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Uh-oh… Eamon Gilmore has spoken about property taxes… July 19, 2010

Posted by WorldbyStorm in Irish Politics, The Left.
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…Not sure that his words are an indication of great strides about to be made by the Labour Party in the future. For he has opined that…

People who are struggling to pay their mortgage cannot be asked to pay a property tax on top of that…

“It would be perverse to ask people to pay a property tax on a property on which they are paying a mortgage and the size of the mortgage is now in many cases more than what the value of what the property is worth,” he added.

Yes. And no. People who are paying rent have had to take wage cuts, people who are unemployed are facing increased consumption taxes [if Dan O’Brien is to be believed]. He’ll have to come up with something better than that. He continues…

….he opposed the idea as many people had already paid a property tax in the form of stamp duty.

The obsession with stamp duties verges dangerously close to the concerns of the Sunday Independent. Yet it’s a curious argument which allows previous payment of stamp duty to trump any future tax.

But there’s ways and means. A property tax could be introduced gradually, with the necessary safeguards to ensure that those unable to pay were protected. Or better still we could hear about a general property tax rather than one limited to houses. But so far nothing.

The Commission on Taxation Report, released last year, a report that in and of itself was fundamentally and explicitly driven by an adherence to the ‘low-tax model’, called for a property tax.

The crying need to broaden the tax base in order to shift away from an over-dependence on a narrow range of taxes is one would have hoped near inarguable at this point. And yet everything seems to indicate that rather than dealing with this issue there’s a populist shift away from it on the part of many parties.

And the principle, that property taxes should be introduced, is something that one would have hoped the social democratic standard bearer could stand behind. That it doesn’t is problematic.

Addendum:

The more I think about it the more it seems that the stamp duty reference was carefully calibrated. And you know what? I think for better or for worse, for worse, it will work in this appeal to middle Ireland. And yet I also think back to the bonfire of the taxes indulged in by almost all parties [Labour too with the absurd idea of yet further cuts in income tax despite the very evident overheating of the economy in the run up to 2007] prior to the last election and I wonder at the credibility of these sorts of statements.

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Comments»

1. Paul Doran - July 19, 2010

Eamon Gilmore. Is he the leader of the Labour Party, that party that represents the working class.He has spoken and it wasn’t on Morning Ireland.Goodness , this is breathtaking.Is it on Youtube, Can we see this.The Labour Party.It see notihng and speaks even less.

Eamon Gilmore. Pat Rabbite, Frank Ross is it the same party, I can’t believe it

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Budapestkick - July 19, 2010

Er, what?

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2. Bartley - July 19, 2010

People who are paying rent have had to take wage cuts, people who are unemployed are facing increased consumption taxes

You dont see the difference?

The wage cuts werent predicated on the earner being a tenant, as opposed to a home-owner. In fact some of groups hit hardest by pay-cuts have higher than average rates of home ownership.

Neither will the consumption tax increases be targeted at the unemployed by dint of their joblessness.

The point about property tax is that singles out the owners of residential property for payment of an extra tax, when often that property is much more of a liability than an asset.

The other point is that it wont so much broaden the tax base, as deepen it. In the sense that those not exempt from the new tax would be the very people who already pay the vast bulk of income tax.

Unless of course retirees, low earners and those on welfare dont get a waiver. In which case the base will indeed be broadened, but not in ways that many around here would support.

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WorldbyStorm - July 19, 2010

Are you not slightly missing the point I made which is that many many different groups of people, I literally chose a few examples at random, face different problems and that it’s curious that homeowners (of which by the way I am one) are singled out in the discourse as if they suffer uniquely.

My second point was that vastly preferable to a house-property tax was a general property tax or the fabled ‘wealth’ tax.

BTW, unemployed people [and low earners] will naturally bear the brunt of consumption taxes such as VAT. How on earth could it be otherwise?

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Bartley - July 20, 2010

curious that homeowners (of which by the way I am one) are singled out in the discourse as if they suffer uniquely.

Well homeowners would suffer uniquely if a tax were imposed on their home ownership.

If that asset were income-generating, owned outright and appreciating in value, it wouldnt be as much of an issue.

Instead for many, their home saps their income, they don\’t actually own the house at all and instead owe the bank more than its worth, and the size of that liability is widening all the time as the value drops.

The concept seems to be close to the imputed rent idea underpinning the old schedule A tax in the UK … i.e. an owner-occupier should be taxed on the supposed rent they pay themselves to live in their own house. That idea is just lu-la, to put it mildly.

Also, dreaming up new ways to tax the same people is not widening the tax net. Such taxes would have to be paid out of earned income anyway, so the effect is similar to increasing income tax rates. Except that its less progressive (as no account is taken of actual income level) and is discriminatory as it doesnt apply to all income earners.

Broadening the tax net implicitly involves either increasing the pool of people who tax directly, or else widening the set of economic activities that attract taxation.

And owning a house in negative equity is not a beneficial economic activity.

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WorldbyStorm - July 20, 2010

Bartley, not sure that’s the most convincing argument re homeowners suffering uniquely, precisely the same point can be made that car owners ‘suffer uniquely’ too, yet curiously we tax them too. Simply because a tax is on a unique item doesn’t make it inconceivable to do.

Re your other points, as you’ll have noted from the off I have pointed out caveats on the very point you make (ability to pay) and that broadening the tax net must involve other taxes in addition to property taxes (however we define such taxes, and my preference is for a general property tax). In relation to the value of property I’m agnostic about that. It strikes me that the main issue there is ability to pay, not the issue of whether the nominal value decreases or rises (obviously those latter have some impact, but the former is the crucial one). Or to put it another way, as long as a mortgage is sustainable financially then whether overall values decrease or increase is somewhat notional unless one intends to sell.

But again, what concerns me above all is that no effort is made to articulate a position that taxation will and must be expanded if the services that are necessary are to be funded.

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3. Ronan L - July 19, 2010

One other thing re stamp duty: grandfather it in, with tax credits for those who have had a recent stamp duty bill: e.g. if brought in in 2011 and you paid €30k in stamp duty, you get a €30k property tax credit. 2009? You get 10% less tax credits… 2001? You get 90% less tax credits.

Transparent and at least fairer than doing nothing. (This could of course be tweaked, but at least it’s a starting point.) Shameless plug on the same topic:
http://www.ronanlyons.com/2010/07/13/falling-house-prices-or-not-ireland-needs-a-property-tax/

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WorldbyStorm - July 19, 2010

I think the point about tweaking is central to this. I’m absolutely agin imposing taxes with no regard for ability to pay, or indeed the efficacy of said taxes.

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WorldbyStorm - July 19, 2010

And sorry, to add to your point, that’s precisely the way I’d do it re grandfathering it in.

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4. Mark P - July 19, 2010

The problem with a residential property tax is not that it’s in principle unfair or regressive but that the way it would be implemented by this government (or by a FG/Lab government) is likely to be deeply obnoxious.

You could conceivably implement a property tax that was essentially a wealth tax and I suspect that few here would have any problem with that. A property tax that is essentially a tax on almost all Dublin homeowners, including the large cohort of those homeowners who are struggling with vastly inflated morgages and/or negative equity, is another thing entirely.

I do not believe for a second that the government intends to implement (or that a FG/Lab government would dream of implementing) a wealth tax designed to raise large amounts of money from the wealthiest sections of society.

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WorldbyStorm - July 19, 2010

Absolutely, hence my point in the OP that there’s ways and means. And indeed RL’s point above is that even in the context of a pure RPT there would be ways of preventing it impacting

But the point that we need to widen the tax base is central. Bartley makes the point that an RPT would impact on many of those paying income tax. Surely, but the overlap isn’t precise.

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Mark P - July 19, 2010

Yes, the point about “widening the tax base” is central.

It’s a basically misleading point because, of course, there is practically nobody outside the “tax base” in this country. The implication is that those who are so low paid that they don’t pay income tax aren’t paying tax at all. That’s not true at all – one of the big problems with this country is that so much of our taxation is done through measures a great deal less progressive than income tax or corportation tax.

The argument that a property tax is wrong because it strikes the wealthier harder and those people are already paying more income tax is a straightforward statement of the class interest of the wealthy. If that was really what a property tax was all about it, I’d be entirely in favour of it. The problem is that it in practice it’s likely to be used to hit ordinary workers, particularly in Dublin and including those struggling with inflated mortgages, very hard.

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WorldbyStorm - July 19, 2010

But I’m not actually talking about widening it in those terms. And if you look at the way in which I use the term in the above post and others it’s very clear that what I’m talking about are different revenue streams rather than simply trying to incorporate ‘more’ people into it, although I do think that there is an argue based on citizenship that all who earn should be taxed on their income even if much of that is given back in the form of some sort of relief.

In any event, and given that most parties appear to resile from an RPT, the actual nature of that form of taxation as I use the term is clearly distinct from that which others use it and shouldn’t prevent those of us on the left articulating an argument for such taxation in a proper form.

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Mark P - July 19, 2010

I wasn’t having a go at you there!

I was talking more generally about the “widen the tax net” argument, based as it is on the lie that there are substantial numbers of people outside of the net at the moment. I fully accept that you were arguing something distinct. And I agree with you that there is a big difference between a property tax as wealth tax and a property tax in the form that one is actually likely to be proposed.

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WorldbyStorm - July 19, 2010

No, my bad. Just wanted to make it clear where I stood, sorry the peeved tone entered my response.

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5. Paul Doran - July 19, 2010

This is too much. Raise the tax on anyone earning over 75,000 per year, Put a stop to the rebates for all Landlords, double the taxation of all 2nd homes.No allowances for ALL Tds Living within 2 hours driving distance of the Dail.Abolish the Defence Forces. Ablolish the Senead.No one employed by the State gets money for work carried out unless a receipt is given for that work.Create State Bank.

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6. irishelectionliterature - July 19, 2010

What was Gilmore going to say?
He had to say he wouldn’t introduce it.

With property Tax you are taxing an asset. But how many properties at this stage are actually assets?
How many of us if we tried to sell in the morning would come out with a profit or even break even?
In all likelihood its those who did not pay stamp duty and bought new homes that are in most difficulty.
They already have a property that is down in value. They are probably in negative equity and if they were unlucky enough to buy an apartment they have little or no chance to sell without incurring a substantial loss.
We also have the spectre of further interest rate rises looming.

It is of course Anti Dublin too.

We have of course been down this road before…..
A Fine Gael Anti Property Tax Leaflet from 1994 http://wp.me/pDoVn-14H

A PD Anti Property Tax Leaflet from 1997 http://wp.me/pDoVn-2r3

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WorldbyStorm - July 19, 2010

Michael Taft has a not dissimilar line to what you’re arguing here… http://notesonthefront.typepad.com/politicaleconomy/2009/07/risking-ayn-rands-ire.html

But I hope what I’m arguing for is something along those lines too or at least a Labour Party honest enough to say, ‘we need some form of property taxation and this is how we’ll do it in a progressive way’.

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irishelectionliterature - July 19, 2010

Its very difficult to do ‘in a progressive way’, unless you start factoring in location, mortgage value, house value, house size, number of occupants, family income and so on…. even then there is no fair formula.
I wonder what the amount of Mortgage Interest Relief is at the minute versus the projected take from a property tax?

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7. Captain Rock - July 19, 2010

Paul Doran, wouldn’t abolishing the Defence Forces actually create unemployment? At least 10,000 job losses, and knock effect of maintainence, catering, local business jobs linked to barracks across the state? What are you proposing, a workers militia?

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8. HAL - July 19, 2010

Not been cynical and I know we need an army,but what exactly do they do.Im all for tripling the size of the Navy and having a marine corp.we see their worth, but the army just seems to be needed for servicing the army.

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9. Paul Doran - July 20, 2010

Captain Rock.Based on what you are saying . Keep all Armies. We don’t need them. Armies are needed.People do become unemployed,
I have many friends in the Army.It is a joke.

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Budapestkick - July 20, 2010

What?

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10. Bartley - July 20, 2010

WbS …

precisely the same point can be made that car owners suffer uniquely too, yet curiously we tax them too.

Not quite the same thing. We tax the initial purchase of the car (VRT), the use of the road infrastructure (motor tax & tolls) and the purchase of fuel (VAT & excise). All these taxes apply whether the car is owned outright, leased or rented by the driver.

However we do not tax the continued ownership of a car. If you want to take a car off the road, you can do so and be liable for no further taxes.

Similarly stamp duty is paid on the initial purchase of a house, service charges are paid to fund refuse collection infrastructure used by the householder, and VAT etc. applies to the energy that heats and lights up the house.

The key difference would be imposing a further tax on simply owning the property, when in many cases that ownership boils down to being liable for a very large debt.

It strikes me that the main issue there is ability to pay, not the issue of whether the nominal value decreases or rises

It depends on what is being taxed here. If the value rises, then there is a notional gain that the householder enjoys. Even if this gain hasnt been realized, it could still make sense to tax it. Similar logic applies to tax imposed on the profits from share options. The notional gain is taxed on exercise-and-hold even if the paper profit never materializes.

Whereas if the house value has dropped since the purchase occurred, we would be applying a tax to a loss, a concept that doesnt exist in other areas of taxation. If you buy shares and these fall in value, there is no tax liability. In fact you can write off the loss against the tax on future profits.

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WorldbyStorm - July 20, 2010

As I noted in my earlier response, I’ve couched all this in caveats which would deal with at least some of what you present as problems.

However where we have a division I think fundamentally is that I don’t see a tax on property, be it a house or some other form, as per se a bad thing or in some way perverse. I don’t think that ownership in and of itself is different to consumption or purchase, etc, and I’m almost certain that that’s not a reason to not tax property. I do agree with you that the very nature of house ownership (although this too is true of cars for the vast majority) is one where that ownership results in liabilities – ownership being essentially shared (!) between banks and ‘owners’, but again that too doesn’t predicate per se against taxation – although it’s a damn good argument to tax the banks through such property too all things being equal.

At base this comes down to whether you think some taxation on houses as part of a broader property tax is a good or a bad thing. My personal opinion is that as part of that broader reworking of the tax base it is a good thing. You take a different opinion and that’s grand. Clearly we’re not going to change each others minds on this.

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11. Oh Eamon, how power changed you… | Machholz's Blog - April 19, 2012

[…] Uh-oh… Eamon Gilmore has spoken about property taxes… (cedarlounge.wordpress.com) […]

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12. Bankrupt St Vincent’s Hospital To Sell Building - - March 27, 2015

[…] Uh-oh… Eamon Gilmore has spoken about property taxes… « The Cedar … […]

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