If you were entertaining any idea that changes to property and land taxes could help to curb the volatility of the UK housing market then just stop it. That is the message of a new report Taxing Issues? released by the Policy Exchange this week. This is a highly political document, and fascinating as a result.
The think tank offers a host of reasons why property and land taxes just won’t do the trick.
The report starts from the premise, based on OECD figures, that the UK already has the most highly taxed property in the developed world. This premise is, if not erroneous, then rather misleading. The OECD includes all sorts of things in the calculation to arrive at that figure – including business rates. Business rates are largely irrelevant to managing the housing market. Except the rhetorical strategy adopted by Taxing Issues? means that they aren’t.
The reasons for thinking property taxes will fail to deliver reduced volatility are a melange of some reasonable points, some basic economic theory, some casual empiricism – including making brief reference to a range of non-comparable taxes in other countries, and a massive dose of street-fighting politics. [Read more...]