George and economics, never the twain, eh?

It’s absurd that the only windfall tax on house prices is stamp duty (and even more absurd that it’s the buyer who pays).

Jeebus, and this guy wants to talk to us about tax?

17 thoughts on “George and economics, never the twain, eh?”

  1. What exactly is wrong with that sentence? Yes the incidence of stamp duty is on the seller, but it’s a moot point who pays.

  2. People who own a second house pay capital gains tax – I am amazed that he doesn’t know this.
    Why people who move more times should pay more tax than people who don’t is a mystery to me.
    I can understand paying more than someone who is poorer than me but not someone on the same income who has the good fortune not to have to move as much as me.

  3. Bloke in North Dorset

    anon,

    Indeed, the transaction costs of moving are a big enough drag on employment flexibility without adding taxes on top.

  4. ” We have a surplus of housing – more per head than we have ever had before”

    When I grew up we had 3 generations under one roof. These days since the left fucked up any sense of the traditional family we have mum living here… dad living there… kids from different partners in between and all must have their own room too.

  5. I usually disagree with him, but I happen to agree that transaction taxes are a bad idea. I am not so sure about the capital gain exception. Paying such tax at sale only is effectively a transaction tax with another name, so it seems somewhat suboptimal. Raising property taxes in general (council tax is mostly a user charge currently) seems like a good idea to me.

    We also just need to build more. People are not going back to living in smaller house. The trend is the opposite. It would be crazy if some of the extra wealth we create each year wasn’t spent on better accommodation. We have to expected people will buy more and more space as they get richer. If you want to keep the price/m2 constant you need to build more than just population growth.

  6. I still can’t see a good reason why not to scrap stamp duty and instead tax capital gains on all houses.

    The only reason that holds water is that stamp duty is easier and cheaper to administer (particularly as you’d probably have a roll-over on the capital gains tax). But the economic problems of discouraging mobility (and downsizing, which is apparently one of the government’s concerns) are probably now greater than the administrative cost of running a more sensible system.

    The less good reason is that the grasping venality of politicians means that we’d risk ending up with CGT and stamp duty.

  7. My view has always been there is no housing shortage. Proved by the absence of shanty towns on Hampstead Heath.
    There’s an absence of a supply of housing at a price to suit the aspirations of seekers of housing. Big f****g deal. Also applies to Ferraris.
    Should be sorted by markets.
    But.
    Between credit creation, bankers, planning restrictions, property developers & the rest of the parasites revolve around property, markets are redirecting much of the capital, would build houses, to the aforementioned.
    Blame government.

  8. Well, the liability for the tax falls on the buyer, but if no buyer can be found then the seller needs to reduce their price. If the buyer has a windfall to spend then I suppose you can call it a windfall tax, but otherwise where is the windfall? You sell your house, you still need somewhere to live: thus add roll-over relief, another concession for equity release to fund care-home costs, and an inter-generational bank-of-mum-and-dad and in the future a likely several-generations-under-one roof. The past is no guide to the future: the days of this property=tax windfall=magic-money-tree are probably over.

  9. > Why people who move more times should pay more tax than people who don’t is a mystery to me.

    Yes. Of course, the “obvious” solution is to rent (which is what some of us in such circumstances do) but that’s not appropriate / acceptable to everyone.

    Monbiot’s solution is… creative. Bold. Courageous. Probably bonkers. Certainly unduly intrusive. Could married couples dodge the tax if they were to argue that they sleep in separate beds? It seems like more of a Snooper’s Charter than the actual Snoopers’ Charter.

    But here’s another bit of creative thinking. How about scrapping Stamp Duty Land Tax and applying the CGT system on principal private residences? (CGT rates TBD, attempt to make new system revenue neutral wrt old one.)

    Tax would still only be due when a sale occurred; liability to pay would shift but incidence would presumably remain the same; and the fact that capital allowances are awarded would mean that people could net off price paid for the property. Might need to allow people to roll up CGT allowances. Of course, you could also net off the cost of extensions etc. Further questions: too complicated to do properly? does it affect the VAT status of extension and redesign work?

  10. Bloke in Costa Rica

    I don’t see how CGT on sale of a primary residence would work. You buy your house in 1975 for £15000. You sell it in 2015 for £300000. That’s £285000 gain, right (derated by some CPI calculation, I assume)? Right, says Mongbat, we’ll have some of that. Where do you live, assuming that every time you move you don’t want to buy a smaller place? You need the proceeds from the sale of your property relatively unpilfered by the taxman in order to buy the next one. You can talk about “netting off” but then it’s not clear there’d be anything left to tax. Stamp duty is probably at about the upper end of how big a property sales tax can be without making the whole system grind to a halt. It raises nugatory amounts but is a real disincentive to buy.

  11. BiS>

    “My view has always been there is no housing shortage. Proved by the absence of shanty towns on Hampstead Heath.”

    That there’s not a situation so absolutely catastrophic as to require shanty towns (or caravan parks, etc) to spring up in public parks doesn’t mean the situation isn’t pretty dire.

    Since I’m house-hunting in London at the moment, I can tell you that things are currently completely fucking ridiculous. A very ordinary three-bed semi in an ordinary part of zone 5 requires a 30%+ deposit as well as an income of £80k+.

    There’s a very good reason people are living in shared flats with no living room, and so-on.

  12. “There’s a very good reason people are living in shared flats with no living room, and so-on.”

    Quite right, and that reason is insane, oppressive, stupid, ridiculous, excessive (geddit yet?) subdivision and building regulations.

  13. BiCR: at a wild guess, it would probably be possible to run a CGT on PPRs with a rate only slightly higher than the current basic SDLT, while raising similar levels of revenue.

    Take your example. First off, to clear up one thing: I wouldn’t suggest putting people who have owned their home from 1975 into this system. You’d start the clock ticking on all purchases after the change is implemented, but not on any purchases made beforehand (or before the announcement date, or whatever; point is, you give people fair warning that the system will change from a certain point onwards). So people sitting on a massive gain are not going to be expected to find tens of thousands unexpectedly.

    So let’s suppose we’re 40 years down the track with this system instead, which may perhaps not have been what was worrying you in the first place but having already written this part I shall persevere. You sell for £300,000, which currently raises a SDLT liability on the buyer of £5,000. Assume a tax-free CGT allowance of £10,000 [1] with a profit of £285,000, a rate of 2% and no uprating [2]: such a tax raises £5,500. Now, some people will pay less than currently because, for example, they bought at £300,000 and sold at £300,000. So, assuming revenue neutrality, the rate would in practice have to be a bit higher, but even a rate of 5%, raising £13,750, seems hardly disproportionate for someone selling a house they bought 40 years ago.

    For consider that they’d have to have raised £5,000 to pay SDLT for the place they were moving to under the current system, so if they haven’t saved the difference over their 40 years of ownership, is it really going to kill them to live in a house that’s £291,000 instead? bearing in mind that under SDLT people who move more often have the value of their assets sapped every single time to the tune of about £5,000? and that someone who bought five years ago at £300,000 and sells at the same has to pay the same SDLT when buying as the people sitting on a gain of £285,000?

    The point about switching from SDLT to CGT is that, if someone is selling a house at roughly the level they bought it at [3], they’d pay less than currently; while if they have made a larger gain, they pay more. It sounds more equitable, certainly, and more to the point, I strongly suspect that it would be less economically damaging as well.

    [1] For the purpose of keeping things simple, I am assuming no rolling-up of the allowance at all.
    [2] I can see that uprating might be demanded, but on the other side of that discussion, uprating would make the system far more complicated and would push the headline rates up in order to preserve revenue neutrality.
    [3] Another wrinkle, of course, is how to handle the cases of people who sell below the price they paid, and in particular those who are selling out of the property market.

  14. As a surveyor who makes half my income from surveying houses for sale, my natural interest is volume of sales, and I can tell you all that stamp duty is a real drag on volume. Why the buyer pays it when it’s the seller who has the cash is mad, unless the aim is to put a brake on sales…

  15. Why the buyer pays it when it’s the seller who has the cash is mad, unless the aim is to put a brake on sales…
    In the middle of the chain, the seller is also a buyer so it does not matter. At the beginning of the chain is a ‘first time buyer’ who probably isn’t buying a mansion at the highest rate of SDLT, at the other end someone is selling out and perhaps they could afford the tax. But, as I said upthread, how often is that really a windfall?

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