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IMPORTANT // Please look after your loved ones, yourself and be kind to others. If you are feeling that the world is too hard to handle there is always help - I implore you not to hesitate in contacting one of these wonderful organisations Lifeline and Beyond Blue ... and I'm sure reaching out to our PRE community we will find a way to help. T.
Alcohol Tax !!
- Thread starter Tigaman
- Start date
What!?!
You dont think peoples pays are directly linked to how hard they work and how hard they studied? You must live in a different world than us lifters.
What rubbish.
We don't tax all income the same.
Say someone is paid $15K a year, no tax. Another person is paid $200K per year, they pay tax.
Wealth the same, tax it progressively. The example above actually exhibits what I said - the $1.5m house is being used as a residence, it is not generating income, the $1m investments would hopefully be making returns.
Did I say the inheritance tax should exclude the principal place of residence? In any case, assuming the kids have left home, it ain't their principal place of residence so it is wealth and taxed.
What do you suggest? More regressive GST maybe? I would prefer the well off get higher tax rates, not the strugglers.
DS
On your last sentence I didn't say that the strugglers should get more. I said we should have a significantly different property tax structure, as part of this I'd also get rid of stamp duty.
On another thread you'd commented about inheritance tax (I should have probably posted this there) and said the principal place of residence should be exempt. To me that doesn't make sense.
2 different people.
1 with a $2m house
1 with a $1m house and $1m in investments (that they have paid tax on the income through their lives)
In a system that exists with an exemption for the PPR, 1 of the above would pay wealth tax and the other wouldn't despite having the same wealth. This is where your argument about progressive taxes on income doesn't make sense. In the income example, everyone has the same $ amount that is exempt income (the tax free threshold) where having a PPR exemption means that that tax free threshold on a wealth tax would be variable and makes the tax selective and certainly not progressive. In fact it would probably do the opposite of what you are proposing. More people will tie more money up in high value housing, which would then filter down and continue to cook the housing market as people get pushed down into bands that currently they wouldn't compete in as it makes sense from a tax planning perspective.
An asset based tax doesn't differentiate based upon wealth, perhaps there could be a method based on income to defer some of the property tax, which would essentially end in a tax liability when a person dies, but it enables people to plan for those eventualities.
I get that a system must be progressive and I'm all for that, but it also needs to be fair and equitable, and having a variable asset act as a tax free threshold IMO riddles an entire tax system as ludicrous. You just simply can't have any exemptions unless they are flat across the board.
Personally I'm against an inheritance tax. I hate the thinking that 1 when your parents die that you have to immediately think about a tax bill that you may not be aware of, or hasn't necessarily be planned for, but also its a significantly deferred tax. Tax the asset and you get the same scenario. Taxing the asset as I also mentioned removes the impact of trusts on tax planning as the tax is there regardless of the owner of an asset.
Obviously any tax would be progressive, ie. low or non existant on lower value housing, rising to higher amounts as you move through property value thresholds, in a similar way to income. This could be offset with a lowering of income tax rates or increases to the tax free thresholds, but with a more progressive impact, impacting the highest value of property values (which are never taxed).
My reasoning for a wealth tax is the incredible inequality of wealth.
Yes, some of this is the result of house prices going through the roof. This is a separate problem which clearly needs addressing, the fact that many people own houses which are worth 10 to 20 times the purchase price is of no use to them - they can sell but, if they still want a roof over their heads, they have to buy again in the same inflated market.
What I don't think is reasonable is to tax someone on the current value of a house they bought a couple of decades ago, for maybe 10% (or less) of the current value, with the sole purpose of living in the house. They would end up being taxed on an increase in wealth which is of no use to them. It does become of use to their children if they inherit the house and sell it, and that is where an inheritance tax comes in.
In the example above the second person with the $1million in investments only holds those investments in order to generate income. Assuming PPR both of the home owners own their houses in order to live there, it is a fundamental difference. The person living in the $1million house has either managed to accumulate wealth enough to have a spare $1million to invest or they live somewhere with cheaper housing. If both bought their houses for the same amount, it remains the case that the person with the $1million in investments has accumulated wealth outside their place of dwelling.
I can see your perspective, but I don't agree.
DS
Yes, some of this is the result of house prices going through the roof. This is a separate problem which clearly needs addressing, the fact that many people own houses which are worth 10 to 20 times the purchase price is of no use to them - they can sell but, if they still want a roof over their heads, they have to buy again in the same inflated market.
What I don't think is reasonable is to tax someone on the current value of a house they bought a couple of decades ago, for maybe 10% (or less) of the current value, with the sole purpose of living in the house. They would end up being taxed on an increase in wealth which is of no use to them. It does become of use to their children if they inherit the house and sell it, and that is where an inheritance tax comes in.
In the example above the second person with the $1million in investments only holds those investments in order to generate income. Assuming PPR both of the home owners own their houses in order to live there, it is a fundamental difference. The person living in the $1million house has either managed to accumulate wealth enough to have a spare $1million to invest or they live somewhere with cheaper housing. If both bought their houses for the same amount, it remains the case that the person with the $1million in investments has accumulated wealth outside their place of dwelling.
I can see your perspective, but I don't agree.
DS
You say you want to deal with the inequality of wealth but then want to ignore wealth that many people have gained due to property prices increasing. It creates a 2 tier system.
The property cycle, is that in your younger years (pre children), people tend to buy smaller properties (1 and 2 bedroom apartments / units), then as they move through adulthood they increase the size of home in order to have children and then downsize as their children move out. Many of the people that have gained from the property market are either towards the end of the middle phase and entering the later phase, where they should be being incentivised to move in to smaller properties. That people aren't is a further detriment to the housing market as housing supply particularly for people in the middle band is not increasing anywhere near the speed of demand. An asset based tax would solve this (at least to some extent).
If we have a wealth tax that excludes the PPR, this will actually make the above situation even worse, as people who have say a $2m home (and as you say could easily have generated wealth of $1.5m), would be able to exclude it. Why would they then downsize igf it could trigger a tax payment of $100k or greater? It doesn't make sense.
A lot of lefties (and from a monetary perspective I'm not one) complain hugely over the inequality of wealth and mention the processes that people go through to minimise their tax obligations (legally), which is far far easier with tax on the individual. Tax on the asset gets around that. Like I say, if there is a significant difference between income and property value, then I'm happy to have measures in place that allow that tax to be deferred (maybe until death) but there has to be an incentive to get people to downsize.
You yourself (I think it was you anyway) have commented elsewhere that the "Australian dream" of having a large house, large garden etc is not sustainable in the long term and I totally agree with this, we need to be living in smaller premises, but if we do what you are suggesting, there is little incentive to downsize and follow this, it actually would do the opposite as I stated above, so why would we be trying to discincentivise older people who may no longer have a requirement for a 4 bedroom home, from downsizing. That to me makes absolutely zero sense.
My experience of my family, my partner's family and lots of other people is that most of them bought one house and raised a family there and moved out in a box. It is actually the ridiculous house price rises which prevent people from getting into a lifetime property first up.
You miss the point about the principal place of residence being a residence, not a wealth asset. Yes, they do rise in price, but if it is a fair dinkum PPR the market value is irrelevant.
Do you want to also put a wealth tax on personal possessions such as a wedding ring? I don't care about that one as I don't believe in marriage so I ain't married, but some of those rings, they can be worth a lot. While we're at it let's have a look at the contents of the house, hmm, lots of books and records, tax them? The point is that these are assets which are not bought for their market value but for their use value.
DS
You miss the point about the principal place of residence being a residence, not a wealth asset. Yes, they do rise in price, but if it is a fair dinkum PPR the market value is irrelevant.
Do you want to also put a wealth tax on personal possessions such as a wedding ring? I don't care about that one as I don't believe in marriage so I ain't married, but some of those rings, they can be worth a lot. While we're at it let's have a look at the contents of the house, hmm, lots of books and records, tax them? The point is that these are assets which are not bought for their market value but for their use value.
DS
I understand that, but the purpose of owning them changes over time.
Many people that have houses that appreciate in value will downsize (which is exactly what I'm getting at), which then turns the house into generated wealth as when downsizing most people will realise value in their homes.
Personally I don't support any sort of wealth tax which is what I'm getting at. If you want a fairer distribution of tax receipts, then you need to target both income and wealth.
For example, take a person that is on a low salary and rents. Any increase in property taxes is likely to be offset by a larger reduction in their personal income tax and hence make people at this level better off (isn't that the point). You'd most likely tier it so that those with modest sort of houses (I guess thats anywhere from $750k to $1.25m now) would likely not be any worse off if on a middle income, and those with high value homes and high incomes would pay more tax.
The whole idea of taxing an asset, is many of the people that are better off can find ways to offset their income and lower their marginal rate of tax, taxing an asset does not allow for that scenario to occur.
Yeh, after doing a mountain of tax returns for all sorts of different individuals and businesses, hard work isn't a necessary precursor for high incomes. Luck plays a fair part. Education & connections play a fair part.
Of course there are people who have started from nothing, followed a passion, worked hard and done well. But I have seen lots of high earners get there whilst working less hours and having it easier than some working two jobs and earning less then $80K.
I'm lost, you want to tax both income and wealth but disagree with a wealth tax? How does that work?
How many people downsize? To say most people end up selling their PPR and realising a gain needs evidence to back it up.
I would keep income tax rates where they are, not that high these days. As I have said before I'd add another tax bracket at very high incomes.
DS
You can’t just ignore the value of a PPOR in a fair system.
The tax benefit to someone whose house appreciated one million is massively different to one who had no appreciation or someone who rented. It might not seem fair to you @DavidSSS but IMO you are very conflicted as it would likely really suck for you.
Houston taxes based on value of land but has no stamp duty going in. Over time replace the very regressive stamp duty with a land tax (on all property including PPOR) will create the right pressures. Windfall value increases drive people to different property as much as when family leaves home and downsizing makes more sense . I can see some social downside to this in the windfall gains section as it may force some to a different area but see way more pros.
Only the ridiculously income rich will sit on too high value properties. The problem in Melbourne and Australia is that being forced to shift creates *smile* windfall income for the state government. This clearly delays people from switching to more appropriate property and makes any moves to move to an annual land tax system now pretty unfair.
We need to fix immigration / ease back on population growth that is overburdening infrastructure and not destroy more of our country with new housing development. Some targeted density improvements make sense.
Any wealth tax you think would see the rich coming up with other ways to get around it and the government being a decade behind. Would create some shitty situations with forced asset sales to pay for any tax that gets assessed. Lawyers and accountants would be rubbing their hands. Conceptually makes sense and provides some resistance against womb lotto. Don’t trust the government to use it wisely though.
The tax benefit to someone whose house appreciated one million is massively different to one who had no appreciation or someone who rented. It might not seem fair to you @DavidSSS but IMO you are very conflicted as it would likely really suck for you.
Houston taxes based on value of land but has no stamp duty going in. Over time replace the very regressive stamp duty with a land tax (on all property including PPOR) will create the right pressures. Windfall value increases drive people to different property as much as when family leaves home and downsizing makes more sense . I can see some social downside to this in the windfall gains section as it may force some to a different area but see way more pros.
Only the ridiculously income rich will sit on too high value properties. The problem in Melbourne and Australia is that being forced to shift creates *smile* windfall income for the state government. This clearly delays people from switching to more appropriate property and makes any moves to move to an annual land tax system now pretty unfair.
We need to fix immigration / ease back on population growth that is overburdening infrastructure and not destroy more of our country with new housing development. Some targeted density improvements make sense.
Any wealth tax you think would see the rich coming up with other ways to get around it and the government being a decade behind. Would create some shitty situations with forced asset sales to pay for any tax that gets assessed. Lawyers and accountants would be rubbing their hands. Conceptually makes sense and provides some resistance against womb lotto. Don’t trust the government to use it wisely though.
