4 ms·

> My view is that agglomeration really is valuable, that the high cost of housing and office space in London reflects their high value. To an extent, but the c

by UVB-76 10y ago

> My view is that agglomeration really is valuable, that the high cost of housing and office space in London reflects their high value. To an extent, but the current London property bubble is fuelled by the treatment of London property as a store of wealth for the world's super-rich. A land value tax would help, as would a more progressive council tax regime. It's madness that council tax in the Royal Borough of Kensington and Chelsea tops out at £2k pa.

lmm 10y ago
Council tax is a weird, awkward compromise between the poll tax that Thatcher wanted and some kind of progressive tax on wealth. I agree that it's dysfunctional, but I fear it's politically impossible to change.
- UVB-76 10y ago
  Yet it's almost entirely regressive. Even to middle class households, it's a major expense, but to those in multi-million pound properties it's a rounding error. That's before you even get into the fact most properties are still banded according to 1991 valuations.
  - lmm 10y ago
    Yeah, I know. So what can we do about it? Redo valuations? That's disproportionately expensive compared to the amount of tax revenue we're talking about. Add new bands or move the existing ones? Again just seems like a lot of effort for an exercise that would have to be repeated every few years.
    - UVB-76 10y ago
      Add new bands for higher value properties. Reduce payments for everyone in the existing bands, and hike the payments dramatically for the new, higher value bands. As with income tax, have the most wealthy paying the majority of the tax. This is a slightly less crude version of the 'Mansion Tax' Labour and Lib Dems have previously proposed. If you own a £5m property which is appreciating even at an extremely conservative 2% pa (£100k), you should be paying a lot more than £2k pa in tax.
    - notahacker 10y ago
      You can impose a pretty large increase in capital gains tax on transfers of physical property ownership (with exemptions for investments made in actually developing the property and rebates for property windfalls subsequently reinvested in other UK property). Personally I'd like to see CGT at confiscatory levels for individuals and entities that aren't tax resident in the UK, which is rather a lot of London freeholders at the moment... Regardless, I can't see revaluation with higher bands not being net profitable even in the short term, or any reasons why revaluation shouldn't take place after quarter of a century.
      - UVB-76 10y ago
        Taxing capital gains on properties is fraught with difficulty, particularly when properties are owned by offshore entities, and even the Land Registry do not know the identity of beneficial owners. Taxes on property transfers (capital gains, stamp duty, etc.) also create hysteresis in the market, which should be discouraged. It's much easier to implement a council tax style system, with non-payment a criminal offence, and the ultimate (if extreme) threat of property confiscation quite practical to go through with.
        notahacker 10y ago
        Agree with your points, but if capital gains taxes were phased in and ratcheted upwards, and the tax is deductible if people are using their gains to purchase a similar value UK property, I don't see hysterisis being a major problem. I'd actually be more worried about avoiding inducing a selling frenzy and crashing prices in the short term. Offshore registered properties without named beneficial owners are only a problem if you allow UK freeholds to be held by shady foreign entities and don't have an especially punitive tax regime just for them. Council tax style systems suffer from property owners (particularly private householders) often not having disposable cashflow remotely comparable to the value of a house they might have acquired many years ago, especially pensioners and especially in London. (whilst I'm sure in practice, private sector equity share schemes wouldn't be too unhappy to lend the house-rich the cash, I can't see council taxes as aggressive as hypothtetical capital gains taxes being politically possible)
    - pjc50 10y ago
      Scrap council tax, business rates AND SDLT, and move to a single percentage-based property tax. Probably about 1.5% would be right; apparently that's the average rate paid in New York. Valuation strikes me as not so hard when Zoopla and Rightmove can do it. "Last sale value + average annual percentage increase in the area" is a reasonable approximation. It would be a bit of a nightmare building in the right exemptions to not destroy the elderly and small businesses, but I don't think it's inherently impossible. It would however attract screaming from the genuinely rich. Remember the mansion tax going nowhere when people argued that £1m houses (ie 37 times median income) were ordinary?
      - nugget 10y ago
        1.5% with a 50% reduction and 2%/year growth cap for a single primary residence, transferable if you want to move housing, but not inheritable. This stuff is not difficult from a policy perspective.
        lmm 10y ago
        So now when a parent dies young in addition to the grief and financial difficulty you're slamming on a big tax increase?
        nugget 10y ago
        If you want to provide for orphans it's probably more efficient and less distorting to do it somewhere other than the property tax code.
        lmm 10y ago
        Tying tax rates to specific individuals is always going to be massively distorting. If you want to... I'm not even sure what your "transferable but not inheritable" was supposed to accomplish, but whatever it is it's probably more efficient and less distorting to do it somewhere other than the property tax code.

by UVB-76 10y ago

lmm 10y ago

Council tax is a weird, awkward compromise between the poll tax that Thatcher wanted and some kind of progressive tax on wealth. I agree that it's dysfunctional, but I fear it's politically impossible to change.

UVB-76 10y ago
Yet it's almost entirely regressive. Even to middle class households, it's a major expense, but to those in multi-million pound properties it's a rounding error. That's before you even get into the fact most properties are still banded according to 1991 valuations.
- lmm 10y ago
  Yeah, I know. So what can we do about it? Redo valuations? That's disproportionately expensive compared to the amount of tax revenue we're talking about. Add new bands or move the existing ones? Again just seems like a lot of effort for an exercise that would have to be repeated every few years.
  - UVB-76 10y ago
    Add new bands for higher value properties. Reduce payments for everyone in the existing bands, and hike the payments dramatically for the new, higher value bands. As with income tax, have the most wealthy paying the majority of the tax. This is a slightly less crude version of the 'Mansion Tax' Labour and Lib Dems have previously proposed. If you own a £5m property which is appreciating even at an extremely conservative 2% pa (£100k), you should be paying a lot more than £2k pa in tax.
  - notahacker 10y ago
    You can impose a pretty large increase in capital gains tax on transfers of physical property ownership (with exemptions for investments made in actually developing the property and rebates for property windfalls subsequently reinvested in other UK property). Personally I'd like to see CGT at confiscatory levels for individuals and entities that aren't tax resident in the UK, which is rather a lot of London freeholders at the moment... Regardless, I can't see revaluation with higher bands not being net profitable even in the short term, or any reasons why revaluation shouldn't take place after quarter of a century.
    - UVB-76 10y ago
      Taxing capital gains on properties is fraught with difficulty, particularly when properties are owned by offshore entities, and even the Land Registry do not know the identity of beneficial owners. Taxes on property transfers (capital gains, stamp duty, etc.) also create hysteresis in the market, which should be discouraged. It's much easier to implement a council tax style system, with non-payment a criminal offence, and the ultimate (if extreme) threat of property confiscation quite practical to go through with.
      - notahacker 10y ago
        Agree with your points, but if capital gains taxes were phased in and ratcheted upwards, and the tax is deductible if people are using their gains to purchase a similar value UK property, I don't see hysterisis being a major problem. I'd actually be more worried about avoiding inducing a selling frenzy and crashing prices in the short term. Offshore registered properties without named beneficial owners are only a problem if you allow UK freeholds to be held by shady foreign entities and don't have an especially punitive tax regime just for them. Council tax style systems suffer from property owners (particularly private householders) often not having disposable cashflow remotely comparable to the value of a house they might have acquired many years ago, especially pensioners and especially in London. (whilst I'm sure in practice, private sector equity share schemes wouldn't be too unhappy to lend the house-rich the cash, I can't see council taxes as aggressive as hypothtetical capital gains taxes being politically possible)
  - pjc50 10y ago
    Scrap council tax, business rates AND SDLT, and move to a single percentage-based property tax. Probably about 1.5% would be right; apparently that's the average rate paid in New York. Valuation strikes me as not so hard when Zoopla and Rightmove can do it. "Last sale value + average annual percentage increase in the area" is a reasonable approximation. It would be a bit of a nightmare building in the right exemptions to not destroy the elderly and small businesses, but I don't think it's inherently impossible. It would however attract screaming from the genuinely rich. Remember the mansion tax going nowhere when people argued that £1m houses (ie 37 times median income) were ordinary?
    - nugget 10y ago
      1.5% with a 50% reduction and 2%/year growth cap for a single primary residence, transferable if you want to move housing, but not inheritable. This stuff is not difficult from a policy perspective.
      - lmm 10y ago
        So now when a parent dies young in addition to the grief and financial difficulty you're slamming on a big tax increase?
        nugget 10y ago
        If you want to provide for orphans it's probably more efficient and less distorting to do it somewhere other than the property tax code.
        lmm 10y ago
        Tying tax rates to specific individuals is always going to be massively distorting. If you want to... I'm not even sure what your "transferable but not inheritable" was supposed to accomplish, but whatever it is it's probably more efficient and less distorting to do it somewhere other than the property tax code.