Monday, December 24, 2012

Where are council tax changes going to end?

In the UK the debt-burdened government is barrel-scraping to pay its way whilst neglecting a perfectly sound way to generate the growth that would help to balance the books.   Terrified of international ratings agencies, it has become fixated on austerity. Ordinary people seemed doomed to a long period of faltering or flat economic activity because any new credit being created - the seed of new growth - rather than flowing to productive business, is mostly feeding speculative bubbles. The authorities are blind to the power of government to create money to fund productive, non-inflationary growth which would enable a steady and safe climb out of the fiscal hole. See this link for a short YouTube explanation how.  

One of the current tax collection themes is council tax from second homes. Up to now those people with above-average wealth had not only the privilege of a second home in some nice part of the country but feather-bedding from the state to help them pay for it through a discount on the local council tax which covers local services. The reason given was low use, but it ignored the fact that those services had to be run anyway.  

So with full council tax payable soon (or even a surcharge) quid pro quo arrives for wealthy sheltered 2nd home owners. Fair contribution to the community for benefits received from the community - that is, the added value that derives from being located in a highly desirable locality.  But just to complicate the  ranking of 2nd homes in the fairness stakes, bear in mind that for every home bought by a 2nd home owner it means one is taken out of those for local people who have not been able to afford even one home. 

Another tax hike on high value homes is the rise of stamp duty on change of ownership, from 5% to 7%; and to 15% in some cases.  Yet another possible one is an annual tax on homes over £2m value. All these changes have prompted Rob Perrins of Berkeley Group (a top UK housebuilder)  to plead for a 'simple competitive tax on property', he doesn't like the 'endless tinkering' (FT 8 Dec 2012). When an eminent developer reporting such promising results and prospects as Berkeley has done recently, says such things you suspect that something is hurting. 

Both Deputy Prime Minister Nick Clegg and Business Secretary Vince Cable are known to support land value tax and a reasonable guess is that the coalition government is moving towards this, starting with the easy targets. Along with cuts in the central government council tax subsidy which will probably affect all council tax payers at all band levels, we should see some interesting debate ahead. 

Land value tax is a 'simple tax' which rates highly in terms of fairness as illustrated in the book The Free Lunch - Fairness with Freedom.   

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