The Rest Is Money 187. Is It Time To Impose Capital Taxes On Our Homes?
Housing Dominates UK Wealth Growth
- Over 70% of British people's wealth increase in 30 years comes from housing, unlike the US where it's mostly investments.
- This creates economic distortion favoring property over business growth and innovation.
Why Freezing Wealth in Homes is Killing the UK Economy
Tom Tugendhat explains that over the last 30 years, much of British capital has been "frozen" in housing rather than flowing into productive businesses. This misallocation acts like a 'dead hand' on the economy, limiting growth and innovation.
He draws a historical parallel with 13th century England, where land held by the church became stagnant capital, leading to economic freezes until laws were passed to free it. Today, our obsession with homeownership similarly traps wealth.
Tugendhat argues this mindset is shaped by policy privileging property, and suggests reforming capital gains tax to align taxation between housing and equities, with a generous lifetime exemption to encourage investment in growth sectors rather than locking wealth in bricks and mortar.
The ultimate goal is to "get the blood flowing" again in the economy, facilitating business growth and higher returns for all generations.
Align Capital Gains Tax Policies
- Align tax treatment of capital gains on housing and equities with a large lifetime exemption to avoid distorting investments.
- This encourages diverse investments in property or businesses without penalizing either.
