The Annals of Taxation

I’m lecturing at the University of Essex and going from office to office chatting with people about their research. This is hard physical labor — I repeatedly go down one or two flights of stairs in this rabbit warren, walk down a hall, up the stairs in the adjoining building, then back down another hall. What a waste — why?

The answer is that the British government imposes a value-add tax on building extensions, so that if the buildings are joined on each floor, the extension is heavily taxed. To avoid this, the University struck a deal with the taxman to allow one internal door between adjoining buildings, allowing what is merely an extension to be treated as a new edifice and to escape taxation. The only problem is that, as usual, taxes create a dead-weight loss, as my well-exercised, tired knees that feel like dead-weights now illustrate. I doubt the building’s planners considered the cost of this loss when they agreed to this tax-avoiding subterfuge. (HT: SP)

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  1. Brad says:

    @Justin: I don’t know about older or whiter, but of course wealthier people complain more about taxes. If you don’t pay taxes you wouldn’t complain about them.

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  2. jonathan says:

    The VAT rule is a little more complicated. VAT is imposed on all construction except but charitable buildings are “zero-rated,” meaning there is no VAT due. I assume the university buildings are themselves zero-rated as charitable. The rules do get weird if you’re adding on but the requirements don’t need a deal with the tax collector. You need to build an “annexe,” meaning the new part has its own main access and it can function independently.

    I don’t defend the oddity of the rule that requires a minimal connection – to make an annexe instead of an extension – but it’s not just that a tax is imposed on additions. It is rather that all building is taxed unless it is zero-rated for charity or something similar. In other words, they didn’t pay any tax on any of the building’s construction.

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  3. James says:

    Justin – I have to disagree. When I was younger and poorer, I complained about taxes because my after-tax income was insufficient to support my desired lifestyle. Now that my after-tax income is more than I care to spend (and has been long enough to build up a comfortable savings), my complaints are more those of #8. Most of what I see appears to be wasted, or even used negatively.

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  4. Jane W says:

    VAT @ 17.5% of the full cost of the build is well worth avoiding but the British Govt is hell bent on improving people’s health and welfare which is why they tax unhealthy spending. Such as underwear, fruit juice and sanitary towels.
    The Cameron Govt is currently attempting to assess national happiness so probably there’ll be a tax on smiling soon, not that people will have much to smile about when the re-rating (annual tax) of homes with proposed increases for the number of lavatories, streetlights and the view come online.

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  5. BSK says:

    In defense of Justin, I have to agree with his overgeneralized statement. As Sam said, their complaints might be valued by dissatisfaction. I take it to be a lack of perspective. Many people complain about taxes, not realizing all the ways they benefit. The roads you drive on, the police who protect your home, the fire fighters who keep you safe… none of that is free. And the people on top, who often claim that their tax burden is disproportionately high, ignore all the ways in which the current structure of our social, political, legal, and economic system have allowed them to achieve the success they have. Absent the protections and support that is in place (which many of them are completely ignorant of), they likely would not be as wealthy as they find themselves today.

    We all benefit from taxes in ways we don’t realize. Many food prices are artificially low because of farming subsidies. We can afford the mortgages we have because mortgage interest is tax deductible, though this requires the difference to be made up elsewhere.

    I’d prefer a system without these complications, with lower taxes for all, and a truly free market. But that is not what we have now. And to complain about the faults of the system without the perspective of the positivies is disingenuous.

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  6. Zoltan says:

    Why on earth aren’t calling people and asking them to come to your office (one walk for each of them, vs. many walks for you), or even better, just calling or using email / IM to talk to them?

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  7. Sam Adams says:

    to BSK,

    I think we are agreeing in general while emphasizing different perspectives. Most of the value you describe is provided by municipal and county government, and I do not resent paying my property taxes that much, though I am abhorred by some of the scandalous assessment practices that occur. I fully value those services and in fact in other forums, I have developed the only argument I know about that makes estate taxes sensible and not merely punitive (the ‘problem’ with this argument is that most estate tax revenue should devolve to municipal and county government based on the same rationale that you used…it is not the estate tax per se but the fact that it is imposed by the Federal government that makes it is so objectionable! If the Feds merely collected it and then dispersed 90% of it back to municipalities as you suggest, then people probably would feel quite differently about it, and a major argument against it would be removed.).

    However, I pay far more in federal income tax than all other taxes combined, and except for military protection, air traffic controllers, and food and drug inspection, I see far, far, far less value in return for that money on a relative basis.

    Instead I see bloated congressional staffs, way too many government departments (why do we have HHS, Commerce, Education, Energy, Interior, and Agriculture as separate departments when each one is an off-shoot of a single more basic central ‘service’?), and far too much intrusion into everyday life (I guess if you don’t run a business you are blissfully unaware of the various regulatory bodies that must be satisfied, no matter how draconian or tangential the rule). Most elections are between parties with little to distinguish them from each other except a desire to control the allocation of the ‘spoils’ to their favored constituencies at the expense of the common good. Frankly, I am surprised that people see much to distinguish the Dummycrats from the Repugnicans; their ‘arguments’ sound like those of the Lilleputians about which end of the egg properly to crack open.

    It seems like the more local your government, the better the service and the lower the tax; while the more remote the government, the higher the degree of parasitical behavior relative to the whole. Monuments to living politicians’ egos are particularly offensive to me.

    To echo # 9 Brad, I’m willing to bet that young successful professional black women complain to their friends more about the level of their taxes than older white men living in trailer parks; it’s just that those conversations occur in private rather than the New York Times editorial section. I recall when my daughter received her first ‘real’ paycheck she was astonished that 30% of it went to various taxing authorities, she had been accustomed to little or no tax based on her part-time work before then.

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  8. 164 says:

    The architecture you describe may also be a remnant of the original design back in the 1960s when it was intended to be one of the largest universities in Britain. The design was that of interconnecting modular blocks that could be built a piece at a time, eventually taking over most of Wivenhoe Park. Sadly the architectural theme chosen can best be described as “drab concrete and glass”. Then in the 60s and 70s student unrest took over and the university became radicalized by the extreme left. The university became nothing more than an outpost of the Socialist Workers party and an embarrassment to the British government. Their plans for expansion were soon abandoned as part of their master plan for expanding the higher education system.

    Even in the mid 1980s I recall striking coal miners taking over the student residences, hosted by students, protesting Thatcher / Regan policies.

    The reputation of the place seems to have improved since the early days, but you have to understand the history of the place.

    Oh and did you check out the Paternoster Lifts in the Library? You get on and get off whenever you want and it never stops.

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