CBI: increase tax on property and savings

[RETIRED2017]

I Would say have to do it,

In the longer term property taxes reduce house prices. They also encourage empty-nesters to move out of family homes which can then be occupied by families. The social infrastructure, particularly schools, doesn't have to be duplicated around the country as often etc.

They enjoy State pensions and perks which their children and their grandchildren won't even dream of. When their private pension funds would have been wiped out after the financial crisis their children and grandchildren bailed them out. When their savings were threatened their children and grandchildren guaranteed them. If they bought their house during a period of high taxed and high interest rates then they also bought during a period of very low prices and high inflation. Their children and grandchildren could have their own big garden to play in every day if more older people downsized.

Nobody can screw you over unless you let then
Purple no one can screw you over as good as yourself just watch where your kind of thinking will get you,

 

[Purple]

If they were PAYE the seen around 19 % of there payroll taken through PRSI from the time the started work up until around 2010
When I see the likes of this I ask myself who are the real loony left,

Please stop posting that nonsense. Their employer paid high social insurance and they paid not so high social insurance until the PRSI ceiling was removed (I think that was in 2002).

It was your age group who were out marching against water charges, You are going to have to get used of paying high taxes like the people now retired did ,

Every age group was out matching against water charges. The only thing they had in common was that they wanted someone else to pay for their water. I'm 100% in favour of water charges.

 

[Purple]

Nobody can screw you over unless you let then
Purple no one can screw you over as good as yourself just watch where your kind of thinking will get you,

I've no idea what that means.

 

[Purple]

We should be going after the State, the State’s bedfellows, and the Church in terms of housing before we go after “empty-nesters” who’ve paid their way.

While I agree that there are many things we should look at why do you think empty-nesters have paid their way? There are as many retired scroungers as working age scroungers. They are also part of the generation for whom the black economy was much larger than it is now. They are also the tax cheating generation, the brown paper bag generation, the nod and wink generation. Thankfully younger generations have more honest, more socially aware, more educated and more competent. Now that they are retired the country won't have to endure their self serving corruption and dishonesty; truly the worst generation we have ever produced.

 

[T McGibney]

Thankfully younger generations have more honest, more socially aware, more educated and more competent.

The country is still mired in nepotism, jobbery and other official buffoonery though. Exhibit 1: the State-engineered housing shortage.

So don't clap ourselves on the back just yet.

 

[PMU]

In the longer term property taxes reduce house prices.

No, in the real world when you put a tax on something its price increases.

They also encourage empty-nesters to move out of family homes which can then be occupied by families.

There is nothing to stop families buying such properties now, they just haven't offered a high enough price to entice the owner to leave. In any event, in a free society, the government has no business deciding that certain categories of citizens are more deserving of outcomes than others. If you want an outcome, e.g. a certain type of house or a certain make of car or go on foreign holidays, you pay for it or go without.

The social infrastructure, particularly schools, doesn't have to be duplicated around the country as often etc.

This is just soviet style planning. In today's world, you live where you like, i.e. can afford to, and then travel to work; to school; to shopping, entertainment, etc. of your choice.

When their private pension funds would have been wiped out after the financial crisis their children and grandchildren bailed them out.

Actually, this never happened. The government introduced a 0.6% levy that was applied to the full value of funds in private pensions schemes that netted, i.e. confiscated, over 2 billion for the exchequer. There was and still is a pension levy on public sector pensions. So pensions, both private and public, bailed the state out, not the other way round.

If they bought their house during a period of high taxed and high interest rates then they also bought during a period of very low prices and high inflation.

In the real world, 'Low prices' and 'high inflation' are mutually excusive. High inflation is after all a secular increase in price levels. Houses are by and large priced to represent a multiple of implied rental earnings or a ratio of price to average income. Houses were no more 'cheaper' in the past in relative terms and were priced in terms of lower wages, higher unemployment, and higher interest rates. Remember, you don't actually buy a house. You buy a mortgage and swap it for a house. Interest rates in the past were up to 17%. Today's mortgage rate of 2.95% is as close to free money as you can get, even in a low inflation environment.

Their children and grandchildren could have their own big garden to play in every day if more older people downsized.

This is just jealousy. You are basically saying that someone else's children should enjoy a garden but not the grandchildren of the people who own it. You can't rationally decide between the marginal happiness one set of children get from playing in a garden and another set.

 

[Gordon Gekko]

For the avoidance of doubt, I am not talking about coming down like a ton of bricks on a man in his 90s; however, if we have a chronic housing shortage and someone like the late Mr Cosgrave is sitting on 16 acres of zoned residential land in suburbia for decades, then the levers of the State (e.g. CGT, CAT) should be used to motivate him to sell. Such a course of action should be prioritised over (say) going after empty-nesters.

 

[Sarenco]

A signal is being sent though and a "narrative" is developing (ref Gordon Gekko) to give cover to a government who wants to do it.

Really?

The Governor of the Central Bank gave a speech at a summer school where he suggested that counter-cyclical fiscal changes could be a useful policy tool at a national level in circumstances where monetary changes are outside our control (due to membership of a currency union).

Does that really sound like part of a grand conspiracy to give the Government cover to increase (or reduce) any particular taxes?

The Government has already pushed the next LPT valuation date out to 31 December 2019 so that doesn't suggest to me that there is any real appetite within the Government to increase property taxes any time soon.

Personally, I think LPT should be scrapped and replaced with a proper site-value tax and/or a council tax but that's a discussion for another day.

 

[RETIRED2017]

I've no idea what that means.

That is the problem looks like the Government have hit on a soft touch can only mean higher taxes for the likes of you,

 

[Gordon Gekko]

Hi Sarenco,

I agree, on condition that it’s not the usual anti-urban stitch-up.

It’s not relevant that my garden might be worth 10 times as much as one in Ballygobackwards, especially if it costs the State far more to deliver services to the latter.

Regards,

G

 

[T McGibney]

For the avoidance of doubt, I am not talking about coming down like a ton of bricks on a man in his 90s; however, if we have a chronic housing shortage and someone like the late Mr Cosgrave is sitting on 16 acres of zoned residential land in suburbia for decades, then the levers of the State (e.g. CGT, CAT) should be used to motivate him to sell. Such a course of action should be prioritised over (say) going after empty-nesters.

Excellent point.

This was done 21 years ago when the CAT & CGT rate was cut in half overnight on a time-limited basis and people like Mr Cosgrave were suddenly incentivised to sell or gift their properties. It was a stroke of genius that delivered huge spikes in asset availability and in government revenue. It needs repeating today but we have nobody in politics with the bravery to even propose it, in an age when self-defeating tax rates are seen as virtuous.

 

[Sarenco]

It’s not relevant that my garden might be worth 10 times as much as one in Ballygobackwards

Well, the value of a property is pretty relevant to any properly constructed site-value tax.

 

[Purple]

No, in the real world when you put a tax on something its price increases.

No it doesn't. The tax in this case is a recurring cost of ownership, thus making the asset less valuable.

There is nothing to stop families buying such properties now, they just haven't offered a high enough price to entice the owner to leave. In any event, in a free society, the government has no business deciding that certain categories of citizens are more deserving of outcomes than others. If you want an outcome, e.g. a certain type of house or a certain make of car or go on foreign holidays, you pay for it or go without.

So you are against welfare, children's allowance, non-contributory pensions, lower taxes for pensioners etc? What about DEIS schools, subsidised creches and grants for 3rd level students from low incomes families?

This is just soviet style planning. In today's world, you live where you like, i.e. can afford to, and then travel to work; to school; to shopping, entertainment, etc. of your choice.

Yes, if you can afford it after capital costs and taxes and recurring taxes. If you think that Soviet you should tell the people in Texas who do exactly that.

Actually, this never happened. The government introduced a 0.6% levy that was applied to the full value of funds in private pensions schemes that netted, i.e. confiscated, over 2 billion for the exchequer. There was and still is a pension levy on public sector pensions. So pensions, both private and public, bailed the state out, not the other way round.

Really, so the banking collapse only cost €2 billion? Sure that's grand so.

In the real world, 'Low prices' and 'high inflation' are mutually excusive. High inflation is after all a secular increase in price levels. Houses are by and large priced to represent a multiple of implied rental earnings or a ratio of price to average income. Houses were no more 'cheaper' in the past in relative terms and were priced in terms of lower wages, higher unemployment, and higher interest rates. Remember, you don't actually buy a house. You buy a mortgage and swap it for a house. Interest rates in the past were up to 17%. Today's mortgage rate of 2.95% is as close to free money as you can get, even in a low inflation environment.

Is that why property prices go up when interest rates go down? High interest rates means the cost of money is high which means the amount people can borrow is lower. That results in lower property prices. The real cost of a house for most buyers is what they will be able to pay per month on their mortgage. If they can pay €800 and that services a €200,000 mortgage then they can spend that (plus a deposit) on a house. If there is a €100 per month property tax then they can only pay €700 a month on a mortgage so they can only borrow €175,000. Apply that to every mortgage in the country and prices drop accordingly.

This is just jealousy. You are basically saying that someone else's children should enjoy a garden but not the grandchildren of the people who own it. You can't rationally decide between the marginal happiness one set of children get from playing in a garden and another set.

I'm not jealous; I have a nice garden thanks. The example above is of children playing in their grandparents garden, on the occasions they visit them. Wouldn't it be better if they lived in the house and could play in that garden every day?

 

[Purple]

That is the problem looks like the Government have hit on a soft touch can only mean higher taxes for the likes of you,

I'm interested in what's good for the country and what's fair. If that means more taxes for me then so be it.

 

[RETIRED2017]

Unless you are part of a lobby group you are going to get screwed over ,Lobby groups love people like you who turn on there own so there is more to be squandered on lobby groups,

I'm interested in what's good for the country and what's fair. If that means more taxes for me then so be it.

 

[Purple]

I'm not in a Union or IBEC and I'm not a farmers or any other lobby group.
That doesn't mean that we should all be motivated by narrow self interest.

 

[RETIRED2017]

I'm not in a Union or IBEC and I'm not a farmers or any other lobby group.
That doesn't mean that we should all be motivated by narrow self interest.

Purple there is a very old saying the squeaky wheel gets all the grease But the quacking duck gets shot,

 

[Gordon Gekko]

Well, the value of a property is pretty relevant to any properly constructed site-value tax.

I don’t think it’s fair to base a tax on the value of a non-income producing garden around one’s home. Again, it penalises urban dwellers.

 

[Sarenco]

I don’t think it’s fair to base a tax on the value of a non-income producing garden around one’s home. Again, it penalises urban dwellers.

Well, one of the reasons that urban land is more valuable than rural land is because it benefits from more immediate access to various services (roads, schools, concert halls, sports stadia, etc.). Many of these facilities are partly or wholly funded by the taxpayer so, all things being equal, it doesn't seem unreasonable that the owner of property in an urban area would make a higher contribution to the exchequer to reflect these additional (taxpayer funded) benefits.

But that's not really the key point of a site-value tax.

Hopefully you will agree that most taxes act as disincentives to productive activities. Income tax disincentives workers from being more productive, stamp duty and CGT are disincentives to investment, etc.

The problem with property taxes such as LPT is that they act as a disincentive to improving a property (e.g. making dwellings built on the property more energy efficient, etc.) if that will result in an increase it the value of a property.

A site-value tax, on the other hand, is simply a levy on the unimproved value of the relevant land – ignoring any buildings, etc., on that land. As such, it incentivizes productive outcomes while being simultaneously efficient and progressive. What's not to like!

Ronan Lyons has written pretty extensively on the idea if you're interested -
http://smarttaxes.org/wp-content/up...-Ireland-Identify-Consulting-final-report.pdf

 

[Gordon Gekko]

I’m not convinced. If the tax is to offset the cost of delivering those services, they’re cheaper to land into my site than the one in BallygoBackwards; ergo, I should not have to pay more. Arguably, I should have to pay less, but I’d settle for paying the same.

Thanks for the Ronan Lyons stuff.