Should owners of houses worth over £1m be forced to pay extra taxes?
There is a gaping hole in the public finances that needs to be filled. Everyone admits there will be cuts but the liberal democrats believe that there should be more redistributive taxes too. The British take great pride in our houses which make up a substantial part of many individuals wealth. Should this not be considered as a resource to be taxed by the central government?
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The wealthiest people in society have benefitted from soaring house prices
Given that those who had money to invest prior to the credit crunch benefitted greatly from the property market whilst it was booming, it now seems only fair that they are taxed on such profits via extra taxes for houses worth over £1 million. This scheme, supported by Nick Clegg of the Liberal Democrats, would only affect those whose houses are still worth over £1million despite the property crash of recent times. Given the high level of remuneration these people received in times of boom, they should now be taxed in order to help those who have been less fortunate in the credit crunch.
This argument assumes that those who now own homes worth over £1 million bought their mansion some time ago. But the opposite could also be the case. It is foreseeable that many people bought houses worth over £1 million just before the credit crunch hit and therefore have paid more for their mansion than what it is now worth. To now tax these people on that house which they have already lost money on does not seem fair. If the government wants to tax profits, then they should think of a comprehensive scheme whereby the increase in the value of property is taxable. This would require a lot more effort on the government’s part which is why they opted for this simpler but morally deficient policy.
£17.1 billion a year could be reinvested into our economy.
With the government spending so much of their budget and money they do not have on bailing out failing banks and businesses, the extra funds created by the scheme would be welcome. We need such funds to reinvest into our economy at these times of crisis. Those who are able to maintain a house which is worth over £1million will be stable enough to take on the extra tax. This is a much better scheme than imposing higher taxes across the board where people are already falling below the breadline.
This is presuming that the Lib Dems have calculated the workings correctly, which seems a rather large assumption at this moment in time. The party has themselves admitted that they are still only in the talking phase and they still have no definite figures. They only estimated that 250,000 houses would be affected, yet they cannot give a precise number. They also conceded that although it would apply throughout the UK, Scottish Parliament would have to pass the legislation in order for it to apply in Scotland.
The plans are
The rich will reap benefits from the scheme in the long run
The government would be able to invest the tax into the economy. They will be able to improve the NHS, improve education and save more failing businesses. Given that those who own houses over £1million will often be in managerial positions, or business owners themselves, they will reap the benefits from where the government put these extra taxes. With a greatly improved NHS system, employees will take less sick days. With a greater education system, employees will be more valuable for businesses. This scheme is a win-win for all.
This argument assumes that those who own houses worth over £1million all own their own businesses; but this very premise is misled. £1 million today is not a mansion budget. These days a five bedroom house on the outskirts of London would be that cost. People who own these sort of homes will have well paid jobs, but they may not necessarily own a company or be in a managerial position. These people would not benefit from the extra money being spent on improving services which would benefit other employees. There is no win-win for people in this described situation.
Will be able to leave those who earn under £10,000 a year tax free.
Given the rising costs in Britain, those who earn the least in society are suffering. They have to stretch their previously meager budgets even further. If tax were taken from those who were not having to budget, like those who own homes worth over £1million, then the least well off will be able to receive some relief from the tax system. This is the fairest way to sort out our economy.
The tax will only be .5% of a houses value beyond the threshold of £1million
This is not a redistribution tax intended to even out the rich and poor divide completely. Some one could still own a house worth £999,999 and not pay a single penny additional tax. So when buying a house, the buyer will have to weigh whether the additional value to their house is worth paying the extra tax. It s a choice they will be able to make. Even if they do decide to pay the tax, it is set at such a minimal rate that they will barely notice it.
Thats not really the point. Apart from a few cases of inherited wealth and dodgy traders, if you've earnt that amout of money, you've probably worked pretty darn hard for it: It is wrong to penalise people for success and sends out the completely wrong message. They've already paid their taxes on the house through stamp duty, and will have to pay inheritance tax when they die, so why should they be taxed again?
Not only that, but the tax change suggested is immediate, so the difference of a few pounds of net-worth could mean masses lost.
We need a better Death Duties
If people want a fairer tax system and one which redistributes taxes then we recommend the folowing
All exemptions to death duties be abolished
All benefits over a lower £100,000 threshold be taxed at 10% not the current 40%
Death dutoies be paid from the person obtaining the benefit not based on the estate of the bereaved
Frok onies raised each young person be given a start up grant to fund education, housing start or business start up
Currently the most wealthy in society escape death duties
The wealthy already pay more tax
The wealthy in Britain already see 40% of their wages taxed on whatever they earn over the £40,000 threshold a year. This is double the tax rate of people who earn less than that threshold. This is how the wealthy pay more, they should not then be taxed even further. The redistribution has already occurred via this income tax, society should not alienate the rich even more so by incurring more and more of these socialist taxes.
This will make the most profitable individuals even more likely to move abroad.
The majority of those who have houses worth over £1million will have well paid jobs. Those who have well paid jobs will often have a great education, a great work ethic or a great sense of business acumen. These are qualities that a dying economy needs. By imposing further taxes on those who have worked their way through the world to great riches; we are chasing these people away. What Britain will be left with is a society of people who all earn under £40,000 and the majority of Britain’s greatest houses will be derelict. Surely this is not what we need. The government will need to rethink how they spend their own money before they start greedily looking at others wealth!
This argument is painfully misled. As Nick Clegg has argued; people have made money over the last decade via get rich quick systems which have accumulated and lead to our economic downturn. Those in positions where they make high level decisions have abused the system in order to benefit their own pocket. We can see this with bankers particularly. The risks taken made these people rich, but they have now left the economy in turmoil. Surely, by taxing houses worth over £1million, we are taxing those who benefitted from the risky business play that has occurred and the money will be reinvested into the people who lost out in this system.
Where will this redistribution end?
Nick Clegg’s idea of taxing, once a year, owners of houses which are worth over £1million, may sound plausible to some. But to use the redistribution argument to justify such a move is dangerous, where will such a socialist policy end? Vince Cable, the Lib Dem Treasury spokesman, has already advocated for a harsher end result; having the property taken off the owner upon their death so that no estate is left for the family [[James Kirkup, Telegraph.co.uk, 21st September 2009]]. This is an entirely different form of redistribution to the tax proposed by Nick Clegg, but such radical policies will be likely to follow if we allow the taxing of houses worth over £1million.
In any political party there will always be someone who wants to take a radial standpoint. But the reality is, this would never happen. We have radical views in Parliament in order to keep our democracy, to represent all views. However, as in society, such radical views are often used as a tool to guide, future ideas, not to use such radical ideologies as a template. Just because one person has advocated for a more radical implementation of the redistribution scheme, it does not mean that this is inevitable or even likely to occur.
Those who own houses over £1million do not necessarily have a high income
The reason we get taxed on the money that we earn, and not taxed on our personal belongings is because just because we own something expensive, it does not mean that we have a lot of disposable income to freely give away. People may own a large home due to inheriting it, or due to previously having a high income. There are many examples to site. The retired would be one. A couple may have worked all their lives, paid off their mortgage on a house worth over £1million and then retired at the ripe age of 65. Living on a pension, how can we expect people to pay an additional tax to people who live on the same income?
Vince Cable, the Lib Dem Treasury spokesman saw this problem and stated that these people should go o equity release schemes in order to create an income! But the whole point of not having a mortgage is not to worry, how can people not worry when they put their house into an equity scheme, especially when so few people trust such schemes after the credit crunch anyway. From the credit boom, should we not have learnt to spend only the money we have, and not invest in schemes which seem all to good to be true.
What do you think?