How does this sound for tax policy? Tax on property ownership over X.

Randvegeta

Hello all,

Anyone who has ready any of my previous threads or responses to others threads probably knows I am sort of against taxes in general and personally would like a minimalistic government since I see tax as a discouragement to work or invest.

That being said I have recently been thinking about owning real estate and how buying property can yield not only good return on your investment when selling, but also continuous income in rent while you do own it.

I have been considering the following scenario.

A person who has purchased a number of properties in the past (and I don't mean 1 - 5 years.. I mean 10 - 20 years) may find that they are considerably more valuable now than they were back in the day when they purchased it and can probably live quite well off the rent alone if they have enough. If you own 4 properties of 200,000 GBP each, you can probably earn more than the average family that lives in those very properties.

These people would effectively become non-productive members of society in that they do not contribute to the country's output and may actually be contributing to an over inflated property market.

So the question is, would it be fair to impose high taxes on property owners who's sole purpose for owning property is to make rental income and/or gains after selling?

For example, if you buy a house to live in (you really should have 1 house/flat to live in) this should most certainly be tax free. And I suppose it is even fair to have 1 extra property for which you can buy/sell and rent out as you wish.

But what about those landlords who just own loads and loads of property? Is this really good for society? Perhaps high taxes should be imposed on rental income on the 3rd - nth owned property as well as higher stamp duty on house purchase/sales for these properties too?

In this way, I would imagine property prices should not be over inflated and the property 'investors' would have to put their money into REAL investments that may actually be productive for society.

Perhaps I am missing something? Thoughts are welcome :-). Sorry if this is not the right thread. It's just my fav thread :-P

John_Pierpoint

It has all been done before and these ideas very nearly become law in USA over 100 years ago.
http://en.wikipedia.org/wiki/Georgism
Raffles, after whom the bar in Singapore is named, is said to have introduced such a tax, mainly because land was the one thing that his new colonial subjects could not hide from him, but also because taxing land does not distort the economic relationships between productive members of society.

It won't happen here, because those who rule the country are land owners and they know that land is something that cannot be inflated away to nothing by the likes of "Quantitive Easing".

In fact the EU spends a great part of its budget subsidising land owners - it is called the "Common Agricultural Policy".

http://farmsubsidy.org/GB/

Fields of Gold: Lifting the Veil on Europe's Farm Subsidies

aka

http://!!!!!!!!!!/6184633

the censored bit reads vimeodotcom

dan.date66

It used to be the case that "unearned income" was taxed at a higher rate than earned income - now just the opposite. Rental income does not attract National Insurance contributions, so somebody on £100,000 income from a portfolio of properties is paying considerably less in tax than an earner on the same salary. So you can understand why so many people have built up portfolios of properties - the tax system is actively encouraging them to do so.

Landlords have an unfair advantage over corresponding purchasers of property to live in - the landlord does not have to repay the loan, consequently the cost to the live-in purchaser is always going to be greater (repayment mortgage v interest only). This is why we are having so many people being priced out of the market...and then having to rent. Straight into the landlords hands! To paraphrase Karl Marx, our property market is effecively becoming a two tier system, a bourgeois property owning elite and a landless proletariat.

As the OP suggests, this is not contributing to the output of society or encouraging entrepreneurship. It is however distorting the property market. What bothers me is that politicians of all hues are trying to "fix" the stagnant housing market, without noticing the elephant in the room.
If you want to fix the property market - ban BTL mortgages. We never used to have them, nor do most countries and we could go back to people buying property.....just to live in!

Mind you, all we need is a small rise in interest rates and we will soon see how many BTLs are swimming naked.

CLAPTON

If I bought shares in well established companies 20 years ago and live off the dividends, one could argue that I contribute nothing to society.
Shares probably haven't done as well as property but is the principle that different?

John_Pierpoint

Yes the land does nothing but extract a rent from the tenant farmer.
The directors of the company you are financing will have restructured their business several times in the last 20 years in all probability and most likely milked you for most of the dividends back again by having a rights issue.

All the landlord has to do is collect rent and possibly prevent the tenant from making the changes he would like to make.

CLAPTON

dan.date66 wrote: »

It used to be the case that "unearned income" was taxed at a higher rate than earned income - now just the opposite. Rental income does not attract National Insurance contributions, so somebody on £100,000 income from a portfolio of properties is paying considerably less in tax than an earner on the same salary. So you can understand why so many people have built up portfolios of properties - the tax system is actively encouraging them to do so.

Landlords have an unfair advantage over corresponding purchasers of property to live in - the landlord does not have to repay the loan, consequently the cost to the live-in purchaser is always going to be greater (repayment mortgage v interest only). This is why we are having so many people being priced out of the market...and then having to rent. Straight into the landlords hands! To paraphrase Karl Marx, our property market is effecively becoming a two tier system, a bourgeois property owning elite and a landless proletariat.

As the OP suggests, this is not contributing to the output of society or encouraging entrepreneurship. It is however distorting the property market. What bothers me is that politicians of all hues are trying to "fix" the stagnant housing market, without noticing the elephant in the room.
If you want to fix the property market - ban BTL mortgages. We never used to have them, nor do most countries and we could go back to people buying property.....just to live in!

Mind you, all we need is a small rise in interest rates and we will soon see how many BTLs are swimming naked.

I don't think the figures show that there is less owner occupiers than 20 years ago.

although 'BTL' is fairly new marketing phrase, we used to have landlords in the past who bought their properties with things called 'mortgages' or even 'loans'.

a little melodramatic to talk about property elite and landless prols

why not illustrate your points will some facts and figures?

Randvegeta

If I bought shares in well established companies 20 years ago and live off the dividends, one could argue that I contribute nothing to society.
Shares probably haven't done as well as property but is the principle that different?

3

I would argue it is quit different. With land, it is not really an investment as you are not developing or producing anything. Investing in share should generally mean you are contributing/financing an institution that does those things. So you are are being productive by proxy so to speak. Is that right?

Also, investing in companies means a much greater risk to yourself in terms of losses. You could quite literally end up with NOTHING if the company goes bust. Even if your land devalues, you still own the land, and you can do what you want (to a certain extent) with that land. So you never end up with NOTHING.

So I would argue that investing in companies is generally a positive force for society, whereas investing in property for the purpose of renting or selling at a profit (or both) is not. As such, the practice should be discouraged.

I do not think that people should be punished for owning property or even restricted from buying property. But where the property is not needed, it becomes a bit of luxury item, and we have already accepted in the UK that not necessity goods carry VAT of 20%, so why not add it to properties purchased if not for use as a your own dwelling? It should also discourage foreigners from buying up property in the UK only to eventually drain the money from the economy thanks to their 'speculation'.

CLAPTON

Randvegeta wrote: »

3

I would argue it is quit different. With land, it is not really an investment as you are not developing or producing anything. Investing in share should generally mean you are contributing/financing an institution that does those things. So you are are being productive by proxy so to speak. Is that right?

Also, investing in companies means a much greater risk to yourself in terms of losses. You could quite literally end up with NOTHING if the company goes bust. Even if your land devalues, you still own the land, and you can do what you want (to a certain extent) with that land. So you never end up with NOTHING.

So I would argue that investing in companies is generally a positive force for society, whereas investing in property for the purpose of renting or selling at a profit (or both) is not. As such, the practice should be discouraged.

I do not think that people should be punished for owning property or even restricted from buying property. But where the property is not needed, it becomes a bit of luxury item, and we have already accepted in the UK that not necessity goods carry VAT of 20%, so why not add it to properties purchased if not for use as a your own dwelling? It should also discourage foreigners from buying up property in the UK only to eventually drain the money from the economy thanks to their 'speculation'.

'investing' in established companies injects no money into the company and seems to me similar to buying an existing property
One can argue that buying existing shares release money to some-else to invest in a start up but that's true of buying property to rent too.


If some-one pays for a builder to build new property that seems a force for good in the community..i.e. we have more houses and their reward is rent


you seem to be saying that there should be NO rental properties at all... where would people live?

Randvegeta

'investing' in established companies injects no money into the company and seems to me similar to buying an existing property

Well even the most established company can issue NEW shares to raise capital for new projects. So it is not entirely true, or at least not universally true.

One can argue that buying existing shares release money to some-else to invest in a start up but that's true of buying property to rent too.

Indeed buying shared and buying property releases cash to someone else but shares are not the same as property. For 1, you risk loosing 100% of your investment as those shares may be cancelled if the company goes bust. If you buy property, you own the land, even if the land is technically worthless. Further more, you need a liquid stock market for shares to be bought/sold easily so people have the confidence and ability to actually make the investments. Property is highly ILLIQUID so the need for unlimited buyers is not necessary.

Finally, a landlord has more control over your average share holder. A landlord can dictate prices and if they are big enough, can really control entire communities. Land/property ownership is quite empowering. If you own enough of a company to have that kind of power, you could end up destroying the company. So it cannot be compared in the same way. This is why property is called REAL estate.

If some-one pays for a builder to build new property that seems a force for good in the community..i.e. we have more houses and their reward is rent

That assumes there is a purchase of a new property. The vast majority of property purchases are not new. I never said there was anything bad about property development. Besides, property development is a business activity, not an individual. Being a landlord doesn't mean you have a business.

you seem to be saying that there should be NO rental properties at all... where would people live?

Where did I say that? I clearly stated in my first post that people should be able to buy 2 properties without any TAX penalty. 1 to live in an 1 to rent out. I fully appreciate that not everyone can afford to buy so some MUST rent. But even so, I did not say people should be restricted from BUYING more than 2 properties, only that taxes for the 3rd - nth property be relatively high to discourage becoming some mega landlord and not being a contributing member of society. At least if they did own lots and lots and lots of property, if the tax rates were high enough, the government would be able to circulate that money back into areas of the economy that need it. At least that's the idea.

real1314

Randvegeta wrote: »

Well even the most established company can issue NEW shares to raise capital for new projects. So it is not entirely true, or at least not universally true.

Landlords investing in property has led to house building - which is both developing and producing something.

Your knowledge of the economy is weak, and therefore your arguments are completely flawed as they are based on this limited knowledge.

What does Tesco develop or produce? Nothing. They are just a middle-man.

There are swathes of the UK economy based on service industry which does not develop or produce anything.

Your biased view has developed into a biased argument. You have failed to consider a single balancing point, have selected examples only on the basis of supporting your pre-determined viewpoint and have only managed to demonstrate your lack of rational judgement. :cool:

Randvegeta

Landlords investing in property has led to house building - which is both developing and producing something.

Can you provide any evidence to support this statement? I know of few people who have bought land, built property and rented it out. Property development is a good thing, I never stated otherwise.

Your knowledge of the economy is weak, and therefore your arguments are completely flawed as they are based on this limited knowledge.

I have a fairly good grasp of the economy. Care to elaborate or do you just like making snide comments? The word, I believe is troll? Listen, I had an idea, and I to be fair, I haven't spent much more than a few minutes really thinking this through. But I posted on here to get some feedback from people to see what the downside is to implementing what I am suggesting. So far I have not heard anything. So do elaborate! If you can!

What does Tesco develop or produce? Nothing. They are just a middle-man.

This is not an argument about developing or producing. In any case, Tesco provides a service. If you read some of my other posts, I would consider the super market business the kind of business that could, and probably should be taxed at a higher rate given they are highly immobile and their success is a result of the national wealth, which is arguably the result of the high level of education and infrastructure. I'm not going to go into detail but you can't compare a business that purpose is to provide a service with an individual who owns land and does nothing but collect on rent.

There are swathes of the UK economy based on service industry which does not develop or produce anything.

What is your point?

Your biased view has developed into a biased argument. You have failed to consider a single balancing point, have selected examples only on the basis of supporting your pre-determined viewpoint and have only managed to demonstrate your lack of rational judgement.

How is my view bias? What exactly am I being bias against? If I have failed to consider the balancing point, please enlighten me. What are your viewpoints? Do you have any? At least I have examples. I have not 'selected them' and ignored others, no other examples have been offered.

If you're going to criticise someone for an idea they have you could at least have an opposing view with reasons. You seem to have neither.