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Ed Balls: Labour Government Would Fast-Track The Mansion Tax

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http://www.independent.co.uk/news/uk/politics/ed-balls-labour-government-would-fasttrack-the-mansion-tax-9941165.html

Imposing a mansion tax on homes worth more than £2m would be one of the first acts of an incoming Labour government next May, Ed Balls has revealed.

In an interview with The Independent, the shadow Chancellor said he hoped that the 100,000 people with the most expensive properties would start to pay the levy in the 2015-16 financial year, even though that starts a month before the May general election.

Mr Balls disclosed that work on introducing the mansion tax would start on “day one” of a Labour administration. The tax would be included in his first Budget so the £1.2bn a year it would raise could be injected immediately into the NHS. He has asked the Treasury to start preparations before the election.

“Saving the NHS will be at the heart of our first Budget,” he said. “I would like to see that revenue coming in in the first year of a Labour government, before the end of the financial year. We will have to see the practicalities.”

Mr Balls denied this would amount to retrospective legislation: “A charge is paid in that [financial] year on the valuation on a date in that year. We will be clear what we are going to do in our manifesto. No one will have any doubt about our intentions.”

I wonder how he's going to raise the money from people who haven't got it that will have to sell their home at some point to pay it? Will we be borrowing that Ed?

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http://www.independent.co.uk/news/uk/politics/ed-balls-labour-government-would-fasttrack-the-mansion-tax-9941165.html

I wonder how he's going to raise the money from people who haven't got it that will have to sell their home at some point to pay it? Will we be borrowing that Ed?

Well it'll only take 10 years of mansion tax to pay for the Labour govts failed IT system for the NHS....

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Well it'll only take 10 years of mansion tax to pay for the Labour govts failed IT system for the NHS....

The companies were only paid for what they delivered which was a fraction of the total expected cost as they couldn't do what they said they would.

So it would probably be a little less time bit I'd imagine labour would find some way to exempt their corporate buddies and make it look they were doing something when they weren't "a la Blair."

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I am personally getting quite fed up of morons in my local paper writing to the Editor to tell him that the cure for all ills is for me to pay more than the 42% in tax/NI that i currently pay.

Just for fun i sent in a letter of my own, recommending that all gains - whether through salary, share sales or house price increases - should be taxed at the same rate. I pointed out that some people have earned more from their houses, tax free, than i have earned.

It would be fair to say that those self same people who want me to pay higher income tax were quite vociferous in condemning me for wanting to tax everything.

The hypocrisy never ceases to amaze me.

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I am personally getting quite fed up of morons in my local paper writing to the Editor to tell him that the cure for all ills is for me to pay more than the 42% in tax/NI that i currently pay.

Just for fun i sent in a letter of my own, recommending that all gains - whether through salary, share sales or house price increases - should be taxed at the same rate. I pointed out that some people have earned more from their houses, tax free, than i have earned.

It would be fair to say that those self same people who want me to pay higher income tax were quite vociferous in condemning me for wanting to tax everything.

The hypocrisy never ceases to amaze me.

Yeah but there are more people with nothing who are likely to envy you and vote for them now

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Why do Labour not want to adjust the council tax banding system so that more expensive homes pay a lot more? I read somewhere that if there was an overhaul of council tax bands, based on later values with more bands added that all those complaining of a mansion tax and having to pay £3000 per year would in fact be paying much more under a revised council tax system. It was obvious that property was going to need to be taxed. The tax take is falling and income has already been taxed too much. Property cannot be moved or hidden so it is ripe for taxing. I am just surprised that BTL has not apparently got into their line of sight (yet).

Edited by fru-gal

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Why do Labour not want to adjust the council tax banding system so that more expensive homes pay a lot more? I read somewhere that if there was an overhaul of council tax bands, based on later values with more bands added that all those complaining of a mansion tax and having to pay £3000 per year would in fact be paying much more under a revised council tax system. It was obvious that property was going to need to be taxed. The tax take is falling and income has already been taxed too much. Property cannot be moved or hidden so it is ripe for taxing. I am just surprised that BTL has not apparently got into their line of sight (yet).

Council tax is payable by the occupant and not the owner, so if council tax was increased in line with property values there would be lots of private tenants paying more council tax while their landlord enjoyed the HPI gains.

It would be better to replace council tax entirely with a land value tax paid by the property owner.

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http://www.independent.co.uk/news/uk/politics/ed-balls-labour-government-would-fasttrack-the-mansion-tax-9941165.html

I wonder how he's going to raise the money from people who haven't got it that will have to sell their home at some point to pay it? Will we be borrowing that Ed?

Yes, it is better to tax hard working people salaries than the house ownership ... great ...

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Yes, it is better to tax hard working people salaries than the house ownership ... great ...

I love the idea that the owners of the 100k most expensive houses in Britain are already on a financial knife-edge and can't possibly cough up a bit of property tax. The last 40 years have been so unkind to these people, no doubt they are subsisting on porridge and tins of beans.

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Council tax is payable by the occupant and not the owner, so if council tax was increased in line with property values there would be lots of private tenants paying more council tax while their landlord enjoyed the HPI gains.

It would be better to replace council tax entirely with a land value tax paid by the property owner.

Not exactly but yes lvt would be better. Landlords charge the max they can, 'market' rents. If council tax was increased and the tenant had to pay more, rents would have to reduce by a commensurate amount to maintain that max value. i.e. net cashflows are the same, but either rents or prices would fall. It's the same as with SDLT - technically paid by the buyer, economically worn by the seller.

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Not exactly but yes lvt would be better. Landlords charge the max they can, 'market' rents. If council tax was increased and the tenant had to pay more, rents would have to reduce by a commensurate amount to maintain that max value. i.e. net cashflows are the same, but either rents or prices would fall. It's the same as with SDLT - technically paid by the buyer, economically worn by the seller.

Taxes are worn by both buyers and sellers, it's not either-or. Landlords ask for as much as possible and tenants offer as little as possible, this is normal market behaviour and does not tell you who wears the tax.

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NHS, yay.

When the bloody NHS takes up 100% of GDP will liebour still be demanding more funding for the thing?

This will always be one of the problems with the NHS model. In other countries the cost of healthcare goes up each year. But it's not really political in the same way.

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I'm starting to think Labour could actually win in May. They seem to be stretching their lead again - which isn't how it's meant to go as an election approaches. And bearing in mind that they've lost 20% of their support in Scotland which would account for 2% of the national fall since last year - so surely that means they're actually doing a bit better in England by about 2% than some of the swing models factor in. They might lose 30 seats in Scotland to the SNP. But would an extra 2% in England give them a big bunch of marginals? I know Michael Ashcroft's polls of marginals show them making big gains.

Edited by oldsport

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I'm starting to think Labour could actually win in May. They seem to be stretching their lead again - which isn't how it's meant to go as an election approaches. And bearing in mind that they've lost 20% of their support in Scotland which would account for 2% of the national fall since last year - so surely that means they're actually doing a bit better in England by about 2% than some of the swing models factor in. They might lose 30 seats in Scotland to the SNP. But would an extra 2% in England give them a big bunch of marginals? I know Michael Ashcroft's polls of marginals show them making big gains.

If that's the only way to get rid of the present government then so be it. The Conservatives would get new leaders, hopefully proper free market Tories, who could sort out the (even bigger) mess in five years time. Of course I could never vote Labour, but if my vote for UKIP helps to bring an end to the current Tory leadership then I shall be happy.

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Taxes are worn by both buyers and sellers, it's not either-or. Landlords ask for as much as possible and tenants offer as little as possible, this is normal market behaviour and does not tell you who wears the tax.

In these cases that's not correct. A landlord can try and a tenant can just say no thanks. Housing supply is inelastic, housing demand isn't. The price of housing services (rents) are therefore almost entirely a function of demand (affordability). Land or house prices amount to the NPV of equivalent future rents accruing to them, so a higher tax impacts future cashflows determining today's value, lowering it. All else being equal they cannot be passed on as additional costs to tenants because the tax is worn by inelastic immovable supply and not more price sensitive (net wages) demand. Whether it impacts the landlord is not relevant while rent > costs and if it becomes relevant that's a Government taxes and not a tenant issue.

If you think that's wrong then why do landords or sellers rent or sell at the prices they do today, and not higher? Or alternatively who bears the liability if tenants just move or opt to buy in the event that a new net tax + rent is more expensive?

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Housing supply is inelastic, housing demand isn't.

Housing demand is definitely elastic. People can and do live with relatives, stay in a failing relationship instead of moving out, house share, use bunkbeds, turn living rooms and lofts into bedrooms or subdivide existing bedrooms, move to other parts of the UK/world, delay/abandon plans to start a family, put the cot in the parents' bedroom etc. This elasticity is the reason there aren't hundreds of thousands of under 40s on the streets despite housing costing much more relative to their incomes than it did 20 years ago.

There is a huge amount of this coping going on but it's largely invisible so easy for politicians to ignore.

Edited by Dorkins

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Hopefully this shift in policy from Labour marks the beginning of policy divergence with the Tories.

To date it's hard to understand what either side stands for, apart from mediocrity.

Back in the good old days the difference was clear. Labour stood for the man in the street and the idea was that they would tax the rich to make the lives of the poor better. Easily understood, even if it didn't work.

Clearly they need some policy differences with the Tories, and obviously there is a calculated gamble here that pissing off 100000 rich voters (who would probably never vote for them anyway) will lead to enhanced support from the masses. I hope it works, and I hope they are encouraged to do more of it. I want to see some real choices in politics and I hope the likes of UKIP forces this.

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Housing demand is definitely elastic. People can and do live with relatives, stay in a failing relationship instead of moving out, house share, use bunkbeds, turn living rooms and lofts into bedrooms or subdivide existing bedrooms, move to other parts of the UK/world, delay/abandon plans to start a family, put the cot in the parents' bedroom etc. This elasticity is the reason there aren't hundreds of thousands of under 40s on the streets despite housing costing much more relative to their incomes than it did 20 years ago.

There is a huge amount of this coping going on but it's largely invisible so easy for politicians to ignore.

You mis-read what I wrote. But your post underscores my point anyway.

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You mis-read what I wrote.

So I did, oops. Having re-read your post properly I agree with you.

Edited by Dorkins

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Hopefully this shift in policy from Labour marks the beginning of policy divergence with the Tories.

To date it's hard to understand what either side stands for, apart from mediocrity.

Back in the good old days the difference was clear. Labour stood for the man in the street and the idea was that they would tax the rich to make the lives of the poor better. Easily understood, even if it didn't work.

Clearly they need some policy differences with the Tories, and obviously there is a calculated gamble here that pissing off 100000 rich voters (who would probably never vote for them anyway) will lead to enhanced support from the masses. I hope it works, and I hope they are encouraged to do more of it. I want to see some real choices in politics and I hope the likes of UKIP forces this.

This ^.

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I can't bring myself to vote Labour but they have this one mostly right.

Anything which discourages the ludicrous situation where some houses cost over 2 million pounds in a country where the average wage is around 25k is absolutely fine by me.

You can call me envious and bitter all you want - I am. If the people with the real wealth had left people like me an even slightly larger slice of the pie over the last few decades then we wouldn't be in this mess.

Now in my 30s, pay higher rate tax, and I am forced to pay through the nose to rent a single room in shared former council house, with no hope of buying a home near my job. So much for hard work getting me somewhere.

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Anything which discourages the ludicrous situation where some houses cost over 2 million pounds in a country where the average wage is around 25k is absolutely fine by me.

Which is why you're part of the problem.

If you want cheaper houses, the solution isn't to tax a few owners more, it's to stop creating vast amounts of credit at near zero interest rates. A tax on houses you can't possibly afford won't make the houses you could possibly afford any cheaper. Yeah, maybe a house that's currently 'worth' 2,500,000 pounds would suddenly sell for 1,999,999 pounds. But how does that help you? People will continue to borrow 250,000 to buy an ex-council flat so long as the government sets interest rates so low that the banks can easily afford to lend it... they won't be snapping up those bargain 1,999,999 pound houses instead.

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