This chap wants to "Make the local authorities bigger [and] allocate the basic rate of tax to the new authorities and give them the power to vary it. Leave the national mechanisms in place to collect the tax. Just add a tag to the PAYE code. Take Council Tax away from the local authorities and make it a national property tax, easier to administer; easier to administer more fairly. Cap the property tax by reference to income, to solve the problem of the asset rich, income poor households".
He's thinking about the right things but ends up getting it wrong, wrong, wrong.
We should replace Council Tax, Stamp Duty Land Tax, Inheritance Tax, Capital Gains Tax and the TV licence fee with a Progressive Property Tax of around 1% of property values and dish that out to local councils on a per capita basis.
Then we should phase out the worst taxes (VAT* and Employer's National Insurance**) and reduce central grants to local councils in tandem. Local councils can then charge local precepts on the PPT if they want, if you don't want to pay it, vote for local councillors who care a bit more about value for money.
As to the 'asset rich, income poor' (i.e. pensioners) just allow them to roll up unpaid PPT until they die or the property is sold.
* Having left the EU, of course.
** Which I believe UKIP are going to propose.
Wednesday, 17 October 2007
Goblin King's advisor gets it all wrong
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8 comments:
The fact that many pensioners would be crucified by such a tax rather illuminates the proposition that we have far, far too large a state.
D, no no no! Pensioners wouldn't have to pay it, as Henry George and Winston Churchill explained time and again a century ago (and as I explained in the post).
Pensioners would be allowed to just leave it oustanding and it is then all repaid when they die and the house is dsold, which is why of course Inheritance Tax would have to go as well, or else that would be a double-whammy.
I saw your point about deferral; by "crucified" I refer to their feelings when they learn that you're going to tax them, say, five thousand a year when they have an income of, say, twenty thousand. Presumably they would have to be promised that the deferred debt will pay interest only at the rate of RPI inflation? But the government will doubtless soon renege on the equivalent promise for student loans, so no-one would then believe any such promise again. Similarly, how could people be persuaded to accept that even if their house should ever become worth less than their debt, their ownership is secure? (A long life, a high rate of RPI and a house price collapse and, bingo, it's possible.) Anyway, three practical points: (1) How will the local extortionists - oops, local government - cope with waiting for the old things to shuffle off? (2) How would you cope with a lot of sentimental gush about how unfair it will be effectively to have an Inheritance Tax on the homes of hard-working people, but not on the savings of the filthy rich? (3)How are Concil House dwellers and other tenants going to be required to pay their shares?
Q - Presumably they would have to be promised that the deferred debt will pay interest only at the rate of RPI inflation?
A - seems fair to me.
Q - the government will doubtless soon renege on the equivalent promise for student loans
A - I am not the government. I do not believe in student loans. See my posts on welfare simplification. No reason why students should not get the same as the unemployed.
Q - if their house should ever become worth less than their debt, their ownership is secure?
A - pensioner, age 65, average life expretancy (say) 20 years, after twenty years, their heirs owe back duty of 20% of value of home. If house prices fall by half (which they will) and pensioner lives to age 100+ then yes, they will have negative equity. So what?
Q- (1) How will the local extortionists - oops, local government - cope with waiting for the old things to shuffle off?
A - Ricardian law of equvalence. Today's borrowing = tomorrow's tax.
Q - (2) How would you cope with a lot of sentimental gush about how unfair it will be effectively to have an Inheritance Tax on the homes of hard-working people, but not on the savings of the filthy rich?
A - I can cope with sentimental gush. Look at your own question!
Q - (3)How are Concil House dwellers and other tenants going to be required to pay their shares?
A - the tax will be payable by the freeholder/landlord, not the tenant.
I have the same problem with this as I do with the current council tax system (and I had with domestic rates, which were effectively the same thing); if I buy a fixer-upper correctly valued at say £20,000 and improve it so it's worth £100,000 I end up paying more to have my rubbish taken away than I did before. How is this justifiable?
Ian, it is not justifiable and is not intended; which is why I would go for a hybrid property/land value tax as explained at the bottom of this post.
Under this system, if you improve your home, you don't pay perceptibly more BUT if all the other people in your street/area improve their homes (which adds to the value of yours because all of a sudden you live in a better street without you lifting a finger) then you DO pay more.
"A - the tax will be payable by the freeholder/landlord"; I can imagine that that might work for private landlords, but it surely wouldn't for council houses or the like, because they'd fake the valuations, wouldn't they? The extortionists, I mean.
D - for the time being I would leave council housing completely out of it, as this would just be The State paying money to The State and it wouldn't be worth the hassle.
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