The Perfect Tax was envisaged to replace other (less-than-perfect) taxes. But Labour can't resist double- and triple-dipping. And this will compound the damage from Corbyn's Tax.
We bought our house almost 50 years ago and its price tag, but not its intrinsic value to us as a home, has roughly increased sixty-fold which is a function of the government policies (inflation, immigration and so on) that you mention.
Many people of our age tend to be asset-rich and cash poor and a ½% tax would force lots of similarly circumstanced folk to sell up with a concommitent element of market disruption. What sort of fools would we be to then buy a less valuable property in the UK rather than to decamp overseas?
As with energy policy, early prisoner releases, arms embargos on Israel and VAT on private education, it's hard to believe that the Labour party have the intellectual heft to peer beyond extreme left ideology to grasp the practical ramifications of their dogma and discern the second order effects.
yes, completely agree. Property "wealth" doesn't do you much good unless you're "long" i.e., you own a bigger house than you want (now or in the foreseeable future). Property "wealth" has created downsizer multi-millionaires, who bought a six-bed in the 1970s on a huge mortgage.
But if you're neutral the market...if you own the house you need to live in, and disposal leaves you homeless or renting...then it's not quite so clear the growth in the value of your asset is so terrific.
There is also the small matter that, other than for people who are now mortgage free, the gross value of their property is vastly different from their equity in it. Someone who bought a house in the south east this year for £1m with a 90% mortgage would suddenly be faced with a £5k tax on their house to add to their repayments on the £900k loan. Any benefit from falling interest rates would be wiped out.
Indeed, and the price correction puts them in negative equity to boot.
While you're not wrong, there's a risk of confusing the economic effect of a tax on property value (or, in Henry George's world, land value) with how purchases were funded with debt or cash. I'd like to be clear that's a transition effect. If a land value tax had always been in place, you would have bought the same house for (say) 850k plus the expectation of paying the land tax, and it's a wash. Or even better, less than 850k because the economics of development land would likely have been more permissive, and land less scarce.
In the real world, a reasonable-minded government would manage such a transition effect by bringing the tax in slowly, like over a decade. Like they're doing with the Education Tax.
Great post. Weird wrinkle to it: I live in Gateshead (the posh bit); if I have to pay 0.5% of the value of my property in council tax that’s actually considerably less than I pay currently. I wonder if this is true of a significant percentage of Northern home owners. PS - Gateshead has just about the highest council tax in the country and is run appallingly. Nobody here ever seems to join the dots between those two things.
We bought our house almost 50 years ago and its price tag, but not its intrinsic value to us as a home, has roughly increased sixty-fold which is a function of the government policies (inflation, immigration and so on) that you mention.
Many people of our age tend to be asset-rich and cash poor and a ½% tax would force lots of similarly circumstanced folk to sell up with a concommitent element of market disruption. What sort of fools would we be to then buy a less valuable property in the UK rather than to decamp overseas?
As with energy policy, early prisoner releases, arms embargos on Israel and VAT on private education, it's hard to believe that the Labour party have the intellectual heft to peer beyond extreme left ideology to grasp the practical ramifications of their dogma and discern the second order effects.
yes, completely agree. Property "wealth" doesn't do you much good unless you're "long" i.e., you own a bigger house than you want (now or in the foreseeable future). Property "wealth" has created downsizer multi-millionaires, who bought a six-bed in the 1970s on a huge mortgage.
But if you're neutral the market...if you own the house you need to live in, and disposal leaves you homeless or renting...then it's not quite so clear the growth in the value of your asset is so terrific.
There is also the small matter that, other than for people who are now mortgage free, the gross value of their property is vastly different from their equity in it. Someone who bought a house in the south east this year for £1m with a 90% mortgage would suddenly be faced with a £5k tax on their house to add to their repayments on the £900k loan. Any benefit from falling interest rates would be wiped out.
Indeed, and the price correction puts them in negative equity to boot.
While you're not wrong, there's a risk of confusing the economic effect of a tax on property value (or, in Henry George's world, land value) with how purchases were funded with debt or cash. I'd like to be clear that's a transition effect. If a land value tax had always been in place, you would have bought the same house for (say) 850k plus the expectation of paying the land tax, and it's a wash. Or even better, less than 850k because the economics of development land would likely have been more permissive, and land less scarce.
In the real world, a reasonable-minded government would manage such a transition effect by bringing the tax in slowly, like over a decade. Like they're doing with the Education Tax.
Great post. Weird wrinkle to it: I live in Gateshead (the posh bit); if I have to pay 0.5% of the value of my property in council tax that’s actually considerably less than I pay currently. I wonder if this is true of a significant percentage of Northern home owners. PS - Gateshead has just about the highest council tax in the country and is run appallingly. Nobody here ever seems to join the dots between those two things.
I enjoyed your metaphor of Basil Fawlty beating the 1100. Thanks