Mansion tax - lib dems or Vince Cable at least

[david_carnell]

Sutton.

[Huguenot]

"But house prices should not be further subsidised by the taxpayer"

Did you just say that because it sounded good in your head?

[mikeb]

Perhaps I'm being obtuse at the end of a long week but I don't follow your sarcasm. Please feel free to elaborate and then we can discuss.

[Huguenot]

Well, unless you view 'not paying tax' as 'subsidy', what you said made no sense.

To be honest a lot of what you said makes no sense. This talk about people buying houses as an investment is simply not true for the vast majority of the population - and is hackneyed cliche worthy of the Mail.

The vast majority of people do not 'live there for a little while', they live there. When they move house that's because they need to live somewhere else.

You have in your mind's eye a tiny fraction of society who do have the opportunity to trade in property, and what you're proposing is to punish the entire population for their behaviour.

[mikeb]

No gain, no tax. Hard to see how that is a 'punishment'.

And yes, I do view tax breaks as subsidies.

For the past 15 years, a sizeable group of society has benefited as they have traded up every few years to use the leveraged gains in property prices as a deposit for somewhere bigger. I saw this with many, many friends and colleagues. As inflation has now moderated, I hope this process may now be over (though interesting to see prices in London more or less at the same levels as in 2007). But that leaves prices too high and a big transfer of wealth to those who owned a property in say 1990 or 2000.

If it helps, I'd be happpy to see capital losses carried recognised.

[Senor Chevalier]

So the arguments against getting house prices under control are:

1) Huguenot - it would be punishing the majority of people for whom it is their home and not an investment

2) Loz - it would lead to negative equity and disaster for the economy

I think we need to decide. If it is just a home to live in then what it is worth is kind of irrelevant if people stay put. If they want to move to a bigger house then it helps. OK I get that negative equity would trap people in homes, but it shouldn't have a bearing on what people pay on their mortgages and it shouldn't have a bearing on how much discretionary cash they have to spend.

It only has a bearing on the disposable cash if it is an investment property or we are into equity release.

Clearly not great to have people evicted from their homes to pay tax, so rolling up the tax and deferring it to be taken off inheritance as I suggested above should be applied to solve this.

Next.

[Huguenot]

House price inflation is a simple case of supply and demand.

Demand was artificially driven by the availability of cheap credit and clever financial products and government incentives that created a buy-to-let frenzy.

The simple solution is to take away these incentives and financial solutions for buy-to-let, starting with the deal that allows landlords to put mortgage interest payments against tax as a business expense.

I suspect that this obvious solution doesn't appeal to many on this forum because it doesn't achieve an underlying goal of punishing rich people by taking away their houses or stripping them of their income.

Every other avenue should be explored before trying to asset strip people for whom a house is a home.

[StraferJack]

Demand was driven not by cheap credit

Demand was driven by people rejecting rented accomodation, primarily because it was " a mugs game". House prices go up so reliably anyone not buying and cashing in was considered simple.

Cheap credit came along because that demand to buy houses was there. Another example of a win/win being nothing of the sort

Supply and demand is petrol. People demand it, supply is finite but every increase in price is met with howls of protest. No such situation exists in housing. Price increases are, for the majority it seems, a good thing

"simple" supply and demand it ain't

[Huguenot]

Sorry SJ, that's simply not the case.

The fact that 'supply' was fixed doesn't mean it's not a supply and demand market.

Renting has always been a mugs game, and it had no impact on the latest housing boom, which effectively ran from 1998 to 2007.

In 1998 only 1% of housing loans were buy-to-let. By 2006 they accounted for 9%. When you take a market that's in restricted supply anyway, and suddenly introduce a 9% higher demand upon it, the market's screwed.

The fact that people thought the housing market was zero risk added to the demand, and drove the prices people were prepared to pay even higher.

In 2001 the market saw the first mortgages offered at over 100% of value (up to 125%), and saw a huge change in the multiples of salary that lenders were willing to make - from a traditional 3x to as much as 8x by the middle of the decade.

http://upload.wikimedia.org/wikipedia/commons/thumb/e/e6/UK_house_prices_adjusted_for_inflation.png/450px-UK_house_prices_adjusted_for_inflation.png

[Senor Chevalier]

...and given that spike, renting is probably no longer a mugs game.

[StraferJack]

I agree buy to let is a significant distorter btw

I don't believe renting is or should be a mugs game tho

[Jeremy]

I don't think renting is a mug's game at all. You don't have to worry about maintenence, you have the freedom to move when you want, your money isn't tied up in an asset. It has advantages.

[Huguenot]

I meant that renting was no more a mugs game in 1998 than at any other time, so it didn't have a sudden impact on house prices.

Whether or not renting is actually a mugs game depends on your circumstances.

However, it doesn't escape from the fact that the principle responsibility for creating a generation of disposessed youth lies at the feet of buy-to-let landlords and their facilitators.

It's uncomfortable truth, but until we recognise it, we cannot solve the problem. Multiple property ownership outside of housing associations should be brutally taxed, and incentives should be put in place to faciltate tenants to rent-to-buy.

[zeban]

I absolutely agree Jeremy. That attitude really gets on my nerves.

[Marmora Man]

Jeremy Wrote:

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> I don't think renting is a mug's game at all. You

> don't have to worry about maintenence, you have

> the freedom to move when you want, your money

> isn't tied up in an asset. It has advantages.

It has advantages - agreed. However, it relies on you having sufficient income to cover the rent for all of your life. A 25 year mortgage brings you an asset that will have only the maintenance costs to cover once the mortgage is paid off. This means that, for example, my mother can manage quite well on her widow's pension Nd stay inthe home she has lived in for most of her life. For her this advantage outweighs the period in her life when paying the mortgage was difficult.

[Senor Chevalier]

OK, so to clarify. Renting is not a mug's game. Paying more in rent than you would pay in interest on a mortgage for the same place (long term) is a mug's game as is spending all your free money on rent, rather than renting a smaller place and putting some money aside to cover your property costs on retirement. That's the mug's game.

[James Barber]

I thought council tax was a form of property tax.

Council Tax banding is defined versus historic property prices from many many years ago.

A mansion tax is just adding an extra council tax band defined using a more current house price threshold.

Lib Dem policy is to scrap council tax as a form of property tax and move to an income basis for council tax. So I would suggest Vince's Mansion Tax isn't as revolutionary as it sounds - certainly grabs headlines - and would if ever implimented last only as long as council property based taxes.

[Senor Chevalier]

So seems this is doing the rounds again.

[Chippy Minton]

It's back in the news because it's the Lib Dem Spring Conference. Cable is horse trading - he wants to introduce it in return for agreeing to drop the 50p tax rate.

[Senor Chevalier]

Sounds kinda sensible. How long I wonder until we hear the phrase "asset stripping pensioners" again?

*starts stopwatch*

[Huguenot]

I don't have a problem with property taxes in principle, and I think I discussed in another thread how persuasive I found david_carnell's arguments about a land value tax.

Neither do I have a problem with most of your motivations for seeking this tax SC.

However the 'Mansion Tax' isn't fit for purpose. Cable is bright enough to know that it cannot achieve any of the aims proposed by proponents on this thread such as yourself SC. It is consequently exposed as naked populism - a point made by James Barber.

As I've said before, rather than abuse pensioners with an unsupported envy tax that is unlikely to have any impact other than impoverishing people who have worked hard all their lives, an effective solution to the housing crisis needs to legislate to prevent young people living alone, stop property squatters, create jobs elsewhere or build more stock.

You make your most important point earlier in this thread where you describe it as an 'equalization tax'. Within this you emphasize the foundation of your argument. In your mind it is essentially a socialist goal for the redistribution of wealth from the bourgeoisie to the proletariat. There are no examples of successful socialist states in the world, so it seems illogical to state that pursuing their manifesto could have anything but a destructive impact.

People need incentives - if you forcibly deprive them of the rewards for their labour, they simply won't work.

[Huguenot]

I don't have a problem with property taxes in principle, and I think I discussed in another thread how persuasive I found david_carnell's arguments about a land value tax.

Neither do I have a problem with most of your motivations for seeking this tax SC.

However the current 'Mansion Tax' as proposed isn't fit for purpose. Cable is bright enough to know that it cannot achieve any of the aims proposed by proponents on this thread such as yourself SC. It is consequently exposed as naked populism - a point made by James Barber.

There are solutions for many of my concerns (for example deferring payments for those with no current income such as pensioners to inheritance tax or capital gains premiums), but they are not part of the current proposal.

As I've said before, rather than abuse pensioners with an unsupported envy tax that is unlikely to have any impact other than impoverishing people who have worked hard all their lives, an effective solution to the housing crisis needs to legislate to dissuade young people from living alone, stop property squatters, create jobs elsewhere or build more stock.

You make your most important point earlier in this thread where you describe it as an 'equalization tax'. Within this you emphasize the foundation of your argument. In your mind it is essentially a socialist goal for the redistribution of wealth from the bourgeoisie to the proletariat. There are no examples of successful socialist states in the world, so it seems illogical to state that pursuing their manifesto could have anything but a destructive impact.

People need incentives - if you forcibly deprive them of the rewards for their labour, they simply won't work.

[Senor Chevalier]

We're in danger of going back over old ground but seeing as not much else has captured my imagination...

Many taxes are progressive including income tax. Those that can afford to pay most are hit harder even though they consume an equivalent amount of public goods or often less. Those that have less contribute less or are net recipients. You say this has never worked successfully. By that token we wouldn't have a welfare state. I don't think you can be so absolute.

All I'm questioning is whether we have the right definition of the haves and the have nots.

I am not suggesting to deprive people of what they have earned to give feckless youth money to piss up the wall. However, I am saying that there is an element of windfall to many who have property wealth and that prices have moved beyond the grasp of many. If the windfall could be taxed in some way then the imbalance may be reduced slightly, so that the next generation might have a similar opportunity to achieve equivalent outcomes to the previous one (if prepared to work equally hard).

That's the crux of my argument: someone performing certain actions today should be entitled to an equivalent level of prosperity to someone who did the same a generation before. Failing that they should at least not be taxed through the nose to pay their winter fuel allowance.

Anyway, anything else interesting going on?

[Loz]

Senor Chevalier Wrote:

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> However, I am saying that there is an element of windfall to many who have property

> wealth and that prices have moved beyond the grasp of many. If the windfall could be taxed in some

> way then the imbalance may be reduced slightly, so that the next generation might have a similar

> opportunity to achieve equivalent outcomes to the previous one (if prepared to work equally hard).

But there is no windfall until the property is sold. Until then, you are taxing a a paper profit, which is inherently unfair. Taxes should only be applied when a profit is monetised.

[HAL9000]

What is the proposed MT rate expressed as a fraction of 100, a ratio known as a "percentage" in fiscal circles?