunities outside of Canada. This is a trend that has been widening and unbroken since 1997 throughout the last five federal governments (4 Liberal, 1 Conservative).

Meanwhile after seven years of nitro-fueled Zero Interest Rate Policy, we have only increased our consumption habits and widened our debt load across both private and public sectors. While the private sector binges on low cost credit, our multi-level governance is shifting more to fiscal policy since monetary policy has not worked as promoted. Yes - CPI remains muted, No - we have no control over what consumers will do with easy credit especially since competing governmental departments encourage minimum equity positions when borrowing. After seven years, the Bank of Canada is still trying to figure it out:

With the next renewal (of the “Inflation Control Target”) approaching in 2016, the Bank is focusing its review and research in the following three areas:

1) The Level of the Inflation Target
2) Financial Stability Considerations in the Formulation of Monetary Policy
3) Measuring Core Inflation

We have a failed Canadian central bank policy of ZIRP and NIRP threats that ape the U.S. Fed policy as well mirroring many other central banks since the pit of gloom in March 2009. It’s been a race to the bottom, and here we are.

We have the outdated 20th Century wild west mortgage insurance liability of CMHC which was created in 1946 as an elaboration of previous housing incentives beginning in 1919 (Wikipedia).

We have an irresponsible overpriced exclusionary and predatory real estate industry that obfuscates, monopolizes and fails at basic fiduciary behaviour.

This combination of patchwork policy has failed to get capital investment into productive employment. Instead we have asset valuations that exceed the worst possible, measured globally, and we have settled for consumption and waste. Asset values may look good on a balance sheet in terms of credit worthiness, but the social contract does not serve our collective needs.

Nowhere is there public debate or care about tomorrow except in the tedium of blogs and anonymity. Governance has clearly failed and the media is busy chasing sirens and shootouts. It’s shameful. It’s time for reform and modernization using the tools we already have.

PART III - The Need for Land Entitlement Reform

“The social state is advantageous only when all have something and none too much.” A paraphrase of Jean-Jacques Rousseau from his Du Contrat Social ou Principes du Droit Politique of 1762.

The APT does not solve the problem of the current historic asset valuations in Canadian housing prices which are at crisis proportions and which cannot now be easily solved with ZIRP, NIRP or a revolving door of political ambitions.

Let’s consider the end to private fee simple land ownership and move all our land and territorial limits into the hands of all of us.

Here’s how I see it:

All land and territorial space inside the jurisdiction of Canada (the Land) would be owned by the Canadian Government (the State) on behalf of Canadian taxpayers (the Tenants).
The land would be leased to the tenants.
The state would set the value of the land lease and term according to use.
Only the improvements allowed on the land are owned by the tenant or transferable to another tenant in an open and free market place.

This simple idea would put an end to the endless inflation of the cost of land since the value of the land would be set by the central organizing body of the state which would assess the needs of the community of tenants and the responsibilities of all of us towards the wellbeing of our health and environment.

The improvements on the land would by definition be valued by their utility and composition of materials all of which are readily assigned value by an open marketplace and would be more prone to deflation than inflation because improvements have to be maintained to retain value.

Valuations would be rational, transparent and immediate. Affordability would be easily controlled. Tenancy agreements on the land would be available to both domestic and foreign users and when combined with the ‘Automated Payment Transaction Tax’ outlined in PART I above, all land lease revenue and all improvement transactions would trigger APT revenue to the state for reinvestment.

How economic inequality harms societies - Richard Wilkinson
"If you want to live the American dream, go to Denmark.”

We humans have accomplished a lot of ambitious and technically challenging projects and have expanded our knowledge base to a degree that suggests we should be able to transform our puny little financial problems in a politically impartial way free of ideology to the benefit of the greater good.

I don’t expect that this post will trigger any change during my remaining lifetime to the status quo of 20th century and older ideas that we remain wedded to, but I publish this because ideas precede action and I am not the only one thinking about this.

According to this December 2015 study by Azoulay, Fons-Rosen & Zivin “Does Science Advance One Funeral at a Time?”, Max Planck’s observation is indeed the way our knowledge base and idea implementation grows.

“A new scientific truth does not triumph by convincing its opponents and making them see the light, but rather because its opponents eventually die, and a new generation grows up that is familiar with it."

Real Time with Bill Maher
Michael Moore – Where to Invade Next

The Automated Payment Transaction Tax

1/11/2012

The Automated Payment Transaction Tax
By capitalizing on financial data processing technology, it is possible to create a tax code for the 21st century that is astonishingly easy for all citizens to understand and administer because it eliminates the need to file tax or information returns.

The foundations of the APT tax proposal—a small, uniform tax on all economic transactions—involve simplification, base broadening, reductions in marginal tax rates, the elimination of tax and information returns and the automatic collection of tax revenues at the payment source. The APT approach would extend the tax base from income, consumption and wealth to all transactions. (Wikipedia)

The system known as the APT or Automated Payments Transaction Tax (41 Page PDF with charts) was developed by Edgar L. Feige, Professor of Economics Emeritus at the University of Wisconsin-Madison.

DREAMING OUT LOUD One Tiny Little Tax By Daniel Akst, The New York Times, February 2, 2003

OFF-THE-BOOKS-WORK and a $500 Billion Tax Gap: An Interview with Edgar Feige By Steve Lawrence, The Gail Fosler Group, July 30, 2013.

Ramifications of Implementing the APT

As with any major change what is viewed as positive for one group may be considered a negative for another. These are listed in accord with the expected majority point of view.

Think about the desirability and feasibility of replacing the present system of personal and corporate income, sales, excise, capital gains, import and export duties, gift and estate taxes with a single comprehensive revenue neutral Automated Payment Transaction (APT) tax.

In its simplest form, the APT tax consists of a flat tax levied on all transactions. The tax is automatically assessed and collected when transactions are settled through the electronic technology of the banking/ payments system.

The APT tax introduces progressivity through the tax base since the volume of final payments includes exchanges of titles to property and is therefore more highly skewed than the conventional income or consumption tax base.

The wealthy carry out a disproportionate share of total transactions and therefore bear a disproportionate burden of the tax despite its flat rate structure.

The automated recording of all APT tax payments by firms and individuals creates a degree of transparency and perceived fairness that induces greater tax compliance. Also, the tax has lower administrative and compliance cost.

Like all taxes, the APT tax creates new distortions whose costs must be weighted against the benefits obtained by replacing the current tax system.

POSITIVES

Strong dollar due to economic stimulus attracting foreign investment where no income or excise taxes exist.
Very low interest rates due to extra savings by individuals and attraction of foreign investment capital allowing lower cost capital and infrastructure expansion.
Budget elasticity for government including the ability to respond to special demands such as war or national emergencies.
Eliminate budget deficits with minor adjustments in an already extremely low tax rate.
Eliminate accumulated national debt through same mechanism if desired; further strengthening the currency.
Multiplier effects of economic stimulus creating greater numbers and value of transactions in an upward spiral reducing rates or allowing more services.
Incentive to move toward a "cashless" system.

NEGATIVES

Public insensitivity to expansion of government budgets and commensurate regulation.
Very low interest rates for people relying on secure, fixed sources of income.
Loss of tax incentive for charitable contribution. People will have more wealth to give but must do so without economic advantage.

Implementation of this elegant and simple idea in Canada would allow Canadians to create an original, authentic social organization that would eventually be copied by all other nations. Let's apply the power of the internet to get this Automated Payments Transaction Tax idea into the mainstream and into application. Canadians, write your Member of Parliament." BR

Tech Talent and Real Estate

If we want to take on the challenges of the 21st century, ie: the urgent generational "moonshots" facing us, then tech sector - take on the challenge of tax reform.

Death & Taxes

Real Time with Bill Maher
Michael Moore – Where to Invade Next

The Automated Payment Transaction Tax

History, Charts & Curated Readings

Archives

Categories

Tech Talent and Real Estate

If we want to take on the challenges of the 21st century, ie: the urgent generational "moonshots" facing us, then tech sector - take on the challenge of tax reform.

Death & Taxes

Real Time with Bill Maher Michael Moore – Where to Invade Next ​

The Automated Payment Transaction Tax

History, Charts & Curated Readings

Archives

Categories

Real Time with Bill Maher
Michael Moore – Where to Invade Next