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Unthinkable? Capital gains tax on homes Unthinkable? Capital gains tax on homes
(4 days later)
What are the three biggest problems in prospect for British society? Everyone will have their own list, but one plausible tricolon would be: cash-starved public services, appallingly unequal wealth, and unaffordable homes. Each feels as unstoppable as it does grim; in combination, they threaten to snuff out dreams on poorer streets, and expose Westminster's slogans about social mobility as cant. Just imagine, then, if one policy could fix all three at once. Ending the capital gains tax exemption for first homes is an answer staring us in the face. When many home-owning Londoners go to work in the morning, their house does the same – and in a much better-renumerated position. Charging for capital gains on the home would not necessarily stop this "second salary". It would merely ensure that, like the first income, it was taxed to give the community a share. The Revenue estimates that closing this loophole would bring in £12.6bn annually if behaviour didn't change, enough at a stroke to dispel the NHS funding crisis or to avert all the benefit cuts that George Osborne pledges for after 2015. In practice the yield might be smaller, since less money would pour into property if investments in housing were taxed like investments elsewhere. But in that case the advances on the fronts of inequality, affordability and, incidentally, the optimal allocation of capital would be all the greater. It may be unthinkable before polling day, but this looks like an indispensable policy for after 2015. What are the three biggest problems in prospect for British society? Everyone will have their own list, but one plausible tricolon would be: cash-starved public services, appallingly unequal wealth, and unaffordable homes. Each feels as unstoppable as it does grim; in combination, they threaten to snuff out dreams on poorer streets, and expose Westminster's slogans about social mobility as cant. Just imagine, then, if one policy could fix all three at once. Ending the capital gains tax exemption for first homes is an answer staring us in the face. When many home-owning Londoners go to work in the morning, their house does the same – and in a much better-remunerated position. Charging for capital gains on the home would not necessarily stop this "second salary". It would merely ensure that, like the first income, it was taxed to give the community a share. The Revenue estimates that closing this loophole would bring in £12.6bn annually if behaviour didn't change, enough at a stroke to dispel the NHS funding crisis or to avert all the benefit cuts that George Osborne pledges for after 2015. In practice the yield might be smaller, since less money would pour into property if investments in housing were taxed like investments elsewhere. But in that case the advances on the fronts of inequality, affordability and, incidentally, the optimal allocation of capital would be all the greater. It may be unthinkable before polling day, but this looks like an indispensable policy for after 2015.
• This article was amended on 22 April 2014. An earlier version misspelled remuneration.