Property during a crisis

Property during a crisis

Property during a crisis

Baron Rothschild, a member of the German origin Rothschild banking family once said that ‘the time to buy is when there is blood on the streets’. The Rothschilds were (and are) a fascinating family, it all started with Mayer Amschel Rothschild, a financially astute money trader. There is a fascinating book called ‘Dynasties, Fortunes & misfortunes of the worlds great family businesses’ and it follows the rise and fall of many successful families.

The ownership of land has always been synonymous with wealth, before paper assets were common it was one of the few things that defined ‘wealthy’. That is where the idea of a ‘site value tax’ is so key, because it captures wealth in particular that of the value of land where the increase in the value was caused by public expenditure.

The idea of income tax is relatively new, in fact, it was Prime Minister William Pitt who created the modern income tax (there was a prior ‘tithe’ on income used to fund the religious wars known as the ‘Crusades’ in the late 1100’s) to fund the Napoleonic wars. It makes income tax a fairly modern innovation, it also hides the cowardice of William Pitt in introducing it, in fact, the then rational taxation thinkers of Britain had it repealed in 1816 believing it should have only been there to fund war time needs.

Why was Pitt a coward? Simply put, he avoided what he should have done, namely to tax the wealthy of the time, the landowners, but their constituency was too strong. There was also a structural issue of the House of Lords being made up of wealthy land owners who you needed on side to get things done. Pitt didn’t have the conviction (and perhaps from a pragmatic sense it was the correct choice) to face them down – rarely will you get anybody in power who will support legislation that has a massive negative impact on them.

The explicit connection between land ownership and the House of Lords only died out in living memory, it was in 1999 due to a reform by New Labour which took out hereditary seats.

The idea of a land value tax was perhaps most strongly voiced by the American economist Henry George, he believed in a ‘single tax’ that would be on land only, it is well worth reading up on his ideas, while it may be a little idealistic to hope for a ‘single tax on land’ as the only source of revenue raising, the idea itself is compelling.

Henry George would have been revolted by the idea of a household charge, in particular the brand that we got of a flat rate. However, there is also a current risk that we will see some broken kind of tax replace it such as a tax based on the value of a property or the size of a property. The ESRI has been in a spot of bother about a recent working paper on welfare, but personally their thoughts on property tax are as worrying if you are a support of a tax on land.

The things which can be measured for usage (such as water, or waste) should rightly be charged directly, after that it is a case of trying to cover local costs of councils, this is where we need to put the focus rather than on constructing a means to remove €500,000,000 from the population as a general levy.

Of course, the comments section is open so that you can add your two cents worth!
We are looking forward to hearing them!

[poll id=”62″]

@karldeeter

 

 

 

Irish Mortgage Brokers

There are 13 comments for this article
  1. Anabol 10 at 9:31 pm

    I will really love for you for guests posting on blogs.myhome.ie

  2. Peter Mac Millan at 12:20 pm

    Dear whoever,
    I have worked for myself over some years at property maintenance and have come across people such as a retired woman living in a very exclusive house of high value that her parents originally purchaced. She was on the basic pension and also had to pay for medication and could only afford to get one room worked on each year to maintain her property.
    On the other hand I have worked for people in corporation houses who are on unemployment assistance and also in the black economy driving taxis for mostly cash. They would also benefit from all the grants available and would not be shy about applying for anything available. The same people would be driving a better car than I could afford, holidaying abroad etc.,
    To take the new property tax as an example , the old woman in the big property has to pay when she can hardly afford to and the people in the corporation house are exempt. This is neither democratic, diplomatic, just, equitable or morally right. If a system of tax is fair and seen to be fair then it will be accepted, otherwise how can it do anything other than divide, create anger, frustration and injustice. Tax should be based on a percentage of income above a base minimum and increase gradually according to ones income it would be the only fair system that would seem to be equitable and fair to all.

  3. Patrick at 9:27 am

    Any form of taxation levied in accordance with the categories mentioned in your poll have to be regarded as totally unworkable. This must be viewed in the varied services or the lack of them being provided by local and national governance. Rural areas are deprived of sewage treatment, water supply lighting, waste disposal/recycling.All of this is being paid for from a very shrunken purse by the people. Now then this begs the obvious question, and not wishing to screw the already hard pressed Urban folk.Which of the above services do they pay directly to whoever? For any household/property charge to be levied fairly, we must all be in receipt of the same services, and until we are provided with this level of support it will not work. A distinction must be made between Rural and Urban property, and if this can be done? (Do not ask Big Phil) we may be in a position to enact an equitable form of Poll Tax.Government for the People by the People,someone once said, I wonder who…Oh perhaps I have forgotten, it must be before the last election//.Have a Good day. Patrick.

  4. Konrad Dechant at 10:50 pm

    Will it be possible one day for the public to be educated to understand that the tax on land-value is in truth a payment for a privilege, and is not a tax in the ordinary sense; that is, it is not a burden like income tax on the creative effort of working people?

  5. lizzie at 10:01 pm

    How about no more ruddy taxes ! We are already screwed with debt so why agree to paying more and more tax ??? Acts and statutes only have the force of law if the governed consent to them , I do not consent to paying more . Why does the myhome.ie survey not have a no more tax option ???

  6. Dermot at 8:37 pm

    Prices are going down.
    Wait till all the houses in arears hit the market when people are thrown out of their homes.

  7. Mary at 8:26 pm

    Putting taxes on land, especially West of the Shannon, will wipe out the 30 acre landholders, who are little better than smallholders – they certainly couldn’t be classed as farmers!

    What may work in other countries, will not be so easily accepted in Ireland (or Scotland), with their histories of land clearances and lack of security of tenure.

    It is bad enough already that families who are recipients of Social Welfare Rent Subsidies are being forced out of their homes into homelessness by the new regulations, as well as homeowners facing repossessions, and private landlords facing empty properties they can no longer let and thus cannot meet mortgage payments on.

    If smallholders are going to also be forced out of their homes, it will create a huge rural homelessness problem, as well as an increased demand for Council Houses i rural areas, and a total crash in the property market. And this can only suit the rich, who will buy it up at rock bottom prices.

    All the new attempts at taxation are aimed at the people who have the least income as it is. And it will never be sufficient to keep the country running anyway, never mind improve services like health, education and provision of homes.

    Meanwhile we seem to be doing everything possible to ensure that the bankers and developers increase their wealth.

    So go on Politicians…increase all the taxes by as much as you can; and the quicker, the better! Whilst it takes a lot of abuse to get people to fight back, the time will come when we will refuse to accept any more of this nonsense. It is long past time for a resurgence of the methods of the Land League…then, our Politicians will never see a penny in taxation returns!

  8. Gabbrio at 7:16 pm

    …well if that was Rothschilds’ creed, I guess they should have built their wealth on the “blood” and misfortunes of people…I think the words “jackal” or “vulture” would be more appropriate than “fascinating” and “astute”…

  9. Brian at 5:02 pm

    The only good tax is a voluntary one. However, I could live with a land tax if it meant only landholders could vote. Voting is corrupted by the ability of those who live without contributing to be able to vote for those who would tax more so they (the non-contributors) can get more of other people’s money (taxes).

  10. Edward J Booth at 2:37 pm

    I believe there should be a more general tax based on the utilisation or lack of utilisation the owners of the assets make of those resources.
    There are thousands of acres of land and all kinds of assets which are totally neglected in Ireland. If owners do not work their assets they should be heavily taxed thereby creating an incentive to sell on the lands and assets to somebody else who could afford them and who would have the incentive to work and to “sweat” those resources. I call it a “dereliction tax” and this would release billions of euro worth of resources to people who would make something of these resources and export more food, forestry, fish, tourism, and SMA type businesses. More tax incentives could then be created to further incentivise the new owners to develope these assets.

  11. StevO at 1:44 pm

    Yep, prices only seem to be heading one way for the next couple of years. And that’s if things at an EU level don’t deteriorate, which does appear to be happening.

  12. Stephen at 1:43 pm

    Surely “A local tax that is levied to support a local authority” can also be in please with the other types. It isn’t that or a tax based on size of the property, unless you are suggesting a flat rate based on the council area?

    What is really annoying on this whole topic is the government is likely to spend loads of money to build a stupid system that will have shortcomings and need adjustment (watch, they’ll use words like that). The problem is this isn’t an overly hard problem to solve either. There is enough data in the public domain to do it fairly for 95% of the population. Throw in data from the land registry office and revenue to tie people to addresses, and you can very quickly get a fair site valuation tax with green fields credits and per person credits.

    Anything else started becoming unfair and stops investment. You really don’t want to discourage people from investing in their home based on the thought of higher taxes, especially when we are already likely to miss our carbon emission quotas in coming years.

  13. james at 1:18 pm

    this article points to many truths…. but in the old scheme of things I think.. this is a real depression that is only just beginning .. watch for the banks failing first.. especially in Ireland and Spain..

    by about 2017 there may be a leveling off with prices around 25% below what they are today.. ,

    I had a tip from our Swiss bank on this 18 months ago.

    young people may be able to afford a house when they wed… won’t that be a novelty..

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