Monday, September 21, 2009
Question for Vince: What About Ability to Pay?
Just because you live in a big house, that doesn't mean you can find an extra couple of grand to pay the taxman. Vince's new mansion tax is clearly a replacement for the 50p rate, yet it bears no relation on the ability to pay. At least with a 50p rate you had some income to pay the extra tax. What about a retired couple who have lived in a house all their lives and never dreamed it would become so valuable? Where are they supposed to come up with the readies from? Well, where? I'm waiting...
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57 comments:
Agreed - but its hardly a poll tax (not that there was anything unfair about the poll tax).
The point is its hardly going to raise huge sums. In reality the episode shows Vince to be a hopeless political performer. From what I saw on the news he quoted other measures as well but its this 'poll tax' thats caught the media eye.
At a time when they needed to be sure footed the LibDems look clod hoppers and totally amateurish.
I have a feeling they are going through a green donkey jacket moment. The Telegraphs picture of Clegg speaking to a bunch of inebriates was devastating.
I think you will find that Vince thought he was doing a George Osborne here, same million squid figures and same thing about having a high value house.
The difference is Vince will punnish the ordinary man and George will understand his cicumstances and both will act accordingly.
Go to the back of the class CABLE.
Couldn't agree more. Also what do they propose to do if someone has a property portfolio worth over a million but spread over a number of lower value homes?
Surely you have just argued either
(a) for a flat rate tax (I think that was called the "Poll Tax" and was very popular indeed);
or
(b) for completely excluding residential property from tax at all. The argument against that, as any borough treasurer might tell you, is -- like the famous gravy in Hancock's Half-hour -- it doesn't move around a bit. Nor is there too much pettifogging debate over what is residential, what is commercial, and what is a mixed-hereditament.
In either case, you have demolished any financial structures for local government and local accountability -- unless, of course, you want a local income tax. That's worth debating, but essentially is a somewhat-more progressive form is simply a progressive form of poll tax.
Over to you.
There's something quite ironic about the "Poor Widow" bogey being churned out almost exactly a century after Winston Churchill ridiculed the way it had been used to exhaustion.
I have done no such thing actually.
I agree the tax is the worst sort of envy politics but that reasoning is nonsense.
Yes, in theory an elderly couple could now have a very valuable home and low income but that's an extreme and rare circumstance; as with any argument that begins 'in theory' it's very weak.
I'm afraid in most of the country the sentence "just because you live in a £1m house doesn't mean you can find an extra couple of grand" meets with the ridicule it deserves.
If you live in such a house in such circumstances it's probably got extensive gardens, multiple bedrooms and bathrooms, garages and car parking space.
Ideal for a commune.
Ideal Lib Deb breeding ground.
Cable's reasoning isn't too far a leap from that which informs Labour's supposition that to possess a mortgage and a car confers membership of the Institute of Directors.
Isn't what the Lib Dems are proposing the end of independently owned country houses in the UK?
The Libdems have been toying with a 1% property tax for some time ( as are some Labour supporters in Scotland) so this property tax lite isn't surprising.
The issue is one which regularly gains support from political anoraks but usually flounders when the public get a site of it.
That's one of the reasons the SNP turned to Local Income tax ( oddly enough a policy the Tories oppose).
As one SNP policy person said " You can't assume wealth".
Go round any new estate and you'll see lots of large new houses with cars with 02 and 03 plates on them.
These people have built up there assets over years and have invested in them but they don't necessarily have high incomes.
The Scottish Tories want to stay with the Council tax but given that the highest band is anything over about £215k and the tax on that is only 3 times a house worth less than £30k, it's easy to see how high tax payers or earners like it.
At about £600 for a band A worth up to £27k then that is about 2% a year.
For a Band D house it's about £1,100k between £90k and £120k which is about 1%.
For a top band H it's about £2,300k which on a £230k house is 1%, but on a £460k house it's only half a percent.
So as the burden of the current system falls heaviest on those in low value houses on low incomes the SNP just can't support it.
It's not about envy or soaking the rich as just trying to avoid over taxing people on low incomes.
In the end they just turn up looking for rebates or credits so it just means sending out bills to people with little money and then bailing them out with benefits.
So a tax on income means that you can invest in your home for yourself and your family and not be penalised for it especially when you retire on a fixed income, but it avoids the Council tax problem of those in the lowest value homes carrying proportionally the highest burden.
Of course to agree with this you do need to accept the SNP view that the Council tax is a contribution to the common good and all the services your wider community needs and wants rather than a sort of service charge for the services you get from the Council.
That I suppose is a clear ideological divide between those who think you should pay for what you get and lean towards the poll tax idea of a single flat rate charge for all and those who see it as a collective contribution where you put in what you can afford and get out what you need.
From a Party political and electoral point of view I think that Clegg has just conceded every marginal in the South East to the Tories without doing enough to compensate by picking up extra Labour seats over and above what they hoped for.
Pretty close to politically inept.
Peter.
I couldn't agree more. I recall, when canvassing in a very affluent area in the South West, meeting a widow who could just about meet the Council Tax demands. She was very concerned. She and her husband had struggled to buy the property. When the mortgage was paid off he, sadly, died. She did not want to leave the house she shared with her husband.
There must be many people in the situation you have identified.
But Cable couldn't care less about them, they are of no concern to him!
I hope he loses his seat, he deserves to!
They could raise money against the value in the house in some kind of equity release scheme, repayable from their estate when they die.
They could sell up and move somewhere cheaper.
Thanks Liam Murray for a bit of common sense. Of course, if you own a million pound property you can afford to pay.
Hint: sell the property.
Iain, don't get sentimental about retired couples. Old people are very selfish. That's how they get to be old.
Actually, Liam Murray seems not to know what he's talking about.
It's highly likely that there are significant numbers of people on low incomes living in high 'value' homes as a result of house price inflation, and it would be iniquitous to evict them, all in the cause of a vindictive tax which wouldn't raise much money anyway.
But what am I saying? This is a Liberal Democrat policy. There will be several backtrackings coming along next week.
The Tories introduced the Council Tax with little reference to the ability to pay. Multimillionaires still pay disproportionately less than a suburban family. Those who cannot afford it get council tax relief. I assume it would work the same way for Cable's proposals. Gues what? It's not a perfect tax but I suspect even those elderly people who find their house is worth a pretty penny or two could raise money somehow to pay the taxman.
Give the Lib Dems enough Cable and they will hang themselves.
@liam murray
Have you ever been to a city called London? have you ever looked at any of the 3 bedroom terraced houses? Do you know what the valuations officer currently values them at?
Grow up and join us in the real world. Stop being so intimidated by people who work harder than you
love from all at
Number 4 Mansion Tax Towers
London W4
Isn’t it really rather irrelevant what Vince says?
Lib-Dems are a sideshow with very limited appeal.
The answer is pretty easy - they'll have to sell their houses and move somewhere cheaper.
Who are we talking about here?
Let's say your house is worth £1.5m. The annual Vince tax is 0.5% of the amount over £1m. i.e £2500. £200 a month then. Can't afford that? The reason for that would most likely be that you are retired and that the household income is therefore quite low. Cry me a river - move to a bungalow and let a family live in that giant house you're sitting in by yourself.
By the way, to the deluded people who think that £1m is a modest house in the SE. It isn't - it's a big house in a very nice area. The only place where it is a 'terrace' is in certain bits of central London. And when we say 'terrace' we don't mean a grimy back-to-back do we? We mean a very nice Georgian terrace. So, get real, and wake up to how the majority of people live in this country. Houses worth more than a million quid are very rare - maybe not in the circles that you all move in, but that's not Vince's problem. Contrary to what you might think, I'm pretty sure that this policy will go down quite well in a lot of marginals where houses worth £1m are pretty thin on the ground (and getting thinner), and people have a visceral loathing of some of the spivs who live in them.
A previous poster pointed to the portfolio problem - what about all those BTL landlords with five properties worth a million quid between them? Well, that's a flaw in Vince's plan, but could easily solved by imposing a tax on all houses - to replace council tax, at a percentage of value to be determined. This would be on the owners, not tenants. Much fairer than council tax, which lets the rich off much too easily, as Vince pointed out.
No doubt some will see this as socialist envy. Wrong. A tax on land values is not only economically efficient, it also incentivises those things often trumpeted by the posters here, like hard work (assuming that taxes on income are cut as result), and disincentivises the type of moronic rentier behaviour that has become all too common in this country in recent years.
Are you a 'property developer' - one of those people fooled by all the property porn on TV into imagining that your own skill was what allowed you to make huge sums from the desperate? Well, I hope you are now bust. If you're not, then you should have to pay a tax on your entirely unearned wealth, so that those of us who actually do work for a living can get a cut in our income tax.
You, Dale, should think about what it means to be a Tory - it doesn't, in my humble opinion, mean knee-jerk reactions to things which you don't even understand.
If it was true LVT I guess it could be set as a charge against the property to be paid on sale plus interest. Or you could set up an equity release scheme to pay it each year. If it was true LVT you could - if you wanted to - levy it a level that enabled the scrapping of CGT, IHT and rates. You might be quite happy with that.
I think we must be coming to the end of the era where a Government can increase taxes and also maintain the idea that the current taxation system is 'fair'.
The system is too complicated, and stunts like charging for 'mansions' just won't raise much money. We would also have to have the planned but secret re-valuation done to identify the 'taxable value of each house.
Proposals like flat taxes, or Land Value Taxes, are just ways of re-labelling the slices of the pie that local and national Government spirit away.
If we don't simplify the system soon we'll end up with even more daft taxes. A beard tax? A todger tax? Window taxes? Lawn Taxes?
If we had (as an example only) just a few taxes like Earnings Tax, Local Tax and Sales Tax we might be horrified by the numbers - but some prices would fall and at least we could understand and compare different tax regimes with impact on our lives. Perhaps we could take the opportunity to reduce the license fees and penalties which form yet another raft of stealth taxes?
Nice try St Vince, but I think you have shown yourself to be part of the problem, not part of the solution.
Cllr Peter Cairns. You plonker. A house is not an asset. It's a liability. An asset puts cash (that's C.A.S.H) in your pocket every day. Houses cost you money every day. Assets are things like shares and bonds that pay dividends and coupon. This is exactly why the SNP and lefties in general are just NBG.
Go away and have a lie down. But whatever you do not doing any councilloring. You'll just impoverish your ratepayers.
And taxes on income are taxes on jobs. They kill employment.
Good grief. You can see the wreckage of these policies all around you. Just go away. Now.
Well the lid is well and truly off the cess bucket of envy now.
Most of burden for this tax would fall in the south east.
Have the Lib Dems given up hope of gaining seats here?
This looks more like a Labour tax, maybe the Lib Dems think they can win Labour votes.
However Cable must have a death wish, this will not help him keep his Twickenham marginal.
Oh, I wish I hadn't retired as a property lawyer! They and the accountants the only ones I can see making money out of this half-baked plan. The odd lease created out of the freehold and, Bob's-your-uncle, you've devalued the property quite nicely.
Edward Sutherland.
If nothing else VC has at least shown the electorate some options, which is better than the other parties have managed. It means the other parties will be pressurised to spend some of their conferences telling us their concrete plans for closing the abyss in public finances.
Labour can't go on 'hoping something will turn up' and the Conservatives can't hide behind the 'we haven't seen the books' excuses forever - they called Labour out on this in the 1990s.
Doesn't anyone else ever notice that not one of the speakers can bring themselves to say the word "England," when they are most definitely speaking about England !!??
I would bet the others will be just the same. If they forced themselves to say it just once, they'd have to run to the loo and shove their fingers down their throats, so disgusting do they find the nation and her people.
I would gladly shove my fist down their throats and help them out. For free.
Lola,
I bought my house nearly 20 years ago for £40K it is now worth six times that and is twice the size. I have been able to boorow against it and the equity in it allows me easier and cheaper access to credit.
Oh and among the widely accepted definitions of an asset are;
An 'asset' in economic theory is a output good which can only be partially consumed (like a Zune portable music player) or input as a factor of production (like a cement mixer) which can only be partially used up in production. ...
In business and accounting, assets are everything of value that is owned by a person or company. Any property or object of value that one possesses, usually considered as applicable to the payment of one's debts is considered an asset. ...
Something or someone of any value; any portion of one's property or effects so considered; Any component, model, process or framework of value ...
assets - anything of material value or usefulness that is owned by a person or company...
Assets are cash, accounts receivable, inventory, real estate, and securities - anything of value that a corporation owns...
Any item of value that an individual or a corporation owns....
Anything of monetary value that is owned by a person. Assets include real property, personal property and enforceable claims against others (including bank accounts, stocks, mutual funds, etc.).....
If you give me a bit more time I'll look up plonker for you so you can be sure to tell people the meaning when they ask why it's on your tee shirt.
Peter.
The way that BBC Wales has been reporting this today is that the value of the house will be based on the land value registration of the property - i.e how much it was worth when it was last purchased?
So if Great Aunt Bessie bought her house for £100 in 1924, but it is now worth £2 million she won't have to pay a penny in extra tax. If she sells the house for its market value then the new owner becomes liable for the tax, and if s/he can afford to buy a new house for £2 million s/he can afford the piddling amount of extra tax asked.
Betsan Powys reckons that the current Land Registry for Wales show than only 40 Welsh houses would be affected today, but that Wales would get 5% of the however many billions the tax raised.
Whatever the rights or wrongs of the tax, it might appeal to those in Welsh Lib Dem marginal's and hopefuls even if it does peeve a lot of never-would-vote-Lib-Dem anyway voters in Kensington and Chelsea.
Perhaps people will now see that Vince is not some kindly, sensible uncle bloke but a rather dim remnant of the "Social Democrat revolution", whose idea of "policy" is to ape every daft idea of the Euro-Dutch state.
But probably not.
Word recognition: godless.
In Alwyn Ap Huws version, the tax becomes completely random.
But look on the bright side, this policy of envy will play well with heartland Labour supporters.
It should become a flagship LibDem policy, perfectly representing the soul of the movement, confused and impractical as it is.
It is a revenue tax on a capital asset. It makes as much sense as paying tax on your savings. Not just tax on the interest, which we currently have, but tax on the actual savings themselves.
Actually, that tax would be marginally more sensible - that is to say it would be incredibly stupid - because it would ensure that the person would have the money to pay it.
The final nail in the coffin is that money used to buy houses has already been taxed. Even if you bought it many years ago and got some form of tax relief on the mortgage interest, the capital element of the loan had to be paid out of taxed income.
Other commenters have pointed out the sheer impracticality of administering the tax.
All in all, quite the little LibDem policy.
Some of the comments are from people who are either masters of irony or real LibDems. Perhaps you have to be a master of irony to be a LibDem in the first place.
Anyhow, I am reminded of the episode of the Guardian travel writer's son. He was going to write a weekly column in the Guardian based on his gap year.
The fury with which this was greeted by the average Guardian reader was amazing, resulting in such vile, viscous comments that the whole section of the website had to be censored (very liberal) and the idea shelved. The comments were founded in jealousy and envy and the effect on the poor boy must have ruined his faith in human nature.
Some of the comments here are in the same vein. Their envy and sheer heartlessness is breathtaking.
A government tax policy is fine, even though it may require you to be evicted from your house.
It's ok even if it requires you to borrow money to repay it.
It's ok even if you have to use an equity release scheme to pay it. (The person suggesting that really should find out what an equity release scheme is).
So LibDem government policy would be to rail against bankers and insurance companies and at the same time provide them with more - extremely profitable - business, at the same time as putting people out of their homes.
Best of all, this policy is acceptable down the pub. I think you'll find so is hanging. Best bring back both then.
Ugh, what a lot of envy and disdain for older people on this link - sickening.
Well said, Iain. I'm tired of this knee-jerk reaction to people living in £1 million houses. My mother's house was worth nearly this figure before the property price crash.
Although on paper she might seem wealthy, the reality is difference - especially since low interest rates hit her income from savings. She shops for cut price deals in supermarkets, frets about heating bills and the only holiday she has is a few days with us each year in the summer.
You might say: "Why doesn't she move somewhere smaller?" but it is her house and she loves it. Twice she's considered putting it up for sale but became depressed at the thought of moving.
BTW she didn't inherit it. Both my parents left school at 14 and worked for every penny they had.
Iain, you seem to be getting a bit hot under the collar on this. It will only hit a few people and even if it's clumsy, that's what happens after a big economic blow-up.
Above all, no Lib Dem policy will ever be implemented, so I'd not give Cable the attention he wants!
I have never understood this argument that wealthy people should pay higher rates of taxation on everything. Income tax, yes. But other taxes? How about 50% VAT on cars valued at over £50k. 75% sales tax on flights costing over £1k. 99% hotel tax on rooms costing over £300 per night.
Unless they are a tax avoider (and I accept that many, if not most, of the rich fit that description - different issue altogether) then rich people are already paying over half their income to the government. Their contribution in cash terms is hundreds, if not thousands of times larger than many other people's.
There is a suggestion that Vince's splendid new policy will be means tested.
So, Mr Abramovitch, if you could just fill in this 73 page form for us? Don't forget to tell us all your sources of income, and do make sure you sign the form...
Mathematically and economically innumerate, and politically inept. St Vince has really slipped off his pedestal and landed in the dog poo on this one.
Good article on this by Ray Boulger in the DT - as senior technical manager for John Charcol the mortgage brokers, he knows what he's on about, unlike poor old Vince.
Given that Lib Dem 'policy' is only ever a positioning statement (there being not a snowball's that it'll be implemented) surely this is little more than an attempt to put space between them and the Tories, and reinvent the LDs as the new left?
Property is an under-taxed asset. ....
Perhaps if it were taxed correctly, then there would not had been this absurd property boom...
You have a point Russell - what's really depressing is that the bigtime tax avoiders (and sometimes evaders!) are pretty much still left to get away with it. Believe it or not, Murdoch and News International pay absolutely no tax in the UK. Not one penny. This is despite them making huge profits here.
Against that background, the policy of all parties should be (a) to fundamentally address the inherant bias in the tax system to favour the non-paying rich and (b) to remove the tax havens. This would liberate huge sums to pay for government expenditures and significantly lower the tax burden on the working majority.
The latest Lib Dem Policy Papers (unless they produce another at this conference) advocates a land tax for most, not just £1million properties. Although most Lib Dem Councillors and MPs will deny this, Julia Goldsworthy confirmed this fact. Both papers are available on our website www.isitfair.co.uk and should be read together. Quite illuminating. So all three of the main parties intend to stick with a property tax. Very little consolation to any of us. Let me run this past you:- If we are to be saddled with the present system of council tax (some reform is urgent), the councils are losing millions of pounds each year through the failure of the VOA to tweak the law. Because there has been no revaluation of properties for yonks, many properties have increased in value because of the increase in size. As the law stands at present, a property will only be moved up a band (or bands) on sale or a revaluation. This is why the people of Wales were so badly hit when revaluation was done there. Some properties moved up as much as 6, 7 even 8 bands because they had been extended extensively over the years.
When you built an extension on your home, the VOA 'marks your card'. If the revaluation was carried out at this stage, millions of pounds would become available to the councils.
Or - Let the Government pay for everything it forces on to councils and the local councils collect for purely local projects. Latest figures tell us that your council tax would fall to about 19% of the present charge - of course income tax would have to rise to cover central Governments demands.
Why not just change the council tax to one that is calculated on the basis of the value of the property taxed and then call it "The Rates"?
Britain needs to change the balance of taxation away from income towards property to make the market for the latter less volatile. It is a shame that the Conservatives' changes to inheritance tax will have the opposite effect and will further reinforce the family home as a tax shelter whilst the burden of tax falls on more productive areas. I have never voted for the Liberals but Mr Cable's idea is not a bad one.
As ti the question of what to do about the owners of portfolios of properties surely the basis on which they are taxed would depend on whether they are for his or her sole use and enjoyment or are rented out? If the former then they would need to be aggregated with the value of the main residence.
But can someone explain to me why some here consider it beyond the pale to charge a retired couple living in a £1.5 million house £2,000 house-tax a year when it is acceptable to charge a low paid worker £2,000 in income tax?
Christine, I don't think the idea that Councils are losing revenue as a result of a failure to revalue stacks up. Banding determines the relative charge, not the absolute charge. If every building in an area suddenly went up three bands, the council would almost certainly have to reduce the Council Tax charged on each band, to bring the total take close to what it was previously.
Your idea of increasing the central grant, increasing Income Tax and reducing Council Tax in the process, will certainly appeal to some sections of society, but it would be economically damaging. I'd rather see a move in the opposite direction, with the central grant being scaled back, Income Tax being reduced and councils being forced to get more of their revenue from Council Tax.
Liam Murray is undoubtedly right that many people in this country will greet the statement that 'just because you live in a £1m house doesn't mean that you can afford an extra couple of grand' with ridicule. But ridicule which will in many cases be based on ignorance of the values of quite modest properties in some parts of the country, on prejudice, and ugly envy.
Pugh is right to comment on the vicious tone of some of this correspondence. The heartlessness and boorish rudeness shown by some is both breathtaking and disturbing.
Chris M
"But can someone explain to me why some here consider it beyond the pale to charge a retired couple living in a £1.5 million house £2,000 house-tax a year when it is acceptable to charge a low paid worker £2,000 in income tax?"
No, I cannot. Because neither of them should be paying tax (house tax or income tax). It is ludicrous that this government has given us a national minimum wage and then taxes people who work full time at this wage.
To all those people who say 'well if they can't afford the tax they should sell up and move'. What business is it of the government to bring in taxes in order to force people to move to cheaper housing? What if everyone owning a £1m+ house moves? They'll never be able to sell up because no-one will want to move into their Vince-taxed home. Where is the economic basis for the £1m? Will it move with inflation, house prices or nothing? This is a grotesquely unfair envy tax. It's a good thing the Lib Dems won't be in office any time soon.
Iain
You are proposing a tax avoidance scheme whereby you put all your wealth into a house and then plead you can not afford to pay tax so please let me off!
A useful reminder that despite his slick marketing, all Mr Cable really offers us is the politics of envy.
He obviously hopes to gain votes from those who would enjoy seeing supposedly 'rich' people hurt - whether or not they themselves actually get any noticeable benefit.
Asset rich, income poor.
Sell the place. Unsentimental and not very romantic, but what is the point of hanging on to it when 40% will go in IHT. Ah, saved by Mr Osborne - always at the beck and call of the wealthy?
Vince could, however, just have introduced a few extra council tax bands to the same effect - no headline grabbing effect though.
I thought it was Lib Dem policy to abolish council tax and replace it with a local income tax based on ability to pay. Does that mean they've abandoned that pledge? I hope they have, it would have really hit young people who are forced to remain living with their parents because of high house prices. They would have suddenly been hit by an extra tax.
Perhaps it would be fairer just to introduce a wealth tax.
As the above comment says (12:08) , Why pick on poor millionaire property owners?
Mark (M)
Surely it could be argued that a mild form of wealth tax, which is what is being suggested here, would actually make property slightly less attractive to own and would in effect bring the price down so as in some cases to bring it below the tax threshold. Therefore your fear that nobody would ever buy a £1 million house would not happen because if that were to be the case houses would then fall below that value and would not then be taxed.
I am the owner of a listed house and the additional costs arising simply because of the implications of listing are well in excess of what is being suggested by the Libdems. There is no evidence however that folk are not buying listed houses.
Lib Dem MPs not happy with policy making hoofers
Something a bit fishy in the state of Bournemouth, they say.
It's fairly obvious that Vince Cable just dreamed this one up on the fly - Nick Clegg's attempts to clarify on Radio 2 this lunchtime were hilariously unpractised and the whole thing quickly descended into farce. Or maybe Cable is trying to pressure his party into policies they like to dither over?
A shame, because a well-thought out wealth tax on something very difficult to wriggle out of like large houses would make a small but useful difference to the dismal state of public finances. Hopefully Clegg will pressure his team to get their act together and become a bit more professional.
Note that none of the main parties are calling for a severe review of the vast expenditure on consultants by government, alongside it's equally vast expenditure on civil servants - the precise purpose of the latter being hard to fathom given the apparent massive need for consultants.
I'm rather shocked, Iain, by all this disrespect being shown to your older and, dare I say, more wiser readers. For some on your pages clearly believe you should move home, re-mortgage your house, or even take out an equity release scheme - and all because the Government wants you to pay a silly little tax. Whatever next? Liberal Democrat students getting a job rather than expecting taxpayers to fund their tuition fees. Hee! Hee! Hee!
Littlejohn has an excellent summation of the idiot Cable here
http://www.dailymail.co.uk/debate/article-1215157/LITTLEJOHN-Saint-Vinny-simply-bob-politician-make.html
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