CBI: increase tax on property and savings

[Sarenco]

If the tax is to offset the cost of delivering those services, they’re cheaper to land into my site than the one in BallygoBackwards

But the point is that many of the publicly funded amenities that add significant value to privately owned urban properties simply aren't available in BallygoBackwards!

There's no airport/concert hall/sports stadium/public park, etc. in BallygoBackwards.

So if publicly funded amenities create private value, the fairest way of paying for the cost of maintaining those amenities is to recoup an element of that value from those who benefit most.

 

[odyssey06]

But the point is that many of the publicly funded amenities that add significant value to privately owned urban properties simply aren't available in BallygoBackwards!

There's no airport/concert hall/sports stadium/public park, etc. in BallygoBackwards.

So if publicly funded amenities create private value, the fairest way of paying for the cost of maintaining those amenities is to recoup an element of that value from those who benefit most.

What about Bus Eireann and Irish Rail and their massive subsidies?
The cost of a postage stamp is the same anywhere in Ireland even though that does not reflect the actual cost of delivery for rural v urban areas.
Do only people who live in Dublin go to Croke Park? Or use Dublin airport? What about Knock? What about the expensive ferry services to islands?
Are there no parks or publicly maintained lands outside urban areas?

Property tax should be about funding local services and nothing else.
Most of the amenities you have listed have nothing to do with local services.

 

[Sarenco]

Property tax should be about funding local services and nothing else.

Well, I don't agree that property taxes along the lines of the LPT are a good idea because they act as a disincentive to improving existing dwellings, etc. In other words, property taxes are not efficient from an economic perspective - they produce outcomes that are not in the common good.

How funds raised by inefficient taxes are spent is of secondary importance.

I favour a site-value tax because it incentivises the efficient use of property. The fact that it takes account of the reality that publicly funded amenities create private value is not really the key point.

Have the public funds that have been expended on Dublin airport created the same private value for a farm in BallygoBackwards as a house in, say, Glasnevin?

Incidentally, I would have no problem with the introduction of a council tax (akin to council tax in the UK) to fund ongoing local services instead of paying for these services out of the central exchequer. That's a separate issue to whether or not a site-value tax should replace LPT (which incidentally all goes to the central exchquer and really has nothing to do with funding local services, spin aside).

The main objective of our tax policy, in my humble opinion, should be to lower taxes on productive enterprises and the promotion of the common good. Unfortunately most arguments around tax policy in Ireland (amongst other things) are really just people expressing their own personal vested interests.

 

[Protocol]

Just to be clear, all LPT goes to the 31 councils, not the central government.

The Revenue do the collection, but it's paid to the 31 LA.

All LPT receipts are spent on local services.

 

[odyssey06]

Have the public funds that have been expended on Dublin airport created the same private value for a farm in BallygoBackwards as a house in, say, Glasnevin?

Dublin airport has nothing to do with the value of houses in Glasnevin.
Glasnevin's property prices were higher than average before Dublin airport was built.
There are places in Dublin where property prices would be higher if they weren't on the flight path of Dublin airport.

The major driver of property prices is not public funds, otherwise we wouldn't see the big differences in prices within Dublin.
If the National Concert Hall or Croke Park or Dublin airport is driving the property prices why is East Wall and Clontarf different in price when they are the same distance from both?

 

[Sarenco]

Just to be clear, all LPT goes to the 31 councils, not the central government.

LPT is set by the Goverment (with a somewhat ridiculous tweak at a local authority level) and is then collected centrally by Revenue, not by my local authority.

It really doesn't matter whether this particular sum or any other sum that is levied and collected by our national Government is remitted to local authorities - it's just window dressing.

 

[Sarenco]

Dublin airport has nothing to do with the value of houses in Glasnevin

You don't really believe that, do you?

What do you think would happen to property values in and around Dublin airport if the airport had to be relocated for some reason? Would the loss of local jobs have zero effect on local property prices?

Of course publicly funded amenities impact private property values!

A house in East Wall may well be cheaper than a house of a similar size and specification in Clontarf (which I would suggest has better publicly funded amenities) but it would still be a heck of a lot more expensive that a similar house in the wilds of Donegal.

 

[Protocol]

Yes, the main rate and the base is set by the CG, although as you say the LG can vary the rate by +/-15%.

So I'm not sure if it qualifies as a full local tax, as the LG don't have full control over the base and/or rate.

Yes, the CG collect the tax, but that is not a significant issue.

In other countries, provinces collect both federal and provincial taxes.

What matters is setting the base/rate.

I don't know what you mean by "window-dressing".

All LPT receipts are paid to LG.

80% of LPT is kept locally, the other 20% goes into a pool to be distributed to weaker LG.

 

[Sarenco]

I don't know what you mean by "window-dressing".

I mean it's not a genuine local authority tax. It's dressed up as a local tax but is levied and collected at a national level.

It doesn't matter a jot whether my local authority is funded out of LPT receipts or out of any other tax that is levied and collected at a national level.

 

[Gordon Gekko]

What about circumstances where a site’s value is largely derived from a view or from its proximity to a privately owned asset such as Dundrum Shopping Centre?

I’m not sure I agree with the logic of linking a tax with some tenuous valuation of certain amenities that may or may not add value and may or may not have been privately funded.

It sounds a lot like a reverse engineered system to nail people who live in good areas. There are no more or less amenities in many areas where values are inherently high.

 

[odyssey06]

You don't really believe that, do you?

What do you think would happen to property values in and around Dublin airport if the airport had to be relocated for some reason? Would the loss of local jobs have zero effect on local property prices?

Of course publicly funded amenities impact private property values!

A house in East Wall may well be cheaper than a house of a similar size and specification in Clontarf (which I would suggest has better publicly funded amenities) but it would still be a heck of a lot more expensive that a similar house in the wilds of Donegal.

Dublin property prices were higher than Donegal prices before the airport was even dreamt of, they would be even if the airport was re-located.
Dublin airport was put where it was because the people were there.

A house in the capital city of the country, all other things being equal, will be a lot more expensive than a house in a remote rural location. It's where the people are. It's where the jobs are. The government doesn't subsidise Dublin's popular music venues, shops, pubs, restaurants, cinemas etc in fact they tax them heavily. They all make Dublin a more attractive place to be.
The Three Arena receives no public funds, Dublin's museums receive millions.
Can anyone say one or the other has a bigger impact on Dublin property prices?

There are properties in remote locations which have had huge public funds expended on them for reasons of flood protection, or transport subsidy of helicopters, ferries or planes for islands. If property tax should somehow be linked to the public funds that have gone into the area their property tax should be about 1000 times higher than it is. Maybe it should be and they should be paying for all those services from their own LPT, regardless of the value of their houses, they should pay their own way.

The level of funds per person in the area spent on Knock airport is massive compared to Dublin airport (and its commuter belt). On that basis, we should expect houses in Knock to be more expensive than Dublin, they're not.
Houses immediately around Croke Park would be more expensive, not less, if they weren't invaded every summer weekend for GAA matches.

The relationship between public funds and private property prices can be negative and positive, even if all areas received the same public funds Dublin property prices would be higher than everywhere else, I don't see any basis for using the distribution of public funds as the basis for justification for property taxes, its effect is way too haphazard -rather, it should at the very least be about paying for local services.

You'll have to convince me on the basis of the "productive enterprises" argument.

 

[Sarenco]

I’m not sure I agree with the logic of linking a tax with some tenuous valuation of certain amenities that may or may not add value and may or may not have been privately funded.

A site-value tax wouldn't be linked to "some tenuous valuation of certain amenities".

It would be calculated on the basis of the unimproved value of the relevant land.

The fact that publicly funded funded amenities add to the value of that privately held land is really not the key point that a site-value tax is preferable from an economic perspective to a property tax such as LPT.

I've now made that point three times. Any chance we could move on?

 

[Gordon Gekko]

A site-value tax wouldn't be linked to "some tenuous valuation of certain amenities".

It would be calculated on the basis of the unimproved value of the relevant land.

The fact that publicly funded funded amenities add to the value of that privately held land is really not the key point that a site-value tax is preferable from an economic perspective to a property tax such as LPT.

I've now made that point three times. Any chance we could move on?

No, because you seemed to infer that a higher property tax for a higher value site was somehow justified on the basis that the greater value was derived from State-funded amenities. I don’t agree that’s the case.

Someone with a 1/4 of an acre garden in Ballsbridge should not pay more than someone with a 1/4 of an acre garden in Ballyhaunis. If the cost of delivery of services is an issue, it costs a hell of a lot more to deliver broadband, electricity, or a letter to the latter.

Property taxes based on the value of the property or the site are just a con-job on urban dwellers.

 

[Sarenco]

Gordon

Obviously a higher value site would attract a higher site-value tax than a lower value site. The same way a high income would logically attract a higher income tax than a lower income. Are you objecting to the idea that taxes should be progressive? I assume you aren't.

Earlier in this thread you objected to the fact that somebody could hold a large undeveloped site in suburban Dublin without any adverse tax implications. Would you have a similar objection to somebody holding a similar sized site in a rural location?

This has nothing to do with the cost of delivering public services. It has to do with the most efficient (or least worst if you prefer) way of levying a tax on private property owners.

I think it is self-evident that publicly funded amenities can and do increase the value of privately held land. I'm amazed anybody would try to argue otherwise. Just look at the value of private property along the DART line as one example among many.

But once again, for the fourth time, that's not really my main point.

My key point is that a site-value tax is more efficient economically than a property tax along the lines of the LPT.

If you don't want to move on from that point, well, that's your prerogative.

 

[Gordon Gekko]

Nice strawman argument. I never said disputed that taxes on income should be progressive.

I did, however, strongly dispute the idea that property taxes should be based on value.

 

[Sarenco]

What strawman argument?

Obviously an ad valorem site-value tax would be progressive in nature. Same as income tax.

Surely you're not arguing for a flat property tax regardless of the value of a property? Seriously?!

Bear in mind that I'm arguing in favour of a site-value tax in place of a property tax such as LPT. But even LPT is based on the value of a dwelling. Do you object to that? Should LPT be applied at a standard rate to every dwelling regardless of the value of the dwelling?

That logic seems totally bizarre to me.

 

[Sophrosyne]

Do property taxes really spread the tax burden or rather concentrate the tax burden on the same sector?
Only home owners pay; renters and local authority tenants do not.

If property taxes are to fund Local Authority services, then we need to take a keener interest in the cost of those services and the operation of Local Authorities (LAs).

A lot of the services previously provided by LAs have been privatized and we pay for these directly to private operators; other services have and will continue to be centralized so that ongoing costs to individual LAs have been considerably reduced.

LAs do not have a good track record in collecting what they are owed. Rent and rates arrears run into millions. The fact that Revenue had to take over collection of LPT is indicative - LAs with a 50% compliance rate compared to Revenue's 90+ compliance rate.

 

[Gordon Gekko]

What strawman argument?

Obviously an ad valorem site-value tax would be progressive in nature. Same as income tax.

Surely you're not arguing for a flat property tax regardless of the value of a property? Seriously?!

Bear in mind that I'm arguing in favour of a site-value tax in place of a property tax such as LPT. But even LPT is based on the value of a dwelling. Do you object to that? Should LPT be applied at a standard rate to every dwelling regardless of the value of the dwelling?

That logic seems totally bizarre to me.

Yes, I object to basing property tax on value (of property or site). A 2,000 sq ft house in BallyGoBackwards should cost the same as a 2,000 sq ft house in Dalkey.

 

[odyssey06]

My key point is that a site-value tax is more efficient economically than a property tax along the lines of the LPT.

Can it be more efficient economically though and act as a macro-economic lever, as per the speech which kicked off this thread?

It should be capable of acting as both a brake and an accelerator. Interest rates were set monthly, went up and down.
If a future government becomes more dependent on property-based taxes, revised annually... they will be even more reluctant in future to reduce the tax, ergo its value as an macro-economic lever is doubtful.

 

[RETIRED2017]

In the longer term property taxes reduce house prices. They also encourage empty-nesters to move out of family homes which can then be occupied by families. The social infrastructure, particularly schools, doesn't have to be duplicated around the country as often etc.

They enjoy State pensions and perks which their children and their grandchildren won't even dream of. When their private pension funds would have been wiped out after the financial crisis their children and grandchildren bailed them out. When their savings were threatened their children and grandchildren guaranteed them. If they bought their house during a period of high taxed and high interest rates then they also bought during a period of very low prices and high inflation. Their children and grandchildren could have their own big garden to play in every day if more older people downsized.

Don't forget It was your generation who borrowed and paid up to 14 times there yearly wages for houses that got Ireland into trouble in the first place,