Monday 21 September 2009

Killer arguments against LVT, not (23)

I read the first couple of dozen comments on Guido's thread on the Lib Dem's plans to have a half-a-per cent annual tax on residential property values in excess of £1 million. While admittedly the Lib Dem's have done this in a totally cack-handed fashion (at the very least they could have said it would go hand-in-hand with exempting residential property from IHT and reducing Stamp Duty Land Tax on the most expensive properties from four per cent to one per cent; and the £1 billion it might raise is a drop in the ocean anyway), at least they have set the hare running, er, in completely the wrong direction...

Douglas McWilliams, chief executive of the Centre for Economics and Business Research, points out that it would hit the property market hard, because prices well below the £1 million level would be knocked as well... "Unfortunately the current crisis is not a time for clever-clever ideas for screwing additional tax out of the already hard pressed middle classes at a time when property prices have already fallen sharply"

Ah yes, all those hard-pressed middle class households in their £1 million mansions...

Nick at comment 160 really has his finger on the pulse:

"So I owe £900,000 on a £1,000,000 house how does that make me rich Vince?"

If somebody has a mortgage of £900,000, is it not reasonable to assume that they have a six-figure salary and are bright enough to have factored in interest rate hikes of a couple of per cent to make sure they can really afford it? If they can afford an interest rate hike of a couple of per cent, is it unreasonable to assume that they can afford a tax of half a per cent on the value of their home in excess of £1 million? Which in Nick's example would be £nil anyway, of course.

Anycolourbutbrown at comment 28 chimes in with the inevitable:

...what about the person, who is now a pensioner and who inherited a house, perhaps 40 or 50 years ago. That house may now be valued at well over a million. Why should he have to pay tax on a valuation he has absolutely no control over? Don’t forget, that he may only be getting a state pension or a small private supplement (think of them having retired 15 -20 years ago).

OK. If such people don't want to pay taxes on up-to-date values, how would they like to make do with a state pension frozen at the rate it was when they retired 15 - 20 years ago as well, i.e. between £44 and £58?

9 comments:

Lester Taylor said...

I was shocked at the Lib Dem's announcement today....Vince has shot himself and party in the foot with this popularistic vote desperate bollox..

If there was ever a system to remove all the wealthy from the u.k. Vince just came up with it....good job it came from teh Lib Dems who will only get into power once everyone in Britain has died.

Mark Wadsworth said...

EV, why would this "remove all the wealthy from the UK"?

If Guido is correct and the value of really nice houses falls by ten per cent, wouldn't that make the UK a more attractive destination for the wealthy (who now get more mansion for their money) in equal and opposite measure?

Lester Taylor said...

As you know Wadsworth I would love to see house prices crash more than anyone...

But that is not the full extent of the Lib Dem's ambitions...

From the times:-
"Mr Cable pledged to close loopholes abused by the highest earners and prevent businessmen paying capital gains tax at 18 per cent rather than the top rate of income tax. "....And there's more...

From Sky News:-
"Cutting taxes for people at the bottom; lifting thresholds to £10,000 a year for pensioners and low-paid workers. The very well-off people will have to pay for that."



But going back purely to the tax on £1m+ houses if you already own a £1m+ house and are struggling to pay the mortgage would you sell up and leave the U.K.? I would.

Mark Wadsworth said...

EV, sure, the other Lib Dem proposals are a crock of shit (apart from increasing personal allowance to £10k which is UKIP policy as well). We don't want or need need higher taxes overall, what we need is to cut a third off government spending (i.e. the quangocracy).

As to the wealthy leaving the country, why would they? How many will leave as and when mortgage interest rates go up by half a per cent? Answer = none.

CityUnslicker said...

I am with you on this Mark. I do quite well in life and don't live in a house worth anything like £1 million. for guido to say this is middle class is ridiculous.

On the other hand, I am against all tax rises when there is so much spending that we could cut first- with more pain to the ididots who voted us this Government and the parlous state we find ourselves in.

Also this is a first step to income based local rates, which is another way to raise taxes.

God I HATE the LIB DEMS and Vince say much know-nothing Cable.

Lester Taylor said...

Interest rate rises? hmmmmm I am starting to wonder if they will rise in the next 5 years.....

Personal allowance of 10k is great but if you hit business to pay for this cut then it all tumbles down.

But yes less tax and that includes the well of...which I am far from....

Otherwise we remove the incentive for success and entrepreneurship...without that we will have no chance of digging our way out of this...

I am on the side of the rich for once in my life....the underdog fight has done me no favors and its all about me.

Lola said...

It all makes you so tired doesn't it? Not one of them, not one (politicians) ever argues their case properly or logically. Here f'rinstance we have something potentially sensible, LVT, that could replace rates, VAT, IHT etc etc, but they bastardise the message by making a soak the rich argument out of it. They should have learned by now that the way to soak the rich and make the poor richer is to cut taxes on the rich who will then buy more services and toys from the poor. But nope, you just get Vince (aged fuckwit) Cable and Nick (I'm a prick) Clegg spouting all this crap. And they think that we believe them? Good Grief.

Paul Lockett said...

EV: "If there was ever a system to remove all the wealthy from the u.k. Vince just came up with it.... if you already own a £1m+ house and are struggling to pay the mortgage would you sell up and leave the U.K.? I would."

Even if that were true, the seller would have to find somebody to buy who would be in a better position to pay the mortgage or even buy outright.

If anything, the effect would be the opposite.

Mark Wadsworth said...

Paul, exactly.

The LibLabConsense reckon that the 50% higher rate income tax will raise £3 billion, but it only needs small increase in emigration/small decrease in immigration for that tax to actually lead to a fall in revenues.

Conversely, I'd guess that very few people will emigrate because of this very modest charge, and an equal and opposite number will immigrate, so it is bound to lead to some net increase in revenues, however small. If we have the happy situation where the 'asset rich income poor' emigrate and high income people immigrate, that makes it even better.