New Dail / New Taoiseach

AndrewJRenko

efanton wrote: »

property taxes simply do not work for many reasons.

Just about every developed economy in Europe disagrees with you, along with the USA and others.

johnnyskeleton

efanton wrote: »

property taxes simply do not work for many reasons.

Who decides what is the appropriate value of a proerty?

We have a system that does just that right now. Every 7 or so years there is a self assessment carried out and so people who want to say their house has gone down in value can get a valuation done.

Just because you might own a house it is no indication of personal wealth, many homes are inherited. You might own a home worth 500k, but your income might only be 20k.

Sure it is. If you own an asset worth 500k, you have an asset worth 500k. The idea that someone with a 500k asset but a low income should be effectively exempt from paying taxes (and, presumably, entitled to benefits or e.g. student grants etc) is a bit odd.

There is a phrase used a lot in Ireland - the haves and the have nots. The people with 500k houses with no mortgage are the haves, IMO.

Also it dis-proportionally hits those that live in cities rather than rural areas simply because of location. You and myself might live in IDENTICAL homes but because one of us live in Dublin and the other in a rural area the tax rate would be significantly different. How could that possibly be fair?

So? Cities generally have better services so its only fair that people who live there and benefit from those services should pay more.

The only fair system of funding services and facilities is general taxation.

I hate this ohrase general taxation. Its a euphamism for increased income tax. Similar to the Brexiteers saying an Australia style trade arrangement rather than no deal.

But for that to work the taxation system must be fair to start with and its not. There are high income workers paying significantly less tax than middle income workers because they are able to avail of tax breaks that a PAYE worker simply cant.

Such as? Which tax breaks? If you mean the pension tax break, you pay tax on the pension when drawn anyway and besides, shouldnt we not be encouraging people to have pensions? Anyone can avail of this tax break and so it seems unlikely that someone earning more would pay less tax unless they had a massively bigger pension, and they will pay tax eventually on that.

There is a reason why general taxation of income, profit or gain works and is the system used by almost every government in the world and that is that it is generally the fairest way for the state to extract taxation to fund services.

The reason income tax is the preferred method is, to quote the late Terry Pratchett, that it allows government to extract the maximum amount of milk for the minimum of moo. "Fairness" doesnt really come into it

I see no point whatsoever in ANY form of property tax. If additional revenue is required to provide services governments should simply be honest about this and adjust general taxation levels.

The problem is that eventually, and im not saying weve reached this point, you disincentivise productive labour so much that people either work less or emigrate. Its very unwise to put the sole burden of taxation on work, not least because we should encourage productive work

Our taxation system is broke

I heard an interesting quote recently - France is a paradise, but the French think they are in hell. I consider this comment to be a similar type scenario - the system works reasonably well as a compromise, and thats why everyone hates it.

Princess Consuela Bananahammock

johnnyskeleton wrote: »

Sure it is. If you own an asset worth 500k, you have an asset worth 500k. The idea that someone with a 500k asset but a low income should be effectively exempt from paying taxes (and, presumably, entitled to benefits or e.g. student grants etc) is a bit odd.

Hang on a second - mortgages are purcheses like any other and, as such are optional. Just becuase you chose not to have one or don't need one, doesn't imply you should be taxed on the money you have from not paying on a mortgage!!

Money saved is NOT income!

It should really be a land tax instead of a property tax.
Higher level land area tend to have more & better services then areas that are worth less.
People that have homes in the higher level land areas should pay more.
Also businesses & companies based in these areas should also pay the land tax

Johnboy1951

johnnyskeleton wrote:

If you own an asset worth 500k, you have an asset worth 500k. The idea that someone with a 500k asset but a low income should be effectively exempt from paying taxes (and, presumably, entitled to benefits or e.g. student grants etc) is a bit odd.

There is a phrase used a lot in Ireland - the haves and the have nots. The people with 500k houses with no mortgage are the haves, IMO.

I would ask you to consider this ..... a person starts of with little or nothing, and works and saves (rather than be profligate with their money) and ends up owning their own home which might be worth your 500k due to continued investment during their working years.

Every cent used in acquiring that 500k asset (their home) has been taxed ...... various taxes on income and VAT on materials etc. etc..
Now that they can no longer work, and have minimal or no income you think they should be be taxed again on the result of their life's work?

With that I disagree.

Nody

Johnboy1951 wrote: »

I would ask you to consider this ..... a person starts of with little or nothing, and works and saves (rather than be profligate with their money) and ends up owning their own home which might be worth your 500k due to continued investment during their working years.

Every cent used in acquiring that 500k asset (their home) has been taxed ...... various taxes on income and VAT on materials etc. etc..
Now that they can no longer work, and have minimal or no income you think they should be be taxed again on the result of their life's work?

With that I disagree.

Now replace house with shares; not only would the same person have had the company pay taxes on the profits but they would then be taxed again on the dividend. Would you say a person with 500k in shares should not be taxed as well then? Because it is an asset exactly like an house; and they have paid even more taxes compared to the house owner on those dividends etc.

Scoondal

I thought I was banned from this thread.

Princess Consuela Bananahammock

Nody wrote: »

Now replace house with shares; not only would the same person have had the company pay taxes on the profits but they would then be taxed again on the dividend. Would you say a person with 500k in shares should not be taxed as well then? Because it is an asset exactly like an house; and they have paid even more taxes compared to the house owner on those dividends etc.

There's a slight differene here in that you can sell some of the shares to pay the tax. You can't seel some of your house.

The other fallacy is the idea that the sales and purcheses are all for investment purposes. This is only the case with shares; whereas houses are usually owned for a practical prupose: to live in.

You can't claim you're taxing the profits on a specualtive act if the prupose is not specualtion.

Now if you're talking second or third properties for the purposes of investment or rental income, then fair enough.

Johnboy1951

Nody wrote: »

Now replace house with shares; not only would the same person have had the company pay taxes on the profits but they would then be taxed again on the dividend. Would you say a person with 500k in shares should not be taxed as well then? Because it is an asset exactly like an house; and they have paid even more taxes compared to the house owner on those dividends etc.

I find it amusing that you can consider a person's home to be comparable with an investment in shares, which primarily is done with a profit motive.

If you had compared the shares with a house bought for investment/renting/whatever then I could understand.

moon2

Johnboy1951 wrote: »

I would ask you to consider this ..... a person starts of with little or nothing, and works and saves (rather than be profligate with their money) and ends up owning their own home which might be worth your 500k due to continued investment during their working years.

Every cent used in acquiring that 500k asset (their home) has been taxed ...... various taxes on income and VAT on materials etc. etc..
Now that they can no longer work, and have minimal or no income you think they should be be taxed again on the result of their life's work?

With that I disagree.

If we lived in a world with no LPT or equivalent, would you consider removing the special tax exemption associated with the sale of primary residences? In short - all property sales would be liable for capital gains tax.

People don't earn that value increase, so it's fair game in that sense.

Good loser

moon2 wrote: »

If we lived in a world with no LPT or equivalent, would you consider removing the special tax exemption associated with the sale of primary residences? In short - all property sales would be liable for capital gains tax.

People don't earn that value increase, so it's fair game in that sense.

I've always considered that to be a very good counter to those who do not favour a Property Tax. It would be very interesting to find out what public opinion would be on this point.


Mind you I am not suggesting a switch. I expect there would be blue murder if it was proposed, with the same bogus/tendentious arguments as used against the LPT.



(The Water Charges rubbish all over again. Incidentally is it true IW now charges €5,000 for a mains connection?)

Johnboy1951

moon2 wrote: »

If we lived in a world with no LPT or equivalent, would you consider removing the special tax exemption associated with the sale of primary residences? In short - all property sales would be liable for capital gains tax.

People don't earn that value increase, so it's fair game in that sense.

Yes, provided allowance was made for the improvements paid for, that contributed to the increased value. Of course if another primary residence was to be purchased with the proceeds that would change things.

Good loser

Sam Russell wrote: »

Was the (market) rental value the basis for the old rates system that existed before the system was abolished?

Theoretically yes - theoretically converted to a base year which was very old.
Effectively the system ran on the basis of comparisons.


An important distinction from LPT is that it was billed to the occupier rather than the owner. (A better system imo)

Good loser

Johnboy1951 wrote: »

Yes, provided allowance was made for the improvements paid for, that contributed to the increased value. Of course if another primary residence was to be purchased with the proceeds that would change things.

Why distinguish between purchase cost and improvement costs?


That gives the lie to your acceptance of the principle - as does your second sentence.

efanton

Water John wrote: »

What is critical is that the country maintains a wide a tax base as possible. Once you have over reliance on one area, you're at high risk.
Property and services are taxed in almost all western countries. I would say income tax, is as high as it should be in this country.

And how could taxing homes possibly increase the tax base?
Does the population suddenly change when you introduce property taxes?

If you think about it, transferring property tax to general taxation is actually widening the tax base. There is more people paying income tax than people who own property.

efanton

johnnyskeleton wrote: »

Sure it is. If you own an asset worth 500k, you have an asset worth 500k. The idea that someone with a 500k asset but a low income should be effectively exempt from paying taxes (and, presumably, entitled to benefits or e.g. student grants etc) is a bit odd.

They will not be exempt from paying taxation, they will be paying income tax proportional to what they can afford.

There is a phrase used a lot in Ireland - the haves and the have nots. The people with 500k houses with no mortgage are the haves, IMO.

so you would consider a pensioner living only the state pension whose only asset is their home wealthy?

So? Cities generally have better services so its only fair that people who live there and benefit from those services should pay more

.
Generally workers in the cities earn more. If property tax was transferred to general taxation they would still be paying slightly more.

I hate this phrase general taxation. Its a euphamism for increased income tax. Similar to the Brexiteers saying an Australia style trade arrangement rather than no deal.

But its not solely income tax is it? Its income tax, vat, and any other taxes that everyone pays. There would be no additional revenue collected. The sum previously collected in property taxes would be compensated for by a small adjustment in income tax to or other form of general taxation in order to collect a similar amount.

Such as? Which tax breaks? If you mean the pension tax break, you pay tax on the pension when drawn anyway and besides, shouldnt we not be encouraging people to have pensions? Anyone can avail of this tax break and so it seems unlikely that someone earning more would pay less tax unless they had a massively bigger pension, and they will pay tax eventually on that.

I was not talking about pension allowances.
I was talking about tax breaks that are available to only non PAYE earners.
Its relatively simple for someone who is self employed to pay far less tax than someone with the same income paying PAYE.

The reason income tax is the preferred method is, to quote the late Terry Pratchett, that it allows government to extract the maximum amount of milk for the minimum of moo. "Fairness" doesnt really come into it

so you agree with me.

The problem is that eventually, and im not saying weve reached this point, you disincentivise productive labour so much that people either work less or emigrate. Its very unwise to put the sole burden of taxation on work, not least because we should encourage productive work[

Now you are talking nonsense. People are not going to stop working simply because they do not own a home. In many countries where renting is predominant very successful people have never owned a home. Do those countries have revenue problems?

efanton

Nody wrote: »

Now replace house with shares; not only would the same person have had the company pay taxes on the profits but they would then be taxed again on the dividend. Would you say a person with 500k in shares should not be taxed as well then? Because it is an asset exactly like an house; and they have paid even more taxes compared to the house owner on those dividends etc.

What are you talking about?

You family home does not produce an income. With no profit or gain there is nothing to be taxed.

Share and dividends do produce a profit or gain, so of course they should be taxed.

IAmTheReign

efanton wrote: »

Not really. A house is not worth a single cent until the moment you sell it.
If I gave you a cheque for 1 million euro that you were unable to cash would it be worth anything? Same principle, its only of value to you once money changes hands or it produces an income.

People dont get that. When they buy a house they think they are making a financial investments. Its not, it is however an investment for the security and well being of their family.

Its only when you buy a house with the intention that you will rent it out or sell it on for profit that it becomes an investment.

With regards the working suckers who pay PAYE you have more or less confirmed my point. If a person on a low income inherits a home, can they actually afford the property taxes? Surely they should contribute what they can afford and the way to do that is through income tax, they too are probably a working sucker paying PAYE.

Are you suggesting that they sell the home they inherit because they might not be able to afford the property taxes? What good would that achieve?
They will have to live somewhere.

Progressive taxation is supposed to be based on the concept that those who can afford to contribute more do. All things being equal someone who owns an asset worth half a million euro is clearly in a better financial position than someone who doesn't. Therefore they should be expected to contribute accordingly.

Someone on a low income who inherits a house worth half a million should absolutely be expected to contribute. They no longer need to pay rent, or try to save for a mortgage, whereas someone on a comparable wage who doesn't inherit any property has to pay for somewhere to live. It's unlikely that would result in them having to sell the house since they now have no other costs to house themselves. In the unlikely event they can't afford them, they could always sell the house and buy something more affordable with the money.

Water John

efanton, you misunderstand a few concepts. You are calling income tax, general taxation. All streams together would be called general taxation.
A wider tax base, refers to, not the number of people paying it, but taxation on different things in society, income tax, Vat, Corporation tax, stamp duty, LPT, CAT, CGT. The more sources, the wider the tax base.
For example we were highly reliant on people moving house, paying stamp duty and CGT every time. When the crash came, that funding stream suddenly went to zero.

efanton

Water John wrote: »

efanton, you misunderstand a few concepts. You are calling income tax, general taxation. All streams together would be called general taxation.
A wider tax base, refers to, not the number of people paying it, but taxation on different things in society, income tax, Vat, Corporation tax, stamp duty, LPT, CAT, CGT. The more sources, the wider the tax base.
For example we were highly reliant on people moving house, paying stamp duty and CGT every time. When the crash came, that funding stream suddenly went to zero.

no, I do get it.
I realise general taxation is not just income tax, I have already said this in a previous post.

I jut do not agree that widening the tax base helps at all if by widening the tax base you only mean increasing the total number of taxes without increasing the total number of tax payers.

If the same revenue is collected then there is absolutely no difference. You would have a point if that was not the case. By transferring the property tax to income tax or VAT for instance there is no way to avoid those taxes and therefore this widening the tax base argument is totally moot.
If you were to transfer it to a tax that only some would pay, CGT for instance, then you might have a problem at some point, as you point out, as the number paying CGT varies from year to year.

Sam Russell

IAmTheReign wrote: »

Progressive taxation is supposed to be based on the concept that those who can afford to contribute more do. All things being equal someone who owns an asset worth half a million euro is clearly in a better financial position than someone who doesn't. Therefore they should be expected to contribute accordingly.

Someone on a low income who inherits a house worth half a million should absolutely be expected to contribute. They no longer need to pay rent, or try to save for a mortgage, whereas someone on a comparable wage who doesn't inherit any property has to pay for somewhere to live. It's unlikely that would result in them having to sell the house since they now have no other costs to house themselves. In the unlikely event they can't afford them, they could always sell the house and buy something more affordable with the money.

They do. Unless they qualify through living in the house for three years prior to inheriting it, and continue to live in it for a further three years (plus other stipulations), the person inheriting it pays 33% tax on its value above a threshold depending on the relationship with the desponer.

Many houses worth the €500k quoted, would not have paid that price for the asset. There has been substantial increase in property prices over the last 50 years, often outstripping even the full earnings of the owner over this time.

LPT attempts to tax property ownership as a broadening of the tax base. It is part of general taxation, and is considered to be a progressive tax (but not in every case). Unfortunate for those who purchased just before the crash who paid huge stamp duty, and saw their property drop in value, and then got saddled with LPT, I can understand their pain.

I have neighbours whose house has risen in value by over 20 times during their occupation of 40 years. Should they not pay LPT?

Princess Consuela Bananahammock

Sam Russell wrote: »

They do. Unless they qualify through living in the house for three years prior to inheriting it, and continue to live in it for a further three years (plus other stipulations), the person inheriting it pays 33% tax on its value above a threshold depending on the relationship with the desponer.

Many houses worth the €500k quoted, would not have paid that price for the asset. There has been substantial increase in property prices over the last 50 years, often outstripping even the full earnings of the owner over this time.

LPT attempts to tax property ownership as a broadening of the tax base. It is part of general taxation, and is considered to be a progressive tax (but not in every case). Unfortunate for those who purchased just before the crash who paid huge stamp duty, and saw their property drop in value, and then got saddled with LPT, I can understand their pain.

I have neighbours whose house has risen in value by over 20 times during their occupation of 40 years. Should they not pay LPT?

No, they shouldn't unless they are profiting from owning the house, in which case they should pay tax on the profits.

How long they've owned it and how the market values it are irrelevant.

Sam Russell

Princess Consuela Bananahammock wrote: »

No, they shouldn't unless they are profiting from owning the house, in which case they should pay tax on the profits.

How long they've owned it and how the market values it are irrelevant.

Well, there we differ.

If you are a tenant paying exorbitant rent to a rapacious landlord, would you not consider it fair that the landlord pays LPT on the property, as well as income tax on the profits from the rent?

The more spread the tax base is, the less likelihood that changes in the economy will result in huge shock to that economy.

Johnboy1951

Sam Russell wrote: »

Well, there we differ.

If you are a tenant paying exorbitant rent to a rapacious landlord, would you not consider it fair that the landlord pays LPT on the property, as well as income tax on the profits from the rent?

The more spread the tax base is, the less likelihood that changes in the economy will result in huge shock to that economy.

So you think that this tax should apply regardless the income of the owner and their ability to pay?

On that we disagree!

Sam Russell

Johnboy1951 wrote: »

So you think that this tax should apply regardless the income of the owner and their ability to pay?

On that we disagree!

I accept that you disagree, but the tax is at the level of 0.18% of the value. I think the cost of insuring my house is of a similar level.

There are measures available for some to defer the LPT, so not being able to pay is taken into account for some.

Johnboy1951

Sam Russell wrote: »

I accept that you disagree, but the tax is at the level of 0.18% of the value. I think the cost of insuring my house is of a similar level.

My view will not change regardless the tax level - whether 0.18% or 18%

There are measures available for some to defer the LPT, so not being able to pay is taken into account for some.

That is a deferred payment ...... still the tax applies.
On that we disagree.

Chips Lovell

There's lots of sound policy reasons for broadening the tax base. While the overall amount of tax collected may not change, it does better insulate you from cyclical booms and busts.

If you want examples of the downsides of a relatively narrow tax base, look at what happened during the crash here when the stamp duty and other construction associated taxes disappeared overnight, leaving a massive hole in the Exchequer finances. The exact opposite to happened in the past couple of years when Corporation Tax receipts were (possibly temporarily) inflated by U.S. multinationals. All of a sudden we were rolling in money and the temptation is of course to spend it.

Broadening the tax base doesn't remove cyclical factors, but it does help smooth them out. The dips aren't as low, the gluts aren't as big.

Secondly, the broader the tax base, the trickier it becomes to avoid taxes. Wealth taxes in particular, such as the Property Tax, are quite "sticky" too, as in hard to avoid. For example, For example, if the top rate of tax is too high, people are less inclined to take a promotion or do overtime because a significant wedge of that disappears in Income Tax. They either turn down the work or demand more from their employer to compensate for the tax wedge, thus driving up costs. A Property Tax doesn't have the same impact, in that your working decisions aren't affected by your liability.

Sam Russell

Chips Lovell wrote: »

There's lots of sound policy reasons for broadening the tax base. While the overall amount of tax collected may not change, it does better insulate you from cyclical booms and busts.

If you want examples of the downsides of a relatively narrow tax base, look at what happened during the crash here when the stamp duty and other construction associated taxes disappeared overnight, leaving a massive hole in the Exchequer finances. The exact opposite to happened in the past couple of years when Corporation Tax receipts were (possibly temporarily) inflated by U.S. multinationals. All of a sudden we were rolling in money and the temptation is of course to spend it.

Broadening the tax base doesn't remove cyclical factors, but it does help smooth them out. The dips aren't as low, the gluts aren't as big.

Secondly, the broader the tax base, the trickier it becomes to avoid taxes. Wealth taxes in particular, such as the Property Tax, are quite "sticky" too, as in hard to avoid. For example, For example, if the top rate of tax is too high, people are less inclined to take a promotion or do overtime because a significant wedge of that disappears in Income Tax. They either turn down the work or demand more from their employer to compensate for the tax wedge, thus driving up costs. A Property Tax doesn't have the same impact, in that your working decisions aren't affected by your liability.

It is possible to take broadening the tax base as a 'good thing'

If say there are ten tax headings under which people pay tax, then some of those headings one might have no liability, some are avoidable, and some are possible to avoid by tax planning and some are impossible to avoid. Also some are tempting to evade.

I am not liable to betting tax because I do not bet. I do not pay inheritance tax because I do not happen to be so lucky. I pay VAT on what I buy because the seller charges me. [Now I do not know if the seller evades the tax, but I trust the Revenue are up to that trick]. I pay income tax as required by the Revenue and I am not in the position to avoid or evade it through tax planning.

Now, if I do not own a house, I pay no LPT, but if I do, I must pay the tax as it is impossible to hide the house. Now I could evade some of it by undeclaring the value, but even that can be found out.

Overall, taxes in general are not onerous for most people, but no-one likes paying tax.

machaseh

Chips Lovell wrote: »

Secondly, the broader the tax base, the trickier it becomes to avoid taxes. Wealth taxes in particular, such as the Property Tax, are quite "sticky" too, as in hard to avoid. For example, For example, if the top rate of tax is too high, people are less inclined to take a promotion or do overtime because a significant wedge of that disappears in Income Tax. They either turn down the work or demand more from their employer to compensate for the tax wedge, thus driving up costs. A Property Tax doesn't have the same impact, in that your working decisions aren't affected by your liability.

You wouldn't take a promotion because you end up in a higher tax bracket? Ah come here now. That's BS of the highest order.

Of course it might drive up wages of higher-level jobs in the long run, but that is not necessarily a bad thing.

That said I do agree that taxation should be focused on taxing stagnant wealth more than income. Property taxes, wealth taxes, inheritance taxes and the like. These stagnant wealth pools are what keep social mobility down more so than just a high income per se.

efanton

This broadening the tax base nonsense is just that nonsense.

People are advocating property taxes via LPT, stamp duty etc, and yet we when have property bubbles and crashes its these very taxes that cause government estimates and revenues to vary widely.

The logic behind broadening the tax base is so that government estimates and revenues are predictable and reliable. Any tax related to property would be the LEAST reliable form of tax. That's one of the reasons I would advocate scrapping LPT or whatever similar tax is used to fund local services and amenities.

Can anyone explain to me how LPT could possibly be a more reliable tax than income tax or VAT?