Mike Schofield of Isitfair wrote an article on the iniquities of Council Tax over at ConHome last week.
Heartened by the blurb on the front page:
"Markets don’t do what politicians want them to. That’s because markets are human. They reflect the interactions between millions of human beings. Indeed, they are the interactions between human beings...",
I posted as follows...
"C[ouncil] T[ax] only pays towards a quarter or so of local government spending, and accounts for about 4% of total tax revenues. I get more upset by the tens of thousands that Mrs W & I have to pay in income tax/National Insurance and VAT than the £2,400 we pay in CT, which, as we are tenants, merely serves to depress the rent that we have to pay. In other words, if they scrapped CT and had local income tax instead ... then our landlady could hike the rent by £2,400 and we'd pay even more [than that in extra] income tax. So for tenants this would be a double whammy, and for landlords is would be a God-send ...
"I recently moved from a Labour controlled council to a Conservative council area in a similar sized house and the council tax bill is £2,400 as opposed to £1,400. Which is fine by me, actually, because the lower council tax boosted the value of the home I sold and depresses the amount of rent we have to pay."
To which Mike Schofield responded "Mark Wadsworth - You amaze me! You are happy to pay £2,400 a year - out of income that has already been taxed at least once!"
Which bit didn't he understand? Can somebody help me here?
Monday, 14 April 2008
How can you have a debate if people won't listen?
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10 comments:
I'm not sure I'm with you there Mark! Council tax does not provide local services, it is handed over to central Government who then redistribute across the UK (primarily to Labour areas!).
You can rest assured that your council tax is paying the pensions of Police Officers who retire at 55 (if they don't retire even earlier because they are sick), pay-offs for failing council executives and for reduced bin collections and more pot holes in the roads than ever!
Snafu, the fact that the gummint spends a large part of tax revenues on pure waste and corruption (and I take it we are agreed that this should be stopped ASAP) does not change the logic of it.
The distinction between 'local' and 'national' is highly artificial anyway.
The fact remains that the 'asset-rich income-poor' (i.e. Devon Pensioners) and landlords prefer income tax to property tax, and as a relatively high earning tenant, I prefer property tax to income tax.
And if we got rid of the £100 bn in waste that Nulab spend every year, then I would still rather see taxes on incomes and production being cut, rather than property taxes, for exactly the same reasons.
How does council tax depress rent? By reducing income of residents and thus amount that can be demanded? By depressing property values and thus the return needed? Another effect?
Couldn't it be argued that council tax isn't a property tax per se, it's a tax on consumption, i.e. your residence of a property, and consumption taxes are typically more problematic than taxes on income?
If it was an actual property tax, such as a land value tax, then things would be a bit different.
Mark,
I had nothing to do with writing the blurb on the front page.
It's not clear from your posting - and I don't know which part of the country you are in - but am I correct in assuming that you sold a property (in band D or E?) in a Labour-controlled area (CT £1,400) and you are now living in a rented property (in band G?) in a Tory-controlled area (CT £2,400)? Just these facts and the names of the CT collecting authorities would be useful to know, and would not reveal any of your personal details.
So it's not a matter of not understanding - or not listening - it's difficulty in trying to respond to you when I don't have all the relevant details.
One thing I would ask you bear in mind is that property (PARTICULARLY if you are renting) does not generate any income for you, so why should you be taxed as if it does?
CT is a sneaky form of wealth tax but tenants, such as yourselves, don't have any of your wealth in the property that you rent so why should you be taxed as if you do?
Regards,
Mike
Mike S, you know your stuff! We sold in Labour council Band D and are now renting in Tory council Band G. Spot on!
We are agreed that a large proportion of tax receipts is wasted, but this applies to all taxes, not just CT in isolation. And as a tenant, property generates no income for me, but it does generate 'wealth' (albeit largely on paper) for homeowners. And now will create massive losses (albeit largely on paper) for homeowners.
CT is not sneaky, it is totally 'in your face' AFAICS. And I wish it were a wealth tax, i.e. a land value tax or a 'property bubble tax', which would keep house prices low and stable, and could replace existing property-related taxes (Council Tax, SDLT, IHT, CGT, TV licence fee and VAT on domestic fuel).
And as LVT is a tax on doing nothing, it does not harm the economy, unlike VAT, National Insurance, income tax and corporation tax!
PT, any property tax payable by the tenant depresses rents. It is not just theory, it is observable fact. We land-value-taxers tell each other the tale of a certain street in west London where properties on one side were in a high CT borough A, and properties on the other side were in a low CT borough .
Rents and house prices were markedly lower in Borough A than in Borough B, so the total cost of renting (rent plus CT) or the total monthly cost of buying (mortgage plus CT) were much the same on either side of the road.
I don't like the expression 'consumption tax'. It is something that politicians bandy about who don't understand economics or tax.
Okay, it was as I thought, I just thought I'd check. I'd rather ask a stupid question than make a stupid mistake later.
I still don't agree with describing Council tax as a property tax; it's a tax on residence. This is why it falls on the residents, not the owners. If it was a tax on property then council tax would actually increase rents, not decrease them.
PT, explain that bit "If it were a tax on property then council tax would actually increase rents, not decrease them".
Any tax that relates to property ownership, occupation or transfer of properties depresses the market capital value and/or rents.
Successive governments have tried exempting certain areas from Stamp Duty (Land Tax) and all that happened was that sales prices increased, they have also tried exempting certain areas from Business Rates, all that happened was that rents went up.
This is because of demand for land/property is always somewhat price elastic but supply is fixed (in the medium term).
Think about it - if interest rates shoot up, then property prices would fall. You can see mortgage interest rates as a 'tax' on property ownership.
Compare also - if demand is price inelastic but supply is elastic (e.g. alcohol, tobacco, petrol), a price on the commodity increases the price that the consumer pays but doesn't affect the producers much.
If council tax falls on those that own the property, i.e. the landlords, then they would be forced to pass the cost on to the residents through increased rent. I agree that there would be marginal areas where the different council tax rates between districts, e.g. your two London streets, would mean owners absorb some of the cost but within the hearts of districts I wouldn't expect landlords to share much of the burden.
PT, it's simpler than that; imagine two identical flats with the same council tax bill of £100 pcm, both to be let out.
One landlord puts his flat up for a market rent of £500 pcm 'inclusive of C Tax', which the landlord pays himself.
The other landlord says the tenants have to sort out the C Tax themselves. A rational tenant would offer to pay a rent of £400 for the second flat.
In either case, the total cost to the tenant is £500 and the landlord nets £400!
Total occupation costs (i.e. rent and C Tax) are the most stable variable in the property market (they grow in line with wages, no faster, no slower). Every other figure (net rents, purchase price) is derived therefrom.
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