Bow Group proposes 1% simplifier tax on homes

According to reports in The Times and Guardian the Tory-aligned Bow Group is proposing a 1% annual levy on the value of all homes to replace four existing taxes - council tax, inheritance tax, capital gains tax on house sales and the BBC's licence fee.

The Bow Group's Mark Wadsworth's 'progressive' proposal would see the first £70,000 of a house's value go untaxed.  Thereafter the 1% annual levy would kick in.  The average homeowner in the north would pay £509.  This is based on the £129,000 price tag for the average northern home.  With average house prices in London at £307,000, however, the average London homeowner would pay nearly five times as much - £2,370pa.

11.45am update: MARK WADSWORTH HAS NOW POSTED ON YOURPLATFORM - DEVELOPING HIS ARGUMENTS AND RESPONDING TO THE COMMENTS BELOW.

Comments

[Adrian Owens]

Poor idea from the usually well-researched Bow Group. This proposal would further penalise retired people who have climbed the property ladder and also convert a voluntary payment - the TV licence fee - into a compulsory tax.

If we're looking to simplify the tax structure, why not scrap Insurance Premium Tax? This is a distinctly unconservative tax, hitting as it does the decisions people make to insure themselves and be self-reliant. Introduced in 1994 by Ken Clarke when public finances were tight, there is now no better signal that Conservatives believe in simplified and lower tax and greater self-reliance than the abolition of this tax.

[TomTom]

Why should a tax on televisions become a tax on homes ?

Capital Gains Tax only applies to SECOND homes.

Water Rates are untouched by this proposal.

Seems The Bow Group must have a lot of Second Home Owners who want to spread the Cost. Well it is a Conservative group so no doubt they do.

[James Hellyer]

Another tax on unrealised income? What a stupid idea.

[Serf]

It rather goes against the whole idea of localism as well. Tax rates will be set by central government.

Instead we need local government to raise most of their own income.

[South East Blogger]

One of the daftest ideas for tax I have heard in a long time....

[Denis Cooper]

Back to the drawing board, I think, for all the reasons already given ...

My wife is in the process of executing her father's will, and it has confirmed my longstanding belief that if there is to be an inheritance tax it should be applied not to the estate as a whole before distribution, but to the individual beneficiaries after they have received their legacies, with each of us having a lifetime allowance for cumulative legacies before tax is applied. Not only is it irrational that the same tax is levied whether there is a single child or a dozen, it would also simplify the task of the executor if payment of inheritance tax was the responsibility of those who inherit, once they have the money in their hands. This is the system used in Ireland and elsewhere in the EU, but I wouldn't rule it out on those grounds.

[sjm]

Oh, just what we need, more stupid, complex ways of stealing our money from us. Or would that be just from those who are struggling to buy their own homes or who have thankfully paid up a mortgage after a liftime, and thus relieving the State of a burden? What about Council tenants, what about private tenants?

May I suggest, without any respect at all, that the Bow Group concentrate their collective minds on how to cut back on State expenditure.

[Chad]

Phew. I wondered what the reaction would be here, and I'm relieved. What a bonkers proposal.

Not "off the back of an envelope" but "off the back of an LSD tab".

It's simple:
IHT should be scrapped completely.

Licence fee should be scrapped through partial privatisation of the Beeb.

Apologies Bow Group if that is too simple.

[CJC]

An incredibly, unbelieveably stupid idea.
In the part of London where I live a modest 3 bed terraced house can go for £600k - up from £100k 15 years ago.
These are not large houses, and although now only bought by affluent professionals, are owned by all sorts from pensioners to teachers. From where are they going to find an extra 4000??

[Chad]

..and of course, basing the charge on house values would effectively make it more expensive to watch the BBC in the south than the north!

Thank the stars for the TaxPayers' Alliance for some welcome common sense on tax issues.

[Laughing Cavalier]

A tax on an asset that doesn't provide the income to pay it? Is income tax going to be reduced correspondingly? Of course not? This has to be the daftest idea the Bowe Group has come up with in a long time - and there have been some real doozies over the years.

[Annabel Herriott]

Crazy idea. Should SHIP or Hodge be made to pay mine? I, like a lot a folk over 70, have had the equity out of my home, so I could do all necessary to it, so I can enjoy my own home until I pop my clogs.
Please return to the drawing board ASAP.

[Selsdon Man]

This proposal would more than double my council tax.

The Bow Group has never been sound - too many wet careerists for my liking.

This proposal only reinforces my perception.

[RobD]

Perhaps the worst part of this is you just know that if Labour got back in power they would just re-inroduce inheritance tax and keep this tax, we would end up with the worst of both worlds.

Something has to be done about inheritance tax but this isn't the answer.

[Jock Coats]

It is described elsewhere in the Times article as a "land value tax". Does anyone know if this is actually the case? It reads otherwise like a property value tax.

If it is a Land Value Tax it is a welcome move in the right direction, if it is done with the intention of eventually replacing a whole load of other taxes, most especially very large chunks of income tax and corporate taxes.

Yes, there are implementation and transitional issues - most particularly those that have been mentioned here about people who have large asset value in their homes but little income with which to pay a tax - but for the vast majority of those the relief is a simple one - you take this particular tax from their estate in the first instance until people get into the habit of spending less on their property and saving more for the incidental costs of ownership, such as land value taxes.

We must in the longer run get into the habit of valuing property not just at its historic cost but for its ongoing social costs. Land is the main natural resource that every single one of us needs, that the occupancy of which by one can directly affect the wellbeing and competitiveness of others, has characteristics of a monopoly (if yours is the only plot available in a good school district, through no effort of yours except that monopoly cachet people will bid up not just to the limits of what they can afford but to the limits of the debt they can afford to take on).

It *will* take a generation (of homeowners at least) to implement properly but if there's a real commitment to shifting tax off of effort, productivity and enterprise and onto such monopolistic assets it will be fantastic news.

What the Times story does not say, however, is that the Lib Dems have already trumped he Bow Group on this one too. I believe we will actually be debating whether to include an LVT style Progressive Property Tax in our policy paper at conference this September as part of the package to begin reducing income taxes, and will include within that an option to get rid of all these other property related taxes such as stamp and IHT.

[Annabel Herriott]

Ah! So Jock Coates is a Libdem then.

[John Coles]

Pathetic. The unquestioning acceptance of the BBC Licence Fee and Inheritance Tax - there are strong arguments for the abolition of both.
Regarding Capital Gains Tax, this only applies to second homes - whoops, I forgot that we have to accommodate the metropolitan rich. Should play well amongst the working class, I don't think.

[Andrew Woodman]

Have to concur with the prvious comments. An idea which would be electoral suicide. For one, we would lose the pensioner vote at a stroke. Many don't pay the last 3 taxes mentioned and those living in a bog house with small income would be crippled.

If I'd have come up with this idea in my GCSE economics class, my teacher would have shown me up in front of the whole class. can't believe the bow group released it.

[steves]

Couple of points

This would just further the growth of untempered public spending, because the main beneficiaries of our stolen tax would not be paying any, why should the people who have purchased property pay a suppossed local tax while tenants get away with it.

Easy answer for the bow group

Scrap the licence fee altogether shut down or privatise the BEEB.

Federate the union with each country becoming fiscally responsible for itself with a flat rate per person given over to the "British" element to pay for the armed forces and foreign office (one that as been restarted after closing down the current one)

Make all taxes as local as they can be, and have a proper system of no representation without taxation (even if you are just on the list and do noty quailfy payments)

[JimJam]

Scrap/ reduce VAT and introduce a local sales tax - simple.

[Julian Morrison]

I oppose any tax on homes, council or otherwise. Otherwise, everyone's basically renting from the government, nobody can ever say "mine". And, I very strongly oppose the death tax, it's absolutely nothing but socialist spite against those whose ancestors worked to build up a better life.

[Jock Coats]

So Jock Coates is a Libdem then.

I don't know. I've not met anyone by that name in the Lib Dems...:)

I oppose any tax on homes, council or otherwise. Otherwise, everyone's basically renting from the government, nobody can ever say "mine". And, I very strongly oppose the death tax, it's absolutely nothing but socialist spite against those whose ancestors worked to build up a better life.

Do you consider John Locke to have been a socialist? Or Winston Churchill? Or indeed Adam Smith, J S Mill or Milton Friedman?

Why is it any less acceptable than a tax on my income - the work of my hands?

Indeed with real property *you* generally do nothing to earn any increase in value. Others do that by making the location popular or desirable. Including, of course, public expenditure.

LVT over time would in fact reduce the need for many taxes. It would encourage enterprise, and enterprising people to go where the tax was low - in other words to relocate from overheated regions to regions that need economic boosters. Presently this sort of thing is done through massive transfer payments - of welfare to support people without incomes in economically depressed areas and of direct subsidy to encourage business.

LVT would create a sort of "isotax" map, like a weather map, where areas of economic high pressure would move to fill areas of economic lower pressures naturally, because it would be in their interests to move to lower tax areas.

But it needs to be part of a commitment to reshape the tax system as a whole, not as a quick fix to get rid of a few relatively small but unpopular taxes.

[david]

Despite what everyone else thinks, there is some merit in the scheme. But 1% is too high, 0.5% of the value of the property. This should be combined with a 1.0% of the income per property. That is if you have one inhabitant earning £30.000, they would pay less than a property which has say a combined income of £100.000 per annum. Pensioners would therefore pay a lot less than working people. Income from housing benefit etc would not be included, which many pensioners receive. So you would have two elements, house value and income.

[Jock Coats]

This would just further the growth of untempered public spending, because the main beneficiaries of our stolen tax would not be paying any

This is just the strangest objection. At present, without a land value tax, those who benefit from infrastructure expenditure pay nothing. Government takes my tax, from working in Oxford, and someone else's from Newcastle, and approves a scheme to spend £400m on a metro-line in Birmingham. Who gains? The landowners around that new infrastructure.

The present system is rent-seeking of the worst kind. LVT would reduce that - making schemes pay for themselves out of the benefits that landowners gain from the expenditure of that money in their area. Seems fairer to me.

[Jock Coats]

David, don't dilute the idea just because of transitional issues. Deal with the transitional issues. Over time the way people choose what housing they can afford and so on at different stages of their life will change to reflect the fact that there is an ongoing tax burden on it.

You don't even need to make such "asset rich-income poor" pensioners borrow or anything to pay the tax - simply defer the tax and get an actuary to work out when it will come in based on death rates and create the necessary money to fill the gap that can be retired when the deferred payment comes from estates.

It would only take one "housing generation" to sort itself out. I would say stay away from taxing people on their efforts and productivity (income etc) because these are things we want to encourage.

[Serf]

Jock does have some good points. The problem with the proposal is that it is not the same as Jock's.

[Editor]

This thread has closed in order for the debate to continue on YourPlatform - where Mark Wadsworth has responded to your concerns.

[Jock Coats]

The problem with the proposal is that it is not the same as Jock's.

Are you sure - I haven't seen any more than in the Times article yet. I will look more this evening. The reason I ask is that other proposals for *introducing* "proper" LVT have also started by using whole property values. The question is whether there is actually an ideological/philosophical basis to this proposal as a way to introduce a Georgist tax or not.

Incidentally, this is beyond party for me. I'm almost sure that I would join whichever of the three main parties produced the best chance of LVT being implemented in my lifetime. It's *that* important!