Tuesday 7 July 2020

Wealth Tax on the List of Demands

My crie du jour just now is: "what are the demands?"   The BLM thing was the proximate cause, and "they" still haven't got remotely near Marcus Rashford's stunning, tangible achievement in terms of coming up with something of all-round practicability.  "Defund the Police and dismantle capitalism & the patriarchal system" allow Kier Starmer to snort with dismissive ridicule for the cameras, and counter with his deep and abiding support for the police.  So - not much traction there.  

But it's broader than just BLM's amateurish flounderings.  Starmer's Labour, and in particular the signally unimpressive Anneliese Dodds, are always coming up with silly anodyne lists of things they'll be holding the government to account for, ("Our 4 tests for Covid Economic Recovery") which are always modelled on the Brown/Balls tests for joining the Euro - designed as a cunning trap for their enemies disguised as something constructive and clever.  (Does this clever-clever political stuff ever really work?)

Anyhow: it hasn't taken long for that old Corbynite favourite, the Wealth Tax (- everything can be paid for by smashing the 1%), to hove into view.  Here's nervous little Dodds again; and here's ... Polly!

Cards on the table: though I'm no LVT obsessive, I've always reckoned the Council Tax is a masterpiece and case study in practical politics, and that Little Git Osborne missed a massive political, fiscal and economic trick in 2010 when he failed to take the simple step of extending the bands upwards very significantly, thereby rectifying a grotesque anomaly.

But WT in the way Polly intends it (and she writes of all manner of serious work being done on the subject) we're talking a lot more than recognising the stupidity of a banding scheme that stops at 'H' ('I' in Wales).

What do we reckon?  Open WT thread below.

ND 

26 comments:

Thud said...

LVT,blah blah tax...no more, we need to be left alone to use our own money as we see fit.

DJK said...

Nobody likes paying taxes; everybody thinks it's the other fellow that should be paying more.

I do think that property is undertaxed. As property prices are inversely proportional to interest rates, most people who bought or inherited property twenty or more years ago are sitting on a big, unearned capital gain. In the US (I think) property taxes are 1-2% (median 1.2%) of the property value. If that was applied here, it would double my council tax.

If the quality of local governance is to be improved then it should be paid for by local taxes, rather than being mostly funded and controlled by central government.

Of course the practical reality of a wealth tax would be that it would hit the respectable middle classes hard, and leave both the feckless and the offshoring, stateless globalists unscathed. Is that fair? Probably not.

BlokeInBrum said...

I read the Polly article and it's the usual lefty bollox of steal from the rich.
It is still the politics of envy and nothing has changed on the left.
The BTL comments are the usual wishlist of pie in the sky spending as they dream of the billions of extra dosh that is to be stolen from those wealthier than them (naturally).
Polly does the usual hand-wave when it comes to actually getting down to the nitty gritty of how it is supposed to work, ie what happens if you are an asset rich, but cash poor pensioner? Do they get kicked out the house after it's sold out from under them in order to pay the tax?
Polly is more than welcome to flog her pad in Umbria if she wants to give any extra cash to HMRC.
And for someone who is keen to level the playing for those less fortunate, how does one get an Oxford scholarship with a singular A-Level?

Raedwald said...

DJK has hinted at the answer already - by accepting without question that all taxation should be determined centrally (as 95% is at the moment) we are trapping ourselves in the central Statist command and control economy so beloved of the comrades. If even half of taxation were determined locally, Labour's redistributive agenda would become much more personal.

I'd deny them even a debate on a wealth tax, and move the argument to local vs central taxation; central taxes for defence, diplomacy, the justice system, air traffic control and similar national collective functions that can only be carried out at national level. For everything else, both tax and level of provision can be decided locally, as close to the point of delivery as is economic and effective. The Swiss have three levels of tax autonomy; national, cantonal and municipal. And if they don't like what an administration is doing at any particular level, they throw them out and elect a new one.

Labour's tax plans, like Labour's spending plans, are geared to hooking the population onto the benevolent teat of the State. IDS dropped a mammoth testicle with his State-centrist benefit reforms; had he devolved and localised, we might even accrue a saving.

Once you even accept that there should be a debate about a national wealth tax, the next question is how much? You've conceded ground. I just wouldn't go there.

Thud said...

DJK, unearned capital gain? and here was me thinking I had paid a mortgage for 20 years and expended much of my income, time and labour on my home, how silly of me! perhaps I should have just pissed it up against the wall and claimed benefits.

CityUnslicker said...

Thud +1 - it is an even easier route than ND suggests to scrap CGT allowance on your main home and if you and evil Labour type, then you disallow any indexation too.


Should kill the housing market pretty quickly that one and bring on this revolution they are all so keen on.

DJK said...

Thud: A common reaction, you are not alone.

All first time buyers --- and this has been the pattern for the last fifty years --- load themselves up with as much debt as they can manage, to buy the biggest house they can possibly afford. This will later be remembered as a time of struggle.

If you were fortunate enough to buy in the 1970s, during high inflation, you would quickly have found that your income rapidly inflated up, whilst falling interest rates meant that your repayments were going down. People generally used the extra spare cash to trade up to a bigger house.

In today's low inflation/interest envornment, wages are pretty static, whilst there is no room for interest rates to go down. Anyone stupid enough to take out an interst only loan is only likely to see their repayments going up.

I have a theory that most homeowners couldn't afford to buy the homes they live in, if they had to start again.

Readwald: Yes, more local taxation.

Roderick said...

I seem to remember a silver cloud in the otherwise dreadfully-governed UK of the seventies.

For a while house price inflation was running above (high) mortgage lending rates so anyone who had loaded themselves up with debt to buy a house soon found that they were effectively making a profit from their borrowing activity. Of course this didn't last long.

PS: Why does no British politician bother to find out how other countries manage? The Dutch have an annual wealth tax for example and nobody seems very bothered by it.

dearieme said...

I commend unto thee my anti-Polly tax - a heavy annual charge on everyone who owns a "home" abroad.

You know who they are, just look at Facebook and so on. Piece of cake!

BlokeInBrum said...

A key component of any tax is always how fair is it?
Most people would be reasonably happy to pay (more) tax if it were believed to be well spent on essential and neccessary expenditure.
Who here thinks that is the case?

dearieme said...

"I have a theory that most homeowners couldn't afford to buy the homes they live in, if they had to start again."

But I'd start again in a better-paying trade.

dearieme said...

"Most people would be reasonably happy to pay (more) tax if it were believed to be well spent on essential and neccessary expenditure."

Ah hae ma doots. The British North American colonies were the most lightly taxed civilisation in history. And still a quarter of the population was prepared to back a rebellion on the promise of less tax.

Anonymous said...

"most people who bought or inherited property twenty or more years ago are sitting on a big, unearned capital gain"

Also an unrealised capital gain. I bought my house for £120k in 1997, then spent £80k extending. But I'd be happy if all prices halved tomorrow, then my children could afford somewhere.

"I have a theory that most homeowners couldn't afford to buy the homes they live in, if they had to start again."

That's down to insane house inflation, which is down to open borders (lots of bottom end demand, not least from landlords), cheap money, dual income families (nearly twice as much cash chasing the same housing stock).

Any comments from the team on making the UK Singapore, without Lee Kuan Yew and with the native British playing the role of Malaysians? How many more clever elite groups who don't care about (or actively hate) the natives does Britain need?

Anonymous said...

How can you not tax wealth if the policy of the current government is to "level up".

If tax is out of the question politically, then you have subsidy or a raft of freebies. And the cost of paying it through tax.

Leveling up or not? Or just another slogan?

I've yet to work out how this will be delivered.

E-K said...

Loft insulation... YAY !!!

So no £500 vouchers for everyone to spend on the high street then.

A Communist government delivers unto us a vile disease, social distancing and the prospect of face masks forever (disease experts are seriously proposing that failure to wear a mask in public be stigmatised like drink driving - not just for CV19 but to be normalised forever.)

Our pubs are ruined and I'm pretty sure most of them will not recover.

BLM UK may be amateurish but they have stolen huge ground from us - comedy is ruined and it cannot be long before psychometric testing is upon is if Harry Antoinette continues with his 'unconscious racism' thing - and the bastards did this just as the country was at its most unified.

The old days are gone. Welcome to the new normal.

So the economic solution to a Communist problem is - you guessed it - Communism.

Replace tractor manufacturing with house building and it's all there.

Heaven forfend if any of that Sunak voucher money actually finds its way onto the high street.

I wouldn't mind tax and spend on sexy stuff... but fucking loft insulation and poxy liberal theatres ????

Matt said...

Not that it'll matter to the morons proposing this, but a wealth tax makes us all less well off.

It's accepted economic theory that a wealth tax will reduce investment (https://en.wikipedia.org/wiki/Wealth_tax#Effect_on_investment) and therefore we have less economic growth (making us less rich).

Sure, there might be some level where it brings in marginally more than we lose but that would need to be carefully regulated which makes it a very poor fit with a government who wants to just spend more.

Nick Drew said...

DJK - Of course the practical reality of a wealth tax would be that it would hit the respectable middle classes hard, and leave both the feckless and the offshoring, stateless globalists unscathed. Is that fair? Probably not

Oh yes, my feelings exactly. Of course Mr & Mrs Feckless are always going to benefit in any progressive, means-tested tax/benefit regime because how you arrived at your impoverished state is not tracked

(when I was involved in social housing there was a feeble attempt made in law to disqualify the "intentionally homeless" but it was just that: feeble)

But the real problem is the trust-wallahs and offshore merchants, which in any case is where the big hypothetical value lies. That's why LVT scores because... well, you know the rest (see Mark Wadsworth passim ad nauseam)

Anon: I've yet to work out how this will be delivered

Whatever approach is taken in an egalitarian direction the honest, tax-form-completing middle classes will get hit most. Whether that's by daylight WT robbery, or silent pension-erosion. They are always effectively the primary target.

Hey, I could almost go LVT at this rate ..!

Lord Blagger said...

Defund the police means a tax cut.

dearieme said...

Luncheon Voucher Tax - fine idea, but will it raise much?

Lord Blagger said...

But the real problem is the trust-wallahs and offshore merchants,
===========
They are just doing what the Guardian does. It clearly works.
So you view that as bad.
I take the opposite view. Because it works it should be the default for all.

Everyone should invest their NI, tax free. Lets have a bit of capitalism for a change.

What you will find is that very quickly people build up large pots of wealth.

They won't vote for that to be taxed.

Lord Blagger said...

Hey, I could almost go LVT at this rate ..!
========
Why is that the LVT proponents can never say what price per acre?

dearieme said...

The simplest, most bearable, wealth tax would be an improved Inheritance Tax. Make the exempt amount £250k each, no fannying around with special cases for housing, direct descendants, and so forth. Keep the transferability to the spouse. Any other transferabilities must involve only deferring payment not avoiding it.

Gift exemption: £10k p.a. - no rubbish about surplus income (currently an exemption without any cap on it), special provisions for weddings, £250 for anyone else, or whatever.

Abolish, or severely cap, the BPR and APR exemptions.

And reduce the tax rate to 20% or even 10%. Would that leave the Treasury still in pocket?

dearieme said...

Oh yeah, and a special income tax rate applied solely to DB pensions. I admit we'd lose by it but oh the joy of thinking of all those ex-government employees paying up.

Or would it be better yet to have a tax aimed only at current and ex-government employees? That could raise a cheer.

Elby the Beserk said...

DJK said...
Thud: A common reaction, you are not alone.

All first time buyers --- and this has been the pattern for the last fifty years --- load themselves up with as much debt as they can manage, to buy the biggest house they can possibly afford. This will later be remembered as a time of struggle.

If you were fortunate enough to buy in the 1970s, during high inflation, you would quickly have found that your income rapidly inflated up, whilst falling interest rates meant that your repayments were going down. People generally used the extra spare cash to trade up to a bigger house.
===========================================================================

Yes, as a late 70s first time housebuyer, it was great when interest rates fell from 15%, I can tell you... even a norm of four or five percent is far higher than many have been paying for years.

Lord Blagger said...

Yes, as a late 70s first time housebuyer, it was great when interest rates fell from 15%, I can tell you... even a norm of four or five percent is far higher than many have been paying for years.
========
Problem with the current regime of stamp duty is

a) You may as well over buy, because you aren't going to willingly pay 2 times your take home pay in tax.

b) Discourages job mobility

c) Perversely encorages BTL. People buy and amortise over lots of renters.

d) If you have the money, need to move, then rent to buy.

e) Want to downsize? That's another tax payment.

Transaction charges need to go.

iOpener said...

I live in Calgary, Canada and we have a "Property Tax" which is a form of LVT as it is based on an assessed value of real estate, which in fairness seems pretty close to reality.

To those of you who say that LVT rates managed at municipal level are more easily managed by the electorate: Yes, but not how you think.

We have a large number of tenant voters who suffer from the happy illusion that tenants do not pay taxes. I'm 67 and have sold most of my residential rental properties, I'm down from 70 units to 16 and have spent years trying to educate my tenants and convince them that I'm just a collection agent for city taxes.

They have only started to accept it since I changed my leases to include an automatic rent increase in the same amount as any property tax increase. Every year when our city council debates the tax rate I email the tenants regularly and tell them what the various proposals will mean to them come the next January 1.

They are surprised and annoyed, both at the start when they are told that their 900 square foot unit already has a city property tax burden of $CAD1,100 and more so when they hear that their rent is going up by $CAD75.00 per year.