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Imf Report Encourages Tax On Fixed Immovable Assets

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It seems the monetary authorities are closing in on the trapped Homeowners who are not being taxed on their accumulated wealth...as many here on HPC have mooted many times:

HAT TIP to Zero hedge and here is a quote and some commentary.

But going back to the original point, here is why those in the market for a house should be worried. Very worried. From page 40 of the IMF's paper on "Fiscal Policy and Income Inequality":

Some taxes levied on wealth, especially on immovable property, are also an option for economies seeking more progressive taxation.
Wealth taxes, of various kinds, target the same underlying base as capital income taxes, namely assets. They could thus be considered as a potential source of progressive taxation, especially where taxes on capital incomes (including on real estate) are low or largely evaded. There are different types of wealth taxes, such as recurrent taxes on property or net wealth, transaction taxes, and inheritance and gift taxes. Over the past decades, revenue from these taxes has not kept up with the surge in wealth as a share of GDP (see earlier section) and, as a result, the effective tax rate has dropped from an average of around 0.9 percent in 1970 to approximately 0.5 percent today. The prospect of raising additional revenue from the various types of wealth taxation was recently discussed in IMF (2013b) and their role in reducing inequality can be summarized as follows.
  • Property taxes
    are equitable and efficient, but
    underutilized
    in many economies. The average yield of property taxes in 65 economies (for which data are available) in the 2000s was around 1 percent of GDP, but in developing economies it averages only half of that (Bahl and Martínez-Vázquez, 2008).
    There is considerable scope to exploit this tax more fully, both as a revenue source and as a redistributive instrument,
    although effective implementation will require a sizable investment in administrative infrastructure, particularly in developing economies (Norregaard, 2013).

And there you have it: if you are buying a house, enjoy the low mortgage (for now... and don't forget - if and when the time comes to sell, the buyer better be able to afford your selling price and the monthly mortgage payment should the 30 Year mortgage rise from the current 4.2% to 6%, 7% or much higher, which all those who forecast an improving economy hope happens), but what will really determine the affordability of that piece of property you have your eyes set on, are the property taxes.

Because they are about to skyrocket.

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what will really determine the affordability of that piece of property you have your eyes set on, are the property taxes.

Because they are about to skyrocket.

I'm not too sure I agree with these suggested immovable property taxes, but was warned, so long ago before no-more-boom-and-bust went crazy, to expect them when Governments need to really start looking to raise revenue.

I fear they will be too destructive and impede the economy. There are other steps they could take first, to bring healthy productive long term revenue and growth, but they all require a correction.

Although as I want HPC, and less Gov Help-To-Overpay.... I'm not overly fussed for now about mansion taxes, so long as they don't affect business / commerce - productive people.

May I latch this story on, to your thread, from today.

Mansion tax 'could trigger huge crash in property prices': Owners' lobby group claim that 'economically illiterate' levy is just politics of envy

New lobby group launched by multi-millionaires in West End restaurant

They claim property prices will fall and hope to overturn public opinion

Experts claim homeowners will be hit with £50,000 bill to live at home

By Glen Owen and Mark Hollingsworth

PUBLISHED: 01:50, 16 March 2014 | UPDATED: 01:50, 16 March 2014

BORIS JOHNSON: Why I will lead the Tory fight against Vince Cable's mansion tax. It's a brutally unfair attack on EVERY homeowner

By Boris Johnson

PUBLISHED: 01:33, 16 March 2014 | UPDATED: 01:42, 16 March 2014

..I explained (and by now the whole carriage was listening, since this is a subject that obsesses both the capital and the rest of the country) that we were helping tens of thousands of people such as them – couples with a joint income of, say, £33,000 – to get a part-buy, part-rent home. This kind of deal allows you gradually to increase the proportion that you own outright, even if you start with a small deposit.

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I'm not too sure I agree with these suggested immovable property taxes, but was warned, so long ago before no-more-boom-and-bust went crazy, to expect them when Governments need to really start looking to raise revenue.

I fear they will be too destructive and impede the economy. There are other steps they could take first, to bring healthy productive long term revenue and growth, but they all require a correction.

Although as I want HPC, and less Gov Help-To-Overpay.... I'm not overly fussed for now about mansion taxes, so long as they don't affect business / commerce - productive people.

May I latch this story on, to your thread, from today.

Latch away as it adds very much to the views on what the future may hold.

FACT: Countries are running very large deficits.

FACT: solutions involve lying about growth and hiding the brakes on entreprenuers.

FACT: this will all lead to a need to raise revenues in the absence of real wealth growth.

This has to, IMHO, mean that the easy targets are going to be hit...tax avoiders will become more clever or move their assets away, so what is left..the General tax payer, trading operations in the country and assets that cant be moved..

They are already attacking the public sector in a tiny way, that will get bigger as time passes...they have no choice...meanwhile direct and stealth taxes are on their way...along with new taxes...I agree with the IMF, taxes on unearned property wealth are going to become more acceptable....you yourself mentioned mansion tax...It seems for those without a small property, even the first rung is a mansion in nominal value...

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Latch away as it adds very much to the views on what the future may hold.

FACT: Countries are running very large deficits.

FACT: solutions involve lying about growth and hiding the brakes on entreprenuers.

FACT: this will all lead to a need to raise revenues in the absence of real wealth growth.

This has to, IMHO, mean that the easy targets are going to be hit...tax avoiders will become more clever or move their assets away, so what is left..the General tax payer, trading operations in the country and assets that cant be moved..

They are already attacking the public sector in a tiny way, that will get bigger as time passes...they have no choice...meanwhile direct and stealth taxes are on their way...along with new taxes...I agree with the IMF, taxes on unearned property wealth are going to become more acceptable....you yourself mentioned mansion tax...It seems for those without a small property, even the first rung is a mansion in nominal value...

Guess the Govt already gets its claws into Ponzi equity via care home fees; stamp duty allows them to get a sliver without having to wait so long. A property tax would allow more to be taken without needing a sale or a decrepit occupier which must be hugely tempting.

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Taxy taxy.

Issue is that most of the housing wealth in UK is in London/SE , which is the Tory base, so ain't going to happen. For same reasons they'll never tax the land owned by the Queen, Charles, Westminster and the Scottish lairds. That is the Tory party.

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This report doesn't surprise me in the least. I recall 'arguing' in various conversations with friends in recent years that, following a decade+ of rise in values of fixed assets, that they will inevitably become a target for ever greedy politicians. The style/form and magnitude of the taxes will obvioulsy vary from one country to another - but I am under no illusion that targeting property, whether directly or indirectly, in increasingly diverse ways will come about. That this new tax burden will effect (lower) property prices or make people radically reassess their costings of property ownership is beyond doubt as far as I am concerned.

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Take note, and, if you have money, try not to show it. The advice, "If you've got it, flaunt it." was composed during a boom. It does not suit depressed circumstances. Depressions are always periods of abrupt political change. What might seem harmless, crank obsessions, like a plan for a wealth tax, could be voted into law.

During the nineteenth century, most states had personal property takes that included all assets, presumably even stocks and bonds. These taxes were drawn in an ages when most assets were tangible assets, like real estate, livestock, farm implements, and buildings that could not be hidden.

A wealth tax at the national level is also a possibility. The constitutional amendment that provided for an income tax did not repeal the earlier ban on a capital tax. This won't necessarily prevent some hard-pressed state and local governments from reaching for confiscatory personal property taxes in a slump. Such niceties may not withstand the rush of circumstances.

Such taxes would mainly be vindictive, not economically useful. Wealth is an antidote to depression, not its cause. A wealth tax would make the rich poorer or send them abroad. It would do nothing to stop a depression or strengthen the overall economy. To the contrary, confiscatory taxes would reduce savings, discourage work, and increase indebtedness. To pay a tax on wealth, much of which is illiquid, would require either reduced savings or more borrowing. It would discourage investment in start-up companies that do not pay dividends and retard the economy in other ways. In the past, the severity of depressions has been correlated to the amount of debt outstanding when they started. The more debt, the deeper the downturn. A wealth tax "cure" for depression would make matters worse, but this is not to say that it won't happen.

-J.D. Davidson 1993.

I used to believe firmly wealth taxes on immovable assets were always stupid (and vindictive), and I still do for productive business, like their machinery/equipment ect.

Yet the vindictiveness has for so many years swung too hard onto younger people and the prudent who didn't over-stretch. Whilst values of real estate holdings / land ect just hyper-inflated in value. So maybe I'm less against it now, if it helps bring about some rebalancing, if it encourages wealthy equity rich owners of massively over-valued fixed assets/land ect to come to market. Or releases the forbearance grip of over-financed zombies who hold too many assets.

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I used to believe firmly wealth taxes on immovable assets were always stupid (and vindictive), and I still do for productive business, like their machinery/equipment ect.

Yet the vindictiveness has for so many years swung too hard onto younger people and the prudent who didn't over-stretch. Whilst values of real estate holdings / land ect just hyper-inflated in value. So maybe I'm less against it now, if it helps bring about some rebalancing, if it encourages wealthy equity rich owners of massively over-valued fixed assets/land ect to come to market. Or releases the forbearance grip of over-financed zombies who hold too many assets.

There's a big difference between a finite natural resource (such as land) and a replaceable manmade asset (such as machinery), especially when the former is essential for survival and the latter is not. The fact that, as a society, we refer to both as "property" and don't clearly differentiate between the two is part of the problem. As they are, by their very definition, both limited in quantity and not the result of any human effort or productivity it seems like it would be fairer and less vindicitive to directly tax the use of finite natural resources and to never tax what human productivity can then add to them.

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If it was an instead of, rather than the likely as well as and a tax on land value - I'd be all for it. But if it ever gets any traction in this country, you just know the average person will end up paying the lion's share of it.

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The people that set the rules have the fixed immovable assets.

I'd like to see some figures but I would guess that tax has been generally shifting towards income rather than the capital gains.

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If it was an instead of, rather than the likely as well as and a tax on land value - I'd be all for it. But if it ever gets any traction in this country, you just know the average person will end up paying the lion's share of it.

There is no other way, the average man has the average income and is the average property owner...of course, he will shoulder the bill, for he is the most numerous and the most vulnerable.

By the average man, I mean around 20% either side of the top of the Bell curve.

He always pays.

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