Balance: Jeremy Corbyn's tax return

capo4th

Mmmmm I do love an apple. 

I have bought and sold a couple of properties they all went up in value over time. 

Houses do generate wealth.

Axe_meister

So you go to a pawn shop and buy a guitar get it home and find it's a 1957 strat.
Increasing it's value by £29,900.
But you are a skint student and need a guitar. Are you will to pay the tax on the increase. How do you police such a tax you somehow have to keep track of everybodies assets and increases in values. Do you they a tax rebate if the value falls?

Axe_meister

Tax on assets will create a cash in hand economy with those with means artificially distorting the market such that nothing increases in value.
A lot of mobile assets will go off shore and we will never get the chance to see great art.
There will be to uncentive for small companies to grow and employ more people.
Houses will not be maintained to a high standard in fear of it's value increasing this out housing stock will diminish.
Of course a building company will not longer take the risk of building on the land as the asset value of land will increase.

Taxation on profit the only way to do it.

Philly_Q

capo4th said:

I have bought and sold a couple of properties they all went up in value over time. 

Houses do generate wealth.

Wealth in terms of value, not cash in hand.

You don't realise that increase in wealth unless and until you sell the house.  If you carry on living in it, it's just a house, same as it always was.  So if you were taxed on the value of that house, where would you find the money to pay the tax?  Sell the house to pay the tax, maybe?  And then what?

quarky

Axe_meister said:

So you go to a pawn shop and buy a guitar get it home and find it's a 1957 strat.
Increasing it's value by £29,900.
But you are a skint student and need a guitar. Are you will to pay the tax on the increase. How do you police such a tax you somehow have to keep track of everybodies assets and increases in values. Do you they a tax rebate if the value falls

Well as I said, we should be talking about people with a lot of wealth, not just £30k, or even £300k, but the answer is a tax return isn't it?

Philly_Q

quarky said:

Axe_meister said:

So you go to a pawn shop and buy a guitar get it home and find it's a 1957 strat.
Increasing it's value by £29,900.
But you are a skint student and need a guitar. Are you will to pay the tax on the increase. How do you police such a tax you somehow have to keep track of everybodies assets and increases in values. Do you they a tax rebate if the value falls

Well as I said, we should be talking about people with a lot of wealth, not just £30k, or even £300k, but the answer is a tax return isn't it?

So you'd list your assets on your tax return every year?  Only individual assets over a certain value, or total assets cumulatively over a certain value, or just all assets?  And who would carry out the valuations?

quarky

digitalscream said:

Honestly, it's getting late and I can't really be arsed, but safe to say four things:

1 - I understand what you're saying just fine.

2 - The concept of paying tax because you own something isn't just mad because of the examples we've had here; it's mad because you end up paying more in tax on something that you own long-term than you ever could by buying it in the first place.

3 - As soon as you decide to make special rules to take even more from a certain demographic of people, those people will disappear. Especially when they're the ones with the most means to do so.

4 - Taxing based on assets is the ultimate "special rule", because it goes against the entire foundation of the tax system.

It must be late because you are still not getting some fairly fundamental points. You are NOT paying tax on something you own, you are paying tax on the return on investment, the ROI. If you own something (house, shares, crème egg, guitar) and they don't go up in value, you have no ROI, so you have no wealth increase to pay tax on. That is a fundamental mistake you are making.

We have special rules already. Income tax was a special rule. Capital gains tax is a special rule. And using your example of a house, what are they going to do? Dismantle it brick by brick and take it with them? I don't think so. I also don't see a reduction in foreign investment in the housing market (which is what it would be if they moved overseas) to be a bad thing. Foreign investment in companies is a bit of a mixed blessing too if it is unbalanced.

Again, it is not taxed based on assets, it is tax based ROI or if you like, the INCOME from those assets. Hope that makes it clearing this morning

As for the house generating wealth, of course it does. There is a return on the value of my asset (the house) and there is a cost to living in a house (rent). Just because the two match, and I don't have any formal agreement with myself doesn't change that. Thing of it as being like an opportunity cost if it is easier. When I moved into my house, I had a mortgage so it was costing me £650/m. Alternatively, I could have rented a house (say next door) for £700/m So by owning the house, it was generating £700/m in income, of which I was usng £650/m to pay my mortgage. The other £50 was a surplus, profit. Now, I have no mortgage and could rent out for say £900/m. So it is generating £900/m which covers my rent of the house. If I was to choose to live somewhere else, I could stll rent this out for £900/m and rent somewhere smaller for £600/m, for a surplus of £300/m (my rent is now only £600/m, but my asset, the house, is still generating £900/m).

quarky

Philly_Q said:

quarky said:

Axe_meister said:

So you go to a pawn shop and buy a guitar get it home and find it's a 1957 strat.
Increasing it's value by £29,900.
But you are a skint student and need a guitar. Are you will to pay the tax on the increase. How do you police such a tax you somehow have to keep track of everybodies assets and increases in values. Do you they a tax rebate if the value falls

Well as I said, we should be talking about people with a lot of wealth, not just £30k, or even £300k, but the answer is a tax return isn't it?

So you'd list your assets on your tax return every year?  Only individual assets over a certain value, or total assets cumulatively over a certain value, or just all assets?  And who would carry out the valuations?

Maybe you need to read my posts again, or my next one (well, the previous one to this). It is increase on wealth on the assets, or the ROI if you like. That is still income even if it is in a different form. If my shares go up in value over the year, my net worth is higher. the only way that can happen is if my income is higher than my expenditure.

Who carries out the valuation of your tax return now? When you fill it in, if you have to list any other income besides PAYE, who does that?

digitalscream

Of course, if you're only talking about big-value stuff, there's another problem (forgetting for a minute that value doesn't equal cash, and that the assets would likely have to be sold in order to pay your tax on those assets, which is something you seem to want to ignore). The average £1m company (or house, or whatever) isn't worth £1m for a whole year. The value is constantly changing, and not by small amounts. How does that translate into tax? How far down do you go - submitting a valuation report every month?

That's a massive overhead for HMRC. The cost of altering their systems alone would likely make it prohibitive (not least because you're changing the whole basis of the tax system for a select number of people), and then the cost of administering it...?

Still a silly idea.

quarky

digitalscream said:

Of course, if you're only talking about big-value stuff, there's another problem (forgetting for a minute that value doesn't equal cash, and that the assets would likely have to be sold in order to pay your tax on those assets, which is something you seem to want to ignore). The average £1m company (or house, or whatever) isn't worth £1m for a whole year. The value is constantly changing, and not by small amounts. How does that translate into tax? How far down do you go - submitting a valuation report every month?

That's a massive overhead for HMRC. The cost of altering their systems alone would likely make it prohibitive (not least because you're changing the whole basis of the tax system for a select number of people), and then the cost of administering it...?

Still a silly idea.

Yes, we are talking about high value stuff. I am not sure why you keep thinking that income and cash are not interchangeable. Sometimes it is easier than others, but they are. And again, you are making a false dilemma as I explained before (with the 300k house owner having to find £300, are you seriously suggesting that someone owning a £300k house mortgage free would have to sell their house over £300, or that this would be a widespread problem?). There are people who struggle to pay tax as it is. So if in a hypothetical situation, someone can't pay income tax, should we abolish that? That makes no sense at all.

We have a tax year. It really isn't that difficult. I have investments during that year, and they will generate a return, That return is taxed. Just like we do now.

Philly_Q

quarky said:

I am not sure why you keep thinking that income and cash are not interchangeable. 

"Income", as you are defining it, and cash are NOT interchangeable!

The "income" you're talking about, the "return on investment", is notional.  It's theoretical.  It's on paper.  It does NOT put money in your bank account.  But if you get taxed on this "income", you need actual cash to pay it.  Where are you supposed to get that cash?

You're not distinguishing between REALISED gains and UNREALISED gains.  An increase in the value of your house is an unrealised gain, it only becomes a realised gain if you actually sell the house.

Let's suppose I have a portfolio of shares in different companies (which I don't).  If I sell some of those shares, I pay tax on the gains.  The shares pay dividends, I pay tax on those dividends.  Again, they're realised gains.  I don't pay tax on the change in valuation of the shares I still own - that's an unrealised gain (or loss).

Coming back to the tax return, you don't report unrealised gains so valuation doesn't come into it.  Everything on the tax return - salary, pension, interest, dividends, capital gains - is realised income.  It's CASH you have received, so you have CASH to pay the tax on it.

Axe_meister

Ok talking about big income stuff. I.e. My house. Yes it has gone up in value and I pay a mortgage and I'm mortgages up to the hilt. Any additional tax will kill me financially. Forcing me to sell.
We already pay a tax on increased value of a property. It's called stamp duty as the value of a property increases so does the cash value of stamp duty once the property is sold.
But as I said what happens when the value of an asset goes down? Do you get a tax refund.
If I had a small company that for what ever bizar reason had a massive growth year and being a responsible owner used the profits to hire more people. So now I need to personally pay a massive tax bill.
To afford that I then have to award myself a massive pay rise thus taking money out of the company.
This means I potentially have to let somebody go causing resentment amongst my employees who are me giving myself a massive pay rise at their cost. That means bad moral and the company not performing as well.
Now the increase in profit of the company would have already been taxed anyway.
All it will do is stifle growth and make anything of value worthless.

Snap

Tax on non liquid assets is absolute nonsense.

Tax is rightly placed on income.

This argument is total rubbish.

Some people would argue that you should be taxed on the proceeds of the sale of you domestic home. I think that's rubbish too. Most of us will paid outrageous compound interest over the life of the mortgage, so I think we all deserve to receive the gain on the house sale without being taxed.

ON anything else you pay capital gains tax, which agreably is coming down too.

For me, a fair solution (IMO) to taxation is very simple - a flat rate and a higher threshold. Everyone pays the same rate of tax on their earnings. That is a level bar. If you want to have more money in your pocket, the ball is in your court: do something about it.

As I said earlier, the underlying issue is that as a nation, we are resentful of wealth. To use the cliche, it really is a culture of envy.

chillidoggy

And I see from this morning's news that my old chums at HMRC once again demonstrate that they've got no idea what's going on. And this time I have to ask myself that if they fail to follow up on the paltry amount of high earners that they do investigate, is there someone pulling the strings? I'm not a conspiracy theorist, but it makes me wonder.

http://www.bbc.co.uk/news/business-36044321

quarky

OK, I am tired of typing.  Some people will get it, some won't here are a couple of good reads about it though:

http://www.bloombergview.com/articles/2014-05-11/picketty-s-wealth-tax-isn-t-a-joke

https://newrepublic.com/article/117499/heres-what-we-know-about-thomas-pikettys-wealth-capital-tax

digitalscream

quarky said:

digitalscream said:

Honestly, it's getting late and I can't really be arsed, but safe to say four things:

1 - I understand what you're saying just fine.

2 - The concept of paying tax because you own something isn't just mad because of the examples we've had here; it's mad because you end up paying more in tax on something that you own long-term than you ever could by buying it in the first place.

3 - As soon as you decide to make special rules to take even more from a certain demographic of people, those people will disappear. Especially when they're the ones with the most means to do so.

4 - Taxing based on assets is the ultimate "special rule", because it goes against the entire foundation of the tax system.

It must be late because you are still not getting some fairly fundamental points. You are NOT paying tax on something you own, you are paying tax on the return on investment, the ROI. If you own something (house, shares, crème egg, guitar) and they don't go up in value, you have no ROI, so you have no wealth increase to pay tax on. That is a fundamental mistake you are making.

There is NO return on investment until the item in question is turned into money by selling it. None. Nada. Nothing.

No amount of condescension on your part regarding my understanding will change that - it's a fundamental part of accounting.

CabbageCat

quarky said:

CabbageCat said:

If I were an alien looking at this system I think I would question why attitude of the bottomies towards the toppies is one of hostility when gratitude would seem to be most logical.

Because the really rich could help out a hell of a lot more and barely even notice?

I am obviously not a commie/leftie, but I also like to think that aliens have done away with a system where people can have way more assets than they could ever need, while in other parts of the world, people are dying of starvation and expose.

The rich could do more, but then so could the not-so-rich. And since it's the rich that are doing all the heavy lifting at the moment I think it's not unreasonable to let someone else shoulder more of the burden. As I said before, it's sad that people are judged on what they could contribute and not what they do contribute. Bill Gates has given billions to charity that he didn't have to - and yet folk still resent him for not giving whatever stuff he has left over.

I'm not a high earner but I live what I consider to be a very comfortable life with a lot of money left over at the end of the month. Of course, it's in my interest to pretend that I can barely scrape by but I know I'd be lying - and if I'm lying then so are other people in my situation.

Drew_TNBD

https://i.imgur.com/Cr7ufrA.jpg

quarky

digitalscream said:

No amount of condescension on your part regarding my understanding will change that - it's a fundamental part of accounting.

Read the links, read the book. To me, if you think that you are paying tax on something just because you own it, you are still missing the point by a mile, but with all respect, I am not going to go into further.

And it wasn't meant as condensing, so sorry if it came across that way.

BigMonka

quarky said:

digitalscream said:

No amount of condescension on your part regarding my understanding will change that - it's a fundamental part of accounting.

Read the links, read the book. To me, if you think that you are paying tax on something just because you own it, you are still missing the point by a mile, but with all respect, I am not going to go into further.

And it wasn't meant as condensing, so sorry if it came across that way.

Does your method of a year tax on "ROI" (in speech marks as I agree with the other posters that it hasn't returned to you until you sell it) actually raise anymore money, when extra administation costs are taken into account, then the current system of taxing when people sell the asset? I'm not currently convinced that it would.