Then let’s extend Capital Gains Tax to family homes. It addresses the key issues:
1. Valuation: The market decides how much a house is worth.
2. Deals with the negative equity question: People who lose money selling their house will be exempt because don’t make a capital gain.
3. Ability to pay: It resolves the €200 a week granny in a €750k house issue. Selling the house releases the equity to pay the tax. No sale, no tax.
To be fair, we’d probably have to let people who paid stamp duty deduct it from the tax. It won’t bring in much money as long as the property market is deflated, but neither will a property tax that pays any attention to ability to pay. But at least it would be fair and not involve the public having to scrape money together to pay an arbitrary tax which would almost certainly tear the country apart.
But here’s a really radical thought. Supposing we told local authorities that in five years time, they would set the CGT rate in their area for family homes, and that the income from the tax would provide the lion’s share of their budgets, allowing central government to cut the direct funding of local authorities. All of a sudden, being a county councillor setting the rate becomes interesting. It also introduces tax competition. Could a well run local authority afford to set a low rate, boosting property prices in the area, and making their county more attractive to live in?