Property tax mulled over

the_flying_pig

wotsthat wrote: »

£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.

I don't think there is a "target" other than to raise a billion ortwo per year in a way that demonstrably appeals to some voters notions of ‘fairness’by falling disproportionately on the well-off.

The 50% tax was an attempt to do the same thing but, despite the fact thatvested interests will always overstate the case , there are problems with thistax. Whilst the 50% rate almost certainly has raised a decent amount of money[despite some of the risible squealing s to the contrary that one mightsometimes read in the Telegraph] it is a tax that: (a) lowers incentives towork,; (b) in the medium term might genuinely start to adversely affect London’sposition as a global financial hub; (c) could eventually lead to widespreadgrowth in tax mitigation [or whatever the favoured euphemism is] schemes.

A mansion tax would suffer from none of problems (a), (b), or (c).

Whether hitting the asset rich but [in a few cases] income poor is any moreor less ‘fair’ than hitting the income rich but [in a few cases] asset poor is acompletely subjective question.

Someone earning £200k p.a. is undoubtedly well off but after giving up morethan a third of that in tax & NI already [and if they’re aged much lessthan 40 very probably having a £50k a year or more mortgage to contend with] it’sdifficult to argue that they aren’t already ‘doing their bit’.

The_White_Horse

princeofpounds wrote: »

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.

why is the widow being subsidised by the single mother?

Graham_Devon

Not many seem to be touching on the fact that this could make investing in property in London less favourable.

Foreign investors don't really add much for the population living there.

Rochdale_Pioneers

I don't get how you can viably impose large taxes on sitting assets annually and expect them to be paid. If people have liquid assets (wages, capital gains, inheritance etc) thats easy. But just because something you own is worth X doesn't mean that you have a pool of ready cash.

However, if I lived in some horrific suburban hell hole like Twickenham and my house was worth £2m, I'd sell up and buy somewhere bigger in a nicer part of the world and bank the rather large bag of change.

the_flying_pig

Rochdale_Pioneers wrote: »

I don't get how you can viably impose large taxes on sitting assets annually and expect them to be paid. If people have liquid assets (wages, capital gains, inheritance etc) thats easy. But just because something you own is worth X doesn't mean that you have a pool of ready cash.

However, if I lived in some horrific suburban hell hole like Twickenham and my house was worth £2m, I'd sell up and buy somewhere bigger in a nicer part of the world and bank the rather large bag of change.

Fine but the house will continue to exist, *someone* will always buy/own it.

System

Radiantsoul wrote: »

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

But we have been told that the 50% rate of tax actually loses money, by driving away people who might pay it. So there is no cost in abolishing it.

System

The_White_Horse wrote: »

why is the widow being subsidised by the single mother?

She isn't being subsidised. A subsidy is when you transfer money from one person to another. Deciding not to impose a proposed new tax is not a subsidy, except in an Orwellian world where words can be twisted to mean anything.

If the government announced that it was considering imposing a 90% tax on everyone, and then decided not to impose the tax, you would not then argue that the result would be a subsidy for everyone?

princeofpounds

why is the widow being subsidised by the single mother?

Actually it's a valid question to which I did not imply an answer, and I perhaps should have been more precise.

The subsidy statement assumes that there are general societal services that are being supplied by the government and require a particular tax revenue to sustain. Probably easiest to explain by example:

Widow pays no significant tax except council tax (so we will ignore local services) due to low earnings, but is a multi-millionaire in terms of illiquid property assets.

Single mother pays PAYE. Has negligible assets and difficulty affording anything above a very basic lifestyle in a cramped private rental bedsit.

Both are consuming a number of national state services equally, such as defence, policing, prisons, judiciary, NHS, education (across their lives), national debt servicing and so on.

The millionaire widow pays zero to this. The breadline mother is contributing.

She isn't being subsidised. A subsidy is when you transfer money from one person to another

That's simply wrong. You have given a definition (rather imprecise at that) of a *direct* subsidy.

There are also things called *indirect* subsidies that do not involve transfers of money.

http://www.britannica.com/EBchecked/topic/570986/subsidy

Deciding not to impose a proposed new tax is not a subsidy, except in an Orwellian world where words can be twisted to mean anything.

It's got nothing to do with imposing a new tax or not. The widow IS being subsidised indirectly. There are many ways you could fix this, from reducing the services and tax burden. You could even argue it is a justified subsidy on the grounds that the widow is old, or that people have a right to never be taxed on their homes no matter how palatial, or that the widow might have earned rather than inherited her wealth, or whatever.

I happen to think that a wealth tax is economically sensible, but that's incidental to the point that I am making which is that the caricature of the rich widow is not a logical defence in itself despite its emotional appeal. You also have to explain why this widow should not have to regard her capital as a resource for self-support.

---

Fundamentally there is only one question to ask at the root of this debate; most people expect society to support those who have no source of income. But we should question whether society should also support those who have no source of income but plenty of capital.

Our tax and welfare rules are remarkably inconsistent on this. Hold your wealth in cash or investments and you will get much reduced support (and no housing support at all until you fall below £16k of savings if I recall correctly). But hold your wealth in property and society will pay for you.

So perhaps we should ask the question at that more basic level before we even worry about the specifics of a mansion tax.

Should society, including the 'working poor', pay for the support of people (directly or indirectly) who have no income but huge amounts of capital wealth?

the_flying_pig

Clifford_Pope wrote: »

But we have been told that the 50% rate of tax actually loses money, by driving away people who might pay it. So there is no cost in abolishing it.

Pff. Told by who? The Daily Telegraph? An advocacy group promoting the interests of the high paid and/or high paying companies?

The bare facts are that:

1 - the Treasury initially estimated that the tax would raise billions;
2 - at the time a predictable set of vested interests squealed that [aside from being unfair etc] it'd actually lose money; and
3 - it's much too early to tell whether the tax actually will raise money or not, whatever the usual suspects on both 'sides' might imply

http://www.telegraph.co.uk/finance/personalfinance/consumertips/tax/9097219/50p-tax-rate-failing-to-boost-revenues.html

http://www.guardian.co.uk/commentisfree/2011/feb/22/50p-tax-rate-treasury

I think that most sensible commentators on either side would admit that the higher rate will almost certainly raise money in the short term... scare stories about hordes of companies & individuals leaving the country have a grain of truth in them but changes of this sort take years rather than months to happen. Similarly, some new tax mitigation wheezes would take quite a long time to dream up & implement.

As for the longer term, well, it's far, far, too early to tell.

HAMISH_MCTAVISH

princeofpounds wrote: »

Hold your wealth in cash or investments and you will get much reduced support (and no housing support at all until you fall below £16k of savings if I recall correctly). But hold your wealth in property and society will pay for you.

To which the answer is that if you've invested your income in property, you are saving society the cost of having to house you should you have no income later on in life.

If you get to retirement age with no house, no pension and no savings (as many do) then the state must pay for your care in it's entirety.

Why would we want to discourage an activity (buying a house) which relieves the state of the cost of housing people in their old age?