Monday, 5 March 2018

David Willetts stumbling vaguely in the right direction

From The Independent:

Baby boomers must pay to fund the spiralling costs of health and social care or risk inflicting crippling tax hikes on their children and grandchildren, Lord Willetts will warn in a major speech on Monday.

“The time has come when we boomers are going to have to reach into our own pockets,” the Tory peer and chair of the Resolution Foundation will say, "The alternative could be an extra 15p on the basic rate of tax, paid largely by our kids. “Is that kind of tax really the legacy we – a generation who own half the nation’s wealth – want to bequeath our children and grandchildren? This is the moment when the chickens come home to roost for all of us, but the baby boomers in particular..."

To tackle the problem, Lord Willetts will propose “long overdue” reform of council tax and inheritance tax, both of which are effectively levies on wealth. A 1 per cent tax on property values over £100,000 would bring in £9bn and a lower rate of inheritance tax on a larger number of estates would be fairer for all, Lord Willetts will say.

That would begin to tap the £2.3 trillion transfer of largely unearned property wealth estimated to have been accrued by baby boomers during their lifetimes.

I'm not sure how you work out that a 1% tax on the value of homes in excess of £100,000 would raise £9bn. The total value of UK housing is, ballpark £7 trillion, knock off £2.8 trillion for bricks and mortar (28 million x £100,000) = £4.2 trillion; £4.2 trillion x 1% = £42 billion. Enough to replace Council tax and Inheritance tax with £10 billion-odd left over.

Mucking about with Inheritance Tax is not worth the bother. As far as I can see, they only have IHT a) as a fig leaf to show some vague commitment to wealth redistribution and b) to generate work for lawyers, accountants, trustees and bank managers. The total income generated by all these avoidance schemes is probably not much less than the IHT actually collected. Scrap it and collect a bit more land value tax instead.


Mike W said...

You beat me to it Mark. I was going to post his speech, as outlined by the Guardian. You may be pleased to find here Willetts now virtually quoting you word for word.

'The idea of controversial new bands for council tax has never been attempted, however, because of the numbers of people living in homes that have risen dramatically in value while their incomes have not.

'However, Willetts points out there could be ways to help “asset-rich, low income older families”, for example through deferred payments.'

Well I never!

Graeme said...

No comment on the story on BBC news at breakfast time - therefore probably not true - that Theresa May is proposing to take action to prevent housebuilders who don't build enough houses from being able to buy land in the future? It struck me as oddly self-defeating - why penalise people who do actually build houses, albeit not fast enough. Wouldn't it be better to subsidise them to build faster? Or penalise them for holding land idle?

Mark Wadsworth said...

MW, ta. He's not quoting me, we all say that.

G, it's all just waffle. She subscribes to the 'build more and house prices will fall' which is observably not true. In the event, taxing land is always better than subsidising it. They can cut their tax bills by building faster, and as we know, a tax cut = a subsidy, so that covers both points.

Mike W said...

Well fuck me, I have no idea what's going on anymore. Day one. I cannot tell the difference between a Willett's quote and a Wadsworth.The Old widow is no more. Day two. Caroline Lucas asks Nick Boles on tv last night to accept the need for LVT. She asks in big, bright, bold L.V.T letters, and he says, yes 'I already do accept it. I have written about it'!Day three. I read John Redwood's latest blog entry. Redwood, in all but name says, Yes, I accept the MMT argument.Osborne was a dick all along.No official at the Treasury worries about finding the pounds on a computer screen. Indeed, it turns out that Redwood even knows Steve Keen's one and only issue with American MMT ers, that the balance of trade deficit is still a central concern for the British Guv, indeed country, outside the American Empire.

DBC Reed said...

As a bit of a side issue, Willetts appeared on Peston with a gigantic chart showing that Oxford and Cambridge remained the only English Universities for centuries while in other European countries "provincial towns" developed their own universities at a steady rate.
Elsewhere he has talked of "the dominance of the Universities of Oxford and Cambridge achieved by systematically extinguishing other attempts at creating universities for 600 years."( 23. xi.17).It is no wonder that the British ruling class retains medieval attitudes and thought patterns from a time when all wealth was in land.

Mark Wadsworth said...

MW, good examples. Glad to hear that Bolesy is staying true to the cause.

DBC, yes, the UK is far more elitist than other countries, what's new? Good for Willetts though.