1) A property tax, if properly constituted, provides a stable income stream for the state. My preference is a system based on the site value.
2) For those with existing mortgages it is an extra cost but for those who take out mortgages after the property tax is introduced there is no net increase in outgoings. For example; if the average home buyer can afford €1000 a month mortgage repayments and €1000 a month buys a €300’000 mortgage then the average house will cost €300’000. If the state takes €100 a month in tax then the average house will cost whatever €900 a month will buy. There is no net cost to the individual (the same applies to stamp duty by the way).
3) If a person has an income of €20’000 a month and a home worth €2’000’000 then they are rich. The fact that their assets are all tied up in their family home is irrelevant.
4) It is socially desirable that retired couples move out of large family homes and into smaller homes so that younger people with families can move into them. This stops the greying of desirable suburbs and young families being forced into the outer suburbs due to high prices caused by limited market activity.
5) Where a country cannot control interest rates it loses one of the main tools it has to control inflation and prevent the economy overheating. A property tax is a poor substitute but it’s better than nothing. Imagine if we had a property tax which was used correctly over the last two decades; no housing bubble, no rampant wage inflation caused by the construction boom, a much reduced loss of competitiveness and flows of capital into wealth and export generating sectors of the economy rather than a speculative and damaging bubble.
2) For those with existing mortgages it is an extra cost but for those who take out mortgages after the property tax is introduced there is no net increase in outgoings. For example; if the average home buyer can afford €1000 a month mortgage repayments and €1000 a month buys a €300’000 mortgage then the average house will cost €300’000. If the state takes €100 a month in tax then the average house will cost whatever €900 a month will buy. There is no net cost to the individual (the same applies to stamp duty by the way).
3) If a person has an income of €20’000 a month and a home worth €2’000’000 then they are rich. The fact that their assets are all tied up in their family home is irrelevant.
4) It is socially desirable that retired couples move out of large family homes and into smaller homes so that younger people with families can move into them. This stops the greying of desirable suburbs and young families being forced into the outer suburbs due to high prices caused by limited market activity.
5) Where a country cannot control interest rates it loses one of the main tools it has to control inflation and prevent the economy overheating. A property tax is a poor substitute but it’s better than nothing. Imagine if we had a property tax which was used correctly over the last two decades; no housing bubble, no rampant wage inflation caused by the construction boom, a much reduced loss of competitiveness and flows of capital into wealth and export generating sectors of the economy rather than a speculative and damaging bubble.