3 ms·

Property taxes (aka council tax) in the uk are trivial compared to the states a >£10 mill house on Ambassadors row pays a tiny amount of tax.

chatmasta 8y ago
Yes, the closest thing the US has to council tax is property tax. However, the MAJOR difference is that in the US, the owner of the property pays the tax. In the UK, the resident of the property (i.e. the tenant) pays the tax. My problem with it is more philosophical than anything, as it seems like a regressive tax that only inhibits rate of home ownership (something UK politicians ostensibly want to increase).
- walshemj 8y ago
  And your point is? the US landlord just increases the rent to pay for their property tax.
  - chatmasta 8y ago
    But the tax is based on the value of the property, not the price of rent. So the incentives are misaligned with council tax because the government sets the price of the tax, on the value of the property the owner owns, but then the tenant pays the tax.
    - blibble 8y ago
      ... council tax is based on the value of the property (with a rather low cap) https://en.wikipedia.org/wiki/Council_Tax https://en.wikipedia.org/wiki/Council_Tax > Each property is assigned one of eight bands (A to H) based on property value, and the tax is set as a fixed amount for each band. Some property is exempt from the tax, some people are exempt from the tax, while some get a discount.
      - chatmasta 8y ago
        I know that. I was talking about council tax, not property tax. So we said the same thing. Sorry I didn’t make that clear. The problem is that the bands are updated every couple of decades and are not aligned with rental prices. Two properties renting in the same price range could be in different council tax bands. This pricing mechanism separates what should be a bidirectional market (tenant and owner) into a tridirectional market (tenant, owner and government). An extra entity means more transaction costs which result in friction. Friction in a market has bad downstream effects, so you don’t want to introduce friction into the real estate market. Either the tenant should pay a tax based on the rental price, and/or the owner should pay a tax based on the property value. I just don’t see why it makes sense to have the tenant pay a tax based on the property value, in which he has no stake.

chatmasta 8y ago

Yes, the closest thing the US has to council tax is property tax. However, the MAJOR difference is that in the US, the owner of the property pays the tax. In the UK, the resident of the property (i.e. the tenant) pays the tax. My problem with it is more philosophical than anything, as it seems like a regressive tax that only inhibits rate of home ownership (something UK politicians ostensibly want to increase).

walshemj 8y ago
And your point is? the US landlord just increases the rent to pay for their property tax.
- chatmasta 8y ago
  But the tax is based on the value of the property, not the price of rent. So the incentives are misaligned with council tax because the government sets the price of the tax, on the value of the property the owner owns, but then the tenant pays the tax.
  - blibble 8y ago
    ... council tax is based on the value of the property (with a rather low cap) https://en.wikipedia.org/wiki/Council_Tax https://en.wikipedia.org/wiki/Council_Tax > Each property is assigned one of eight bands (A to H) based on property value, and the tax is set as a fixed amount for each band. Some property is exempt from the tax, some people are exempt from the tax, while some get a discount.
    - chatmasta 8y ago
      I know that. I was talking about council tax, not property tax. So we said the same thing. Sorry I didn’t make that clear. The problem is that the bands are updated every couple of decades and are not aligned with rental prices. Two properties renting in the same price range could be in different council tax bands. This pricing mechanism separates what should be a bidirectional market (tenant and owner) into a tridirectional market (tenant, owner and government). An extra entity means more transaction costs which result in friction. Friction in a market has bad downstream effects, so you don’t want to introduce friction into the real estate market. Either the tenant should pay a tax based on the rental price, and/or the owner should pay a tax based on the property value. I just don’t see why it makes sense to have the tenant pay a tax based on the property value, in which he has no stake.