All good Tories should support a mansion tax

[truman]

a regressive tax is one that is charged at the same rate irrespective of income, so that the lower your income, the higher the proportion of your income you pay on that tax

 

e.g. tax expenditure of £10,000 out of an income of £100,000 is 10% - tax expenditure of £10,000 out of an income of £50,000 is 20%

 

so, two people buying similar properties at the same price are paying the same amount of stamp duty, but, as a proportion of income, the rate paid is different - that is why stamp duty is regressive - the amount payable is a proportion of the asset value, not the income of the purchaser

 

i accept that, the higher earner, as a general rule, may buy a more expensive house which has a higher rate of stamp duty payable on it, but that only means that the rates are progressive, not the tax itself

 

and i'm not an accountant either

 

 

How does income have any relevance to Stamp Duty?

 

"A regressive tax is a tax imposed in such a manner that the tax rate decreases as the amount subject to taxation increases"

 

Stamp duty doesn't do that.. it's totally disconnected from income....the more a house is worth then the more tax is paid..

[L00b]

"A regressive tax is a tax imposed in such a manner that the tax rate decreases as the amount subject to taxation increases"

 

"A progressive tax is a tax in which the tax rate increases as the taxable base amount increases"

 

(both Wiki)

 

As previously posted, the stamp duty (tax) rate increases as the value of house (amount) subject to taxation increases. Progressive, QED.

 

How does income have any relevance to Stamp Duty?

Income tax and stamp duty are both progressive

 

"The term is frequently applied in reference to personal income taxes, where people with more income pay a higher percentage of that income in tax than do those with less income"

 

(again, Wiki)

 

But let's not have the politics of envy get in the way of a good argument or...er...something like that

[Cyclone]

This discussion has caused me to look a little bit more closely at what we normally mean by progressive and regressive taxation.

 

When it's a fixed tax on something that we all buy and we all buy at roughly the same price (say milk for example) then I can see what that would be called regressive.

A rich person pays much less as a % of income on their purchase of milk than a poor person.

 

But regarding housing and stamp duty I don't think it's so very clear at all.

 

For a start there are progressive levels in the tax itself based on the value of the property being purchased, and secondly the value of the property being purchased relates quite closely to the income and wealth of the purchaser.

 

A house is not the same as milk, we do not all buy the same houses for the same price. Thus the higher income/wealth individual will in reality pay more when they buy a house.

[Manlinose]

How does income have any relevance to Stamp Duty?

 

"A regressive tax is a tax imposed in such a manner that the tax rate decreases as the amount subject to taxation increases"

 

Stamp duty doesn't do that.. it's totally disconnected from income....the more a house is worth then the more tax is paid..

 

income and stamp duty are loosely connected as pointed out in Cyclone's post, but whether or not a tax is progressive, regressive or proportional is determined as a proportion of the payer's income, not the actual rate of tax charged

 

the rates of stamp duty are progressive - the more you pay for the property, the higher the rate of stamp duty charged, and, in most cases, the more you earn, the more you pay for a property

 

but within the same property band, stamp duty is regressive because, the lower your income, the higher proportion of your income is being paid in tax

 

---------- Post added 22-02-2013 at 15:55 ----------

 

Income tax and stamp duty are both progressive

 

 

income tax bands are progressive, but within each band it is proportional - you pay the same percentage of your income in tax as everyone else within that income band - you only pay a progressively higher rate once your income goes over a certain level

 

i can only go back to my previous example and enhance it a bit - my neighbour bought his house at roughly the same time as I bought mine. we both paid the same amount (within a couple of thousand) and both paid the same rate of stamp duty and so we both paid a very similar amount of stamp duty. however, unless we both earned the same amount, the amount we pay in stamp duty as a proportion of our income is different - that is why stamp duty is regressive - you pay the same amount in tax (within the same band) irrespective of how much you earn, so the more you earn, the less, as a percentage of your earnings, you are paying in tax

[L00b]

income tax bands are progressive, but within each band it is proportional - you pay the same percentage of your income in tax as everyone else within that income band - you only pay a progressively higher rate once your income goes over a certain level

But that logic applies equally to house prices within a same stamp duty band: you pay the same percentage of the house price up to the max house price before you fall into the next band

 

Someone on £40k does not pay as much tax at 40% as someone on £50k. Both pay as much tax at 10 and 20%.

 

Same with house, someone who buys a house at £300k does not pay as much stamp duty at 3% as someone who buys a house at £400k. Both pay as much stamp duty at 1%.

 

I understand your 'neighbour example' perfectly well. But "regressive" and "progressive" taxes are defined relative to the taxable basis, not the income required to afford the taxable basis (logical, since no two persons' total circumstances are ever identical in terms of income and expenditure, and there are many more ways to buy a stamp duty-subjected asset than with just what one earns).

[Manlinose]

But that logic applies equally to house prices within a same stamp duty band: you pay the same percentage of the house price up to the max house price before you fall into the next band

 

 

i'm probably not explaining this as clearly as i think i am, and i'm probably confusing matters the more i try to clarify!

 

within the same income tax band, we all pay the same percentage of our income in tax - those who earn more (but still within the same band) pay a higher amount, but it is still 20% of our taxable income

 

the amount of tax paid varies depending on the amount of income, but the rate is the same for everyone

 

with stamp duty, within the same property band, it is the opposite - the amount paid is the same for everyone, but the rate (as a percentage of income) varies

 

so the lower your income, the higher the proportion of it is paid in tax

[gnvqsos]

But that logic applies equally to house prices within a same stamp duty band: you pay the same percentage of the house price up to the max house price before you fall into the next band

 

Someone on £40k does not pay as much tax at 40% as someone on £50k. Both pay as much tax at 10 and 20%.

 

Same with house, someone who buys a house at £300k does not pay as much stamp duty at 3% as someone who buys a house at £400k. Both pay as much stamp duty at 1%.

 

I understand your 'neighbour example' perfectly well. But "regressive" and "progressive" taxes are defined relative to the taxable basis, not the income required to afford the taxable basis (logical, since no two persons' total circumstances are ever identical in terms of income and expenditure, and there are many more ways to buy a stamp duty-subjected asset than with just what one earns).

 

You should become an economics lecturer and be paid for all the time expended on this point.

 

To summarise,and forget Wikiwatsit

 

Stamp Duty is regressive within a bad but is progressive between bands.end of.........

 

And well done for evading the VAT question,using the omission of a single letter to evade your task.Perhaps you are a lawyer?

[Cyclone]

I think the regressive/progressive tax issue only matters when considering taxation on staples (not the shop the things everyone has to buy).

[gnvqsos]

I think the regressive/progressive tax issue only matters when considering taxation on staples (not the shop the things everyone has to buy).

 

I think the issue is much wider than the tax placed on a stationery product used to join pieces of paper.In my view the best rules apply to the general not to the specific.Can you name a progressive tax which applies to the sale of any goods?

[Cyclone]

No I can't, indeed it would be difficult to link the amount of tax charged on a specific item to the income of the person purchasing it.

 

The best that can be done when the general class of items spans a large cost base is to apply progressive banding... Which is exactly how stamp duty works.