Mark Wadsworth

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

Killer Arguments Against LVT, Not (147)

Accountancy Age did a brief write up of the Telegraph’s brief write up of the OECD’s tax simplification proposals.

The comments open with this:

With the majority of the more expensive properties in the UK being owned by people who have or are about to retire(1) (assuming any of us ever do retire that is) a tax based on the market value of a property would hit anyone on a fixed or low income very badly.(2)

Also, when interest rates go up what about people overstretched when times were good and who now find themselves in a negative equity situation.(3) They won’t be able to sell (4) and will probably only just manage to afford the mortgage repayments, how would they cope with a large increase in any form of tax?(5) Would they just hand the keys back before the house was repossessed? With the housing market barely limping along, this idea would probably finish it off.(6)

1) At least she brazenly admits that the Baby Boomers have bagged all the housing for themselves and have no intention of letting young people ‘get on the ladder’ without paying a massive ransom first.

2) The first paragraph is fairly plain vanilla version of the Poor Widow Bogey (concepts like “Give them exemptions or discounts or just increase the State Pension” are far too complicated for their tiny little minds). The PWB is fundamentally a huge great lie of course: they always wail about the tax hitting ‘people’ but it’s not a tax on people it’s a tax on land values, so if you don’t want to pay it, you’ll just have to live somewhere smaller or cheaper (most people would be able to find something within a few hundred yards of where they live now) etc.

3) The Homeys like to show how kind and caring they are, so they choose diametrically opposed examples [old, low income, expensive house, no mortgage] with [young, high income, smaller house, big mortgage] to illustrate that such a tax would hurt both, which is nonsense, it’s like smokers whining that tobacco duty hits non-smokers as well. Crocodile tears.

4) Who says? You can sell anything if the price is right.

5) A sensible borrower budgets for the fact that interest rates might increase by a few per cent in the first few years of the loan. The taxes which the OECD proposed to replace (Council Tax, SDLT, IHT, CGT) would average out at about one per cent of the value of every house, so for a sensible borrower this is no big deal – it’s like the interest rate on the mortgage going up by one per cent but OTOH, he no longer has to pay Council Tax. So that’s more crocodile tears. And if young people with a big mortgage and possibly young kids can afford the tax, why on earth can’t older people – with no mortgage and the kids our of the house – afford it?

6) Does this woman have any idea what ‘a market’ is? It’s where people come together to buy and sell things. Housing transactions have more or less ground to a halt, because what sellers think their houses are worth is about a third more than what FTBs can realistically afford. This is not ‘a market’. Turning up the heat a little bit on the smug and complacent Homeys might just give them the nudge to drop their price and sell; the FTB can by definition afford the tax as he will adjust the price he pays up or down accordingly. So more transactions and a more active market, everybody ends up paying as much or as little tax as he wants. The tax would be good for the market.

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