Perma house price bear Roger Bootle on top form.
He points out the idiocy of trying to sustain the house price bubble at all costs. The whole thing is worth a read, but my favourite bit is this:
"If the Government wanted to be really radical, though, it would end the ludicrous subsidies to owner-occupiers – the exemption from capital gains tax and the absence of tax on the imputed rent from living in a property.
This would stop the ridiculous spectacle of single people living in large houses because they think that it is the most tax-efficient way of increasing their wealth."
Spotter's badge: Drewster at HPC.
Monday, 7 February 2011
I'm surprised to see this in The Telegraph...
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18 comments:
The return of Schedule A on imputed rent? Blimey this had the effect (pre 1963 when it was abolished in the first advance of Homeownerism) of taxing house price rises straight out of income: people were scared of making home improvements lest it put up their Income Tax! Would serve the Homeistas right for turning their noses up at LVT ,(even the gentle Sentinel tax version)if this came about.
If he's going to torpedo the Telegraph's housing policy, he should be called Roger "Das Boot" Bootle.
Isn't council tax already a tax on imputed rent? - after all rates were directly assessed on rentable values and council tax bands followed ratatable values - you want another tax on top?
W42, no it's not and yes I do.
A tax on capital gains would need a baseline to be set so as to avoid the trap of not being able to relocate because of not being able to afford to sell one house and buy another at the same price.
A tax on imputed rent is just a jargon way of saying land value tax, isn't it?
BE, agreed. Capital Gains tax (like Stamp Duty) is among the worst taxes. And yes, Schedule A is just another kind of LVT. I would also argue it is not 'imputed' rent but very real rent.
If Bootle gtes picked up by the Chatterrati and as as Wince Cable has already mooted LVT, this would increae the audience for the debate on LVT. Which would be a good thing?
L, The Torygraph has run a few articles like this, by Bootle, Edmund Conway and others but the Home-Owner-Ist coalition will shut them up very quickly. Possibly by offering them a job with the BoE or something (Weale, King, possibly Neubauer, Martin Wolf), or in Cable & Huhne's case, a cabinet post.
A tax on capital gains would need a baseline to be set so as to avoid the trap of not being able to relocate
Whether or not CGT is a "good" or "bad" tax, it's only charged if the gain is realised - so no CGT need be payable if "gains" through a general increase in house prices were rolled over into the purchase of a new house. Surely the primary aim of CGT on equity in a house would be to discourage the treatment of the house as a source of wealth (and so act against future housing bubbles), rather than to raise revenue for the government.
I can see that it might be argued that the "gain" is realised by reducing the amount borrowed to fund a new house, but surely that's a highly desirable end in itself?
"If Bootle gtes picked up by the Chatterrati and as as Wince Cable has already mooted LVT, this would increae the audience for the debate on LVT. Which would be a good thing?"
From what I've seen around and about in the ether, a few of these policy think-tanks have put out papers on either LVT or simply abolishing the cap on the higher bands of council tax (largely the same thing) as a strategy for promoting growth due to lower deadweight costs.
Clearly the more people that bring it up the more chance there is of it becoming more widespread and being truly debated as something which could come into force. The labour party is still too much of a hand-wringing party of the rich whilst pretending to be for the common working man/woman to ever truly take it seriously. Burnham raise the topic in his leadership manifesto but it was sadly lacking in economic sensibility appearing to be an additional tax to "soak the rich" rather than a tax shift as Vince Cable has proposed as well as our Mr. Wadsworth here and a few others.
FT:
"I can see that it might be argued that the "gain" is realised by reducing the amount borrowed to fund a new house, but surely that's a highly desirable end in itself?"
After yet another property based credit bubble (even though i'm too young to remember the last) I would be inclined to agree that yes it is a good thing, also if the original purchase price is rolled over like this it could act in place of IHT by transferring the asset at this rolled over base cost and shifting the capital gain onto the heirs.
I would still prefer just proper LVT though.
FT, that's a fair point with rolling over, but the paperwork required would be stupendous (believe me, CGT is trickier than it looks because stuff gets lost in time and what about the costs of improvements? Big things like a loft conversion would clearly be added on, but what about minor improvements? etc)
SW, if we are going to go with this idea, then I think that death would have to be a trigger point (so that gets rid of IHT very neatly).
SW - I rather thought that Wince had proposed LVT as an additional tax, as opposed to a shift in tax from labour and capital onto land values?
L, the old Vince Cable consistently spoke about a "tax shift" from incomes to land and buildings. Although he was never specific about which taxes on which income taxes he'd cut, the Lib Dems appear to be sticking to their proposal to increase the personal allowance.
And remember that the 1% Mansion Tax only applied to the top slice of the top 1% of homes, and the liability would reduce the estate liable to IHT on death, so really the effective rate was about 0.2% or something.
The new Vince Cable thinks that VAT is a good tax. Go figure.
MW
"The new Vince Cable thinks that VAT is a good tax. Go figure"
He's a politician so don't expect consistency let alone sense (or honesty).
As I read it, Bootle is certainly talking additional not replacement. Let's face facts, if LVT ever gets a fair wind behind it, it'll be brought in as an addition. Lose all that lovely income tax, VAT, stamp duty, CGT etc + the votes of the bureaucrats who administer the whole load of crap + (particularly) the power to interfere at a micro level in the little people's lives? No chance!
BTW the politicians will call an additional LVT a "fair" tax as will the genius you rightly castigate in your later posting.
L
If I remember correctly the mansion tax was proposed as an additional tax on the proportion of a home valued at above £1mil and then revised to a higher percentage of the proportion above £2mil after the lib-dem conference.
Later on however (after the coalition was formed), leather man was in the news again actually discussing a tax shift. (at least i'm pretty sure of this and will try and post a link)
U, Vince is a politician, I am an economist, as is Roger B. Were you to ask him "Are there any taxes which you think damage the economy and which you would like to see reduced?" I'm sure he can think of several.
Conversely, I rail and rail against massive waste in government spending and really bad taxes like VAT or National Insurance (each of which raises three or four times as much as Council Tax or my modest LVT proposal).
You know perfectly well that LVT doesn't have a snow flake's chance in Hell (because of Home-Owner-Ism), to even have a raindrop's chance in Hell it would have to be a replacement tax for [insert your own list of most hated taxes here].
So the Lib-Cons will press merrily ahead with increasing govt spending, hiking VAT and NI and income tax and then expect a pat of the f***ing back for 'freezing council tax'.
SW, I'm no cheerleader for Vince, I can only repeat what I believe him to have said. Problem is, he totally contradicts himself (being a politician).
So that's cleared that up then, MW, U, SW et al....
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