Budget: Threat to Tax Homeowners on the Value of Their Property.

I've just heard on the Radio, the latest stupid idea considered by Labour as part of the budget. 

Taxing homeowners on the value of their property (theresholds vary).

Let's say your house is worth a million pounds. How did it gain that value? Did it attain those lofty heights through some magic?

No , it gained value through government policy. It's government policy that has not provided the new hoses that are required in order to keep the price of houses down.

So the first point against this "Wealth Tax" is it's highly immoral for a government to artificially inflate the value of an asset (your house) and then once it attains a certain value, to tax you on it.

The second point is that most houses are subject to a mortgage. i.e. you are actually in debt to the value of the house. It's in effect a negative asset. So is the government really saying they are going to tax you on the debt you owe? 

Not only that, you don't actually own a house while it's subject to a mortgage. The Bank or Building Society hold the deeds of the house until the mortgage is paid off. 

So is the government really going to tax you on something you don't actually own?

Is the government going to tax the lender and the occupier pro rata on what percentage of the house each owns? As an example, if you've paid off 20% of your mortgage, do you pay 20% of the tax payable and the lender pay the 80%? Who is going to work that out? How much will it cost the government to employ extra people to work that out?

If the government accepts the above and only taxes houses that are owned outright, don't forget that all other houses have increased in price at the same rate. So for instance you bought a house 10 years ago at £500,000 and it's now worth £1 million, ALL the other houses in the area have increased in price at the same rate. 

So the COMPARABLE VALUE hasn't actually increased. Yes the monetary amount is higher, but that amount only buys you the same asset.

Again, is it moral for the government to tax something that hasn't actually increased in value compared to similar assets?

Now, you could argue that if you buy a house for 50K, spend 5K doing it up and you sell it for 100K, then there should be a tax on the profit. But there already is capital gains tax, or corporation tax payable on that.

I could go on and on about the immorality of such a tax, how it is unworkable, how it would be expensive to administer.

There is talk of local councils administering the scheme, basically reporting property values back to HMRC. But that's an extra burden on local government for which they are not being paid. 

I wouldn't be surprised if local councils refused to administer the scheme. And I would especially expect Reform councils to refuse to comply.