Why people would hate a property tax

My friend Tim Leunig is a cerebral thinker of the best kind. Though not party-political, he has worked for Tory chancellors and would give the same advice to governments of any stripe. Wikipedia calls him a prize-winning economist and that’s right, but he has a gadfly instinct and a remorselessly rational intellect that takes him into the deeps: into first principles, logical consequences and the reductiones ad absurdum of some of our trains of argument. He writes a substack (timleunig.substack.com) and it was his recent summary there of proposals he wrote as chief economist for the Onward thinktank that caught my eye.

The proposals are for a radical reform of property taxation. They prompt this column. Because I’m not sure he’s right. Leunig says this: ‘Council tax and stamp duty are terrible taxes. They are unfair and unpopular, and both should be replaced with proportional property taxes. Council tax should be replaced by an annual tax on all houses, and stamp duty with an annual tax only on houses worth £500,000 or more.’

Both these taxes would be payable by owners, not (in rented property) by tenants. The tax on houses worth less than £500,000 would be proportionate to value, and a single rate would be set by (and payable to) the local council. The extra tax on houses worth more than £500,000 would be set by (and payable to) central government, and there would be two rates: one on property value from £500,000 to £1 million, and a higher one on value beyond £1 million.

I cannot argue with the logic here. Council tax is clumsy and produces grotesque results. Stamp duty gums up the housing market, hitting younger people at the wrong time as they try to move up the ladder; and it discourages older people from the downsizing that might otherwise make sense.