A traditional KLN is that if we collected some tax on the rental value of land and reduced other bad taxes on transactions, output, employment etc, all the wealthy foreigners with their fancy status homes in London would flee the country, leaving economic devastation in their wake.
OK.
From today's Evening Standard:
Foreign “buy to leave” property owners are not preventing ordinary Londoners from affording their own homes and in fact inject millions of pounds into the capital’s economy, a new report claims today.
It says sales of homes worth more than £2 million in central London “have not fuelled a general rise in house prices” and insists that overseas buying at the top end of the market “does not play a major role” in the housing crisis.
The report, commissioned by Westminster council, suggests that owners of trophy mansions pump £2.3 billion a year into the city’s economy through spending in shops and restaurants, work on homes and employing staff.
It found that owners of homes worth more than £15 million spend an average of £4.5 million a year in London while those in the £5 million to £15 million bracket spend £2.75 million annually.
The study follows growing public and political anger over the impact that foreign buying has had on the capital’s property market. The furore has resulted in a raft of new taxes on owners of homes worth more than £2 million and the threat of a further “mansion tax” from Labour and the Liberal Democrats after the election.
Okey doke.
So let's start off with a modest LVT of approx. 1% on current selling prices (25% of the site premium), which would be enough to replace Council Tax, Stamp Duty Land Tax, Capital Gains Tax, the TV licence fee and Insurance Premium Tax, as well as the annual non-dom levy of £30,000 or £50,000 per person.
So our hero in a £15 million home has to pay £150,000 a year in LVT, possibly a smidge more or less than whatever he is currently paying.
If he and his family really spend £4.5 million a year here, are they really going to notice an extra £10,000 or £50,000 a year? About as much as they would notice a tax cut of £10,000 or £50,000 a year, methinks.
I think we can rule out the possibility that Westminster Council are lying for their own nefarious reasons, party political donations from oligarchs and so on.
A grim document
4 hours ago
9 comments:
The benefit you get from living in UK Plc is measured by the market as the rental value of land your property occupies.
If your contributions to the State(all of us) do not equal or exceed this, you are a net beneficiary.
If you decide to leave, this will therefore be a net gain to the rest of us.
You will be making space for a net contributor to enjoy the location you have currently excluded them from.
What could be fairer or more economically efficient than that?
BJ, ah yes, but apparently a couple of dozen of such homes are still occupied by Poor Widows, whose husbands served faithfully in WW2 and Korea and whose pension was stolen by Gordon Brown etc continued page 94.
@ MW
Well, they can downsize or fuck off too.
Today's generation would be equally willing to fight the Nazis, Commies etc. And are destined to stuffer at the hands of idiot politicians just as much as the previous.
Same rules apply.
Playing the guilt card doesn't work with me. But, let's be nice and offer roll up and deferment.
Which is more than a bank or landlord would offer a young homeowner/tenant who couldn't afford their mortgage/rent.
BJ, I'm immune to the guilt card.
Fact is, anybody over 50 or so who owns a house was effectively given it for free.
What upsets them is that for the first time in their lives, they are going to have to pay to live where they want, exactly like what they are doing to everybody else.
"Fact is, anybody over 50 or so who owns a house was effectively given it for free."
Not really, I think you are forgetting about inflation. There have been many times over the past half century when house prices have been a low multiple of earnings, the most recent being 1995, but someone in their sixties who first bought in the early '70's could have paid up to five times their earnings for their first house.
B, I am not forgetting anything.
You have chosen a time to buy which gives the lowest overall negative cost, but it's still negative or at worst free.
1. Because of rent and mortgage caps, Domestic Rates etc, houses used to cost half as much as now.
2. During the 1970s inflation period, mortgage interest rates were less than inflation, so effectively half the debt was written off.
See here.
3. And MIRAS used to be worth a lot, your top rate of tax times the full amount of allowable interest.
4. The initial mortgage payments were no higher than what it would have cost to rent, so then (as now) people buy houses out of the rent they save.
5. I know all this because my parents told me, in the late 1970s or early 1980s they paid off the mortgage out of petty cash.
6. I was a beneficiary of this too, my mortgage cost me half as much as it would have cost to rent in the ten years it took me to pay it off, and I'm not even 50
7. I'm not even factoring in house price gains here.
"1. Because of rent and mortgage caps, Domestic Rates etc, houses used to cost half as much as now."
Well, the earnings/price multiplier now is damn nearly ten (http://www.telegraph.co.uk/finance/personalfinance/houseprices/10905333/House-prices-rise-to-ten-times-average-salary.html), so yes, in the past, apart from 1972 and 1990, houses cost less than half what they do now. However, that is because now they are ridiculously expensive, not because then they were ridiculously cheap. The minimum multiplier since 1952 seems to be about three times and three years' earnings (or two and a half years, if you factor in MIRAS) still isn't nothing.
2, 3, ditto, "cheap" doesn't equal "free", especially when even "cheap" is a five-figure sum.
4. Agreed that buying a house cost you less in the past than renting it, but that doesn't mean you got it for free. It still cost you something, even if that something was called "mortgage payments", rather than "rent".
5. Well, yes, but were they at at that point, earning a lot more than they were when they bought the house?
6. Me, too, but we still both paid a large chunk of money in the end. "Cheaper than" doesn't mean "cheap". A Bugatti Veyron is cheaper than a Bugatti Royale.
B
OK, if houses cost three times average salary to buy, at least the land is free, because the rebuild cost/value of a house is about three times an average salary. Can we agree on that at least?
5. No, less actually.
6. No I didn't. £20k deposit and £800 a month for ten years (which would have cost me £2,000 a month to rent at today's prices). Brilliant value, as good as given away. And the part of the price which related to the land can't have been more than £10,000 or £20,000.
Let's also not forget the house prices to earning ratio is in terms of gross salary not net. If you factor in how many people are now higher rate taxpayers, and the cost of housing compared to what you would need to earn, this makes the numbers even worse.
PS. i know income tax bands in the 70s were high at the top end, but did the average earner really have such a high income tax bill?
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