Sunday, November 05, 2006

'The Great Tax Clawback Scam'

Ricardo's Law - House Prices and The Great Tax Clawback Scam by Fred Harrison (Shepheard-Walwyn) is a compelling read. It will shock any fair minded person into seeing a hugely unjust aspect of our tax system.
To illustrate: People who rent their home, pay taxes on income and goods just as we all do and receive various benefits, through such things as free education for their children, free hospital treatment and so on. But the tax the renters have paid is gone.
However, people who own their home are a privileged elite. Say they earn £50k and the tax and national insurance payable is about £15k. Thus far they are the same as a renter.
But the Halifax Bank shows that over the 20 years from 1984, the average annual house price increase was 10%. So a £250k London house, which is affordable to someone on a £50k salary, gained £24k in value in 2005 alone. Thus their tax payment of £15k has been effectively refunded to them with an added bonus of £9k! Owners can either cash in on this rise and fund current expenses, or leave it to accumulate for later use, but both are tax-free gains.
'Our comfortably-off home owner receives the use of the transport system, schools and hospitals for nothing. He is the classic free rider. He rides on the back of the tax-paying tenant family that is not able to store up capital gains for a glorious spend-up in the future.'

Harrison does not blame homeowners for this incredible and perverse injustice that is inbuilt into our supposedly 'redistributive' tax system. He indicts the weakness of our politicians who have access to top advisers and, despite knowing that better solutions for tackling endemic poverty and unfairness have been around for 200 years, are too timid to enact fairer laws.
Why has the left-leaning UK government of the past 10 years, in an economic boom period, been unable to reduce the widening gap between rich and poor that they inherited? This very important book is detailed and comprehensive, but eminently readable.
It covers in some detail one aspect of The Free Lunch- Fairness with Freedom. link:

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