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armorique4

Actually Taxing Property Wealth!

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Lots more sense from Vince Cable

http://news.bbc.co.uk/1/hi/uk_politics/7284895.stm

Given that the massive inequalities in this country are much more in asset wealth, not income, he is right in that it is a massive anomaly that the equity in a house is ridiculous in being completely tax-free as compared to the fruits of your labour, which are taxed at up to 41%.

Transactions are also taxed at very high levels, which doesn't make that much sense either in light of the above, in terms of trying to promote economic growth.....................

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Given that the massive inequalities in this country are much more in asset wealth, not income, he is right in that it is a massive anomaly that the equity in a house is ridiculous in being completely tax-free as compared to the fruits of your labour, which are taxed at up to 41%.

I don't see anything on taxing equity there, and it would be hard to justify IMO -- if you save up your after-tax income and buy mortgage-free then you have 100% equity, why should you be taxed on that? Or if you increase your equity by overpaying your mortgage?

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Hmmm The Liberals I think they first need to identify their own sexuality before they start trying to run the nation.

Taxing housing is not an option, property inflation is not continuous, prices fall and people will be wanting tax rebates!!!.

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I don't see anything on taxing equity there, and it would be hard to justify IMO -- if you save up your after-tax income and buy mortgage-free then you have 100% equity, why should you be taxed on that? Or if you increase your equity by overpaying your mortgage?

Why should you be taxed on that? Quite. Why be taxed on income either?

My point is that the anomaly is in the differential tax treatment of earned income and possibly unearned equity, the former taxed very highly and thelatter, not at all.

There is an obsession on this forum with interest rates and very little discussion of fiscal policy which has led to massive distortions in asset values. Would the £80 million houses Vince Cable referred to be priced at that level if they were taxed? Would any property?

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Or even just get the taxpayer to pay your mortgage interest and take a 300k loan, and invest it for what - a couple of grand a month interest?

Mind you, you'd have to be an MP to manage that trick.

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I agree with him. Not only is this wealth un-taxed, but invariably nothing has been done to earn it.

YES LETS TAX IT.

thats the answer. Cause a problem then solve it with taxes!

Ok lets have this fiat money system that causes bubbles and robs people throgh inflation.

Then we can tax incomes to pay the govenments debt.

The debt the government accures through providing market distorting economic policies that

cause people to not take responsibility for their lives (like social benefits and NHS)

Then we can also tax just about any increase in wealth and exchange of goods.

Oh and add in a global carbon tax through a fear induced by lies (Man Made Global Warming).

KEWL.

Why not strap me into a wheelchair...feed me through a tube and wipe my anus for me...if im a good boy.

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Guest Charlie The Tramp
I agree with him. Not only is this wealth un-taxed, but invariably nothing has been done to earn it.

Yep I agree, so when you pop your clogs your beneficiaries should be taxed at 90%, Seriously. ;)

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I agree with him. Not only is this wealth un-taxed, but invariably nothing has been done to earn it.

What wealth, the solution is to manage the economy properly and not allowing runnaway inflation in property.

HPI is a consequence of a failed fiscal policy by a party of war criminals.

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Shifting more tax from earnings to land/property is what's needed if you are ever going to help solve the benefits trap as well as house price boom/busts - on the continent there is a lot more taxation on property sales which drives out the speculator and leads to a more stable housing market. Well-off individuals in the UK off are able to use housing booms to claw back the taxes they pay through rising land/property values which is an unearned income and untaxed, so they effectively pay less tax than those who are working and renting.

I personally can't see anything changing - all the people who hold the power are land/property owners and it suits them to keep things as they are, even if we have to have these 18 year boom/bust cycles.

The benefits trap is an illusion. There is no reason for an able bodied person in the UK to be without work.

My criticism is that this Government have not invested in education, in fact they have done the opposite. The have attempted to create a micro economy from education, with belts tightening its going to be interesting to see who on earth would wish to be saddles with a 30k debt to get a second rate degree that employers value as worthless. When new Labour first came to power, 30k would buy you a 2 bed terraced house!!!.

Look around the world and you will find that the most impoverished nations are those that are liberal, and those that fail to invest in the education of their people. If I had a business and I could take 40% of everything my employees earnt in return for paying for their education and healthcare I would be sitting with Bill Gates and Tony Blair eating Canope's and sipping pink gins.

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What wealth, the solution is to manage the economy properly and not allowing runnaway inflation in property.

Exactly, these are notional capital gains that can only be realised by forcing the property to be flogged off.

It would have been far better to have had proper credit restrictions in place in the first place.

Anyway since a lot of borrowers have MEWed themsleves upto the hilt they wont have much 'wealth' left in their property once house prices start to tank. This would only leave the those who bought years ago and kept their mortgages under control. Looks like just another example of politicians taxing the prudent to bail out the feckless.

This whole discussion is going to become pretty academic in a few years as government and local authorities are going to find that the credit crunch is going to cause their tax base to evaporate as is already happening ins some areas in the US.

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Exactly, these are notional capital gains that can only be realised by forcing the property to be flogged off.

It would have been far better to have had proper credit restrictions in place in the first place.

Anyway since a lot of borrowers have MEWed themsleves upto the hilt they wont have much 'wealth' left in their property once house prices start to tank. This would only leave the those who bought years ago and kept their mortgages under control. Looks like just another example of politicians taxing the prudent to bail out the feckless.

This whole discussion is going to become pretty academic in a few years as government and local authorities are going to find that the credit crunch is going to cause their tax base to evaporate as is already happening ins some areas in the US.

Immediately I can see a flaw in the plan, people would simply extract the equity and invest it elsewhere to become tax efficient, leaving the banks and pension funds holding an even larger pile of overpiced securities than they have today.

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The benefits trap is an illusion. There is no reason for an able bodied person in the UK to be without work.

My criticism is that this Government have not invested in education, in fact they have done the opposite. The have attempted to create a micro economy from education, with belts tightening its going to be interesting to see who on earth would wish to be saddles with a 30k debt to get a second rate degree that employers value as worthless. When new Labour first came to power, 30k would buy you a 2 bed terraced house!!!.

Look around the world and you will find that the most impoverished nations are those that are liberal, and those that fail to invest in the education of their people. If I had a business and I could take 40% of everything my employees earnt in return for paying for their education and healthcare I would be sitting with Bill Gates and Tony Blair eating Canope's and sipping pink gins.

I'm agreeing with you for the second time in an evening. You're speaking with great clarity tonight (apart from the mispelling of canape). Have you been on the wine or something ?

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the equity in a house is ridiculous in being completely tax-free as compared to the fruits of your labour, which are taxed at up to 41%.

Actually, make that more like 48%; don't forget that your employer is paying around 12% tax on top of what they actually pay you.

Just because you never see that money on your pay slip doesn't make it any less a tax on 'the fruits of your labour'. It should hardly be surprising that Britons prefer housing speculation to working when one is taxed so much more than the other.

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Why should you be taxed on that? Quite. Why be taxed on income either?

My point is that the anomaly is in the differential tax treatment of earned income and possibly unearned equity, the former taxed very highly and thelatter, not at all.

There's the rub. Just saying 'tax equity' makes no differentiation (and Cable is making no such call whatsoever, as far as I can see).

If you do decide to tax unearned housing gains then there's no reason to treat it differently from any other capital gain -- i.e. when the gain is realised. And as we all know, the gain is always on paper until you sell up or downsize, i.e. this concept of equity is like finanical vapourware for most people. And indeed you find that equity does evaporate when you try to grasp (MEW) it.

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There's the rub. Just saying 'tax equity' makes no differentiation (and Cable is making no such call whatsoever, as far as I can see).

If you do decide to tax unearned housing gains then there's no reason to treat it differently from any other capital gain -- i.e. when the gain is realised. And as we all know, the gain is always on paper until you sell up or downsize, i.e. this concept of equity is like finanical vapourware for most people. And indeed you find that equity does evaporate when you try to grasp (MEW) it.

There is no such thing as making a profit, what you sell for you have to pay for the next one, its all relative.

The only winner in this is the Taxman who takes Stamp Duty, and VAT on legals.

If a person makes money from Property, all he has done is cash in his right to keep pace with inflation that is created by an inept Government.

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I don't see anything on taxing equity there, and it would be hard to justify IMO -- if you save up your after-tax income and buy mortgage-free then you have 100% equity, why should you be taxed on that? Or if you increase your equity by overpaying your mortgage?

The justification for taxing equity in property would be the same as the justification for Capital Gains Tax on any other asset.

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If you invest in company stock, which after all (hopefully) is a productive, wealth-producing and tax paying entity which creates employment and innovation, you are taxed on both the dividends and on the capital gain.

Again, for property equity, you are taxed on neither. If you count the "dividend" as the benefit of actually living in the home, home-owners pay council tax at exactly the same level as someone renting the place.

If the state's unfunded future obligations have any hope of being met, a level playing field in terms of tax might be a good idea, rather than encouraging a society where people often put every single penny they make into their property, with consequent roller-coaster values due to speculation.

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Exactly, these are notional capital gains that can only be realised by forcing the property to be flogged off.

It would have been far better to have had proper credit restrictions in place in the first place.

Anyway since a lot of borrowers have MEWed themsleves upto the hilt they wont have much 'wealth' left in their property once house prices start to tank. This would only leave the those who bought years ago and kept their mortgages under control. Looks like just another example of politicians taxing the prudent to bail out the feckless.

This whole discussion is going to become pretty academic in a few years as government and local authorities are going to find that the credit crunch is going to cause their tax base to evaporate as is already happening ins some areas in the US.

I don't think Vince Cable is suggesting taxing equity, where do you get that idea from?

More generally, I think we should be taxing earnings less and assets more. This, I think will become a bigger and bigger issue as the recession bites. Government will need to change the attitude of people who have been fed the idea that sitting on your **** and waiting for property prices to go up is a good way of getting rich, they will need to be 're-educated'. The only way of recovering from a speculation driven bust will be a shift to productivity.

This whole debate of cause brings into question the boomer-driven agenda of building your wealth through appropriating the hard work of the previous generation and shifting the viability down to the next. It is unsustainable and the collapse in social mobility we have witnessed over the last 20 odd years is testament to it.

Vince Cable really is a lone voice out there amongst our self-serving political elite.

Edited by Bear Goggles

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Vince cable is suggesting a land tax... somthing that would prevent HPI completely.

He's talked about on properties over £1m but it really needs to be on all property, else the rich would just break their £1m property in 2 £1/2m propeties. But he didn't want the lower classes thinking itwould apply to them too.

The trick is to tax land values (the ground itself, not thehouse built on it) and to scrap income tax. Thus owning land become unattrative and working becomes more attractive.

Incidently, the "benefits trap" is where unemployed people as well as their dole money, get their rent paid for by housing benefit. Often that rent could be £500-800, maybe more. It can be hard to find a job that pays more per month than £800 rent +£150 council tax +£200 dole + free healthcare etc. If your rent is £800 you need a job that pays £1200 after tax just to break even.

Well, you used to. All hell is about to break lose now LHA has replaced Houing Benfit. Expect riots. Lots of Riots.

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The justification for taxing equity in property would be the same as the justification for Capital Gains Tax on any other asset.

I agree -- and you are not taxed on equity in any other asset, only on the capital gain at the time of disposal.

Hint: equity and capital gain are not the same thing, if you put down a 20% deposit on a house which then goes down by 10%, you still have equity in the house but have made a (paper) capital loss.

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OK so I buy a three bed semi in 1995 for 50k under the Tories, Labour come to power and with all Labour Governments we go through a period of Tax and Spend, which sends property prices spiralling to inflate 300% in ten years.

I am made redundant in my job, but offered a job 80 miles away, I dont want to commute each day as that would add tons of carbon to the Ozone, so I sell my house and buy one next door to my new workplace.

I had an interest only mortgage on my previous property so I still owe 50k, however inflation means I will have 150k in cash when I sell it for 200k, however the house I am buying is also a three bed semi, and the price is also 200k.

Are you suggesting that the Chancellor should penalise me for his work in inflating house prices, that I should be taxed at 40% on 150k leaving me with a massive mortgage if I wish to purchase a house for the same value as the one I sold ?

Edited by laurejon

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  • 294 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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