Buying a home is stressful enough on its own and being presented with the largest single tax bill you’re ever likely to face just adds to this. Because of this punitive cost, Stamp Duty gums up the housing market and erects a barrier to families trying to get on the housing ladder - it is time to abolish it. The reforms made by George Osborne that removed the slab rates were a step in the right direction, and certainly removed some of Stamp Duty’s worst aspects, but there is a reason that there is a continued chorus of groups and people calling for it to be scrapped.
One illustration of the problems caused by Stamp Duty is that it makes it incredibly expensive to downsize. When a couple’s children move out and they want to move to a smaller, more affordable to run, house they would have to pay a huge chunk of tax for the privilege. As a consequence they may think twice and decide against it, and this has knock-on effects. If older couples are being trapped in a relatively large home, a young family who might need the extra rooms cannot buy it and put it to its full use. People turn down better paying jobs in different parts of the country. Stamp Duty isn’t just exacerbating the housing crisis, it’s also partly to blame for our productivity puzzle.
Although abolishing Stamp Duty wouldn’t alone be enough to make housing affordable, for which many more new houses are needed, it would certainly be a step in the right direction and avoid the absurd situations like the one mentioned above.
The relatively small amount of tax this raises doesn’t come close to justifying the continued existence of this tax, it’s bad for the housing market, bad for families and needs to be consigned to the dustbin of history.