Thursday, 23 April 2015

More glorious Home-Owner-Ist DoubleThink.

I do not know who decided to call the proposed annual tax on high value dwellings a 'Mansion Tax' but it was a bad idea (singling out one particular cut-off price level was also a terrible idea, but we all know why that happened so that is not at issue here).

It is possible that the Home-Owner-Ists themselves coined the phrase 'mansion tax' in which case it was tactically a brilliant idea - if my wife buys a tin opener and I decide to call it 'a pair of scissors' then I can moan at her every time I try to cut cloth or paper with it, telling her that the 'scissors' she bought just don't do the job properly. See also Labour/Bedroom Tax.

So the Homeys do the same thing and bombard us with articles like this:

Agents condemned the tax as “completely unfair” claiming that it will catch thousands of modest family homes in central London while the owners of large country houses in cheaper areas of the country will pay nothing.

In other words, 'Mansion Tax' is badly named tax; the Homeys then say 'Therefore it must be a bad tax'.

Anyway, Ed Miliband must be tired of hearing this crap by now and agreed that his own high value dwelling was not, in the traditional meaning of the word, 'a mansion'. It clearly isn't, it's a fairly big London townhouse. Ed also cheerfully said that he didn't know who had invented the phrase 'mansion tax'.

The Homeys, having spent the past year or two repeatedly making the same point, then go completely mental:

Nigel Adams, Conservative candidate for Selby and Ainsty, said:

“Ed Miliband’s desperate to come across like the man of the people – but these comments are yet more proof he’s completely out of touch with ordinary people. Is it any wonder Ed’s happy to slap a homes’ tax on hardworking families while at the same time hiding his nanny in the downstairs kitchen?"

Look, you Homey fuckers, is Ed's house a 'mansion' or isn't it? It's a simple question. He was agreeing with what you have been saying all along, is all. Do you mean that you are actually out of touch as well?

Good to see 'hardworking families' getting a mention, makes a change from Poor Widows In Mansions.


Dinero said...

You cant blame them. if you tell someone a=b and they point out that its not, they are not wrong. Its the original message that is wrong, and Ed does not have an alternative message except that he himself can afford to pay it. Having a Nanny doesn't make your house a mansion, but does indicate something about your ability to pay it.
Have a listen to the J Vine show.

1Hour 21 mins 30seconds

James James said...

Off topic, could someone help me understand the economics of having two land tax regimes in the this country? We have council tax and business rates. Council tax is a very low land tax; most of the rent still goes to the landlord. Whereas business rates is quite high, with almost all the rent going to the state and very little left over for the landlord. Is that correct?

Now, if commercial land can't be used for housing or vice versa, say because of planning law, then these two regimes are totally isolated, and don't affect each other.

But, if commercial land can be converted to residential, then having business rates higher than council tax will create an incentive for landlords to do so. This will distort the land use market because there will be less commercial land available. It will also increase costs for business, i.e. the tax incidence will not be solely on the landlord but will affect the productive economy as well.

Is that right? Businesses will have to pay higher rent until the return from the landlord's point of view is the same. Since the total amount of rent is the same, residential rents must fall.

One way to look at it is that while the total amount of land is fixed (supply curve vertical), the amount of commercial and residential land is not fixed because commercial can become residential and vice versa, so they do not have vertical supply curves.


Robin Smith said...

On the term Doublethink I was at the Ministry of Truth the other day:

Apolgies for the massive link. WE now live in the ultra low quality, ultra high quantity technology world of the Internet.

Robin Smith said...

James James.

You're allowed to invest pensions and other financial instruments tax free into commercial property but not residential.

Though its a poor way to do it, the amount might be about the same.

Mark Wadsworth said...

JJ, yes, I've made that point many a time.

Clearly you can't convert an out of town iron smelter to residential, but in urban areas a building can easily be switched from residential to commercial.

So there is an easy massive windfall tax arbitrage gain to be had from converting from C to R.

So much so that inner London councils have to invent new rules to prevent landowners from doing just that.

But as RS says, to a small extent this is negated by the tax breaks for commercial letting.

Mark Wadsworth said...

Din, I do not understand your comment.

The tax on high value dwellings was misnamed 'Mansion Tax'. Fact.

The London Homeys point out that many dwellings worth £2m plus are flats or small houses, not mansions. Correct. Fact.

Ed Miliband agreed with both of these facts and confirmed that he neither knew who misnamed the tax nor was his dwelling a mansion (even though I am sure it is pretty nice).

And now the London Homeys deride him as 'out of touch'. You can't argue with facts.

Bayard said...

'Therefore it must be a bad tax'

They're not wrong about that, either, but just not for the right reason.

Physiocrat said...

Different rates of tax for land in different classes of use will distort the market.

Physiocrat said...

Only my closest acquaintances know that my real name is Phenian O'Craight abd that I am the proprietor of a vast mansion in a remote corner of Northumberland.

Ever since the Mansion Tax was announced, I have been working on plans to convert my West Wing into stables to bring its value below the threshold. If this goes ahead I shall proceed with my plans and purchase some thoroughbred racehorses for breeding.