Property tax mulled over

Fella

Tax & NI on what you earn.

Use what's left to buy a property & pay tax on that (Stamp duty).

Now we have that most overrated of morons Vince Cable suggesting a further tax during the lifetime of the property, a Mansion Tax.

Then finally another tax when people die. via Estate duties.

So that's at least 4 taxes on the same earned income. UK politicians really know how to incentivise people.

Look forward to hearing those same politicians whine about the lack of entrepeneurs & the lack of jobs being created in a soundbite coming to you soon.

Going4TheDream

Perhaps the government can put 'their house in order ' first.

Sensible acceptable expenses for MP's, how much money have MP's made by owning second homes, and all the whitehall cronies using limited companies to 'evade' tax on their salaries.

I am all for people paying tax but if loop holes exist so people avoid doing so then close them.

Too be honest I would be pretty miffed if I had been above board in my tax dealings, according to law and regulations at the time and then find out that the house I worked hard for was to be taxed too, retrospectively.

LydiaJ

Emy1501 wrote: »

My understanding is a Mansion tax will cost someone living in a 2m house an etc 5k a year. Not a huge amount of money for anyone who can afford to live in one of these houses regardless of whether they are a pensioner or not.

Not necessarily. Many pensioners bought their houses ages ago and own them outright. They can afford to carry on living them even if they now have a really quite low income. A bit of extra gas for heating, that's the only added expense, other than taxes.

Vince_Cable_(in_the_article) wrote:

And it's not taxed at all. Basically you get people with multi-million-pound properties paying exactly the same council tax as someone in a three-bedroom semi. So the system doesn't work.

Err, no Mr Cable. Are you not aware that council tax is done in bands, and a 3-bed semi is not the top band???? (Where's that shrug smiley when you want it?)

Fella

Anyone who thinks a mansion tax would only affect the "super-rich" should think again too. Once introduced a tax like this could easily be extended downwards to lower-priced properties, either directly or via years of fiscal drag. Another house price boom & this could become a tax that affects many people (similar to the "high" income tax band of 40% which squarely hits lots of people who are anything but well-off nowadays).

It's been obvious for awhile that various politicians are looking greedily at the pile of cash (via bricks) some people are sitting on thanks to the house price boom & trying to work out ways they can get their hands on it.

Thrugelmir

Just collecting the 5% stamp duty and blocking the tax loop hole for overseas investors would be a start.

LydiaJ

In general I think taxes on either income or spending are better than taxes on wealth. You earn (or spend) the money and you pay tax on it, and that's that. But with wealth taxes you have the assets, you pay tax on then, and then you pay tax on the same assets again, and again, and again, and again, until there's nothing left. Income or spending taxes feel to me like the government taking a cut and then butting out, whereas wealth taxes feel like the government saying "whatever you've got, we won't let you keep it", which feels unfair to me, and much more of a disincentive to try to succeed economically.

ETA Just to clear up any misunderstanding.... I am talking here about taxes on the wealth or income of reasonably equivalently well-off people. So if we're talking about taxing the kind of people who live in £2m houses, then I'm comparing that with increasing taxes on income at the level of the typical income of people who live in those kinds of houses, not increasing income tax for everyone.

HAMISH_MCTAVISH

Fella wrote: »

Once introduced a tax like this could easily be extended downwards to lower-priced properties, either directly or via years of fiscal drag..

Exactly the point I was going to make.

Fiscal drag would ensure most of the country is paying this tax within a few decades.

LydiaJ wrote: »

Income or spending taxes feel to me like the government taking a cut and then butting out, whereas wealth taxes feel like the government saying "whatever you've got, we won't let you keep it", which feels unfair to me, and much more of a disincentive to try to succeed economically.

Absolutely correct.

The government should get one bite of the cherry, not be able to nibble away at it forever.

pqrdef

John Redwood is very worried about the little old lady on a meagre pension who can't afford the mansion tax on her £2m flat in Kensington.

I'm not. Seems to me she could massively improve her standard of living by trading down to somewhere half the price and supplementing her pittance with the investment income from the other million.

Or she could let out the £2m pad, rent a £1m pad, and eke out her paltry pension with the difference.

She'd lose benefits though. Hey maybe that's one way to sell it to the Tories.

the_flying_pig

there are many ways in which taxing property is superior to taxing income although, of course, it's not obviously better in every single respect.

i'm no expert but if I were to trying to think up the perfect tax i'd bear principles such as the following in mind:

1 - tax should encourage good behaviour & discourage bad - taxing property is superior to taxing income because discouraging working is just about the biggest economic no-no. it's impossible to discourage ownership of £2m houses because every property will always be owned by someone, somewhere.

2 - tax should be 'fair' - possible to let subjectivity creep in here. property ownership is a lot less equal than wage income, making a tax on very expensive property relatively 'fair'. property ownership is also much less well correlated with effort and ability than income. points about old people living in very valuable houses noted but why is this any less fair than a 30 year old worker in London who earns [say] £70k but can't ever expect to earn a really nice house having many times the taxbill of a property-rich, low-income household? pure subjectivity.

3 - tax should be difficult to avoid - tax on property would be vastly superior to tax on income iuf it came with a rule that a property will be taxed regardless of the identity or status of the person or company that owns it [as we know it's relatively easy for very high earners to reclassify their income as something that doesn't attract income tax].

4 - tax should be easy & cheap to levy & collect - PAYE is a [relatively] finely tuned machine. there'd no doubt be issues around valuations & son on that'd create more bureaucracy if property taxes were to increase.

the_flying_pig

LydiaJ wrote: »

In general I think taxes on either income or spending are better than taxes on wealth. You earn (or spend) the money and you pay tax on it, and that's that. But with wealth taxes you have the assets, you pay tax on then, and then you pay tax on the same assets again, and again, and again, and again, until there's nothing left. Income or spending taxes feel to me like the government taking a cut and then butting out, whereas wealth taxes feel like the government saying "whatever you've got, we won't let you keep it", which feels unfair to me, and much more of a disincentive to try to succeed economically.

to me that doesn't mean anything.

if i'm going to pay [say] £10k in tax per year, why the heck do i care whether it comes straight out my income or whether I have to pay it based on the value of my house?

the point of the wealth tax is that only the very wealthy pay it. they stop paying if they ever stop becoming wealthy.

it's possible that there'd be fiscal drag but with a threshold set at £2m it'd be at least a decade before a mansion tax hit anyone who wasn't fairly seriously wealthy, making it a very good tax for at least a decade, and easily restorable to being a very good tax just by increasing the threshold in the way that income tax thresholds have changed over time.