Make mortgage interest payments and childcare costs tax deductible while at the same time increasing property tax on PPR's

[Purple]

There is a serious flaw in the conversation about wealth, what it is and how we tax it.
Income is not wealth, in the context of housing it is what we use to acquire someone else's wealth (by paying off a mortgage) or to access someone else's wealth (by paying rent).

Here's an example of two couples, one with a high income but no wealth, the other with aa low income and considerable wealth. Figures are approximate.




Married couple with 2 kids in primary school and a mortgage.

Joint income €130,000
Income tax, USC & PRSI €40,000
Mortgage of €450k over 25 years cost PA €30,000
Crèche cost €21,000

Income less tax, cost of housing and childcare €39,000



Retired couple with no kids who own their home.

Joint Income €40,000
Income tax, USC & PRSI €1,000
Housing cost €0



Income less tax, cost of housing and childcare €39,000



The couple on €130k a year are regarded as rich as they have a high income.

The couple on €40k a year are regarded as moderately poor as they have a low income.


The first couple are paying a third of their after-tax income to access someone else’s wealth.
The second couple have wealth; a house with no mortgage.
We need to stop treating income as wealth. It is not the same thing.


If you don’t have wealth you have to buy access to it from after tax income. If you have wealth you are not taxed on it at all. If our objective is to have a fair and equitable taxation system then we need to significantly increase property tax on PPR’s while at the same time reintroduce mortgage interest relief for PPR’s. Making childcare costs tax deductible would also desirable.

 

[T McGibney]

Make childcare costs tax-deductible and provider prices will pretty much immediately inflate by 30-50%. Eventually they may well double. "Sure you can claim the tax relief on it".

If at the same time you significantly increase property tax on PPR’s, you will be robbing families on the double.

 

[Purple]

Make childcare costs tax-deductible and provider prices will pretty much immediately inflate by 30-50%. Eventually they may well double. "Sure you can claim the tax relief on it".

How do you know?
There are direct government handouts at the moment. Get rid of them. There are low barriers to entry into the market so competition should put a ceiling on prices.

If at the same time you significantly increase property tax on PPR’s, you will be robbing families on the double.

Every home owner would pay property tax. The majority don't purchase childcare so the net cost to those households who do will be lower. They are also the households who are paying the biggest mortgages so they are most likely to benefit from the relief on their mortgage interest payment.

Making mortgage interest tax deductible and finding it through increases in property tax is certainly more straightforward. If it's a site value based tax and it is progressive it should also act to reduce house prices.

 

[jim]

If you don’t have wealth you have to buy access to it from after tax income. If you have wealth you are not taxed on it at all

But you are taxed in acquiring the wealth in the first place. Where do you draw the line?

 

[T McGibney]

How do you know?

Basic economics.

There are direct government handouts at the moment. Get rid of them.

"That's why we have no option but to hook up our prices."

There are low barriers to entry into the market so competition should put a ceiling on prices.

Really - Planning? HSE? Elf & safety?

 

[Purple]

But you are taxed in acquiring the wealth in the first place. Where do you draw the line?

Not if you acquired most of it though inflation caused by quantitative easing. People who bought their house for £30k and are now sitting on €900k didn't pay any tax on that.

 

[jim]

Not if you acquired most of it though inflation caused by quantitative easing. People who bought their house for £30k and are now sitting on €900k didn't pay any tax on that.

But thats an extreme example. You cant apply such an example to public tax policy when equally you can use an eample of someone thats acquired their 500k home through working hard and spending their after tax savings on the deposit and their after tax income on mortgage repayments. Then you want to tax their acquired wealth ie the house? it seems unfair and like a double whammy

 

[Purple]

Basic economics.

No, that doesn't answer it. Basic economic would say that the market will set the price. We know that we don't have a proper open market for services in Ireland but this isn't nearly as restrictive as many services.

"That's why we have no option but to hook up our prices.

Yep, they'd go up alright but there's a shortage of places now and that's driving up prices.

Really - Planning?

C'mon, that's hardly a massive hurdle.

 

[T McGibney]

No, that doesn't answer it. Basic economic would say that the market will set the price. We know that we don't have a proper open market for services in Ireland but this isn't nearly as restrictive as many services.

Thanks for agreeing with me.

Yep, they'd go up alright but there's a shortage of places now and that's driving up prices.

Ditto.

C'mon, that's hardly a massive hurdle.

Try setting up a creche in your house and let us know in due course how you get on.

 

[Purple]

But thats an extreme example. You cant apply such an example to public tax policy when equally you can use an eample of someone thats acquired their 500k home through working hard and spending their after tax savings on the deposit and their after tax income on mortgage repayments. Then you want to tax their acquired wealth ie the house? it seems unfair and like a double whammy

Sure, all taxes are unfair to someone. If they haven't made a killing through price appreciation then they're probably still paying a mortgage. They'll be getting their income tax back on the interest element of that. That'll more than cover the increase in property tax.
My property tax on a house worth €1.2 million was around €100 a month. The mortgage was €3400 a month and a good chunk of that was interest. Even if property tax was tripled I'd still be much better off.

 

[Purple]

Thanks for agreeing with me.

You have misunderstood my reply.

Ditto.

Ditto

Try setting up a creche in your house and let us know how you in due course how you get on.

Why would I do that? I've talked to Crèche owners and I've had kids in childcare.

 

[T McGibney]

Why would I do that? I've talked to Crèche owners and I've had kids in childcare.

To see how easy or hard it is to get planning for a new creche or childcare facility. You've said its not a massive hurdle. I'd like to see you substantiate that.

 

[Purple]

To see how easy or hard it is to get planning for a new creche or childcare facility. You've said its not a massive hurdle. I'd like to see you substantiate that.

Are you saying that it is a massive hurdle?

 

[T McGibney]

Are you saying that it is a massive hurdle?

You used the term, not me. You also said "There are low barriers to entry". Maybe you can substantiate that.

 

[Purple]

You used the term, not me.

That's right. If you are suggesting otherwise then offer something more than a contrarian view.

You also said "There are low barriers to entry". Maybe you can substantiate that.

Why? If you think otherwise then offer reason. If you think that there aren't low barriers to entry then maybe you can substantiate that. That's how discussions work.

This is a discussion forum, if you want to have a discussion you're in the right place but that's not what you are doing.

 

[T McGibney]

If you think that there aren't low barriers to entry then maybe you can substantiate that.

You made the claim.

 

[Purple]

You made the claim.

Sure, I'm going on my discussion with a crèche owner who used to work in a chain and then set one up in her house. She had industry experience and a reputation, was vetted, knew the procedures, understood the cost base etc. She didn't find it difficult.

It would be unusual for someone with no experience of a sector to open a business within that sector. That's why I found it strange that you proposed that I try opening a Creche as if that would be indicative of the typical experience of someone doing so.
If you have an issue with the net cost to the State then by all means chime in with some figures. It's just a proposal and I'm more than willing to be shown that it doesn't stack up.

I'd be interested in hearing your views on making mortgage interest tax deductible and funding it through property tax increases, particularly since the Central Bank lending rules should, I think, keep a lid on prices.

 

[T McGibney]

It would be unusual for someone with no experience of a sector to open a business within that sector.

So there are barriers to entry.

If you have an issue with the net cost to the State

I never mentioned the net cost to the State.

I'd be interested in hearing your views on making mortgage interest tax deductible and funding it through property tax increases, particularly since the Central Bank lending rules should, I think, keep a lid on prices.

I have no particular opinion either way on that, although the Irish experience has generally been that tax reliefs are temporary and tax hikes are permanent.

 

[TRS30]

I fall into the first category and don't feel wealthy, rich or even well off. I fear that a left leaning government would see me as all 3 and treat me accordingly.

 

[Bow tie]

Not if you acquired most of it though inflation caused by quantitative easing. People who bought their house for £30k and are now sitting on €900k didn't pay any tax on that.

But that 'wave' of purchasers will give way to those who paid much higher and didn't benefit and then you have caused the same impact to them!?
Also, not sure destabilising older people's housing situation is a good idea at any time but with the oncoming energy crisis!?