From today's Observer*
"Labour highlighted a series of green taxes that would be needed to fund Redwood's proposed £21bn tax cuts if the Tories want to avoid cuts in public spending. They include ... imposing VAT on the building of new homes, raising £7.7bn, adding £35,000 to the cost of a £200,000 new home"
This is complete and utter bollocks, of course.
Think about it ... most people are indifferent between buying a new home or a 'second hand' home. Eighty per cent of sales each year are of 'second hand' homes. There has to be an equilibrium between prices for new and second hand. Builders would not be able to put up the price of a new home to £35,000 unless people put up the prices of second hand homes by the same amount.
The prices that people can pay for properties are dictated by what they can afford, in other words the market. So the selling price of a new home would stay at £200,000 and the builder will have to absorb £35,000 VAT into his overheads. Builders will only build if they can make a profit out of it, so the one "made up" figure in the property market, pure land values for sites with planning permission will go down by £35,000.
Seeing as residential building land is currently worth about £1.5 million per acre on average in the UK (up from pretty much nothing in the mid-1990s), putting VAT on new homes would be a very good idea. It would hurt neither householders nor builders, it would raise money to pay for cuts in more damaging taxes and be borne by landowners who do f*** all for the economy.
Of course I am sick and tired of this 'green tax' crap as well, different topic.
*Thanks to Christina Speight for alerting me to this in one of her round robin emails.
About That Closet
3 hours ago
4 comments:
Interesting analysis Mark. I agree that it would have to be absorbed in the value chain by driving a wedge between the inputs and sale price. If it raised that much revenue then it could be used to lower the overall VAT rate.
btw, since you have done a fair few sums for the citizens income i have a question. I used to be/still am (sort of) a fan of the CI for the reasons that it does not distort markets or remove work incentives etc, but it is costly. For that reason i became more inclined to support a negative income tax, although the withdrawal rate increases admin etc.
So have you modelled a hybrid solution, e.g. a £2,000 CI plus a £2,00 NIT, where there NIT element si withdrawn but the CI is not? Just a thought! Would provide some of the benefits of each.
Vindico, I ground out the figures for the Citizen's Income Trust, bizarrely enough, it would be (slightly) cheaper to give everybody a CI set at current Income Support/Pensions Credit levels (£57 or £119 per person per week) with a flat income tax of 33% (22% income tax plus 11% National Insurance) than the present shambles of crappy fuckwittery.
And that's ignoring dynamic gains from ending the poverty trap etc.
See here.
I have pestered UKIP's policy people, and I think they'll go for this as well!
The Tories are like our right winged extremists (ultra conservatives) and the liberals who are flaky left winged bleeding hearts make me want to f***** stab myself in the eye every time I hear them talk on some CNN interview.
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