# Make mortgage interest payments and childcare costs tax deductible while at the same time increasing property tax on PPR's



## Purple (4 Aug 2022)

There is a serious flaw in the conversation about wealth, what it is and how we tax it. 
Income is not wealth, in the context of housing it is what we use to acquire someone else's wealth (by paying off a mortgage) or to access someone else's wealth (by paying rent).

Here's an example of two couples, one with a high income but no wealth, the other with aa low income and considerable wealth. Figures are approximate.




Married couple with 2 kids in primary school and a mortgage.

Joint income                                                      €130,000
Income tax, USC & PRSI                                      €40,000
Mortgage of €450k over 25 years cost PA          €30,000
Crèche cost €21,000

Income less tax, cost of housing and childcare  €39,000



Retired couple with no kids who own their home.

Joint Income                                                       €40,000
Income tax, USC & PRSI                                       €1,000
Housing cost                                                               €0



Income less tax, cost of housing and childcare €39,000



The couple on €130k a year are regarded as rich as they have a high income.

The couple on €40k a year are regarded as moderately poor as they have a low income.


The first couple are paying a third of their after-tax income to access someone else’s wealth.
The second couple have wealth; a house with no mortgage.
We need to stop treating income as wealth. It is not the same thing.


If you don’t have wealth you have to buy access to it from after tax income. If you have wealth you are not taxed on it at all. If our objective is to have a fair and equitable taxation system then we need to significantly increase property tax on PPR’s while at the same time reintroduce mortgage interest relief for PPR’s. Making childcare costs tax deductible would also desirable.


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## T McGibney (4 Aug 2022)

Make childcare costs tax-deductible and provider prices will pretty much immediately inflate by 30-50%. Eventually they may well double. "Sure you can claim the tax relief on it". 

If at the same time you significantly increase property tax on PPR’s, you will be robbing families on the double.


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## Purple (4 Aug 2022)

T McGibney said:


> Make childcare costs tax-deductible and provider prices will pretty much immediately inflate by 30-50%. Eventually they may well double. "Sure you can claim the tax relief on it".


How do you know?
There are direct government handouts at the moment. Get rid of them. There are low barriers to entry into the market so competition should put a ceiling on prices.


T McGibney said:


> If at the same time you significantly increase property tax on PPR’s, you will be robbing families on the double.


Every home owner would pay property tax. The majority don't purchase childcare so the net cost to those households who do will be lower. They are also the households who are paying the biggest mortgages so they are most likely to benefit from the relief on their mortgage interest payment.

Making mortgage interest tax deductible and finding it through increases in property tax is certainly more straightforward. If it's a site value based tax and it is progressive it should also act to reduce house prices.


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## jim (4 Aug 2022)

Purple said:


> If you don’t have wealth you have to buy access to it from after tax income. If you have wealth you are not taxed on it at all


But you are taxed in acquiring the wealth in the first place. Where do you draw the line?


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## T McGibney (4 Aug 2022)

Purple said:


> How do you know?


Basic economics.


Purple said:


> There are direct government handouts at the moment. Get rid of them.


"That's why we have no option but to hook up our prices."


Purple said:


> *There are low barriers to entry* into the market so competition should put a ceiling on prices.


Really - Planning? HSE? Elf & safety?


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## Purple (4 Aug 2022)

jim said:


> But you are taxed in acquiring the wealth in the first place. Where do you draw the line?


Not if you acquired most of it though inflation caused by quantitative easing. People who bought their house for £30k and are now sitting on €900k didn't pay any tax on that.


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## jim (4 Aug 2022)

Purple said:


> Not if you acquired most of it though inflation caused by quantitative easing. People who bought their house for £30k and are now sitting on €900k didn't pay any tax on that.


But thats an extreme example. You cant apply such an example to public tax policy when equally you can use an eample of someone thats acquired their 500k home through working hard and spending their after tax savings on the deposit and their after tax income on mortgage repayments. Then you want to tax their acquired wealth ie the house? it seems unfair and like a double whammy


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## Purple (4 Aug 2022)

T McGibney said:


> Basic economics.


No, that doesn't answer it. Basic economic would say that the market will set the price. We know that we don't have a proper open market for services in Ireland but this isn't nearly as restrictive as many services. 



T McGibney said:


> "That's why we have no option but to hook up our prices.


Yep, they'd go up alright but there's a shortage of places now and that's driving up prices. 


T McGibney said:


> Really - Planning?


C'mon, that's hardly a massive hurdle.


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## T McGibney (4 Aug 2022)

Purple said:


> No, that doesn't answer it. *Basic economic would say that the market will set the price. We know that we don't have a proper open market for services in Ireland *but this isn't nearly as restrictive as many services.


Thanks for agreeing with me.


Purple said:


> *Yep, they'd go up alright* but there's a shortage of places now and that's driving up prices.


Ditto.


Purple said:


> C'mon, that's hardly a massive hurdle.


Try setting up a creche in your house and let us know in due course how you get on.


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## Purple (4 Aug 2022)

jim said:


> But thats an extreme example. You cant apply such an example to public tax policy when equally you can use an eample of someone thats acquired their 500k home through working hard and spending their after tax savings on the deposit and their after tax income on mortgage repayments. Then you want to tax their acquired wealth ie the house? it seems unfair and like a double whammy


Sure, all taxes are unfair to someone. If they haven't made a killing through price appreciation then they're probably still paying a mortgage. They'll be getting their income tax back on the interest element of that. That'll more than cover the increase in property tax. 
My property tax on a house worth €1.2 million was around €100 a month. The mortgage was €3400 a month and a good chunk of that was interest. Even if property tax was tripled I'd still be much better off.


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## Purple (4 Aug 2022)

T McGibney said:


> Thanks for agreeing with me.


You have misunderstood my reply. 


T McGibney said:


> Ditto.


Ditto


T McGibney said:


> Try setting up a creche in your house and let us know how you in due course how you get on.


Why would I do that? I've talked to Crèche owners and I've had kids in childcare.


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## T McGibney (4 Aug 2022)

Purple said:


> Why would I do that? I've talked to Crèche owners and I've had kids in childcare.


To see how easy or hard it is to get planning for a new creche or childcare facility. You've said its not a massive hurdle. I'd like to see you substantiate that.


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## Purple (4 Aug 2022)

T McGibney said:


> To see how easy or hard it is to get planning for a new creche or childcare facility. You've said its not a massive hurdle. I'd like to see you substantiate that.


Are you saying that it is a massive hurdle?


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## T McGibney (4 Aug 2022)

Purple said:


> Are you saying that it is a massive hurdle?


You used the term, not me. You also said "There are low barriers to entry". Maybe you can substantiate that.


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## Purple (4 Aug 2022)

T McGibney said:


> You used the term, not me.


That's right. If you are suggesting otherwise then offer something more than a contrarian view. 


T McGibney said:


> You also said "There are low barriers to entry". Maybe you can substantiate that.


Why? If you think otherwise then offer reason. If you think that there aren't low barriers to entry then maybe you can substantiate that. That's how discussions work.

This is a discussion forum, if you want to have a discussion you're in the right place but that's not what you are doing.


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## T McGibney (4 Aug 2022)

Purple said:


> If you think that there aren't low barriers to entry then maybe you can substantiate that.


You made the claim.


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## Purple (4 Aug 2022)

T McGibney said:


> You made the claim.


Sure, I'm going on my discussion with a crèche owner who used to work in a chain and then set one up in her house. She had industry experience and a reputation, was vetted, knew the procedures, understood the cost base etc. She didn't find it difficult. 

It would be unusual for someone with no experience of a sector to open a business within that sector. That's why I found it strange that you proposed that I try opening a Creche as if that would be indicative of the typical experience of someone doing so. 
If you have an issue with the net cost to the State then by all means chime in with some figures. It's just a proposal and I'm more than willing to be shown that it doesn't stack up.

I'd be interested in hearing your views on making mortgage interest tax deductible and funding it through property tax increases, particularly since the Central Bank lending rules should, I think, keep a lid on prices.


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## T McGibney (4 Aug 2022)

Purple said:


> It would be unusual for someone with no experience of a sector to open a business within that sector.


So there *are* barriers to entry.


Purple said:


> If you have an issue with the net cost to the State


I never mentioned the net cost to the State.


Purple said:


> I'd be interested in hearing your views on making mortgage interest tax deductible and funding it through property tax increases, particularly since the Central Bank lending rules should, I think, keep a lid on prices.


I have no particular opinion either way on that, although the Irish experience has generally been that tax reliefs are temporary and tax hikes are permanent.


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## TRS30 (4 Aug 2022)

I fall into the first category and don't feel wealthy, rich or even well off.  I fear that a left leaning government would see me as all 3 and treat me accordingly.


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## Bow tie (4 Aug 2022)

Purple said:


> Not if you acquired most of it though inflation caused by quantitative easing. People who bought their house for £30k and are now sitting on €900k didn't pay any tax on that.


But that 'wave' of purchasers will give way to those who paid much higher and didn't benefit and then you have caused the same impact to them!?
Also, not sure destabilising older people's housing situation is a good idea at any time but with the oncoming energy crisis!?


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## Purple (4 Aug 2022)

T McGibney said:


> So there *are* barriers to entry.


I never said there weren’t.


T McGibney said:


> I never mentioned the net cost to the State.


I know.


T McGibney said:


> I have no particular opinion either way on that, although the Irish experience has generally been that tax reliefs are temporary and tax hikes are permanent.


Yep, I agree.


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## Purple (4 Aug 2022)

Bow tie said:


> But that 'wave' of purchasers will give way to those who paid much higher and didn't benefit and then you have caused the same impact to them!?


Yep, taxes are never fair to everyone but the latter group of people will get tax relief on their mortgage interest which will be greater than their property tax. 


Bow tie said:


> Also, not sure destabilising older people's housing situation is a good idea at any time but with the oncoming energy crisis!?


Who’s talking about destabilising older people? They are the richest cohort in the country with the most wealth and the highest disposable income. 
If they really can’t afford to pay the tax just let it roll up and take it from their estate when they die.


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## Purple (4 Aug 2022)

TRS30 said:


> I fall into the first category and don't feel wealthy, rich or even well off.  I fear that a left leaning government would see me as all 3 and treat me accordingly.


The current one sees you as all three and treats you accordingly. The next further left government will only make it worse.


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## Bow tie (5 Aug 2022)

I have fallen into the first cohort but usually with less income for most years since having a house and kids. Income usually rises over a lifetime. 
I am hopeful I will then be at a stage where I arrive at cohort 2, and am allowed to live a smaller income life with whatever I have built up which was already taxed. 
After paying throughout life over and over, you also want to penalise a person who makes it to cohort 2. I would say that they should be allowed benefit from a lifetime of work- this is the notion that I was raised with, if I worked hard I would benefit.

Take that couple who now live in a more expensive house through inflation/time, or an older person who was never high income and inherited a family home in a now gentrified town location. You are now levying a penal property tax which will either have them deciding between necessities or moving at a time in their life when they shouldn't have to.


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## Purple (5 Aug 2022)

Bow tie said:


> I have fallen into the first cohort but usually with less income for most years since having a house and kids. Income usually rises over a lifetime.
> I am hopeful I will then be at a stage where I arrive at cohort 2, and am allowed to live a smaller income life with whatever I have built up which was already taxed.
> After paying throughout life over and over, you also want to penalise a person who makes it to cohort 2. I would say that they should be allowed benefit from a lifetime of work- this is the notion that I was raised with, if I worked hard I would benefit.


Who says every retired person worked hard all their life? Many did but plenty didn't.
A tripling of the property tax rates would still constitute a small tax. If the pensioner happened to not be able to afford it then it could be deferred until they die.


Bow tie said:


> Take that couple who now live in a more expensive house through inflation/time, or an older person who was never high income and inherited a family home in a now gentrified town location. You are now levying a penal property tax which will either have them deciding between necessities or moving at a time in their life when they shouldn't have to.


See above and do remember that children are far more likely to live in poverty than retirees. As for deciding between necessities or moving, if you are living on your own in a house worth a €750k to million euro and you are just about getting by then you should downsize.


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## odyssey06 (5 Aug 2022)

Purple said:


> Who says every retired person worked hard all their life? Many did but plenty didn't.
> A tripling of the property tax rates would still constitute a small tax. If the pensioner happened to not be able to afford it then it could be deferred until they die.
> 
> See above and do remember that children are far more likely to live in poverty than retirees. As for deciding between necessities or moving, if you are living on your own in a house worth a €750k to million euro and you are just about getting by then you should downsize.


But in terms of your specific proposal... you're not comparing 'children'. Your creche proposal will benefit families who are paying creches fees and paying tax. Are they more likely to be in poverty than retirees on state pension in their own homes? Than all retirees owning their own home? Possibly but it's not as clear cut.


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## Bow tie (5 Aug 2022)

Purple said:


> Who says every retired person worked hard all their life? Many did but plenty didn't.
> A tripling of the property tax rates would still constitute a small tax. If the pensioner happened to not be able to afford it then it could be deferred until they die.
> 
> See above and do remember that children are far more likely to live in poverty than retirees. As for deciding between necessities or moving, if you are living on your own in a house worth a €750k to million euro and you are just about getting by then you should downsize.


But downsizing should be a personal decision not a necessity at the oldest point in your life. This forcing of hand and the state with their hand in everything... we purport to be a socially democratic state but not communist.
Leaving it til I die is another argument, but similar, again not a fan of the state getting it's grab on everything in life (sometimes for a second and third time).


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## Bow tie (5 Aug 2022)

odyssey06 said:


> But in terms of your specific proposal... you're not comparing 'children'. Your creche proposal will benefit families who are paying creches fees and paying tax. Are they more likely to be in poverty than retirees on state pension in their own homes? Than all retirees owning their own home? Possibly but it's not as clear cut.


And it doesn't consider transfers back for children- take ECCE and child benefit at these stages.


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## Purple (5 Aug 2022)

odyssey06 said:


> But in terms of your specific proposal... you're not comparing 'children'. Your creche proposal will benefit families who are paying creches fees and paying tax. Are they more likely to be in poverty than retirees on state pension in their own homes?


I don't know. It's a proposal for discussion. Do remember that the property tax can be deferred if they can't pay it. Also remember that every property owner would be paying it, not just pensioners. 

I'm aware that the proposal will benefit families that are paying tax. That's the objective. Despite high incomes many are struggling and have much lower levels of real disposable income because of the high cost of housing and the high cost of childcare. The bottom line is that wealth retention is not taxed but wealth acquisition (and therefore creation) is taxed very heavily. I find that inequitable. The State is rubbish at delivering services so the last thing we need is a state run after school service. This is an alternative. 



odyssey06 said:


> Than all retirees owning their own home? Possibly but it's not as clear cut.


If they don't own their home they won't be paying the tax. If they still have a mortgage then they'll be benefitting from the interest tax relief. They could get the latter and defer the former if necessary.


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## Purple (5 Aug 2022)

Bow tie said:


> But downsizing should be a personal decision not a necessity at the oldest point in your life. This forcing of hand and the state with their hand in everything... we purport to be a socially democratic state but not communist.


I'm not a communist and I'm not a social democrat in the Irish context. I believe in equality of opportunity but that means taxing those who work less, taxing those with inherited and accumulated wealth a bit more and giving less to those who choose not to work. For example someone who is of sound mind and body who can work and chooses not to should get nothing. I would literally let them starve. That's not the Irish definition of social democracy. 
I do think that someone who has accumulated a large amount of wealth due to Quantitative Easing and Government debt should have to pay more of it in tax. We're all talking about windfall taxes on energy companies at the moment but we're ignoring that us home owners made a killing due to QE because that's what's driven house price inflation. 


Bow tie said:


> Leaving it til I die is another argument, but similar, again not a fan of the state getting it's grab on everything in life (sometimes for a second and third time).


This proposal would mean the State gets a grab on less during life.


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## odyssey06 (5 Aug 2022)

Purple said:


> I don't know. It's a proposal for discussion. Do remember that the property tax can be deferred if they can't pay it. Also remember that every property owner would be paying it, not just pensioners.
> 
> I'm aware that the proposal will benefit families that are paying tax. That's the objective. Despite high incomes many are struggling and have much lower levels of real disposable income because of the high cost of housing and the high cost of childcare. The bottom line is that wealth retention is not taxed but wealth acquisition (and therefore creation) is taxed very heavily. I find that inequitable. The State is rubbish at delivering services so the last thing we need is a state run after school service. This is an alternative.
> 
> ...


It's an interesting proposal. I think another objection is how does this play out if property prices drop significantly? Is the property tax income expected to drop - you are tying is to the asset value of the property.


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## Purple (5 Aug 2022)

odyssey06 said:


> It's an interesting proposal. I think another objection is how does this play out if property prices drop significantly? Is the property tax income expected to drop - you are tying is to the asset value of the property.


Yes, it has to. If it's a progressive tax it would, hopefully, act to reduce prices anyway. A tax tied to the site value, or weighted towards the site value, would be best.


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## T McGibney (5 Aug 2022)

Purple said:


> If it's a progressive tax it would, hopefully, act to reduce prices anyway.


Why and how would it do that? There are already a lot of costs involved in owning and maintaining a house or apartment. Marginal increases in these costs never seem to dampen demand for them.


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## Purple (5 Aug 2022)

T McGibney said:


> Why and how would it do that? There are already a lot of costs involved in owning and maintaining a house or apartment. Marginal increases in these costs never seem to dampen demand for them.


Have bands, say nothing on the fist €250k, 0.5% on the next 250, 0.75% on the next 250, 1% on the next 250 etc. The hope is that would put a few speed ramps in to house price inflation. My figures are just to illustrate the point.


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## T McGibney (5 Aug 2022)

Purple said:


> Have bands, say nothing on the fist €250k, 0.5% on the next 250, 0.75% on the next 250, 1% on the next 250 etc. The hope is that would put a few speed ramps in to house price inflation. My figures are just to illustrate the point.


If you contrive to dampen headline prices by inflating costs of ownership, you're not solving house price inflation though, just moving costs around. You might as well increase stamp duty.


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## Purple (5 Aug 2022)

T McGibney said:


> If you contrive to dampen headline prices by inflating costs of ownership, you're not solving house price inflation though, just moving costs around. You might as well increase stamp duty.


It broadens the tax base and it reduced the cost of purchase. Around 1% of our housing stock changes hands every year so a tax that is applied to all properties should provide a net cost benefit to the 1% who are buying. 
It should be looked at as part of a broader strategy to lower the income tax burden on people earning up to €80-€100k a year. Taxing wealth creation reduced the incentive to create wealth. Taxing wealth retention doesn't. 

We both know that probably won't happen and there's plenty of other ways of reducing the tax burden, the main one being the State wasting less money, but that won't happen either. Obesity costs us billions every year. If we could reduce the number of fatties back to 1980's levels we'd probably have €2-€3 billion a year more to spend on housing or, more likely, just waste elsewhere, but we have to aspire to better as a cynical shrug of the shoulders solves nothing.


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## Bluefin (5 Aug 2022)

Purple said:


> I don't know. It's a proposal for discussion. Do remember that the property tax can be deferred if they can't pay it. Also remember that every property owner would be paying it, not just pensioners.
> 
> I'm aware that the proposal will benefit families that are paying tax. That's the objective. Despite high incomes many are struggling and have much lower levels of real disposable income because of the high cost of housing and the high cost of childcare. The bottom line is that wealth retention is not taxed but wealth acquisition (and therefore creation) is taxed very heavily. I find that inequitable. The State is rubbish at delivering services so the last thing we need is a state run after school service. This is an alternative.
> 
> ...


High cost of childcare is a very real issue but what I can never understand is why people believe they have a right to have large families (>2) and expect the rest of society to pay for this choice. I actually think it's grossly irresponsible where you cannot give each child the same opportunities out of your own resources... What's going to happen when they have 3 young adults in university... How are they going to fund this major expense? State pick up the tab again?


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## T McGibney (5 Aug 2022)

Purple said:


> It broadens the tax base and it reduced the cost of purchase.


It doesn't reduce the cost of purchase, no more than a cheap printer deal tied to expensive ink use reduces the cost of purchasing a printer.


Purple said:


> Around 1% of our housing stock changes hands every year so a tax that is applied to all properties should provide a net cost benefit to the 1% who are buying.
> It should be looked at as part of a broader strategy to lower the income tax burden on people earning up to €80-€100k a year. Taxing wealth creation reduced the incentive to create wealth. Taxing wealth retention doesn't.


Why not just increase stamp duty instead? (At least if it backfires, it's easier to reverse than LPT).


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## T McGibney (5 Aug 2022)

Bluefin said:


> High cost of childcare is a very real issue but what I can never understand is why people believe they have a right to have large families (>2) and expect the rest of society to pay for this choice. I actually think it's grossly irresponsible where you cannot give each child the same opportunities out of your own resources... What's going to happen when they have 3 young adults in university... How are they going to fund this major expense? State pick up the tab again?


The looming demographic crisis will be fun. Not.


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## Purple (5 Aug 2022)

Bluefin said:


> High cost of childcare is a very real issue but what I can never understand is why people believe they have a right to have large families (>2) and expect the rest of society to pay for this choice. I actually think it's grossly irresponsible where you cannot give each child the same opportunities out of your own resources... What's going to happen when they have 3 young adults in university... How are they going to fund this major expense? State pick up the tab again?


Poor people have the most kids. It costs the State around €8k a year to educate each child so most people with children are net recipients. The point is that when they grow up they will become net contributors. We subsidise children because they will have an economic value just as we subsidise older people because they used to have an economic value. 

If we are going to have less children then we have to have fewer retirees. That means they either work longer or we start killing them off. I'm okay with either option.


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## Purple (5 Aug 2022)

T McGibney said:


> It doesn't reduce the cost of purchase, no more than a cheap printer deal tied to expensive ink use reduces the cost of purchasing a printer.


Why do you think that?


T McGibney said:


> Why not just increase stamp duty instead? (At least if it backfires, it's easier to reverse than LPT).


Because that's a transaction tax which is only paid by the people who buy the 1% of properties which change hands. A wealth tax is fairer and less volatile.


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## T McGibney (5 Aug 2022)

Purple said:


> Why do you think that?


Because it's a truism that the cost of purchasing any property, especially a home, involves more than the price you pay to acquire it. 


Purple said:


> Because that's a transaction tax which is only paid by the people who buy the 1% of properties which change hands. A wealth tax is fairer and less volatile.


You're not proposing a wealth tax though.


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## Bluefin (5 Aug 2022)

Where's the sweet spot purple.. . Plenty of families around me with both parents working in well paid jobs with 3/4 kids? 

With the climate changes (disaster) on its way, ireland may become a very attractive destination in the not to distant future fot net migration... If only we humans could solve the bloody housing issues


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## Purple (5 Aug 2022)

T McGibney said:


> Because it's a truism that the cost of purchasing any property, especially a home, involves more than the price you pay to acquire it.


Yes, but that doesn't explain why you thing it doesn't reduce the cost of purchase.


T McGibney said:


> You're not proposing a wealth tax though.


Most wealth is held in the form of property. A property tax is the best form of wealth tax.


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## Purple (5 Aug 2022)

Bluefin said:


> Where's the sweet spot purple.. . Plenty of families around me with both parents working in well paid jobs with 3/4 kids?


That's the question alright. I suppose the answer has a lot to do with how economically productive the children will be in the future. 


Bluefin said:


> With the climate changes (disaster) on its way, ireland may become a very attractive destination in the not to distant future fot net migration... If only we humans could solve the bloody housing issues


There's 10 billion people on the planet. The population will top out at around 11-12 billion. There's more than enough resources for us all if we just use them correctly but that topic's been covered on plenty of other threads.


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## T McGibney (5 Aug 2022)

Purple said:


> Yes, but that doesn't explain why you think it doesn't reduce the cost of purchase.


I can't read your mind. You've claimed that it would without explaining your full reasoning. Perhaps you're assuming that a property tax hike will cause house prices to drop disproportionately, but if you are, you haven't said that.


Purple said:


> Most wealth is held in the form of property.


Possible but questionable. I'd have thought that totals in cash and equities combined would be more, but I may be wrong.


Purple said:


> A property tax is the best form of wealth tax.


Again questionable. And that assumes we actually need a wealth tax.


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## Purple (5 Aug 2022)

T McGibney said:


> I can't read your mind. You've claimed that it would without explaining your full reasoning. Perhaps you're assuming that a property tax hike will cause house prices to drop disproportionately, but if you are, you haven't said that.


You said that "It doesn't reduce the cost of purchase". Why do you think that a higher property tax which, as I've already proposed, would be progressive, wouldn't have an impact on house prices? 


T McGibney said:


> Possible but questionable. I'd have thought that totals in cash and equities combined would be more, but I may be wrong.


_"Housing accounts for the bulk of household wealth , valued at €555 billion and it accounts around two thirds of all assets held by households.
Taking account of debt attached to housing, the net figure is still comfortably over half of all net wealth." _Source



T McGibney said:


> Again questionable. And that assumes we actually need a wealth tax.


Yes, it's my opinion and this is a discussion forum. I've already said that I'm in favour of a reduction in tax on wealth creation and an increase in tax on wealth retention.


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## T McGibney (5 Aug 2022)

Purple said:


> You said that "It doesn't reduce the cost of purchase"


Selective quote.


Purple said:


> . Why do you think that a higher property tax which, as I've already proposed, would be progressive, wouldn't have an impact on house prices?


It might well affect house prices, but not the cost of buying a house. You haven't clarified that.


Purple said:


> _"Housing accounts for the bulk of household wealth , valued at €555 billion and it accounts around two thirds of all assets held by households.
> Taking account of debt attached to housing, the net figure is still comfortably over half of all net wealth." _Source


That source is inaccessible. Does it factor in for example, pension entitlements?


Purple said:


> Yes, it's my opinion and this is a discussion forum. I've already said that I'm in favour of a reduction in tax on wealth creation and an increase in tax on wealth retention.


Yes, opinion.


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## Purple (5 Aug 2022)

T McGibney said:


> Selective quote.


I know. It was selected to show the point you were making. 


T McGibney said:


> It might well affect house prices, but not the cost of buying a house. You haven't clarified that.


Do you mean the total costs associated with buying the house or the total cost of ownership over the lifetime of that ownership?


T McGibney said:


> That source is inaccessible. Does it factor in for example, pension entitlements?


They take private DB pension values into account but not State pensions. There are discussions elsewhere on AAM about it.


T McGibney said:


> Yes, opinion.


Now you're getting it!


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## T McGibney (5 Aug 2022)

Purple said:


> Do you mean the total costs associated with buying the house or the total cost of ownership over the lifetime of that ownership?



Both, obviously.

Which are you counting, and why?


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## Bow tie (5 Aug 2022)

A person who created their own wealth...especially in the form of a roof over their and dependants heads for stability purposes (the PPR not investments), and which has already been taxed (frequently at 52%) does deserve to retain said wealth and not be forced down specific pathways.


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## Purple (5 Aug 2022)

T McGibney said:


> Both, obviously.
> 
> Which are you counting, and why?


I'm talking about the former, the cost of purchase. That's when people with young families have the least wealth and the highest outgoings.


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## T McGibney (5 Aug 2022)

Purple said:


> I'm talking about the former, the cost of purchase. That's when people with young families have the least wealth and the highest outgoings.


...which are typically spread over decades with the help of a mortgage.

And that's why when they're buying, they and their finance provider have to concentrate not on the price _per se_ but on future affordability, ie the lifetime cost, which is impacted by any material hikes in property tax, interest rates, and other costs.


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## Purple (5 Aug 2022)

Bow tie said:


> A person who created their own wealth...especially in the form of a roof over their and dependants heads for stability purposes (the PPR not investments), and which has already been taxed (frequently at 52%) does deserve to retain said wealth and not be forced down specific pathways.


But most home owners haven't created their wealth. They have benefitted from a massive increase in house prices which was driven by a massive increase in money supply which was the result of QE. It takes a special type of delusion by a person to think that they are sitting in houses worth 5 times what they paid for it and with pension fund that has more than doubled in value over the last 6-7 years by virtue of their own hard work, intellect and ingenuity.  Think of property tax as a small contribution to the people who have to pay for all of that because that house and pension value is down to luck and an unimaginable burden of debt which has been foisted on future generations.


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## Bow tie (5 Aug 2022)

Nice insults. I created the wealth to purchase the home.


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## Purple (5 Aug 2022)

T McGibney said:


> ...which are typically spread over decades with the help of a mortgage.
> 
> And that's why when they're buying, they and their finance provider have to concentrate not on the price _per se_ but on future affordability, ie the lifetime cost, which is impacted by any material hikes in property tax and other costs.


You are ignoring the other part of the proposal where the revenue from the increases in property tax are used to offset the cost of making mortgage interest tax deductible. One part acts to depress prices in the entire market while the other offers targeted a benefit to buyers.


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## T McGibney (5 Aug 2022)

Purple said:


> You are ignoring the other part of the proposal where the revenue from the increases in property tax are used to offset the cost of making mortgage interest tax deductible.


I am because as I said yesterday in this country tax breaks are temporary while tax hikes are permanent. The mooted tax-deductibility of PPR mortgage interest wouldn't last 2 difficult Budgets and probably not even one.



Purple said:


> One part acts to depress prices in the entire market while the other offers targeted a benefit to buyers.


For the nth time, prices are irrelevant. The new buyer will inevitably be worse off when (not if) their mortgage interest tax deduction is curbed and then scrapped.


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## Purple (5 Aug 2022)

Bow tie said:


> Nice insults. I created the wealth to purchase the home.


It's not an insult. You may well have created the wealth to buy the home but the increase in the price of the home had nothing to do with you. 

I'm currently selling a house. It has increased in value by €600k in the last 10 years. That's €1154 a week. I'd have to earn an extra €2400 a week to net that sort of money.
During the same period my pension increased in value by €400k without me putting a cent into it. That's an increase of a million Euro in net wealth without me contributing anything towards it. People who don't have capital (wealth)  have no chance of making that sort of gain.


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## Purple (5 Aug 2022)

T McGibney said:


> I am because as I said yesterday in this country tax breaks are temporary while tax hikes are permanent. The mooted tax-deductibility of PPR mortgage interest wouldn't last 2 difficult Budgets and probably not even one.
> 
> 
> For the nth time, prices are irrelevant. The new buyer will inevitably be worse off when (not if) their mortgage interest tax deduction is curbed and then scrapped.


So you're not opposed to the proposal, you're opposed to what you think will happen to the proposal. Is that correct? That's a completely different thing.


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## T McGibney (5 Aug 2022)

Purple said:


> So you're not opposed to the proposal, you're opposed to what you think will happen to the proposal. Is that correct? That's a completely different thing.


I'm opposed to it because on the basis of 30+ years experience, I know with reasonably certainty how it would play out in the medium/longer term.


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## T McGibney (5 Aug 2022)

Purple said:


> It's not an insult. You may well have created the wealth to buy the home but the increase in the price of the home had nothing to do with you.


Untrue. If you invest wisely, you will most likely do well. If you invest recklessly or plan badly, anything can happen.


Purple said:


> I'm currently selling a house. It has increased in value by €600k in the last 10 years. That's €1154 a week. I'd have to earn an extra €2400 a week to net that sort of money.
> During the same period my pension increased in value by €400k without me putting a cent into it.


QED. Congrats.


Purple said:


> That's an increase of a million Euro in net wealth *without me contributing anything towards it*.


Untrue.


Purple said:


> People who don't have capital (wealth)  have no chance of making that sort of gain.


And lots of people with more wealth than you back then have lost out in the meantime. There's always a fair degree of survivorship bias in these "my property/pension fund has quadrupled in value" stories.


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## Purple (5 Aug 2022)

T McGibney said:


> I'm opposed to it because on the basis of 30+ years experience, I know with reasonably certainty how it would play out in the medium/longer term.


Okay, so you're opposed to what you think will happen to the proposal, got it.
Based on my 30+ years of experience I see income taxes being concentrated more and more on a small group of earners with no consideration to their actual wealth. I see a continuous conflation of the terms wealth and income to the stage where they seem to be interchangeable now. I know with reasonable certainty that until we change that narrative that problem (and yes, I see it as a problem) will only get worse.


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## Purple (5 Aug 2022)

T McGibney said:


> Untrue. If you invest wisely, you will most likely do well. If you invest recklessly or plan badly, anything can happen.


Owning a house and having a passively managed diversified pension fund isn't "investing wisely". Getting a return of 100% over 10 years is luck.


T McGibney said:


> Untrue.


No, it's true.


T McGibney said:


> And lots of people with more wealth than you back then have lost out in the meantime. There's always a fair degree of survivorship bias in these "my property/pension fund has quadrupled in value" stories.


Lots of people lost money on property and pensions during a decade of QE? I find that hard to believe.


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## T McGibney (5 Aug 2022)

Purple said:


> Based on my 30+ years of experience I see income taxes being concentrated more and more on a small group of earners with no consideration to their actual wealth. I see a continuous conflation of the terms wealth and income to the stage where they seem to be interchangeable now. I know with reasonable certainty that until we change that narrative that problem (and yes, I see it as a problem) will only get worse.


And it hasn't dawned on you that these are the same people by and large who are property owners?
After all, the burden of a higher property tax falls predominantly on the same people who are paying, or who have previously paid, the bulk of income tax.


Purple said:


> Owning a house and having a passively managed diversified pension fund isn't "investing wisely".


It's a lot wiser than the opposite.


Purple said:


> No, it's true.


Untrue, unless you contributed nothing to your pension during that time.


Purple said:


> Lots of people lost money on property and pensions during a decade of QE? I find that hard to believe.


Yes. The country is full of crumbling properties less than 20 years old. And plenty of people unwisely crystallised pension losses around 2010 by sticking their funds into cash and they're still there.


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## Purple (5 Aug 2022)

T McGibney said:


> And it hasn't dawned on you that these are the same people by and large who are property owners?
> After all, the burden of a higher property tax falls predominantly on the same people who are paying, or who have previously paid, the bulk of income tax.


Yep, they are also the same people who got the gains from property price inflation.


T McGibney said:


> It's a lot wiser than the opposite.


I think you are confusing wisdom with luck.


T McGibney said:


> Untrue, unless you contributed nothing to your pension during that time.


I already said that I put nothing into it during that time. 


T McGibney said:


> Yes. The country is full of crumbling properties less than 20 years old.


The State will be picking up the tab for that.


T McGibney said:


> And plenty of people unwisely crystallised pension losses around 2010 by sticking their funds into cash and they're still there.


Plenty or lots? How many lost money on property during that time?


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## Bow tie (5 Aug 2022)

Purple said:


> It's not an insult. You may well have created the wealth to buy the home but the increase in the price of the home had nothing to do with you.
> 
> I'm currently selling a house. It has increased in value by €600k in the last 10 years. That's €1154 a week. I'd have to earn an extra €2400 a week to net that sort of money.
> During the same period my pension increased in value by €400k without me putting a cent into it. That's an increase of a million Euro in net wealth without me contributing anything towards it. People who don't have capital (wealth)  have no chance of making that sort of gain.


Calling a poster delusional is fairly insulting.

"People who don't have capital (wealth)  have no chance of making that sort of gain." So are you proposing more transfers from those who work and have capital to those who don't work or have capital?
I doubt it based on your previous comment regarding letting them starve (whether tongue in cheek, I would 100% disagree)

All in all taxes which assist social stability, more benefit for more work etc. are good for society.
Short term, not fully thought through gains have a way of playing out badly.


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## T McGibney (5 Aug 2022)

Purple said:


> Yep, they are also the same people who got the gains from property price inflation.


And...?


Purple said:


> I think you are confusing wisdom with luck.


No, I'm not as my comment confirms.


Purple said:


> I already said that I put nothing into it during that time.


You did contribute the initial capital? Or did your fund create itself?


Purple said:


> The State will be picking up the tab for that.


Not for all of them, I'm sure. Not even for a decent proportion of them I'd wager. After all if you neglect a relatively new property and leave it empty and unmaintained for a decade or longer, the State won't be a blind bit interested in compensating you, nor should it be.


Purple said:


> Plenty or lots?


? (nitpicking?)


Purple said:


> How many lost money on property during that time?


A lot of them, although many or most of these losses won't have crystallised. Every rural town in the country has too many of these places. They are obviously worth less than their original cost.


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## Purple (5 Aug 2022)

Bow tie said:


> Calling a poster delusional is fairly insulting.


If so then I apologies.


Bow tie said:


> "People who don't have capital (wealth)  have no chance of making that sort of gain." So are you proposing more transfers from those who work and have capital to those who don't work or have capital?


No, I'm proposing less of a transfer from those who work but don't have capital from those who have capital whether they work or not. If that latter group don't have the income to pay that transfer it can be deferred until their die and taken from their estate. 


Bow tie said:


> All in all taxes which assist social stability, more benefit for more work etc. are good for society.
> Short term, not fully thought through gains have a way of playing out badly.


I agree completely. That's why I'm in favour of wealth taxes and less income taxes because wealth and income are not the same thing.


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## Purple (5 Aug 2022)

T McGibney said:


> And...?


And what?


T McGibney said:


> No, I'm not as my comment confirms.


Eh?


T McGibney said:


> You did contribute the initial capital? Or did your fund create itself?


I contributed nothing during the time the fund doubled in value. 


T McGibney said:


> Not for all of them, I'm sure.


Are you?


T McGibney said:


> ? (nitpicking?)


You started 


T McGibney said:


> A lot of them, although many or most of these losses won't have crystallised. Every rural town in the country has too many of these places. They are obviously worth less than their original cost.


During the last 10 years though. That's the time I'm talking about.


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## T McGibney (5 Aug 2022)

Purple said:


> I contributed nothing during the time the fund doubled in value.


You did contribute previously though, so the fund was of course well positioned to grow at that point, in the absence of wars, disasters, economic collapses etc. Which was very wise of you.


Purple said:


> During the last 10 years though. That's the time I'm talking about.


Of course the fact that equities and Irish property were both in almost unprecedented slump 10 years ago has nothing with your focus on the 10 years? Indeed, a lot of these properties deteriorated in the past decade. That's what happens when places are poorly managed.


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## Purple (5 Aug 2022)

T McGibney said:


> You did contribute previously though, so the fund was of course well positioned to grow at that point, in the absence of wars, disasters, economic collapses etc. Which was very wise of you.


The gain was due to the political decision to print money after the last recession. As I doubt anyone from the Fed or ECB seeks out my posts here for guidance (or anyone else if they've any sense) I can't say that I influenced that decision. Therefore it was right place at the right time stuff. 


T McGibney said:


> Of course the fact that equities and Irish property were both in almost unprecedented slump 10 years ago has nothing to do with this.


Oh it has but those who didn't have capital in the last 10 years have been left behind in the wealth stakes and they are mostly the younger people who will have to pay the QE bill, one way or the other. They are the ones trying to buy a house and start a family now. Real wage growth has been less than 1% per year up until this year. During the same period we more than doubled the amount of money in the world. That means we've halved the value of waged relative to capital during that time. I find that unfair on those starting out in life who are working. I certainly didn't face the same disadvantages. That's mainly down to luck. I did buy an apartment in 1996 because of the impending EMU and the interest rate reductions that came with it. The rest was luck.


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## Bow tie (5 Aug 2022)

Purple said:


> I agree completely. That's why I'm in favour of wealth taxes and less income taxes because wealth and income are not the same thing.


To me wealth built from taxed income is a derivative of income, just put into bricks and mortar rather than the bank.
With interest rates rising would you propose a similar punitive tax on savings?


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## Bow tie (5 Aug 2022)

Purple said:


> Therefore it was right place at the right time stuff.


We all did contribute though via bank bailouts and austerity though, so in an extremely roundabout way we have contributed


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## Purple (5 Aug 2022)

Bow tie said:


> To me wealth built from taxed income is a derivative of income, just put into bricks and mortar rather than the bank.
> 
> With interest rates rising would you propose a similar punitive tax on savings?


We pay DIRT tax at 33%. I'm not proposing anything that punitive.


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## Purple (5 Aug 2022)

Bow tie said:


> We all did contribute though via bank bailouts and austerity though, so in an extremely roundabout way we have contributed


Well most of that was borrowed but QE is a different thing and the Bank Bailout was a bailout of bond holders (pension funds etc and depositors) but for the bit your did contribute thanks!


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