The BREXIT vote was immensely important for Britain, but the hard choices are still ahead. Whichever way they go, it will make the difference between greater prosperity than the EU, or becoming just another unimportant island nation.
Britain can become the low-tax alternative to the EU, and prosper, or replicate the stagnating EU countries choking their economies with ever more taxes and regulations.
If it is serious in becoming more prosperous than the EU, it has to start its own tax reform. It should start with the elimination of the “stamp tax” on real estate purchases.
This tax rises to 12% on the purchase price of property above about £1.5 million. On top of that you have the real estate commission. For rational buyers, it doesn’t make sense to purchase property unless you want to live in the property for the rest of your life.
This tax may not be extremely important during the real estate boom of the past years, but with the BREXIT, it is the real estate killer. Here is the schedule for the stamp tax, according to which.co:
Will other countries eventually follow Britain and put a heavy tax on real estate purchases? We believe so. As income tax revenues shrink, governments everywhere will try to find new sources of taxes.
We think this tax may be implemented by other countries and states because the masses of people are at the lower end. These people rent. They can be sold on the concept that the “rich should pay much more.” Thus, repeal of that tax will be unpopular. But the resulting plunge in real estate values hurts everyone.
In Hawaii, property taxes were almost tripled on homes owned by non-residents valued over $1 million, which is basically the value of a garage. The politicians figured it wouldn’t hurt their political future because non-residents don’t vote in Hawaii. Clever!
The International Monetary Fund (IMF) did a study of what factors have the greatest influence on economic growth. The top item was tax rates: lower taxes=higher economic growth. That why Trump’s plan is so good for America with the substantial tax cuts he proposed.
The second item was ‘regulations’ which kill growth. Trump’s plan is to reduce regulations and for every new regulation two would have to be eliminated. That’s close to our proposal of many years, but we say cancel 5 old regulations for each new one.
The economic stagnation of a great part of the world, Europe and Japan, is a testament to the poison of big governments who only know to raise taxes and produce more regulations.
If Britain takes the right path at the fork in the road, which is now, they will show the world that they have made a true turn in the direction of prosperity. That will draw companies to Britain instead of getting them to leave. We are skeptical. Where is the Margaret Thatcher of today? Is it Theresa May? We will see.
Yogi Berra famously said: “When you get to the fork in the road, take it.” He didn’t say which direction. We hope Britain will make the right choice. Perhaps Nigel Farage, who led the fight for BREXIT and succeeded against all odds, will become Prime Minister. He was a former currency trader. He knows how the world works. Perhaps if the US election shows that the pendulum in the world may be returning from the ultra-left back towards the right, other countries will follow.