Would this tax system not create a slew of distortions of its own? To minimise taxable market value as a rental, I would become motivated to make and keep my own house as unappealing as possible to others. A generation or two of this and pride of ownership would be lost and our built living environment would spiral downwards. Look at Egypt, Mexico and other places where there are tax advantages in having an (ugly) incomplete house, with bare concrete slabs for roofs, and rusty exposed reinforcing , piles of bricks and sand and rubble left for years etc. There is no doubt that people will sacrifice personal amenity when being taxed on it - the hated window tax in the UK, and all the bricked-up window openings being another case in point. This raises another question - how should we as taxpayers acknowledge the public benefit created by urban environments that generate more amenity for the public than would result from tax optimised buildings?
Official response from Gareth Morgan
Depends what you’re doing the improvements for. If they’re for you to enjoy then that’s a benefit or income and should be taxed. If you’re doing it because you dressing it up to sell well yes there’s not much point if house prices aren’t rising (in real terms) which is the whole objective here - to let the price of housing reflect whatever those who wish to own their own home simply to enjoy it. Not to let the price of housing reflect the vale of the tax loophole.
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