To think that the mansion tax breaks the principles of taxation

[NorthXNorthWest]

Most taxes fall into:
Income you receive
Profit you realise
Spending you choose

Council tax sit outisde of this. Its more like levy based valuation bandings and was a quick and dirty fix after the poll tax fiasco. It is effectively a service charge not a wealth tax.

Whereas mansion tax is the government estimating the value your actual house, then treating this valuation as pure profit then taxing you on this. Given the majority of homes are purchased with mortgages and paid for by already taxed money:

Why is

Mansion Tax = Estmated value × %

More reasonable than

CGT = Profit * % (Profit = Actual sales price - (Purchase price + actutal costs)

With actual costs being renovations not stamp duty or interest paid on your mortgage

I am not in the mansion tax bracket. I do accept that some taxes need to rise but I don't believe this is the solution.

The principle was broken already when employers NI went up. That meant that employers have had to reduce staffing, make redundancies, reduce part rises for staff and stop hiring. Guess, pay packets got smaller and unemployment has increased.

It was broken again when tax thresholds were frozen. In fact this is the single biggest tax hike ever.

Then there’s taxing peoples homes.

And it just gets worse. Rachel Reeves has blatantly lied to the country and parliament about not increasing taxes on business and when hospitality tax rates have just gone through the roof. And the final straw is the she lied about the £22b black hole, because there isn’t one. She has lied to people to bring in the biggest tax hike ever and told an egregious lie. She should be sacked. But that won’t happen. So the public needs to vote this government out, starting by teaching them a lesson in May.

Is England and Wales not under flood alert today ?

All the flood defence work costs a lot of money. This article here says 2.56 billion allocated spending. From feb this year.

Improving the UK's flood defences and resilience through £2.65 billion in funding (openaccessgovernment.org)

Go to June this year, and that allocated spend is up to 7.9 billion.

UK Government Commits £7.9bn to Largest-Ever Flood Defence Programme - Highways Industry

I am not doing accurate costings here, just quick net searches.

The Mansion Tax is projected to raise 400 mil over the same sort of time frame.

Is it not fair that people with more to lose pay a bit more ?

I suppose it can be thought of in the same way as insurance. Pay the government to do the work to reduce the chance of the loss happening. And hey, some " mansions" might even see their insurance costs go down if work is done in their area. It is a certainty that if their "mansion" floods, their premiums will go up.

Quote : " That is why Estimated Value × % is weaker and harsher than Actual Profit × %."

When I read that, and you mention profit, It seems to me that you think taxing the rise in value of a property ( the profit ), if fairer ?

Is that what you are saying ?

What is the greater number ? The mansion tax, or the increase in value of a property for the period the tax is due ?

When we are looking for the least-bad, I think a property value tax is less bad than SDLT.

Transaction taxes like SDLT are bad becuase they stop people making trades that would benefit everyone.

For example, I’d like to live in a small home near school. I actually live in a large home near someone else’s school.

Extra commute for all involved and unused space. No one benefits, not even the govt, but to fix it by moving for a few years would cost too much in SDLT.

A property value tax doesn’t distort behaviour in that way.

You mentioned fairness: why should someone who moves five times pay five times when someone who doesn’t move pays once? The frequent mover isn’t committing some sin to be punished (the opposite: they are often moving for work, which is a good thing), and is usually not richer either. In fact they are usually younger and therefore less rich on average.

Is that not like saying if I pay 20% VAT on a 100 quid coffee machine, I should be able to buy as many subsequent coffee machines as I want because I have already paid VAT on 1 ?

This is the key point. It only makes any sense if the tax is levied on equity, so after valuation they will need to deduct any outstanding mortgage and then apply the tax to the actual value of wealth held in the property.

No.

In fact, VAT illustrates the principle quite well. You really don’t want to be levying a transaction tax on things that need to be frequently traded to maximise their social value.

Thats why the VAT paid on all those intermediate parts that go into the coffee machine can be reclaimed through the process. It’s a VAT rather than a sales tax, therefore.

SDLT is a sales tax. Is property something that needs to be frequently traded to maximise its social value? I’d say yes, unless we plan to go to a system where everyone rents routinely for life(like some European countries).

No, because moving house is not consumption. The asset remains and is used by whomever purchases it subsequently. It is an exchange of a limited resource which is beneficial for productivity, social mobility and effective allocation of housing stock. Therefore a transaction tax on house purchases is clearly economically damaging and disincentivising a positive behaviour.

Neither is the proposal being made a good one. It muddies the waters because Council Tax should be for local services. Houses don’t consume services. Poll tax was a more sensible system to fund that.

If the Government wants to levy a wealth tax that should be entirely separate and nothing to do with Council Tax. It should also not only apply to housing stock because that is hugely distortive and again an attack on the middle class rather than the wealthy. Note that the upper band for this is £7500 per annum which will apply equally to Buckingham Palace (240 bedrooms) and some other 4 bedroom houses i.e. deliberately designed to affect the truly wealthy very little and to target those who have the majority of their wealth in housing (not the really wealthy). Just like the hammering of those who earn salaries via PAYE while those who run businesses pay far, far lower rates of tax. Just like IHT which again hits middle class professionals and the actually wealthy can avoid almost entirely.

That said, wealth taxes have failed in countries that have tried to introduce them (France, Sweden and others) for numerous reasons. What we should be doing is addressing the disparity between PAYE tax and tax for the self-employed/ capital gains tax etc. Get rid of the pretence that employers pay the employer NI - this is a tax directly on what an employer will pay to employ someone and is a deduction from their salary. If people realised the true amount they are paying compared to what those who invest and have passive income are paying they would not be happy, hence this pretence.

Tax transactions that have a negative economic effect and not those that have a positive one (like people saving into pensions!!). Redirect spending to productive parts of the economy. It’s astonishing, for example, that the Chancellor said not a single word in either of her budgets about increasing education funding significantly if she had any genuine desire to increase growth.

Absolutely. It is an idiotic proposal, like pretty much everything in her latest budget.

Capital Gains Tax at least works off actual profit, not a morally dodgy valuation that treats the whole house as if it were pure gain. Paired with the removal/ significant reduction of samp duty for downsizers it could free. Help free up the market.

There is already stacking. You pay tax on the income you earned to buy the house, then Stamp Duty Land Tax at purchase, then Council Tax every year, and now a mansion tax on top. The same home is taxed four times. It’s sold as 'fairness' and encouraging downsizing, but it won’t stop at £2m. It never does. SDLT is at least a one-off. The others are permanent and will only rise. The mansion tax is more likely to exists because Rachel Reeves has run out of room to push income tax higher and she needs more money to waste.

It still won’t free up homes for ordinary families. They are still blocked by deposits, mortgage rates and affordability. On top of this, there will non be a group of people who decide it is now financial suicide to move up the ladder. And just like that another group of people who can't or wont move but this group will be blocking the housing market for families.

The forced sales are likely be snaffled up by the holdersof liquid capital. They love a good distress sale! They’ll clean using tax / wealth planning loopholes, whilst enjoying gains in wealth from wholesale redevelopments, flat conversions and HMOs.

I wonder how many property sales will go through at £1.99M with the extra booked as fixtures and fittings to avoid the levy ...

On top of this, there will non be a group of people who decide it is now financial suicide to move up the ladder

you're talking about a tiny number of property owners, and you're not taking account of those who already live in £2m+ houses who aren't going to move because they now have to pay £2,500 a year extra.

neither will people stop their house move plans because of the tax, they'll have predicted this and now be working with their vendor to avoid the levy by the method I've mentioned at the top of my post. Anyone buying a £3-5m house isn't going to be bothered either.

Death and taxes, the 2 certainties in life

The rich get richer, and everyone else gets forced out.

how are "the rich getting richer" in this scenario?

Me too. Much fairer. Although I'm in favour of the mansion tax (because rich people can hide all their other wealth), another cliff edge is going to have lots of attached problems.

Maybe we can let them secure it as a charge against their property instead. Then the money can be collected when the property is sold.

They didnt earn all that value. It came from a crazy escalation in house prices that is causing others to struggle to even dream of buying a home

If it has a mortgage surely the bank owns that bit so they should chip in

It's absolute nonsense.

But it will work like arsenic. Low dose at first, barely noticed (piddling), then quietly lethal once it’s sunk into the system.

We need to start taxing wealth, not income.
income doesn’t make you wealthy. As a high earning dual high income family, with high mortgage, high childcare fees, high cost of living, but no inherited wealth, we are not wealthy.
We’ve both worked extremely hard, done several degrees with no financial backing or wealth behind us. We’ve always worked very long hours, weekends, late into the night.
It’s been a long uphill struggle and the future is still uncertain.

Those around us with familial wealth, land, multiple properties, very high value properties who themselves work much less, earn much less, spend more time with their kids, yet pay less tax. All whilst being able to afford multiple holidays and private school. How is this fair? Income tax does not tax true wealth.

We should be taxing billionaires, big corporations, those with land/multiple properties and prevent wealth from being off-shored. The real reason times are getting harder is that true wealth, large assets, land, global corporations are not taxed enough.

Responding to the poster who said this will raise half a million for flood defences. The truth is that half a billion is very little, way more than the welfare reform that Labour Reform MPs wouldn’t stomach and much less than all other tax raising mechanisms. It could cost more to administer at the start so they’re only doing it to expand to many more homes soon.
It is like the farmer inheritance changes and VAT on school fees - a starter before the main course.

I didn’t say anything about tax being old. I said governments can tax anything they like and if we don’t like it we can vote them out.

The IFS has done a great series on tax if you’re interested. Arguing it’s a bad tax is different to making stuff up about principals of taxation that don’t exist. If enough people don’t like it then they will be voted out at the next election.

I agree with this. You can work till you are killing yourself with stress in a high paid job and you still won't have a fraction of the wealth of Jenny down the street who is currently renting a property from her dad, having UC pay the rent and working PT and will then inherit her dad's (paid for by UC) property empire in due course (and I personally know quite a number of mums doing this!)

It will also be like the window tax, which caused people to brick up window in their homes in the 18th century. People will let properties fall into a state of neglect to prevent them being valued too highly.

That will only work within a particular band of value though and will be pretty counter productive

Had a look at Durban…

Durban is what you get when wealth tax policy is built on the back of a fag packet, a heavy dose of liberal bias, and a lot of dog-whistling about 'fairness' and 'mobility'. It’s the real world version of what that 'tax wealth harder and hope for the best' actually looks like when growth and capital mobility are ignored.