TPA Briefing Note: Empty Property Rates

TPA Briefing Note: Empty Property Rates
admin  •  Home  •  Sunday 20 March 2011

In April the holiday period for Empty Property Rates relief comes to an end. Soon nearly all businesses will have to pay full business rates on an empty commercial property just three months after it becomes vacant, and six months later for an industrial property. This comes at a time when the Government needs to do all it can to help businesses lead the recovery.

The TPA believes that the Government should scrap the tax in this month’s Budget.

Click here to see the full report

Click here to read the press release

Key points:

Empty Property Rates will hinder a private-sector led economic recovery. Last year, empty rate relief was worth £1.2 billion to businesses.With high vacancy rates across the UK, many landlords may simply to choose to demolish empty properties instead of paying the new rates. This would contract the fixed capital stock and make recovery more difficult.Pensioners who are funding their retirement with rental income from a small number of commercial properties will also be hit despite receiving no income from empty properties.Collecting Empty Property Rates also causes councils problems, with increased administrative and collection costs. And some are using taxpayers’ money to destroy buildings to avoid paying the tax themselves.In opposition, senior Liberal Democrat and Conservatives were highly critical of the tax.

John O’Connell, Research Director of The TaxPayers’ Alliance, said:

“It’s crucial that businesses are allowed to get on with driving an economic recovery, but hiking tax on empty properties threatens to scupper many firms’ ability to grow. A huge number of properties lying vacant run the risk of simply being demolished to avoid the burden, making it far more difficult for businesses to start up or relocate and making a mess of towns across the country. Senior figures in the Government were critical of the policy before the election and we keep hearing how they want to take on the enemies of enterprise – they can do this at the Budget on Wednesday by getting rid of this stealth tax.”

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US Treasury Bond Interest Rates: Nowhere to Go But Up

03/14/11 Tampa, Florida – Charts from contraryinvestor.com show that, as of right now, there is going to be almost $1.8 trillion in US Treasury debt maturing this year, and all of it will need to be “rolled over” by issuing new debt.

Perhaps it is also instructive that they also note that “Just shy of 50% of UST debt ‘rolls’ within three years.”

What this means, in practical terms, of course, is that We’re Freaking Doomed (WFD). “Why?” you ask. “Because,” I helpfully explain, “rising rates of inflation mean higher rates of interest that borrowers, especially deadbeat bankrupted governments, must pay when they try to rollover such massive amounts of debt!”

And what were interest rates three years ago when half of all Treasury debt, now rolling over, was first issued? I don’t know exactly, but the graph of “US Treasury Bond Interest Rate History” at observationsandnotes.blogspot.com shows that interest rates were higher in 2008, and lower now in the range economists call “squat,” meaning that rates have nowhere to go but up.

Well, perhaps you would be interested to know that the interest rate on these bonds is lower than at any time since the ’50s, and is just inches away from the all-time, record-low of 2% set in 1940.

Or perhaps you would be staggered, clutching your heart and screaming, “Nooooooo!” when you learn that the average interest rate over the years was somewhere just under 6% ever since the low of 2% set in 1940, which means that interest rates would have to double – double! – from here just to get back to the average interest rate paid on bonds since 1971!

And why was 1971 the big inflection point where interest rates went nuts? Because that was when volatility in interest rates really started Going Freaking Nuts (GFN) because, not by coincidence, Nixon severed the last threads of connection between the dollar and gold.

And there is a personal reason, too for picking that date. Before 1971, I was a fresh-faced kid, his whole bright future ahead of him, but who decided to make one idiotic, disastrous decision after another until I ended up here, decades later, a bitter little man wearing a bullet-proof vest and a tinfoil hat, hiding in the closet under the stairs and typing out hate-mail to the Federal Reserve (“Dear Federal Reserve morons, I hate you! Signed, Hateful in Florida”) and the Congress (“Dear Congress morons, I hate you! Signed, Hateful in Florida”).

And even before that, back to 1900, interest rates were low, and swings in interest rates were much more muted, too, because the dollar was mostly on the gold standard, which are two of the beauties of the gold standard, as we are seeing by just standing up and going over and looking out at a world on the verge of panic and ruination thanks to the Federal Reserve creating So Freaking Much Money (SFMM) for So Freaking Long (SFL).

And when the people of the world do panic, they will run to gold and silver, and their prices will soar, making this investing stuff so easy that you just gotta say, with every bit of earnestness you can muster, “Whee!”

The Mogambo Guru
for The Daily Reckoning

Richard Daughty (Mogambo Guru) is general partner and COO for Smith Consultant Group, serving the financial and medical communities, and the writer/publisher of the Mogambo Guru economic newsletter, an avocational exercise to better heap disrespect on those who desperately deserve it. The Mogambo Guru is quoted frequently in Barron's, The Daily Reckoning , and other fine publications.

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U.S. Household Incomes Growth Rates

U.S. Household Incomes Growth Rates
March 9, 2011

I've received several emails commenting on my growth of household incomes posted earlier this week. In response to my observation about the higher annualized growth rate of the bottom quintile, Bruce Ollodart, the president of American Actuarial explained this phenomenon as the result of affirmative action, minimum wage laws, women entering the labor market, and the rise of minority protections.

Bruce also included some interesting comments on the comparative growth rates of the household segments. In the chart above I've illustrated the real linear growth rates for the bottom quintile and top 5% of households — 0.52% and 1.5% respectively. What a difference a percent makes! Of course these two population averages started out with significantly different annual incomes.

But we normally think of our raises in nominal terms. So if we add the average 4.25% inflation rate over the period, the nominal raises for these income segments would be around 4.75% and 5.75%, respectively.

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