The UK has just upped income tax upon rental incomes by two percentage points. This reflects the assumption among some to many in the UK that landlords are ghastly rentiers ripping off the proletariat. Portugal has just cut the income tax upon rental income to 10%. On the basis, we assume at least, that some to many in Portugal’s government see landlords as helpful in carrying the capital costs and risks of housing for those proletarians who cannot, or prefer not to, carry those risks themselves.
Leave aside, just for a moment, those differences in views upon landlordism. Just consider the likely effect upon the number of people who decide to become landlords. Then the follow through effect upon the number of rentals and therefore the rents that can be sucked out of the proles. We are really pretty insistent that taxing landlords less is likely to, over time, increase supply and so reduce rents. As we can also see in the UK the opposite, as the rules on landlordism become ever more restrictive so rents are rising.
OK. So which policy should we be following in the UK? Higher taxes upon landlords or lower? Answer that question twice of course, once employing your prejudices about landlordism, once considering what’s best for the proletarians. Finally, ponder whether prejudices or proles should win out. And?
Tim Worstall