Wednesday, Jan 25, 2012
Mansion Tax - an excellent idea which would be an administrative doddle.
City Wire Money: Mansion tax: a terrible, unworkable idea
My comment under the article: "The Mansion Tax is a splendid idea, especially if it goes hand in hand with scrapping the 50p tax rate. The whole valuations thing is a doddle, even Fattie Pickles admitted that HM Land Reg could revalue every single house in the whole country for about £5 or £10 each, they got all the info they need and more on their databases.Even better, forget having a special Mansion Tax and just have council tax bands A to Z, where Band A is £100 a year and Band Z is £10,000. This is all a tenny tiny shift towards proper Land Value Tax, which is NOT a tax on "wealth", far from it, it is a user charge, it is no more a tax on "wealth" than the £4 cost of admission to your local municipal swimming baths."
Posted by mark wadsworth @ 12:28 PM (700 views) Add Comment
15 Comments
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1. need-a-crash said...
"A tax based on what a group of strangers might be prepared to pay for your home makes no sense, argues Linton Chiswick."
But of course a tax based on what a group of companies are prepared to pay you in wages is perfectly fair?!!
2. jack c said...
MW - I've just stuck a comment on Citywire
3. mark wadsworth said...
NAC, Jack, thanks.
4. Pjl said...
Ah, a tax on people who invest in housing rather than give it to banks so they can take a percentage to pay their astranomical bonuses. Another Tory strategy for wealth sharing, i.e. taking any of your wealth and sharing amongst their banking friends.
5. nod2glod said...
As day is followed by night, a "mansion tax" will be followed with, oh the rich must pay their fair share, so we are reducing the mansion tax threshold. same as pretty much every tax that's been invented.
Taxation of wealth or income are about as "fair" as each other. We over consume and under save and invest, maybe we should increase tax on consumption and reduce tax on saving and investment...
6. mark wadsworth said...
Nod2Glod: "maybe we should increase tax on consumption and reduce tax on saving and investment..."
That rolls off the tongue of every politician, but what does it mean in practice?
The only general "tax on consumption" is Value Added Tax, which as the name suggests is a tax on value added (or gross profits), and having checked the numbers and applied the logic of the supply-demand curve, it is indeed borne to two-thirds by the producer and one-third by the consumer. It also destroys jobs and businesses.
Although the headline tax rate on cash savings is low (20% or exempt in an ISA), there is a hidden tax on savings called inflation, which is a deliberate and malicious transfer of wealth from cash savers to mortgage borrowers, i,e. land owners.
There is no tax on "investment" in the true sense of the word, as reinvested profits are not liable to corporation tax because money reinvested in the fabric of the business is allowed as an expense (sure, there are timing differences with capital allowances, that is a minor issue).
So if you cancel out all the contradictions, Land Value Tax is the only tax on consumption (of land) which is not a tax on production (land is not produced by anybody), it is not a tax on cash savings, and as it would dampen inflation it would help cash savers, and it is not a tax on investment (the land is just there, it does not need investment).
As to reducing the threshold, the average Council Tax bill on an average house is pretty close to one per cent per annum, so they could replace council tax with Mansion Tax on all houses and two-thirds of the population would not notice the difference, and people in very small/cheap houses in many areas of the country would actually end up paying less.
7. paul said...
"I agree. It's a terrible idea. I don't approve. And I'm going to write to my MP to say so. Hands off my unearned wealth. Meh"
8. mark wadsworth said...
And as regards The Poor Widow In A Mansion, I have come up with the perfect solution.
When people get sent their LVT forms, there'll be a couple of boxes to tick (do you want to pay by direct debit, have it collected via PAYE etc) and another one "Do you think that PWIMs should be exempt?"
Then all the PWIMs will be exempted and the shortfall will be made up by slapping a surcharge on those people who ticked "Yes", so they might end up paying fifty per cent more or twice as much as their callous neighbours who ticked "No". I think it's only fair to expect people to put their money where their mouths are.
9. ontheotherhand said...
MW, keep up the educational work. I think some of it is sticking. There are a couple of themes.
1. Those who think it is a wealth tax and a slippery slope and are not understanding the concept of user charge. Perhaps they need to understand that location provides amenities as well as services. After all, anyone who has a speck of the new high speed rail appear in their country view will demand compensation. Under LVT, their tax would go down because some of the amenity they had - protected green view because of exclusion of others - has gone. Extending you hotel room analogy, user charge is not a wealth tax and so a mortgage or not is irrelevant for the same reason that the use of the suite in a Ritz is the same using a credit card as if you paid cash out of savings.
2. Those who believe council tax pays for all of council services and don't know the majority comes from central taxation.
I think it's clear on other occasions when you've explained that taxes will not be passed on to renters when you give the example of a landlord who owns a property outright compared to one who owns it with a big mortgage. They both charge the maximum renters will bear. The owner with the mortgage cannot say, "I have to pay a mortgage, so I'm going to charge you more."
10. mark wadsworth said...
OTOH, thanks for support, it is a struggle.
Out of all the people on that thread, Jon seems to be the most thoughtful, but he does the same thing as all Homeys down the ages, he sets up a straw man, I explain patiently and slowly that this is a non-argument, and then a few comments later he's back to the same straw man. It was Jon himself who correctly said that LVT was a tax on site only rental value of land, and I concurred, and then several comments later he's back to saying "Well, if you tax land, what next? A window tax?"
I do like your Ritz example - very clever. But being entirely fair, if you've just bought with a 100% mortgage, you are already paying 100% of the amenity value (to the bank). So if we shifted to LVT lock, stock and barrel, you would be paying double, but your consolation is, the LVT will end up rather less than the income tax etc which you no longer have to pay.
11. nickb said...
Mark W,
Good stuff yes. But what can be done about the fact that our political class is too criminally corrupt ever to take on the vested interests that would kill off any whiff of LVT before it gets a fair hearing (and have killed it off in the past)? Much of the present cabinet (and probably shadow cabinet) must be landowners and in cohoots with landowners and corporations that are landowners.
N
12. libertas said...
Mark, you are such a controlled mouth piece. If we survived and developed an Empire without a 50% tax rate then we don't need an extra tax to replace it. We need to scrap the spending. End the wars, slash the spending.
We do not need a new tax to avoid a mansion tax!
13. mark wadsworth said...
NickB: "what can be done..?"
Just keep talking about it. Nick Clegg was on top form today, he said that the Mansion Tax was a straight swap for much higher personal allowances, that's the kind of argument that gets across. You should never talk about LVT without saying which other taxes could and should be cut in tandem.
14. mark wadsworth said...
Libertas: "If we survived and developed an Empire without a 50% tax rate..."
Firstly, are you pro- or anti-foreign military adventures? Secondly, back when we had an empire, we didn't even have income tax (apart from that 1% for Napoleon), let alone VAT or NIC. At the time, the main sources of government revenue were Business Rates, Domestic Rates and Agricultural Rates (and surprisingly, Beer Duty). In other words, Land Value Tax.
On an earlier thread, you said if we have Mansion Tax, then people who owned mansions would sell up (to whom, exactly?) and move to Florida. I take it that you checked the Florida state website before making this statement and established that the property tax on a $3.2 million mansion in Florida is about $40,000 a year? That's a smidge more than Vince's proposed Mansion Tax, eh?
Finally, I agree on slashing spending, I'd go much further than you, how much the government spends is a completely separate debate to how it raises the money. Do you understand this? People make one decision, what kind of job they want to do, and they make another decision, how they spend their money. The two are completely unconnected, apart from the fact that how much you earn sets a total limit on your budget?
So I've asked you three polite questions and patiently await your answers.
15. ontheotherhand said...
Libertas, I totally agree that spending is too high. One way that we would force politicians to bring down spending is to make tax more visible and painful. If tax is hidden as VAT in the price, or comes out as employer's NI, or is most of the price of petrol, or even is through higher electricity prices for all because the state has agreed to subsidise solar, then most people just don't notice the pain. They therefore vote for every more goodies because they think someone else is paying. I think it's a great thing how hated LVT is.
"Yes you can have your eco-warden nagging idling cars to switch off their engine (current TFL campaign), but your LVT will have to go up to pay for it".