Property tax mulled over

the_flying_pig

wotsthat wrote: »

...Whatif it applied to houses over £200k -what would we think then?...

You mean whatif it was a completely different tax aimed at a completely different set ofpeople? I daresay that most people, me included, would have completelydifferent opinions.

Let’s say [these figures are rounded guesstimates but very similar to the ones bandied around in the papers] that there are 50,000 £2m+ residential properties in the UK, with an average value of £3m, total value £150bn. A 1% tax would raise £1.5bn, average £30k per house.

If instead the money was to be raised on £200k+ houses [say with an average value of £300k, assuming that there are 5m of these houses, total value £1.5trn], to raise £1.5bn the tax would have to be 0.1%, i.e. £300 per house.

The keypoint is that £2m is a fortune. It’s about 80 years’ worth of the national average pretax wage or about 10 average houses. Even a very old person living in one will very likely always have been very comfortably off, since whilst their house won't always have been worth £2m, it will most likely always have been worth about 10 average houses.

Emy1501

wotsthat wrote: »

Emy1501 wrote: »

I can see the point about council tax but I'm not sure that there are really many if any pensioners living in 2m houses who are living on the poverty line. As i say I would rather the tax etc be collected another way ie closing loop holes etc. but when there are old people dying every day because they can't afford to heat their house its difficult to really get too upset about the odd person who may have to sell a 2m house and move into a 1m house. QUOTE]

To a degree we´ve fallen into the type of trap often laid by politicians. In this case we are focusing on people living in £2m houses and thinking about what "mansion" tax actually means.

What if it applied to houses over £200k - what would we think then?

After all a house of that value is above average and would be considered by many to be a mansion and occupied by a rich person.

Maybe Vince Cable will clarify his remarks?

Not sure of anywhere where a house worth 200K would be considered a mansion. For me 2m in side london and 1m outside is what I would call a mansion. At the same time i have no problem with a sliding scale ie say £200 a year for a 200k house and 2k for say a 2m house.

Radiantsoul

tartanterra wrote: »

However, if you pay your income tax and national insurance, then use what's left to buy a house - paying stamp duty and VAT on the purchase, then pay your council tax based on your property, then I think a line should be drawn.

Property tax is a step too far.

Another option would be to charge Capital Gains Tax on private residences. If you are going to push the fairness aspect, then it is unfair that people gain on property more than they would investing in other asset classes.

the_flying_pig

Radiantsoul wrote: »

Another option would be to charge Capital Gains Tax on private residences. If you are going to push the fairness aspect, then it is unfair that people gain on property more than they would investing in other asset classes.

the issue i have with that is that it'd be a tax on moving, which incidentally means that to raise the same amount of money, given that people generally move a lot less than once a year, the amount of tax per property would need to be a lot higher.

as per an earlier post of mine tax should either not distort at all or else be focused on discouraging bad behaviour & encouraging good. what's 'bad' about moving? doesn't moving grease the wheels of the jobs market & whatnot?

it seems daft to me that someone who lives for 5 years in a £2m house pays zilch in tax but someone who moves twice in 2 years to a couple of much cheaper [say £1m] houses pays £100k in moving tax.

Radiantsoul

CGT would not be a tax on moving though. In fact moving frequently would lower the CGT liability as everyone has a £10k allowance which mostly goes unused.

princeofpounds

the issue i have with that is that it'd be a tax on moving,

Indeed. Add stamp duty to that and you would kill labour mobility dead. That would be a disaster for the economy over the long term (think about the decaying mill towns with the unemployed population stuck in their lifetime-tenancy, benefit-funded council houses whilst cleaning and construction companies in the south east resort to hiring people from the other end of Europe to try to overcome salary inflation pressures.)



Personally, I do find this caricature of 'poor widow in large house' quite amusing. Yes, taxes on wealth are unpleasant to those who bear them. But so is taxation on income.

If you want to use caricature to fight caricature, at the moment, you have a situation where a rich widow in her £2 million house is subsidised by the taxation on the labour of the single mother supemarket shelf stacker who works a 50 hour week simply to keep herself and her baby in food, heating and a bedsit.

It's not fair on the widow to be forced to downsize. But it's also not fair on the stuggling worker that she can't afford to heat her home throughout the winter.

Tax is never fair, by definition it involves theft and redistribution of property.

If you know the rich (and I do, working in finance), you will realise that all the *genuinely* wealthy people tend to have remarkably little in taxable income, yet plenty of assets and ways to manage the income into capital gains and from there into tax-efficient vehicles.

There are plenty of sound economic arguments why a wealth tax is better and fairer than an income tax. But unfortunately emotional arguments are the ones that people understand and listend to, so I wouldn't hold my breath.

System

I think a tax is more likely to be perceived as fair if it can be seen as being raised in order to pay for some services that the payer is likely to benefit from.

Council tax, however outrageously high it may seem, is at least directed towards paying for local services. But an additional property tax on top has no pretence about paying for anything in particular, and no additional local benefit will arise, either to the payer or anyone else.

It is simply licensed theft.

The_White_Horse

this property tax is joke. as is stamp duty. why should you pay tax to buy a home to live in?

the best way forward is to make the seller of property pay tax on the gain they have made when they sell. If they bought a house in 1970 for 15k and it is now worth 500k, then they should be taxed on 485k. If they bought it in 2005 for 490k and it is now worth 500k, they should be taxed on 10k. simple as that.

Radiantsoul

Clifford_Pope wrote: »

I think a tax is more likely to be perceived as fair if it can be seen as being raised in order to pay for some services that the payer is likely to benefit from.

Council tax, however outrageously high it may seem, is at least directed towards paying for local services. But an additional property tax on top has no pretence about paying for anything in particular, and no additional local benefit will arise, either to the payer or anyone else.

It is simply licensed theft.

It sounds like it is going to pay for something in particular, namely a reduction in the top rate of income tax.

wotsthat

the_flying_pig wrote: »

The keypoint is that £2m is a fortune. It’s about 80 years’ worth of the national average pretax wage or about 10 average houses. Even a very old person living in one will very likely always have been very comfortably off, since whilst their house won't always have been worth £2m, it will most likely always have been worth about 10 average houses.

£2m is a fortune and that's agreed.

Where I'm coming from is that we don't have a clue about it other than what's been reported on a remark by Vince Cable. This is testing the water but to get the answer he wants he throws in a little bait about a labour peer who owns a house that the vast majority can only aspire to. All of of sudden we're all for it - that'll show wealthy foreigners avoiding stamp duty etc. etc.

We'll find very quickly that this is 'interpreted' as widespread public support for a property tax. Be careful what you wish for because you don't need a wild imagination to work out where it goes from there.

If the target is meant to be people who live in houses that are bigger than they need why not introduce a tax based on, for example, people per bedroom?

If the target is wealthy people that avoid stamp duty then how can the loophole be closed?

The ideas above may be rubbish but they get the debate off someone who causes mild jealousy and on to what we want the tax to do.

I'm not in favour of any tax that increases the cost of accomodation (renters or buyers) especially in a country where high prices are supported by government failure to ensure enough houses are available.