Scotland fixes stamp duty, the most broken tax in the nation

Now when will the rest of Britain follow suit?

Good news if you're Scottish: your government is fixing one of the most ridiculously broken parts of the British tax system! (If you aren't Scottish, you're going to have to hold on a bit longer).

Stamp duty, the fee paid upon purchase of a house worth more than £125,000, is set to be devolved to the Scottish government. It will be the first time that Holyrood has exercised the powers given to it in the Scotland Act 2012 to amend the duty on land and property.

Under the existing regime, stamp duty is one of the last taxes left in the world which features a tiered rate structure based on the entire value of the thing being taxed. That is: on a property worth £125,000, you pay 0 per cent stamp duty, but on a property worth £125,001 – exactly on the threshold – you pay a tax of 1 per cent on the entire value of the house. That's over £1000, just for a £1 increase in the sale price.

It gets even worse at higher levels. At £250,000, the duty raises from 1 per cent to 3 per cent, meaning a £1 change in house price costs an extra £5000 in tax. At £500,000, the cost of the £1 change is another £5000; at £1m, it costs £10,000; and at £2m, it costs a whopping £40,000. (Admittedly, few will weep hot tears for the people selling £2m houses).

That imposes a massive distortion onto the housing market. Take a look at this chart, from estate agent Savills, of the distribution of sale prices in London. Do you see the massive anomaly for houses priced between £250,000 and £260,000? That's entirely due to the stamp duty threshold:

If your house is surveyed at £255,000, you will actually take home less money selling it at that price than if you knocked £5,000 off the sale price (this isn't strictly true; the tax is techincally paid by the buyer, not the seller. But it's the easiest way to explain why it's stupid). And that imposes a distortion all the way up the market: if your house is surveyed at £260,000, you're having to compete with people who are selling theirs at over £5,000 below the asking price to avoid a tax. So you have to drop your price a bit as well.

Compare that to income tax, which is what's called a marginal tax: if you earn £155,000, you only pay the 45p rate on the last £5000 you earn, meaning there's no motivation to keep your earnings to £149,999.99.

The reason for Stamp duty being so unbelievably poorly designed is because it actually pre-dates our understanding of why it's a bad idea: the so-called marginalist revolution of the mid-to-late 19th century. That was when economists first started to realise that people make their decisions on the margin: that, for instance, when you are about to buy your tenth pair of shoes, you don't think "how much do I need ten pairs of shoes?"; you think "how much do I need this pair of shoes?"

Stamp duty was introduced in 1694 (and was literally a fee payable to the crown for placing its stamp on legal documents), and was first graduated according to value in 1808. Over time, we've come to realise how stupid that is, but no-one's actually had the guts to do anything about it. Although a decade ago the name was changed to SDLT, so that's something.

So congratulations to Scotland. The proposed tax will now be charged only on the value of the home above £180,000, and will be set at 7.5 per cent up to £1.5m, and 10 per cent above that. That leaves people selling houses worth less than £300,000 better off; but more importantly, it also fixes the broken structure of the old system entirely.

Hopefully the rest of Britain will follow suit – and soon.

A man walks a saltire past Holyrood. Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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The most terrifying thing about Donald Trump's speech? What he didn't say

No politician uses official speeches to put across their most controversial ideas. But Donald Trump's are not hard to find. 

As Donald Trump took the podium on a cold Washington day to deliver his inauguration speech, the world held its breath. Viewers hunched over televisions or internet streaming services watched Trump mouth “thank you” to the camera, no doubt wondering how he could possibly live up to his deranged late-night Twitter persona. In newsrooms across America, reporters unsure when they might next get access to a president who seems to delight in denying them the right to ask questions got ready to parse his words for any clue as to what was to come. Some, deciding they couldn’t bear to watch, studiously busied themselves with other things.

But when the moment came, Trump’s speech was uncharacteristically professional – at least compared to his previous performances. The fractured, repetitive grammar that marks many of his off-the-cuff statements was missing, and so, too, were most of his most controversial policy ideas.

Trump told the crowd that his presidency would “determine the course of America, and the world, for many, many years to come” before expressing his gratefulness to President Barack Obama and Michelle Obama for their “gracious aid” during the transition. “They have been magnificent," Trump said, before leading applause of thanks from the crowd.

If this opening was innocent enough, however, it all changed in the next breath. The new president moved quickly to the “historic movement”, “the likes of which the world has never seen before”, that elected him President. Following the small-state rhetoric of his campaign, Trump promised to take power from the “establishment” and restore it to the American people. “This moment," he told them, “Is your moment. It belongs to you.”

A good deal of the speech was given over to re-iterating his nationalist positions while also making repeated references to the key issues – “Islamic terrorism” and families – that remain points of commonality within the fractured Republican GOP.

The loss of business to overseas producers was blamed for “destroying our jobs”. “Protection," Trump said, “Will lead to great strength." He promised to end what he called the “American carnage” caused by drugs and crime.

“From this day forward," Trump said, “It’s going to be only America first."

There was plenty in the speech, then, that should worry viewers, particularly if you read Trump’s promises to make America “unstoppable” so it can “win” again in light of his recent tweets about China

But it was the things Trump didn't mention that should worry us most. Trump, we know, doesn’t use official channels to communicate his most troubling ideas. From bizarre television interviews to his upsetting and offensive rallies and, of course, the infamous tweets, the new President is inclined to fling his thoughts into the world as and when he sees fit, not on the occasions when he’s required to address the nation (see, also, his anodyne acceptance speech).

It’s important to remember that Trump’s administration wins when it makes itself seem as innocent as possible. During the speech, I was reminded of my colleague Helen Lewis’ recent thoughts on the “gaslighter-in-chief”, reflecting on Trump’s lying claim that he never mocked a disabled reporter. “Now we can see," she wrote, “A false narrative being built in real time, tweet by tweet."

Saying things that are untrue isn’t the only way of lying – it is also possible to lie by omission.

There has been much discussion as to whether Trump will soften after he becomes president. All the things this speech did not mention were designed to keep us guessing about many of the President’s most controversial promises.

Trump did not mention his proposed ban on Muslims entering the US, nor the wall he insists he will erect between America and Mexico (which he maintains the latter will pay for). He maintained a polite coolness towards the former President and avoiding any discussion of alleged cuts to anti-domestic violence programs and abortion regulations. Why? Trump wanted to leave viewers unsure as to whether he actually intends to carry through on his election rhetoric.

To understand what Trump is capable of, therefore, it is best not to look to his speeches on a global stage, but to the promises he makes to his allies. So when the President’s personal website still insists he will build a wall, end catch-and-release, suspend immigration from “terror-prone regions” “where adequate screening cannot occur”; when, despite saying he understands only 3 per cent of Planned Parenthood services relate to abortion and that “millions” of women are helped by their cancer screening, he plans to defund Planned Parenthood; when the president says he will remove gun-free zones around schools “on his first day” - believe him.  

Stephanie Boland is digital assistant at the New Statesman. She tweets at @stephanieboland