Inside Housing – Commentary – In pursuit of new tax revenue, Hunt should look more into housing wealth

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A land value tax (LVT), for example, could replace business taxes and stamp duty (as recommended by the Mirlees Tax System Review in 2010) and contribute to a more productive use of the land and buildings therein, and thus to growth.

Capital gains realized by landowners could also be taxed more effectively. As John Müllbauer argue in the FinancialTimes this week, the government could reform the system of land value capture and landowner compensation to address the high land costs that are at the heart of many of our problems. This could stimulate housing construction, infrastructure and economic growth.

Meanwhile, fairer sharing is a campaign supported by all political parties to replace the housing tax, the stamp duty and the tourist tax by a proportional property tax (PPT).

Under his proposal, tenants would pay no tax and landlords would pay an annual TPP of 0.48% of their property value – but he calculates that 77% of landlords would save money.

This idea is designed to be revenue neutral, but it could be modified to generate additional revenue and increase the resources of cash-strapped local authorities while removing the tax incentives built into the existing system for people to buy the most expensive house. they can afford.

“Change is not impossible – just look at how mortgage tax relief was seen as politically untouchable in the 1980s but was eventually phased out by Tories and Labor in the 1990s and 2000”

The same arguments can be made in all advanced economies. In a report published this summer, the Organisation for Economic Co-operation and Development found that “the way council taxes are designed often reduces their effectiveness, fairness and revenue potential”.

He cited examples such as recurring property taxes based on obsolete property values ​​(such as council tax), transaction taxes that reduce mobility (such as stamp duty) and tax exemptions on capital gains (such as principal residence relief).

Property tax reform would be far from simple – but add it all up and the case looks compelling, with the potential to raise incomes, increase intergenerational equity and make our tax system work better. lodging.

The problem so far has been the overwhelming political arguments against even discussing taxes on the 65% of us who own our homes.

But change isn’t impossible – just look at how mortgage tax relief was seen as politically untouchable in the 1980s but was eventually scrapped by the Tories and Labor in the 1990s and 2000s.

Jeremy Hunt and Rishi Sunak probably won’t take the opportunity next week, but they should.

Jules Birch, columnist, Inside Housing

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