This letter from Michael Johnson, CPS Research Fellow, was originally published by the Financial Times (£)/
Sir, Follow the money.
By far the largest pool of wealth is tied up as home equity: some £5tn net of mortgage debt, 2.6 times gross domestic product (FT Money, May 13).
In addition, it is concentrated among those soonest to need care: the elderly. But how to get at it? Notwithstanding politics, a mansion tax (or higher council taxes) is impractical for one reason: cash flow.
Many of the retired have lived in their homes for decades: their incomes have (massively) lagged behind rising property prices. Higher inheritance tax is one option but, by planning ahead, it is easy to avoid. Better to introduce a property gains tax payable upon sale, when the cash would be available to pay it. Such an approach would effectively socialise the uplift in land values across society (via the Treasury’s coffers). In parallel, stamp duty could be scrapped to remove a barrier to mobility and to help the next generation get on the property ladder.
Homeowners are becoming wealthier by doing nothing, at the expense of the non-home-owning next generation.