Can Property Taxes Reduce House Price Volatility?

[Purple]

This IMF report on property tax suggest that such taxes are suitable tools to use to reduce property price volatility and dampen prices.
I'm a big fan of property tax as it is equitable and counters some of the structures we have in place which disenfranchises the young.
In my opinion one of the most unjust things about our taxation system is that it penalises the acquirement of wealth, particularly through economic activities which actually create that wealth. At the same time we don't touch wealth retention and have much lower rates of tax on wealth that is acquired through activities which doesn't actually create that wealth.

It's as if a bunch of us have been playing Monopoly for hours and then someone else joins the game. If all they start off with is what we started off with they'll never catch up.

What are poster's thoughts on property tax?

 

[Baby boomer]

Well if it were an alternative to income taxes, yeah, I'd reluctantly concede that you have a point. But this is Ireland, the public has endless demands for government to spend money on stuff for them, and government's instinct is always towards mission creep, so if we were to get more property taxes, it'd inevitably be as an addition to current taxes rather than a replacement for them.

So, no thank you, we're highly taxed enough as it is. Don't be encouraging them!

 

[odyssey06]

Brain dump of the first thoughts that pop into my head...

I would share BabyBoomer's concern re: additonal tax.

Also, local councils here are horribly inefficient, and seem to be black holes for spending. If we're going to have property tax, then we need accountable local government with directly elected mayors in our cities.

We need to stop the transfers of tax from one council to another, that just encourages free loaders and unaccountability.

Possibly we should also allow some variation in how councils base the tax, not a free for all, but some councils might want to assess properties differently e.g. number of bedrooms, size of property.

Also, I'm not really clear on how property taxes reduce volatility in house prices... my first instinct is that's a bit tenuous. I don't see how higher property taxes would have reduced volatility over the last 5 years in Ireland in any appreciable way. Can someone summarise the basis for that concept?
Also, we are basing our property taxes on property prices, if property prices are volatile what does that do to the taxes?

 

[Purple]

Well if it were an alternative to income taxes, yeah, I'd reluctantly concede that you have a point. But this is Ireland, the public has endless demands for government to spend money on stuff for them, and government's instinct is always towards mission creep, so if we were to get more property taxes, it'd inevitably be as an addition to current taxes rather than a replacement for them.

So, no thank you, we're highly taxed enough as it is. Don't be encouraging them!

I agree that they should be an alternative to income tax. We need to reduce our taxes on wealth creation and slightly increase our taxes on wealth retention. The current system suits me but it's unfair.

 

[kinnjohn]

But this is Ireland, the public has endless demands for government to spend money on stuff for them, and government's instinct is always towards mission creep, so if we were to get more property taxes, it'd inevitably be as an addition to current taxes rather than a replacement for them.

So, no thank you, we're highly taxed enough as it is. Don't be encouraging them!

Well by saying the public demands has endless demands for the government to spend money on stuff for them, totally wrong statement,

I don't agree with you it is the public endless demands that are driving up the need for additional taxes it is away simpler than that,

Irish Government for the last 30 years have been taking in one EURO and promising to give back two for the past 30 years they achieved this by borrowing large amounts money,
EU rules mean they cannot do this anymore,

Direct work payroll of 100000 the employee gets around 56K and the Government gets 44K or 44%
Total tax take on payroll of 100000 is 44%
Total tax take on payroll of 50000 is 38%
Direct Work payroll of 100000 the marginal tax take including income tax prsi and usc is around 63%,
Direct Work payroll of 50000 the marginal tax take including income tax prsi and usc is around 48%
Direct Work payroll of 50000 the employee gets around 31k and the Government gets around 19K or 38%

Like it or not no matter what political party or parties are in power Wealth retention is going to get hammered one way or another,

 

[kinnjohn]

Well by saying the public demands has endless demands for the government to spend money on stuff for them, totally wrong statement,

I don't agree with you it is the public endless demands that are driving up the need for additional taxes it is away simpler than that,

Irish Government for the last 30 years have been taking in one EURO and promising to give back two for the past 30 years they achieved this by borrowing large amounts money,
EU rules mean they cannot do this anymore,

Direct work payroll of 100000 the employee gets around 56K and the Government gets 44K or 44%
Total tax take on payroll of 100000 is 44%
Total tax take on payroll of 50000 is 38%
Direct Work payroll of 100000 the marginal tax take including income tax prsi and usc is around 63%,
Direct Work payroll of 50000 the marginal tax take including income tax prsi and usc is around 48%
Direct Work payroll of 50000 the employee gets around 31k and the Government gets around 19K or 38%

 

[Protocol]

@odyssey06,
most countries have some form of fiscal equalisation for local governments.

Either vertical, where the CG give grants to the weaker LG.

Or else horizontal, where the stronger LG give grants to the weaker LG.

 

[Protocol]

So, no thank you, we're highly taxed enough as it is. Don't be encouraging them!

Overall, taxes are not high in Ireland. This is well established.

Now, people might feel they don't get good services for the middling amount of taxes paid here, okay.

Also, the top MTR starts at 35k approx, that may be one reason why some people think taxes are high here.

 

[odyssey06]

Well by saying the public demands has endless demands for the government to spend money on stuff for them, totally wrong statement,

I don't agree with you it is the public endless demands that are driving up the need for additional taxes it is away simpler than that,

Irish Government for the last 30 years have been taking in one EURO and promising to give back two for the past 30 years they achieved this by borrowing large amounts money,
EU rules mean they cannot do this anymore,

Direct work payroll of 100000 the employee gets around 56K and the Government gets 44K or 44%
Total tax take on payroll of 100000 is 44%
Total tax take on payroll of 50000 is 38%
Direct Work payroll of 100000 the marginal tax take including income tax prsi and usc is around 63%,
Direct Work payroll of 50000 the marginal tax take including income tax prsi and usc is around 48%
Direct Work payroll of 50000 the employee gets around 31k and the Government gets around 19K or 38%

Like it or not no matter what political party or parties are in power Wealth retention is going to get hammered one way or another,

But the reason they've been taking in one euro and giving back ... is because of the endless demands for the government to spend money on X, Y, Z and Irish governments inability to say no.

 

[Protocol]

Also, I'm not really clear on how property taxes reduce volatility in house prices... my first instinct is that's a bit tenuous. I don't see how higher property taxes would have reduced volatility over the last 5 years in Ireland in any appreciable way. Can someone summarise the basis for that concept?
Also, we are basing our property taxes on property prices, if property prices are volatile what does that do to the taxes?

Yes, I agree.

An annual 500 tax on a house worth 400k is hardly going to affect people's decisions??

 

[kinnjohn]

Overall, taxes are not high in Ireland. This is well established.

Now, people might feel they don't get good services for the middling amount of taxes paid here, okay.

Also, the top MTR starts at 35k approx, that may be one reason why some people think taxes are high here.

Tax on Direct work in Ireland is high when you compared to what you get in return,
There is very little room to increase Direct Work tax without increasing benefits to Direct workers and employers in return,

on the other hand, other types of work and wealth retention are taxed away lower it is going to be tricky to increase but the Government have no choice but to do so,

 

[kinnjohn]

But the reason they've been taking in one euro and giving back ... is because of the endless demands for the government to spend money on X, Y, Z and Irish governments inability to say no.

All the main parties have spent the last 30 years trying to outdo one another at election time with more goodies that we do not need to pay for,

the wealthy are soon going to find out their assets will be used to picking up the tab for the main political parties promises,

 

[Purple]

Yes, I agree.

An annual 500 tax on a house worth 400k is hardly going to affect people's decisions??

An annual tax of €1500 or €2500 might.
That's the level is should be at, but with a corresponding reduction in marginal tax rates.
An income tax band of around 28% om incomes between €35k and €70k would be good.
USC should be charged on all income. Maybe they could rename it, call it a Universal Social Charge... oh, wait...

 

[odyssey06]

An annual tax of €1500 or €2500 might.
That's the level is should be at, but with a corresponding reduction in marginal tax rates.
An income tax band of around 28% om incomes between €35k and €70k would be good.
USC should be charged on all income. Maybe they could rename it, call it a Universal Social Charge... oh, wait...

How though? Can you give us an example scenario of how higher property taxes could affect people's decisions that feed into the level property prices go up and down?

 

[Purple]

How though? Can you give us an example scenario of how higher property taxes could affect people's decisions that feed into the level property prices go up and down?

No, other than the report I quoted in my first post. I agree that they don't show evidence to support their conclusion. In my view property tax would depress the value of houses slightly, would broaden the tax base, be a more stable source of revenue than income or transaction taxes and move a small amount that broadened tax base away from wealth creation and onto wealth retention.

 

[kinnjohn]

Mods I am not sure why it posted the same message several times,
I must have pressed a button on my computer by mistake
Sorry for any extra work I caused,
Kennjohn,

 

[kinnjohn]

No, other than the report I quoted in my first post. I agree that they don't show evidence to support their conclusion. In my view property tax would depress the value of houses slightly, would broaden the tax base, be a more stable source of revenue than income or transaction taxes and move a small amount that broadened tax base away from wealth creation and onto wealth retention.

I haven't thought this trough
one advantage might be to drive the size and value of high priced housing down because it is not just being able to buy or repay the mortgage
there would be higher yearly property tax to pay,
But as I said I haven't given it much thought except work is taxed as high as it can unless Benefits are increased, Direct payroll high earners, and their employers are highly taxed compared to others,

The wealth that cannot be moved will get a hammering no matter who is in power no party can/will avoid increasing taxes on this sector it is just a matter of finding the right time to do so,

 

[kinnjohn]

No, other than the report I quoted in my first post. I agree that they don't show evidence to support their conclusion. In my view property tax would depress the value of houses slightly, would broaden the tax base, be a more stable source of revenue than income or transaction taxes and move a small amount that broadened tax base away from wealth creation and onto wealth retention.

I haven't thought this trough
one advantage might be to drive the size and value of high priced housing down because it is not just being able to buy or repay the mortgage
there would be higher yearly property tax to pay,
But as I said I haven't given it much thought except work is taxed as high as it can unless Benefits are increased, Direct payroll high earners, and their employers are highly taxed compared to others,

The wealth that cannot be moved will get a hammering no matter who is in power no party can/will avoid increasing taxes on this sector it is just a matter of finding the right time to do so,

 

[kinnjohn]

No, other than the report I quoted in my first post. I agree that they don't show evidence to support their conclusion. In my view property tax would depress the value of houses slightly, would broaden the tax base, be a more stable source of revenue than income or transaction taxes and move a small amount that broadened tax base away from wealth creation and onto wealth retention.

I haven't thought this trough
one advantage might be to drive the size and value of high priced housing down because it is not just being able to buy or repay the mortgage
there would be higher yearly property tax to pay,
But as I said I haven't given it much thought except work is taxed as high as it can unless Benefits are increased, Direct payroll high earners, and their employers are highly taxed compared to others,

The wealth that cannot be moved will get a hammering no matter who is in power no party can/will avoid increasing taxes on this sector it is just a matter of finding the right time to do so,

 

[kinnjohn]

No, other than the report I quoted in my first post. I agree that they don't show evidence to support their conclusion. In my view property tax would depress the value of houses slightly, would broaden the tax base, be a more stable source of revenue than income or transaction taxes and move a small amount that broadened tax base away from wealth creation and onto wealth retention.

I haven't thought this trough
one advantage might be to drive the size and value of high priced housing down because it is not just being able to buy or repay the mortgage
there would be higher yearly property tax to pay,
But as I said I haven't given it much thought except work is taxed as high as it can unless Benefits are increased, Direct payroll high earners, and their employers are highly taxed compared to others,

The wealth that cannot be moved will get a hammering no matter who is in power no party can/will avoid increasing taxes on this sector it is just a matter of finding the right time to do so,