Monday, 9 April 2018

Poacher turned Gamekeeper

Ed Conway in 2009, rooting for LVT:

Second, the Government must reshape the tax system so that it does not favour home ownership. This may mean experimenting with a land tax, whereby families pay annual taxes based on the value of their home and land; it may mean imposing capital gains tax on first homes. Both steps would help prevent another bubble, although they would have unpredictable side effects.

Ed Conway in 2018:

It’s not just left-wing economists proposing new taxes on wealth and property these days, says Ed Conway. Last month the Resolution Foundation, chaired by the former Conservative minister David Willetts, proposed replacing council tax with a new property tax of 1%-2% of the home’s value.

But the proposal is flawed. For a start, it would be fairer to charge a percentage of the un-mortgaged portion of the property. That, however, would send solvent homeowners scuttling to take out new mortgages.

Most importantly, how does one determine value fairly? Visual valuations would benefit the banker who has dug out a three-storey basement. As for using sale prices, some don’t appear on the Land Registry. And what about the old lady who’s lived in her home since it was a slum and can’t afford the bill?

In any case, while we may not have a formal wealth tax, the British “collect proportionally more wealth-related taxes than anyone else”. Inequality is average compared to the rest of Europe and our top earners already pay a “near-record proportion of the tax base”. So by all means modernise council tax, but the government should steer clear of new property taxes. They are “fiscal dynamite”.

"Fiscal dynamite", eh? He's not wrong there, but otherwise a rich seam of KLNs and full marks for including that mythical beast, the PWIM.


Mark Wadsworth said...

A long list of KLNs.

Mark Wadsworth said...

particularly galling is the double-diagonal comparison.

Recent purchasers - high incomes, low home-value-to-income, big mortgage, will make the biggest tax savings, probably in a home that is too small for them.

PWIM - low incomes, high home-value-to-income, no mortgage, will pay more tax (or her heirs will inherit less), probably in a home that is too big for them.

They are complete and utter opposites, if an LVT shift is bad for PWIMs (or their heirs, and let's admit is is and that's a Good Thing) then it is doubleplusgood for recent purchasers.

A classic bit of Homey DoubleThink.

And it won't be fiscal dynamite, it'll soon all wash out, politically it might be but that is a problem of education.

Bayard said...

It will be fiscal dynamite, but in a good way. I don't think he meant to be right there.