Legal and economic incidence of a tax (part 94)

For all fucknut Osborne's waffle about his SDLT changes "helping buyers", we are not surprised to see this sort of breathless and hyperbolic do-whattery in The Evening Standard:

Property buyers are demanding huge last-minute price reductions on central London homes following George Osborne’s dramatic shake-up of stamp duty…

Charles Puxley, director of sales in the Chelsea office of agents Jackson-Stops, said: “We had a case in SW7 last week on a property under offer at £3.6 million where a buyer said, ‘The stamp duty is going to cost me that much more — I’m going to reduce my price by £80,000’. It’s human nature that if you have to spend that much more you’re going to take it off the offer. In this case the client refused to accept the gazunder.”

The practice of gazundering — the mirror image of gazumping, when a seller accepts a higher offer after a price was agreed — is a classic sign of a buyers’ market.

A tax on anything is borne whichever factor is less sensitive to price (in terms of quantity supplied or demanded). So clearly, taxes on land, be they annual recurring taxes or transaction taxes, are borne by the seller. Regardless of the price offered, he cannot produce or provide more or less than he has. The buyer can demand larger or smaller quantities.

So this is not a sign of a "buyer's market" or anything else, it is a sign that, er, SDLT has been increased on sales of the most expensive homes. And knocking £80,000 off a £3.6 million bid is not a "huge reduction", it is a 2% reduction, the same amount as the SDLT went up.

Similarly, SDLT has been reduced somewhat on the sales of the other 98% of homes, and we would expect to see prices firming a bit with some gazumping going on elsewhere in the country.