Mark Wadsworth

This is a spare 'blog in case my main 'blog at markwadsworth.blogspot.com isn't working

The Poor Widow Bogey played out of turn

Spotted by SW in The Daily Mail:

“A ‘supertax’ on thousands of homes is being demanded by the Liberal Democrats as the price of agreeing to scrap the 50p top rate of income tax… The Lib Dems are thought to be proposing that capital gains tax – which is currently paid only on profits from the sale of second homes – should be levied on profits from first homes that are worth more than £1million.

The Lib Dems are thought to be proposing that capital gains tax – which is currently paid only on profits from the sale of second homes – should be levied on profits from first homes that are worth more than £1million… Around 250,000 homes would be above the £1million threshold, though some are occupied by families without a high income, including pensioners.

On an international note, they have such a tax in the USA: capital gains on your main residence in excess of $500,000 are taxable. And on a reformist note, they are shelving an idea for A Good Tax (annual tax of 0.5% or 1% tax on the value of very expensive houses above a certain threshold) with A Bad Tax (capital gains tax, which discourages efficient allocation of housing, however expensive), but at least they want to get rid of A Really Bad Tax (the 50p income tax rate), so fair play.

Assuming that the article explains the tax correctly (and The Daily Mail are usually pretty reliable on actual facts, it’s the spin which is wrong), then the design of the tax seems a bit haphazard; if you bought for £100,000 a couple of decades ago and sell for £1 million you pay nothing, but if you buy for £1m last year and sell for £1.1 million today, you pay £18,000 or £28,000, which seems illogical to say the least.

The point is that the Home-Owner-Ists are so conditioned to slap down what they believe to be their trump card, The Poor Widow Bogey, the minute that anybody suggests increasing the tax on residential land and buildings a bit, that they’ll play it even in the middle of a game of Monopoly.

Whatever the merits or demerits of such a tax, it is not due until and unless a home is actually sold, so by definition, the vendor will always have more than £1 million proceeds sloshing around, even after paying the tax, why on earth do the Home-Owner-Ists think they can start bleating about ability to pay? The tax is not going to be collected out of people’s old age pensions or anything, is it?

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