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IMF's Property Tax Hike Proposal Comes True With UK Imposing "Mansion Tax" As Soon As This Year

Tyler Durden's picture




 

One could see this one coming from a mile away.

It was a week ago that we highlighted the latest implied IMF proposal on how to reduce income inequality, quietly highlighted in its paper titled "Fiscal Policy and Income Inequality". The key fragment in the paper said the following:

Some taxes levied on wealth, especially on immovable property, are also an option for economies seeking more progressive taxation. Wealth taxes, of various kinds, target the same underlying base as capital income taxes, namely assets. They could thus be considered as a potential source of progressive taxation, especially where taxes on capital incomes (including on real estate) are low or largely evaded. There are different types of wealth taxes, such as recurrent taxes on property or net wealth, transaction taxes, and inheritance and gift taxes. Over the past decades, revenue from these taxes has not kept up with the surge in wealth as a share of GDP (see earlier section) and, as a result, the effective tax rate has dropped from an average of around 0.9 percent in 1970 to approximately 0.5 percent today. The prospect of raising additional revenue from the various types of wealth taxation was recently discussed in IMF (2013b) and their role in reducing inequality can be summarized as follows.

  • Property taxes are equitable and efficient, but underutilized in many economies. The average yield of property taxes in 65 economies (for which data are available) in the 2000s was around 1 percent of GDP, but in developing economies it averages only half of that (Bahl and Martínez-Vázquez, 2008). There is considerable scope to exploit this tax more fully, both as a revenue source and as a redistributive instrument, although effective implementation will require a sizable investment in administrative infrastructure, particularly in developing economies (Norregaard, 2013).

We summed this up as follows: "if you are buying a house, enjoy the low mortgage (for now... and don't forget - if and when the time comes to sell, the buyer better be able to afford your selling price and the monthly mortgage payment should the 30 Year mortgage rise from the current 4.2% to 6%, 7% or much higher, which all those who forecast an improving economy hope happens), but what will really determine the affordability of that piece of property you have your eyes set on, are the property taxes. Because they are about to skyrocket."

Sure enough, a week later the Telegraph reports that UK Treasury officials have begun work on a mansion tax that could be levied as soon as next year, citing  a Cabinet minister.

"Danny Alexander, the Liberal Democrat Chief Secretary to the Treasury, told The Telegraph that officials had done “a lot of work” on the best way to impose the charge. The preparatory work would mean that a Government elected next year might be able to introduce the charge soon after taking office.  Mr Alexander said there was growing political support for a tax on expensive houses, saying owners should pay more to help balance the books.

After all it's only fair. It is also only fair, for now, to only tax the uber-rich, who are so defined merely in the eye of the populist beholder. However, said definition tends to be fluid, and what will be a tax on, i.e., £2  million properties tomorrow, will be lowered to £1  million, £500,000 and so on, in 2, 3, etc, years.

And in a world which as Zero Hedge first defined years ago as shaped by the "fairness doctrine", the one word that was so far missing from this article, can be found momentarily:

“There’s a consensus among the public that a modest additional levy on higher value properties is a fair and reasonable thing to do in the context of further deficit reduction,” he said. “It’s important that the burden is shared.”

There you have it: "fair." Because there is nothing quite like shaping fiscal (and monetary) policy based on what the du jour definition of fair is to 1 person... or a billion. Especially if that billion has a vote in the "democratic" process.

It gets betters:

Mr Alexander said the new tax would not be “punitive” and insisted that the Lib Dems remained in favour of wealth creation.

So if it's not "punitive" it must be... rewarding? And how long until the definition of fair, far short of the projected tax windfall, is expanded to include more and more, until those who were previously for the "fair" tax, suddenly become ensnared by it? As for wealth creation, perhaps in addition to the fairness doctrine it is time to be honest about what socialism really means: "wealth redistribution."

Telegraph continues:

That may be a seen as a challenge to Vince Cable, the Business Secretary, who first called for the mansion tax and has criticised high earners.

 

The Lib Dems and Labour are both in favour of a tax on expensive houses. Labour says the money raised could fund a new lower 10p rate of income tax.

 

The Lib Dems have suggested that the tax should fall on houses valued at £2  million and more.

 

The Treasury last year estimated that about 55,000 homes are in that range, though the Lib Dems say the figure is closer to 70,000.

To be sure not everyone is for the tax:

David Cameron has opposed a mansion tax but George Osborne, the Chancellor, is said to be more open to the idea. Most of the homes that might be affected are in London and the south-east of England.

 

Boris Johnson, the Tory Mayor of London, promised last week to oppose any move towards the tax, which he described as “brutally unfair on people who happen to be living in family homes”.

 

Some critics have questioned the practicality of the policy, asking how the State would arrive at valuations for houses.

Well, they will simply draw a redline above any number they deem "unfair", duh. As for the London housing bubble, it may have finally popped, now that all those who bought mansions in London will "suddenly" find themselves at the "fair tax" mercy of yet another wealth redistributionist government.

Unfortunately, for the UK, the "mansion tax" idea, , gloriously populist as it may be, may be too little too late.

As we reported late last week in "The Music Just Ended: "Wealthy" Chinese Are Liquidating Offshore Luxury Homes In Scramble For Cash", the Chinese offshore real estate buying juggernaut has now ended courtesy of what appears to be China's credit bubble bursting. So if the liquidation wave truly picks up, and since there is no greater fool left (you can forget about sanctioned Russian oligarchs investing more cash in the City in a world where asset freezes and confiscations are all too real), very soon London may find that there is nobody in the "fair" real estate taxation category left to tax.

But that's ok - because that's when one simply expands the definition of what is fair to include the not so wealthy... and then again.... and again.

Finally, if anyone is still confused, the IMF-proposed "mansion tax" is most certainly coming to the US, and every other insolvent "developed world" nation, next.

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Sat, 03/22/2014 - 09:54 | 4580045 I am a Man I am...
I am a Man I am Forty's picture

Might as well get your second passport now, that window's going to close soon.  

Sat, 03/22/2014 - 09:55 | 4580047 Motorhead
Motorhead's picture

The revolution will not be televised, bitchez!

Sat, 03/22/2014 - 10:10 | 4580078 fonestar
fonestar's picture

fonestar has always argued that land and property of any type is essentially a paper investment.  And one of the easiest paper investments for anyone with more guns than you to steal.

Sat, 03/22/2014 - 10:18 | 4580090 BigJim
BigJim's picture

Not at all! I'm sure this will only apply to the top 1%... just like income tax!

Oh, wait...

On another note, I think it's perfectly reasonable to tax monopoly access to a natural resource, like the underlying land, rather than any 'improvement' that may have been made to it. The first is a resource tax; the second is a 'value added' tax. There's no conceivable justification for the governmment to tax profits arising from value added activities, ie, income, manufacturing, retailing.

Sat, 03/22/2014 - 10:43 | 4580141 Troll Magnet
Troll Magnet's picture

What's the big deal? The ISRAEL Monetary Fund is simply asking you to pay your fair share. Killing Palestinean babies and upkeeping a stolen land cost money, you know.

Sat, 03/22/2014 - 11:21 | 4580237 Soul Glow
Soul Glow's picture

IMF is international and they care not for religion as long as you abide by one.  They are coming for all the dollars and euros and yen they can get their hands on.  From the quarterly IMF report, this one from October '13, titled Taxing Times (below) and from the second chapter - Taxing Our Way Out of or Into Trouble? - on page 49 sits this paragraph....

 

A One Off Capital Levy ?

 

The sharp deterioration of the public finances in many countries has revived interest in a “capital levy”— a one-off tax on private wealth—as an exceptional measure to restore debt sustainability.1 The appeal is that such a tax, if it is implemented before avoidance
is possible and there is a belief that it will never be repeated, does not distort behavior (and may be seen by some as fair). There have been illustrious supporters, including Pigou, Ricardo, Schumpeter, and—until he changed his mind—Keynes. The conditions for success are strong, but also need to be weighed against the risks of the alternatives, which include repudiating public debt or inflating it away (these, in turn, are a particular form of wealth tax—on bondholders—that also falls on nonresidents).

 

1 As for instance in Bach (2012).

  

They are coming for all the money in bank deposit accounts, which, are unallocated.

Taxing Times:

http://www.imf.org/external/pubs/ft/fm/2013/02/pdf/fm1302.pdf

Sat, 03/22/2014 - 12:09 | 4580335 strannick
strannick's picture

Barbarous relics are better stores of vale than Mcmansions

Sat, 03/22/2014 - 12:37 | 4580397 AlaricBalth
AlaricBalth's picture

Since 2009, the Bank of England has been engaged in a massive Quantitative Easing program. According to Dallas Fed president Fisher, QE has been nothing but a gift to the wealthy which has lead to a far greater gap between the plutocracy and the rest of us. Now the British government is considering a wealth tax on property and many people are up in arms over the "fairness" of this confiscation. Seems to me, this is a case of the Lords giveth and the Lords taketh away.

Sat, 03/22/2014 - 16:53 | 4580833 mjcOH1
mjcOH1's picture

"Barbarous relics are better stores of vale than Mcmansions"

Yep.   6 years post-crash, with wear and tear by your average under-water McFamily who've avoided all but minimal expenditures to maintain habitability.....if they haven't tossed that idea out the door and stripped every cabinet/light fixture/appliance/copper wire....and "fixer-upper" has reached a new level of understatement.

Sat, 03/22/2014 - 20:43 | 4581268 kaiserhoff
kaiserhoff's picture

Yaz, that's the ticket.  Drive all the rich folk into the sea.  Replace them with some good Anglish Liverpudlian soccer thugs.

   Ticket to where, exactly?

Sun, 03/23/2014 - 11:50 | 4582361 MontgomeryScott
MontgomeryScott's picture

So, it begins.

They like to call it 'predictive programming', or some shit.

EAT THE RICH. LIFE IS A BITCH.

http://www.youtube.com/watch?v=0XmKbIxnl9I

They don't even hide it, anymore.

Plank #2 is a HEAVY PROGRESSIVE OR GRADUATED (INCOME) TAX.

Work hard? save money? Build a nice home? YOU don't deserve that. HOW DARE YOU!

Sat, 03/22/2014 - 12:52 | 4580433 Pairadimes
Pairadimes's picture

Unless you are a member of the Rothschild family, it was never really yours anyway.

Sat, 03/22/2014 - 13:42 | 4580520 actionjacksonbrownie
actionjacksonbrownie's picture

Raisng property taxes on mansions? Really???

 

How about simply making them proportionate to lesser valued homes?

 

Here, a $200,000 home is taxed approx. $3000/yr.

 

A $3,000,000 home is taxed $8000/yr.

 

Please excuse me if I am not heartbroken over the coming "unfair" treatment of the wealthy mansion owners.

Sat, 03/22/2014 - 14:56 | 4580631 effendi
effendi's picture

It is unfair. Both owners get one vote, both get one Public Library card and both get one garbage bin pick-up. So what extras worth $5,000 does the mansion owner get for the money extorted by the taxing powers of the state?

The only truly fair tax is a Poll Tax and only those who pay that tax should get to vote.

Sat, 03/22/2014 - 15:29 | 4580691 Soul Glow
Soul Glow's picture

So the difference between your ideal system and the current one is we won't hide the fact that the poor are not represented in politics.  At least your way is honest.

Sat, 03/22/2014 - 16:57 | 4580839 mjcOH1
mjcOH1's picture

I believe he's saying that the poor are not only represented in politics....they're compensated by it.  

Luckily, there are a few tax-donkeys who remain employed to keep the monthly EBT payments showing up.   What could go wrong?

Sun, 03/23/2014 - 05:58 | 4581946 EscapingProgress
EscapingProgress's picture

You assume that the votes are counted in spite of the fact that there is no such evidence.

Sat, 03/22/2014 - 23:27 | 4581613 Antifaschistische
Antifaschistische's picture

Here's my take...

There is no difference between Property Tax and Rent.

If an individual or entity can kick you off ANY piece of property because you don't pay the rent (or property tax) then I have a surprise for you....YOU DONT TRULY OWN IT.

and if I don't truly own it, why do I accept all the costs of maintenance and bear all the risk of depreciation, etc...this is the big American Dream Scam.

sure, we have families and wives that influence us and that's a good thing, but if there is any tax revolt in America it ought to start with property taxes.

Sat, 03/22/2014 - 15:08 | 4580645 Renfield
Renfield's picture

<<Unless you are a member of the Rothschild family, it was never really yours anyway.>>

Key point.

Are any of these property or mansion taxes going to hit the cunt 'queen', who (surprise!) has more mansions than anyone else? Are they going to be imposed on anyone surnamed 'rothschild'?

Are they going to be imposed on any EU aristocracy? How about the 'elected' political aristocracy? What percentage of owned mansions do THEIR property tax exemptions cover?

Reminds me of the 'window tax'. Anyone remember that one?

You could tell who was hit by the tax, and who wasn't, by which oppressed citizens resorted to bricking up their own windows. How many of their own windows did the monarchy have to brick up? Was it zero?

Sat, 03/22/2014 - 18:09 | 4580956 RichardParker
RichardParker's picture

Yep, people started to brick over their windows, then came a "brick tax",  Wish I was joking about this...

Sat, 03/22/2014 - 18:02 | 4580943 RichardParker
RichardParker's picture

Horatio Bunce summed it up best, "The power of collecting and disbursing money at pleasure is the most dangerous power
that can be intrusted to man."

Sun, 03/23/2014 - 05:10 | 4581923 trader1
trader1's picture

that's why we need to give that power to human and earth loving aliens.  or to open source androids with the highest IQ and EQ.

 

Sat, 03/22/2014 - 10:42 | 4580145 BlindMonkey
BlindMonkey's picture

Whatever. The wealthy will bribe the politicians to create loopholes. Historic property exemptions, agriculture (any of you seen the tech giant's office in Irving Tx where they have cattle and corn surrounding the buildings to they get ag tax rates), etc. this is only going to apply to a few now and will get redefined as stated. Much like the AMT.

Sat, 03/22/2014 - 10:48 | 4580164 Hobbleknee
Hobbleknee's picture

Exactly, and anything larger than a cardboard box will be labeled a mansion.

Sat, 03/22/2014 - 13:13 | 4580467 Urban Roman
Urban Roman's picture

You have a cardboard box? I'm sorry, you will have to pay the mansion tax ...

Sat, 03/22/2014 - 13:44 | 4580525 DCFusor
DCFusor's picture

I think of it this way - spreading the wealth is equal to spreading the poor...Making the wealthy poor doesn't make the poor rich, since it's not the poor who benefit from taking from the rich - it's the government toadies and job security for them in their little cubicles.

Sat, 03/22/2014 - 13:33 | 4580502 RafterManFMJ
RafterManFMJ's picture

Exactly, and anything larger than a cardboard box will be labeled a mansion.

Sweet! My casa caja de refrigerador pays off yet again! Pro tip - boxes that contained fruit are often waxed and make excellent, if flammable, roofing tiles.

Sat, 03/22/2014 - 14:03 | 4580549 zhandax
zhandax's picture

Why do none of these fucktards talking about 'fair' ever think of a bankster tax?  Could they know on which side their bread is buttered?

Sun, 03/23/2014 - 00:23 | 4581721 TheReplacement
TheReplacement's picture

If you asked a politician what is wrong and how to fix it do you think you would hear a peep about politicians?

If you asked a CEO what is wrong and how to fix it do you think you would hear a peep about CEOs?

It's the same if you ask a banker, a taxpayer and voter, union member, yada yada.

Sun, 03/23/2014 - 09:26 | 4582079 zhandax
zhandax's picture

Interesting point since my premise concerned two allegedly dissimilar occupations.  Do you suggest there is little difference between banksters and politicians, or that they answer to the same master?

Sat, 03/22/2014 - 11:32 | 4580260 Dollarmedes
Dollarmedes's picture

That can only go on for so long, because the government's need for money is great...and real. The politically connected will skate by for a while until people notice. When the outcry becomes great enough, they will be thrown under the bus.

Sun, 03/23/2014 - 00:20 | 4581717 TheReplacement
TheReplacement's picture

Don't bet on it.  Of course they will try but this smells like a big setup.  The rich are going to be blamed for everything.  If there is a "one off" wealth tax, who will benefit?  Will you?

Sat, 03/22/2014 - 14:50 | 4580619 effendi
effendi's picture

Here in Australia all land is taxed at the "Unimproved Capital Value". That is the value that a property is worth without any improvements. 

My state (NSW) also applies an additional Land Tax to the 1,000 most valuable residential properties (mostly waterfronts and dress circle oversized blocks) and has done this for about 10 years. England is slow.

Sat, 03/22/2014 - 21:56 | 4581451 G-R-U-N-T
G-R-U-N-T's picture
-Britons rate Russia more positively than EU, poll shows-

Next up civil unrest!

http://news.yahoo.com/britons-rate-russia-more-positively-eu-poll-shows-...

Sat, 03/22/2014 - 10:21 | 4580093 philipat
philipat's picture

You are a total asshole. Assets of non-Americans can be parked wherever because, ONLY the Land of the Free, of all OECD countries, taxes income worldwide. They OWN you, especiially the Middle Class as Tax donkeys. Bitcoin, when they are ready, will be destroyed. MtGox was jsut a warning which can be applied whenerver and wherever they want. The Alpahbet soups are already all over it AND the encryption is already well broken all the way down the Blockchain.

 

Dream on. Good luck!!

Sat, 03/22/2014 - 10:22 | 4580102 CheapBastard
CheapBastard's picture

Property tax Hike?!

Unpossible!

[wait untilt hose McMansions in Cali are taxed to pay for Brown's Superhighway from Mexico to LA!]

Sat, 03/22/2014 - 10:50 | 4580170 Troll Magnet
Troll Magnet's picture

Would that be an underground superhighway?

Hmmm...Mexico...LA...Mexico...LA...Mexico...Mexico..

Sat, 03/22/2014 - 10:58 | 4580193 fonestar
fonestar's picture

Moron. It's far easier for a government to blow up your house or just one RPG through your living room window than it is for them to do anything substantial against Bitcoin network.

Sat, 03/22/2014 - 11:32 | 4580257 richsob
richsob's picture

Honest question for you, Fonestar: Do you really believe that if the President of the United States gave a direct order to the NSA, FBI, CIA, etc. to "take Bitcoin down...now!...I want it dead, dead, dead within a week" that it wouldn't be possible?  Come on, man.  Anything that exists now is at the mercy of organizations and people with powers that are truly scary.  There is an old saying: There never was a woman who couldn't be rode, there never was a man who couldn't be throwed".  Do you truly believe Bitcoin is immune to the U.S. government going after it tooth and nail?

Sat, 03/22/2014 - 11:52 | 4580296 fonestar
fonestar's picture

There's nothing your gov, POTUS, FBI, CIA, NSA can do about Bitcoin.  They can try and ban math and the whole world will laugh at them.

Sat, 03/22/2014 - 12:30 | 4580379 richsob
richsob's picture

I have been giving you the benefit of the doubt about Bitcoin, fonestar, but if you really believe what you just said (that the resources of the entire U.S. government could not take down Bitcoin if that was a #1 priority) then you, sir, are delusional.  You are as bad as the people who believe gold is immune to any future government actions.  Or someone who thinks having a dozen firearms and several thousand rounds of ammo makes him invincible.  

Sat, 03/22/2014 - 14:59 | 4580637 fonestar
fonestar's picture

No these losers cannot take down Bitcoin.  What the fuck, do you think they can ban gravity too?

Sat, 03/22/2014 - 17:45 | 4580917 kareninca
kareninca's picture

Do you literally wear a cheerleader outfit when you put up these posts, fonestar?

Also, as far as attempting to destroy the personal wealth of your fellow humans, you are going to end up being as guilty as the banksters who pushed crappy overpriced houses.  You are criminally irresponsible, to be trying to get other people to put their money into this beanie baby scam.  When they lose all their savings, are you going to reimburse them?  Are you going to take any responsibility for your actions?

It really is shameful, to see someone push a scam that will wreck the finances of many, many people.

Stupid, destructive and massively irrepsonsible.

Sat, 03/22/2014 - 20:30 | 4581235 fonestar
fonestar's picture

Bullshit. Bitcoin has been the best performing asset year after year. Just because you don't understand it or how it works doesn't mean the rest of us don't.

Sat, 03/22/2014 - 21:01 | 4581276 kareninca
kareninca's picture

Yes, and Beanie Babies did really well for a while.  So did Madoff.  People who doubted were told that they "just didn't understand."

You troll every thread with your stupid posts; you are a total waste of human protein.  If I could block (from my own view; no I wouldn't censor) one poster on this blog, it would be you.  Actually you are the only poster on this blog that I would block.

Again, when this goes south, are you going to take responsibility for the people who put their money into this scam?  No, of course you're not.  You'll just pack away your cheerleading outfit, very quietly.

Stupidity like Bitcoin makes physical gold look really, really good. 

Sun, 03/23/2014 - 09:48 | 4582104 odatruf
odatruf's picture

If I understand bitcoin right, then I agree with fone - I think it is implausible that .gov could interfere with the crypto system itself. Maths cannot be hijacked so easy.  However, people can. So I do think it would be well within .gov's power to corrupt enough users, data chain processors, etc. to make it moot that the system is so hardened.

Sat, 03/22/2014 - 15:10 | 4580655 vaft
vaft's picture

I have seen you make this claim in the past and I've always assumed you were just baiting for replies. On the off chance that you're actually serious, I would suggest you do some more due diligence. I am a fan of btc because of it's utility and potential, but I also understand the ways in which btc can be disrupted, and for your own sake, you should too.

At this point, all the NSA needs to do is block traffic on tcp port 8333 and the bitcoin network would fall mostly silent. Granted, it would only last a few hours and would trigger an arms race in which everyone decides to use a port the NSA would be unwilling to block like 443, but that does not mean it would be impossible to stop btc traffic. I work in the VPN industry, and I have seen evidence that the chinese government has a method for distinguishing between HTTPS traffic and OpenVPN traffic (over tcp 443) in spite of them both using SSL. Using the same methodology (presumably examining the handshake, destination, traffic pattern, etc), the NSA could require ISPs to filter out anything that LOOKS like btc traffic. A government in it's death throes is a dangerous thing and the internet is usually it's first victim -- I had VPN customers in Syria and Egypt who simply went dark for months when their internet was shut off.

But that would be a hamfisted approach. I could still imagine ways in which they could use a combination of hacking, court orders, gag orders, waterboarding, or whatever in order to gain control of enough mining pools to usurp the blockchain with a 51% attack. For that matter, are you not concerned about a collusion of selfish miners? -no government intervention necessary- http://arxiv.org/abs/1311.0243

 

Sat, 03/22/2014 - 15:37 | 4580708 fonestar
fonestar's picture

fonestar does not believe simply blocking ports would work to disrupt the Bitcoin network.  They would really need to implement ALGs with deep packet inspection all around the entire Earth.  Or basically, fundamentally redisign the internet from the top down and hope everyone gets onboard with it.  Ultimately, they would need to ban encryption technologies altogether and break the entire internet in the process.

Sun, 03/23/2014 - 07:35 | 4581993 prains
prains's picture

whipmecoin needs more than the 20 volts running the 8 lbs of fat residing between your ear holes, when all that's left is your 20 volts, what then?.......fantasy time

Sat, 03/22/2014 - 11:12 | 4580228 constantine
constantine's picture

Yes, and renting one of these 'paper investments' out from a landlord would qualify as a 'paper expense'.  Pick your poison.  Of course there's always door number three... homelessness.

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