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Homeowners must be taxed on equity in homes to address crisis, MPs told

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    Homeowners must be taxed on equity in homes to address crisis, MPs told

    Taken from Mortgage Solutions:

    Stamp Duty should be scrapped and replaced with a tax on equity in people’s homes, MPs have been told.
    The government should introduce a ‘primary property gains tax,’ in order to address the housing crisis and close the gap on wealth inequality, Michael Johnson, research fellow at the Centre for Policy Studies, today told the Treasury Select Committee.

    The committee of MPs, chaired by Nicky Morgan, is investigating household finances and which policies could support people in saving and sustainable debt and credit.

    Mr Johnson told the committee: “We’re going to have to grasp the nettle, and ask ourselves the question about redistribution.

    “There are only two areas to go to – one is pensions and the other is equity in homes.”

    Replace Stamp Duty

    Mr Johnson said: “We ought to scrap Stamp Duty, it’s a barrier to entry, and we are going to have to introduce a primary property gains tax.”

    Mr Johnson said he had bought four-bedroom house in North London 20 years ago, which generated £3m of equity.

    He added: “I believe I should be taxed on [the equity] when I sell it.”

    Mr Johnson also predicted that as first-time buyers take longer to get into ownership and the decline in final salary pensions, more people will rely on the home for income in retirement in the future.

    He said: “Equity release is going to have to play a much bigger role in the provision of retirement and income than it has historically.”

    The ideas raise similar thoughts to those proposed by the London School of Economics (LSE), which suggested Stamp Duty needed to be overhauled along with Council Tax.

    #2
    Completely agree with this.

    Comment


      #3
      What if your house devalues? Would you get a tax return?

      Comment


        #4
        Western societies need to start taxing assets more, and productivity (labour and profits) less. There would need to be a sensible way of allowing retired people to roll up taxes into a charge on the property to be realised at death or sale.

        Comment


          #5
          Originally posted by northernladyuk View Post
          Western societies need to start taxing assets more, and productivity (labour and profits) less. There would need to be a sensible way of allowing retired people to roll up taxes into a charge on the property to be realised at death or sale.
          Exactly. It’s perfectly doable. This is nothing particularly ground-breaking. Assets, particularly property assets, need to be taxed more relative to earned income, but not through transaction taxes, which distort the market.

          Comment


            #6
            Originally posted by jamesbrown View Post
            Exactly. It’s perfectly doable. This is nothing particularly ground-breaking. Assets, particularly property assets, need to be taxed more relative to earned income, but not through transaction taxes, which distort the market.
            Who is going to tell the Daily Mail?

            It would also be good to see a higher rate on empty properties in areas such as London.

            Comment


              #7
              Originally posted by northernladyuk View Post
              Who is going to tell the Daily Mail?

              It would also be good to see a higher rate on empty properties in areas such as London.
              Agreed. The council tax system isn’t fit for purpose in this regard.

              If it pisses on the DMs fire, that’s a bonus.

              Comment


                #8
                It's a stupid idea because it'll still cause the property market to gum up. Imagine you're a growing family and need a bigger house - you'll be lumbered with a CGT bill that would prohibit you from moving up the ladder. So smaller homes won't be freed up for first time buyers.

                Older people will suffer. Through no fault of their own their homes have gone up a lot in value and will be taxed when they sell to downgrade. Why should their nest-egg be subject to CGT when at some point IHT will be taken?

                It's just desperate, stupid ideas from a desperate, stupid government.

                It would be more effective if they reduced SLDT across the board so as to increase property transactions, leading to greater tax revenue.

                Comment


                  #9
                  Originally posted by ChimpMaster View Post
                  It's a stupid idea because it'll still cause the property market to gum up. Imagine you're a growing family and need a bigger house - you'll be lumbered with a CGT bill that would prohibit you from moving up the ladder. So smaller homes won't be freed up for first time buyers.

                  Older people will suffer. Through no fault of their own their homes have gone up a lot in value and will be taxed when they sell to downgrade. Why should their nest-egg be subject to CGT when at some point IHT will be taken?

                  It's just desperate, stupid ideas from a desperate, stupid government.

                  It would be more effective if they reduced SLDT across the board so as to increase property transactions, leading to greater tax revenue.
                  CGT would be a tax on sale, which to be fair to you is what the article referenced suggests. JB (I think) and I are suggesting something different which is an annual tax on assets, offset by reductions in taxes on productivity. It would encourage a more efficient use of assets, particularly of property (or for the purists, of land).

                  Comment


                    #10
                    Originally posted by northernladyuk View Post
                    CGT would be a tax on sale, which to be fair to you is what the article referenced suggests. JB (I think) and I are suggesting something different which is an annual tax on assets, offset by reductions in taxes on productivity. It would encourage a more efficient use of assets, particularly of property (or for the purists, of land).
                    Yes, exactly. The implementation details matter a lot here - it should not be levied at the point of transaction - but it’s perfectly doable. Stamp duty has monumentally gummed up the market so, if that’s the true opposition, pretty much everyone can get onboard with a sensible implementation. Of course, that isn’t the true opposition.

                    Comment

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