When discussions turn to Council Tax (a feeble and distant cousin of proper LVT), the Home-Owner-Ist instinct really comes to the fore. All logic and coherence is abandoned and most people's knee-jerk response is that it should be replaced with either Poll Tax or with Local Income Tax, or sometimes both (notwithstanding that these are more or less opposite, at least they are not taxes on the Holy of Holies), see typical reader's letters here:
Council tax is unjust and unfair and is not based upon the ability to pay. Apart from the difficulties in collection, the poll tax was inherently much fairer.
People who are responsible, self-sufficient and hardworking, often pensioners, are in the group who are clobbered and the feckless and many others are now free riders.
C Lloyd, Exeter.
Of course, the bulk of pensioners are neither self-sufficient nor hardworking, by definition, but he hasn't got as far as bothering to calculate that replacing Council Tax with a Poll Tax would equate to a tax of £625 per adult.
I fail to see how a flat tax of £625 per adult relates to 'ability to pay' any more than an average Council Tax of £1,000 per home (assuming 25 million homes and 40 million adults). While this would clearly benefit single people in large houses, i.e. widowed pensioners, it would be worse for couples (whether working age or pensioners!) in anything but the top three Council Tax bands.
And in the grander scheme of things it would relate even less to 'ability to pay' than Council Tax. Nobody is forced to live in a big house, but most people who live in small ones do so because they are 'forced' to, for example.
Having attempted to ride the coat tails of the "responsible, self-sufficient and hardworking", at least C Lloyd didn't have the temerity to suggest Local Income Tax, unlike the writer of the next letter...
Council tax is the most unfair tax. It has no relation to income and for retired people it's a substantial bill... The police bill, and possibly education*, should be removed from local authority costs and added to income tax.
Which brave political party will have the courage to change a system which is far worse than the poll tax?
K Martinez, Exeter.
It's a 'substantial bill' compared to what? The biggest chunk of pensioners' income is the State Pension (heavily subsidised private pensions and public sector pensions are second and third on the list). And these pensions are paid or subsidised by current taxpayers, so to state that "Council Tax costs me x per cent of my pension" is a meaningless calculation - all that is relevant is how much of that pension is left over after Council Tax is paid.
In the grander scheme of things, it does not make any difference whether you get a State pension of £7,000 (from the taxpayer) and pay £1,000 Council Tax back into the pot, or whether you get a State pension of £14,000 (from the taxpayer) and pay £8,000 Council Tax back into the pot; only with the latter system there is an incentive to trade down into a smaller home, thus vastly improving your disposable income as well as freeing up a larger home for a younger couple (who may well be your children or grandchildren anyway).
* K Martinez deserves an extra kicking for suggesting that the cost of education (about £80 billion a year) is paid out of Council tax (receipts about £25 billion a year).
Friday 11 February 2011
Killer Arguments Against LVT, not (92)
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12 comments:
Are you going to throw a party when you reach 100, Mark?
JH, I would if I knew how a 'Blog Party' actually worked.
Where are the trade unions? All that money, power and support and they can't even make a coherent case for shifting taxation off of their members' wages and onto the consumers of state services.
Surely with a bit more education homeowners would stop making silly "and I want a pony" arguments.
I think most of the "killer arguments (not)" result from a misunderstanding of both how the tax would work and the relative burden of local and national taxation.
CD, good question. Part of the reason is because trade unions are more or less synonymous with the public sector nowadays so they have no interest in shifting taxes, they just want to increase them.
For example, Unison in Scotland did suggest adding a few extra Council Tax bands recently and were roundly shouted down, possible rightly, because they want councils to maintain or increase spending, rather than using the proceeds to reduce other taxes (in fairness, the flipside of having more council tax bands would be getting rid of Stamp Duty and Inheritance Tax).
BE, maybe, maybe not.
I can explain until I am blue in the face how it would work, how easy valuations are, that pensioners could be given discounts, who would pay how much and how this would compare with current burden of all the taxes LVT could and should replace etc (there'd be surprisingly few major winners or losers if you do the sums right) but we always come back to "It's moi laarnd, Oi've paid for it and it's moin." and you can't really argue with that.
And yer average poor pensioner spends 50% of their pension on tax, which they all seem to forget.
The only problem I have with this is that I don't want to downsize. I've put so much love and money into my home why should I trade it for a breeze blocked box just to make way for a family? As a hard working pensioner (unpaid) it's my wish to stay in my home without pressure from society.
Subrosa: did you even read the piece? The point is, under any LVT proposal that anyone's making you can do precisely that without any problems.
The tax would be paid out of your estate after you die. Simple.
Sub, perhaps you don't want to downsize, but even if you did, you would not have to buy a 'breeze blocked box' (nor should anybody else, for that matter).
But can you not understand that young people are a bit miffed at the fact that older people
a) don't want to downsize and
b) won't allow any new houses to be built, and therefore that
c) young people have to pay twice as much for a house as it's really worth?
JB, ta for back up.
Mark, tsk, tsk, you know that c isn't caused by b.
What I find depressing about all this is that most people, if gven the choice between something that is "fair" and costs them a lot and something that isn't. but effective and costs them little, will unhesitatingly plump for the former.
It would be interesting to try and work out just how much the average Englishman is prepared to pay to prevent someone else getting a better deal than him.
B, quick history lesson. Back in the 1950s and 1960s when half of today's pensioners bought their homes, house prices were low and stable because of four things:
1. We had Domestic Rates and Schedule A tax.
2. Labour and Tory parties both encouraged/allowed 300,000 to 400,000 new homes to be built every year (whether social or private housing).
3. There were strict limits on how much money Building Societies could lend (banks did hardly any mortgage lending until the 1980s)
4. There were strict limits on rent levels and/or punitive taxation of rental income, as well as modest subsidies to owner-occupiers like MIRAS.
I'd submit that these are all necessary but not sufficient conditions for affordable housing, and I would prefer a combination of 1. and 3., but 2. must have helped (and I don't recommend 4. rent caps, but taxing rental income at LOWER rates than earned income seems just as unfair as penalising it).
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