Not that it really matters, because the house I sold before I bought this one was just as spectacularly over-priced. And, more to the point, the house my mother sold, just as the bubble was bursting, annihilated my mortgage and that of my siblings.
And Thomas Piketty wants to take away my just desserts. Hell, I worked for that inheritance. I visited my mother in her comfortable nursing home at least twice a week. Sometimes, I brought her a packet of polo mints.
When she died, in 2009, having spent very little of her capital on her nursing-home care, because she wisely invested the money she got when she sold her house, her children were her only inheritors.
But it wasn’t all wine and roses. We did pay tax. Heavens, yes, on anything we got over €300,000.
We all did different things with our money. I paid my debts and sat pretty, safe in the knowledge that our friends, who are working like dogs just to pay their interest on their bank debt, will never catch up with us, because our parents happened to buy a pebble-dashed house in south Dublin in the 1950s and our mother happened to sell it in 2007.
Piketty says that’s not fair. He says that inherited capital, rather than labour, is returning to dominate modern economies, to the extent that it threatens the very basis of our democracies. He disagrees that our societies have become more equal through redistribution. He says that the relatively equal period from 1950 to 1980 was an aftershock of the destruction of wealth during the World Wars, followed by very rapid growth.
At least, that’s what I think he says, because I am barely a chapter into Capital in the Twenty-first Century and my girlfriends are already ribbing me about it. But, so far, I admit that he is articulating a little niggle I have had for some time. Namely: how can you reward innovation and entrepreneurship, in any society, if crossing your fingers and hoping that your parent will die during an upswing in the property market is the fastest way to wealth?
How fair is it, for instance, to pay a massive residential property tax on a house on which you have a massive mortgage and can’t possibly sell? Surely, the only way to redistribute capital through the property tax is to pitch it higher when the owner has no debt and include farm land in the calculations?
You would be looking, then, at a redistribution of wealth such as hasn’t happened since the Brits brought in the Land Acts. You would cut chains of entitlement that stretch back into the mists of time, as big farmer inherited from big farmer, and leafy south Dublin houses with paths worn to the Four Courts bought more leafy south Dublin houses with paths worn to the Four Courts.
Add taxes on very high incomes, up to 80% on €2m, such as pertained in the UK in the 1960s and in the US in the 1930s, and you would be looking at something approaching our republican ideal of genuine equality.
I would be cooked. But I wouldn’t be the only one. I wasn’t, after all, the only person who inherited a share of the extravagant sale price of a property during the bubble years and kept the money. There were a few more. Thousands more.
If you add up the yield from stamp duty on sales of residential property between 2002 and 2006, it comes to €3.8bn, when the rates of stamp duty paid by owner-occupiers of second-hand houses ranged from 3% for houses bought for between €127,000 and €190,000, and 9% for houses bought for between €381,001 and €635,000.
In the later years of the boom, it would have been a modest house indeed that would have attracted a rate below 9%.
But let’s pitch ourselves in the middle of the range, at 6%, for argument’s sake. If all the stamp duty had been collected at this rate between 2002 and 2006, then sellers of residential properties would have gone home with €60.8bn in their pockets. Which is to say nothing of what was earned on commercial property.
Nothing is ever whispered about the massive financial gains people made during the property boom, and nothing has been done to stop them making the same financial gains during the next boom.
Of course, there is nothing wrong with making money. But there is something wrong with making vast amounts of money mostly because you had money in the first place, rather than through any particular effort on your part. It makes a mockery of effort and innovation.
And there is something wrong with vast gains of which the tax man sees so little, because it deprives our society of income it needs to become more equal. Maybe I am a bit dim, but I don’t understand why stamp duty is charged to the person buying a house, and not to the person selling a house.
From the way we are roaring about hauling people up in front of that politically choreographed role playing that is the banking enquiry, you would think that we, the people of Ireland, had not ourselves pocketed vast sums of money during the property boom. Sure, lots of people lost lots of money. But lots of people earned lots, too.
And when even my black Labrador frequently barked at me that the property market was seriously overheating, I don’t recall anyone saying to a buyer, “Don’t give me that much for that house. It’s not a great house. My parents bought it when Adam was a boy. There hasn’t been a mortgage on it in 20 years. I really don’t need all that money for my retirement. You have kids to raise, you need it far more than me.”
Central Bank governor Patrick Honohan’s excellent report into the banking collapse repeatedly states the difficulty of reigning in the property boom, given the public’s extreme antipathy to any such moves.
If it’s true that his report, along with Nyberg’s, isn’t enough for us and that the main actors in the banking crash need to be questioned before our eyes, it’s also true that this will never fully explain the property bubble, because thousands of the main culprits will never be called in.
Look into the bathroom mirror tonight as you’re brushing your teeth and you may see one of them.