Philip Hammond must scrap stamp duty on property sales to solve the housing crisis and boost the economy, a think-tank warned last night.
The Adam Smith Institute said the ‘damaging’ tax – which raised £11.7billion last year – stopped Britons moving jobs and kept them in houses too large for their needs.
By penalising older people for downsizing, stamp duty makes the number of larger homes on the market for growing families even smaller.
Transactions taxes are a bad idea.
We could even say, in fact we should, that stamp duty raises the unemployment rate. It’s actually well known that an owner occupier rate which is “too high” increases unemployment. It costs to sell and move. So, if regional employment patterns change “too high” an owner occupier rate makes labour immobile. There’s also the point that without a vibrant private (social housing is even more immobile that owned, making the problem worse) rental market, which is the inverse of course, it’s not possible to move as swiftly as one might need to for those employment reasons.
Stamp duty increases that cost of moving, increasing the immobility of labour, thus raising the unemployment rate.
This is one of those things, as with so much in economics, which is undoubtedly true. But that’s not enough, there are many effects which are true and some will be working in the opposite direction as well. What we want to know is whether this is both true and important, is it a large enough effect to make a difference?
As best we know, yes. It’s a large enough effect that it can be measured, people have done it and proven it. That is, just the immobility of labour due to a high owner occupation rate is large enough that we can measure the effect.
Thus, presumably, stamp duty makes it worse.
Having now looked at it I recommend this paper. Really rather good.