Milking the poor to make the rich.. richer.

[I1L2T3]

Think I may have posted this on here before but a tax on property shouldn't be a tax on the value of the property but rather on the rental value/potential of a property.

 

The market valuation of a property is not the real cost to the economy of that property being available for economic use. The real cost is the rental value - that is what needs to be potentially made available day to day. The property sale valuation is funny money, in the case of the UK over-inflated and often not reflective of the true economic value of property.

 

So, perhaps what would be fairer would be a tax of 20%-30% of rental potential on property. It would be punishing to some (e.g. older people sitting in big houses not being used to full economic potential) but fair for most. It could also be used punatively when land was being witheld from economic use without good reason, e.g. a 100% tax could be levied against property being held by house builders but not actually being built on.

 

I hate the idea of taxing people on the sale value of their property. It gets emotive and it really means nothing. Wealth in that respect is a moving target that is hard to pin down and probably impossible to tax effectively. We should be taxing the economic (rental) value of land/property not some fantasy sale valuation propped up by unnatural levels of credit availability.

[carosio]

Think I may have posted this on here before but a tax on property shouldn't be a tax on the value of the property but rather on the rental value/potential of a property.

Isn't that the same as the old rates, the rental value?

 

So, perhaps what would be fairer would be a tax of 20%-30% of rental potential on property. It would be punishing to some (e.g. older people sitting in big houses not being used to full economic potential) but fair for most.

Do you mean the owners or the tenant? How would they pay the punative tax? Would they vote for it?

[I1L2T3]

Do you mean the owners or the tenant? How would they pay the punative tax? Would they vote for it?

 

No, it's not the same as the old rates.

 

The owners pay the tax because they are the ones in receipt of the rent. A tax for local services could continue to be paid by all residents, whether owners or renters. It could lead to a much lower rate of income tax too.

 

The punative tax rate could be aimed at companies hogging or under-utilising land that could otherwise be released or optimised for desirable economic activities. The punative tax would be a disincentive for land owners to do things that were not in the best interests of the economy.

[maxmaximus]

No, it's not the same as the old rates.

 

The owners pay the tax because they are the ones in receipt of the rent. A tax for local services could continue to be paid by all residents, whether owners or renters. It could lead to a much lower rate of income tax too.

 

The punative tax rate could be aimed at companies hogging or under-utilising land that could otherwise be released or optimised for desirable economic activities. The punative tax would be a disincentive for land owners to do things that were not in the best interests of the economy.

 

Don't people that rent property out already pay tax on the rental income?

Or is your idea to tax everyone that owns property even if they live in it and don’t rent it out?

[I1L2T3]

Don't people that rent property out already pay tax on the rental income?

Or is your idea to tax everyone that owns property even if they live in it and don’t rent it out?

 

Yes, everybody who owns land pays tax based on the rental potential of the land. Obviously for owner-occupiers the rate could be lower. For people renting out property as a business they pay more. For people/businesses hogging or under-utilising land they pay way more.

 

It sounds draconian at first. The flipside is that if land tax was collected efficiently then income tax could be reduced so it could reduce the overall tax burden on ordinary people. I'm not very happy that a lot of taxes that we pay are used for housing benefits to subsidise landlords. I'm sure you aren't either. You might counter and say that it would force up rents but the beauty of the punative tax rate on unused and under-utilised land is that it could be used to force that land to be developed, increasing the housing stock which would push down rents and stimulate the economy.

[Conrod]

Yes, everybody who owns land pays tax based on the rental potential of the land. Obviously for owner-occupiers the rate could be lower. For people renting out property as a business they pay more. For people/businesses hogging or under-utilising land they pay way more.

 

It sounds draconian at first. The flipside is that if land tax was collected efficiently then income tax could be reduced so it could reduce the overall tax burden on ordinary people. I'm not very happy that a lot of taxes that we pay are used for housing benefits to subsidise landlords. I'm sure you aren't either. You might counter and say that it would force up rents but the beauty of the punative tax rate on unused and under-utilised land is that it could be used to force that land to be developed, increasing the housing stock which would push down rents and stimulate the economy.

The trouble is, some people choose over a lifetime to rent property and spend their money on holidays/cars/beer/hookers or whatever.

Others choose to spend it on their property or mortgage - why should the latter be penalised because their income was spent on buying property?

[I1L2T3]

The trouble is, some people choose over a lifetime to rent property and spend their money on holidays/cars/beer/hookers or whatever.

Others choose to spend it on their property or mortgage - why should the latter be penalised because their income was spent on buying property?

 

They're not being penalised. They're making a different lifestyle choice and selecting to own property. Renting property should be cheaper than owning property, at least on a month to month basis. Of course over the long term, even when the land tax is taken into account, the ones who choose to own will be better off through gaining assets. The renters won't. Another spin-off is by keeping rents lower and forcing the housing stock to keep pace with demand then labour becomes more mobile, people can re-deploy more easily to where the opportunities are.

 

Edit: Sorry just to add I'm trying to make a case for NOT taxing wealth. Wealth is an illusory concept anyway and I think any discussion about taxing it is pointless. The LibDems mansion tax idea is idiotic. The rent-generating aspects of the economy are where we should be looking if we are intent on some kind of property/land-based taxation.

Edited December 1, 2012 by I1L2T3

[carosio]

You might counter and say that it would force up rents but the beauty of the punative tax rate on unused and under-utilised land is that it could be used to force that land to be developed, increasing the housing stock which would push down rents and stimulate the economy.

 

But if landowners have to pay more taxes, what's the incentive to build houses and receive lower rents from them? Unless, of course, their income tax is reduced in proportion.

 

In a depressed area which needs investment in housing, it's hardly a good idea to punish potential investors.

[Conrod]

They're not being penalised. They're making a different lifestyle choice and selecting to own property. Renting property should be cheaper than owning property, at least on a month to month basis. Of course over the long term, even when the land tax is taken into account, the ones who choose to own will be better off through gaining assets. The renters won't. Another spin-off is by keeping rents lower and forcing the housing stock to keep pace with demand then labour becomes more mobile, people can re-deploy more easily to where the opportunities are.

Sounds great in theory, but we're back to penalising sensible spending.

 

And, how can we make renting cheaper than buying? It will never be viable in business terms. Unless renting is subsidised by somebody (the taxpayer??), it HAS to be more expensive than buying.

 

---------- Post added 01-12-2012 at 23:10 ----------

 

But if landowners have to pay more taxes, what's the incentive to build houses and receive lower rents from them? Unless, of course, their income tax is reduced in proportion.

 

In a depressed area which needs investment in housing, it's hardly a good idea to punish potential investors.

Indeed, it suggests build property, pay £600 a month on the investment, and receive £500 a month in rent. Bankruptcy here we come.

[I1L2T3]

But if landowners have to pay more taxes, what's the incentive to build houses and receive lower rents from them? Unless, of course, their income tax is reduced in proportion.

 

In a depressed area which needs investment in housing, it's hardly a good idea to punish potential investors.

 

They get to build more houses, lower rent for each unit but more overall.

 

And the second bit, the depressed area. You might want to not build even more housing there unless there was a corresponding programme to stimulate economic growth. You might want to not be so punative on holders of unused land in those areas. In fact you might want to use the flexibility of the system to provide tax breaks to encourage the right type of activity.

 

It isn't a one-size-fits-all. It could never be. Don't think of it as a punishment though, but more of a system that is responsive to economic conditions and flexible enough to help change economic conditions for the better.

 

---------- Post added 01-12-2012 at 23:27 ----------

 

Sounds great in theory, but we're back to penalising sensible spending.

 

And, how can we make renting cheaper than buying? It will never be viable in business terms. Unless renting is subsidised by somebody (the taxpayer??), it HAS to be more expensive than buying.

 

---------- Post added 01-12-2012 at 23:10 ----------

 

Indeed, it suggests build property, pay £600 a month on the investment, and receive £500 a month in rent. Bankruptcy here we come.

 

Those arguments only work if you think buy to let is the future, the rental market served by millions of landlords with one or just a handful of properties. That is a really inefficient economic model in terms of providing volume housing.