Home truths about tax

If Polly Toynbee and Kate Barker want "a tax on all your houses" (Comment, November 5), they shouldn't stop at new ones. In fact, the planning gain supplement is a species of what 19th-century economist David Ricardo called "the ultimate anti-market tax", that on transfers of property rights. It will be just as inflationary as its predecessor "land taxes" - development land tax and betterment levy. Moreover, it will undermine the principle behind planning gain: that the developer's contribution to infrastructure costs must be applied locally to the development.

The only sound form of tax on houses that will achieve what we all want - a greater supply of housing land at lower price - is a tax levied on all land annually, based on the value which planning permission, actual or implied, gives to its owners. Land value tax must not be seen as an additional tax. When introducing it, governments should alleviate other taxes that are more distorting. My favourite for the chop would be Stamp Duty Land Tax and Planning Gain itself would follow shortly after.
Cllr Tony Vickers
West Berkshire Council


Toynbee's proposal - extending capital gains tax to first homes - is politically impossible (too many people have based their financial planning on the current tax regime, and people would try to stay in the same home, reducing labour mobility). Council tax should be made progressive up to, say, £750,000, and a new annual tax imposed of, say, 0.5% per annum on values above £750,000, with proceeds to the Treasury. This would raise billions from the real rich (including non-residents with posh homes here) without penalising earnings. A second property tax on all second or empty homes would do more to increase supply efficiently than any new building programme - by bringing some existing underused homes back into full occupation. The percentage rate of the tax could be varied at the extremes of the property market cycle to dampen or increase demand, thus regulating property prices directly instead of through interest rates.
Mary Campbell
London


Stamp duty and inheritance tax could be abolished. Instead, CGT allowances should be able to be accrued for the duration of ownership of property. These allowances would then be applied at the time of any sale. There would be several benefits: long-term property ownership would be encouraged; people who inherit the family home would not be forced to sell; and the pensions market would not be distorted by property prices as houses would not be subsidised as an investment. Multiple home ownership would not be favoured since each person only has one set of CGT allowances to apply.

A further step would be to create "maintenance allowances" so that home owners could claim for basic repairs and energy efficiency improvements. These, again, would be offset against the CGT liability when the house was sold. This would penalise those out to make a quick buck by tarting up a house and encourage those who invest in genuine improvements in the housing stock.
Richard Gilyead
Cirencester, Glos


Toynbee's assertion that taxes are better than interest rates for holding down house prices is proved right by the report in your business pages the same day that raising interest rates has only succeeded in halting house-price inflation at the cost of halving overall economic growth. But the CGT on house sales she proposes would put people off selling, whereas an annual land value tax would, unlike the one-off Barker tax, continuously track property price rises and provide a steady revenue stream while squeezing real estate kept as a cost-free long-term investment on to the market, so increasing economic activity.
DBC Reed
Labour Land Campaign