Friday, Sep 25, 2009

Martin Wolf rocks!

Financial Times: Why Cable’s mansions tax is right

"... the batty Lib Dem idea is not Mr Cable’s “mansion tax”, but replacing council tax with a local income tax. Taxation of property should be heavier, not lighter. But it should also be less regressive. That is why the mansion tax is the germ of an excellent idea. Property taxes are economically desirable, though the best such tax is on site value, rather than on completed development. What makes such taxes attractive is that they bear not on effort, but on “rent” – value over and above the economic costs of production. Income tax, by contrast, bears on successful effort... people will bleat about the injustice done to the house-rich, income-poor elderly. My reaction is: tough...

Posted by mark wadsworth @ 04:57 PM (1002 views)
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10 Comments

1. shipbuilder said...

Anyone who says they believe in a capitalist meritocracy, where reward is in proportion to effort, could not possibly object to replacement of income tax with property tax. You want more money, you work harder - don't we hear this everywhere? Yet I suspect most self-proclaimed 'capitalists' actually wish to increase their wealth with as little effort as possible, hence the proliferation of property 'investors', tax-avoiders and the like, in reality pulling up the ladder behind themselves to the detriment of future generations.
The reality is that there is a limited amount of land and one generation cannot be allowed to benefit at the expense of the next because of this. If we all actually believed in what we say we do, property tax would be a no-brainer vote winner.

Friday, September 25, 2009 05:19PM Report Comment
 

2. mark wadsworth said...

@ Shipbuilder "in reality pulling up the ladder behind themselves to the detriment of future generations."

I suspect that the fundamental flaw in "home-owner-ism" (which is the whole basis for the UK's economic system) is that home owners think they are immortal, in the very literal sense that they believe that they will live forever - for example, they don't accept that their gain is the next generation's loss - and they wail about "preserving the greenbelt for future generations" while overlooking the fact that they will be dead by then and "future generations" might well decide they'd prefer a bigger house and garden, in the same way as the current "home-owner-class" would be a bit miffed if we suggested demolishing all their houses and using the land for agriculture instead.

Friday, September 25, 2009 05:30PM Report Comment
 

3. letthemfall said...

shipbuilder
That's it in a nutshell. You watch them on TV, a large sprawling house behind them, puffing and objecting at the prospect of paying out what for them will be a modest amount. That typifies many of the very well-off. They believe they are more talented and harder working than everyone else, and will do everything they can to avoid a fair share of taxation. You only have to watch the dodgy tax-haven shenigans of the banks to see that. But I despair of it changing.

Friday, September 25, 2009 05:35PM Report Comment
 

4. uncle tom said...

The fundamental problem with this idea is identifying liable properties, and valuation.

Good taxes are simple, easily collected, equitable, hard to evade, and minimal in number.

This idea doesn't tick enough boxes..

Saturday, September 26, 2009 11:56AM Report Comment
 

5. clockslinger said...

UT! you are kidding, surely? Easy to calculate, (current open market value updated at regular intervals) easy to collect (montly installments as per poll tax) and to enforce (failure to pay = charge againsy the asset on title at land registry ...and imprisonment as per poll tax!), impossible to evade even by non domiciles and any inequitable outcomes (poor elderly in family home) can be quite easily addressed via a means tested rebate/ exemption system a la council tax benefit).
The real problem, as Shipbuilder correctly percieves, is that it requires walking the talk in controlling property speculation and its non productive profits. You need a government and population that plants trees in whose shade they know they will never sit for this, so probably won't ever happen here then, despite its perfection.

Saturday, September 26, 2009 12:40PM Report Comment
 

6. uncle tom said...

Clockslinger,

No, not kidding..

Is it simple? - There is no database detailing the value of every house in the country, only the price realised when it was last sold (if it has been sold in the last decade or so - prior to that, it's all on paper) - and big houses have a far more subjective value, as they normally differ from the one next door.

There would be endless disputes and appeals over valuations, so it would be far from simple.

Easily collected? - yes, if people pay up, but overseas owners might not be very good at paying. Have you ever tried putting a charging order on a property? - The paperwork and court applications take forever. Would it be worth chasing those in houses worth, say, £1.1m - probably not.

Equitable? - should someone in a million pound house be taxed, but someone with a million in the bank not? - it doesn't stack very well on that front.

Hard to evade - yes, it gets one good tick!

Minimal in number? - it's being presented as an extra tax, not a replacement or a simplification.

So for points out of five it scores about a point and a half - must try harder Vince.

Saturday, September 26, 2009 02:25PM Report Comment
 

7. dbc reed said...

@6 uncle tom
They valued every single house in Northern Ireland during the recent rates review and issued individualised assessments.There were very few appeals.
Vince Cable's proposal is not much more than adding an extra band at the high end of the Council Tax.Even the "revolutionary" land value tax would not amount to much more than an adjustment to Council Tax .
Before 1963, house value rises,even ones you had created yourselves like extensions,were subject to Income Tax (Schedule A) .House prices,not surprisingly, hardly rose at all for decades.

Saturday, September 26, 2009 04:09PM Report Comment
 

8. uncle tom said...

dbc,

Banding is less contentious - you can say 'that house is worth more than a million, therefore it has to be in a super band on the council tax scale' - that is not so difficult.

The problem with Cable's idea is that the exact value has to be determined - is a large house worth 1.2m or 1.4m? - that difference will make a 100% difference to the amount of tax paid.

- People will argue long and hard about that!

Saturday, September 26, 2009 05:17PM Report Comment
 

9. shipbuilder said...

My agreement is with the article, which argues the principle of land tax vs other taxes, of which Cable's idea is just an example, so basing the discussion on Cable's idea only is moving the goalposts a bit...

Saturday, September 26, 2009 05:51PM Report Comment
 

10. shipbuilder said...

UT - your point on a million pound house vs a million in the bank - chances are the million in the bank was earned, as opposed to much of the property worth, which is simply a result of circumstance, so in fact it is much fairer and in accordance with the principles that we all say we live by - 'a fair day's pay for a fair day's work'.

Saturday, September 26, 2009 06:36PM Report Comment
 

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