Why mansion tax makes sense

Gerry Thames

It might make sense for you Ross, but family homes in some areas of London are creeping up to the £2 million mark. I don't really fancy taking another 5% stamp duty hit just because I don't have an extra £20k to hand over to the government each year - and with my wife and I having lost our jobs several times in recent years, this tax would have made our situation even more miserable.

Taxed Enough Already

Karla

Oh but it's nonsense, the French tried this, the Germans too and all you do is sell the house for £1.9m and pay the rest in a brown envelope under the table.

David B

A tax based on asset appreciation is inherently unfair. It does not reflect ability to pay and will cause sale decisions to be made based on tax planning reasons. This always leads to poor decision making and regularly increases the activity it tries to eliminate.

Tax must reflect ability to pay and not unrealised gains. Make property subject to capital gains tax as this reflects earned and banked gains, but not this tax on perceived wealth.

Magnolia

It all sounds so reasonable on paper but it won't work that way.
So called property speculators might well include the majority of the electorate who are trying to find a way of protecting their savings/pension/alternative to a pot of gold, from theft by the state which already helps itself to too much of their wealth.
Many home occupier and owner elderly people can't afford to move even if they want to and a 1% anual tax on a small modest home would effectively turf many out onto the streets.
My frail old mum can't afford to keep warm or eat properly without using savings and she gave up on property maintenance years ago so where will she find a punitive 'roof over your head' tax from?
Her tiny savings used to give her enough income to get by before the government decided to rob savers with negative interest rates and now she's to be classed as part of the problem because she's too wealthy?
Property tax for homes over £2million will sound reasonable at first but, just as with inheritance tax and income tax bands, it will be allowed to creep down with inflation to catch many middle income people as well.
The problem isn't that we need more tax.

JR

I think a partial move towards land taxes would be a good thing because it would encourage work and productive activity through lower income taxes. However I'd caution you to look at American states and in particular Florida before shifting too far in that direction. Additionally you'd want to consider what would happen if there was a crash in prices to overall tax revenue.

But yes I'd fully support a Conservative government that made this change. I believe it's pro business, pro work policy.

startledcod

"a mansion tax ­- assuming it was balanced by a dramatic cut on taxes on income" and therein lies the rub. It would not be balanced by a dramatic cut on anything. The motivation for this tax is not primarily revenue generation it is to 'punish', and be seen to 'punish', the undeserving rich so there will be no offset cuts. The 50p rate is just such a gesture, that raises little, a 'mansion' tax would not be so avoidable. If this was about revenue generation the top rate would be lowered to Treasury engorging 38%,

Chris Puttick

And those whose house is a farm? And the properties that they leave just get converted to flats? People should leave their homes because someone comes up with a silly tax system? Incomes are taxed as a method of ensuring those who have the most pay the most; mansion tax makes erroneous assumptions about how much wealth the owner of the property has.

commentator

The obvious move is to restrict CGT main residence relief which has become a major cause of property speculation. CGT would only be payable if and when a house was sold at a profit. Why should those who can afford to buy in London's most expensive postcodes be given unlimited tax relief on their speculative gains? Any change must however ensure that non-residents are taxed on their gains too.

Tom Pride

One thing worse than rising property prices – falling property prices. Private pensions screwed up with low investment returns, Brown’s continuing tax raid and all time low annuity rates, shares prices static or falling, inflation at 5% and rising and negative real interests rates on savings – a real vote winner to add in falling property prices to that list.

Frank Sutton

As I might have pointed out before, the only owner-occupiers who benefit from an increase in the value of their home are those who can trade down - either by buying a smaller place or by dying.
Why should you be taxed on an increase which doesn't benefit you at all?

Fergus Pickering

Magnolia, does your frail old mum live in a house worth £2m? Maybe she should downsize. It must be awfully big. And WHERE are 'family' houses worth £2m? As for brown envelopes. the houses will be valued as houses are at present. It doesn't matter what you sell it for.

Magnolia

@ Fergus Pickering
The text says,
"An annual tax of one per cent on the value of all residential property would raise £40billion, a revenue stream which would enable 16pence to be cut from the basic rate of income tax...."
I was merely applying his logic to the situation of my mother who lives in a very modest bungalow.
How will you fund your 1%?

Publius

"If you cannot afford to pay a tax of one per cent of the value of your home you almost certainly cannot afford to maintain it properly, either."

Nasty.

Casual Observer

The mansion tax makes no sense at all and is purely based on envy (note the pejorative use of the word "mansion"). Why should someone pay merely for owning an asset?

It is grossly unfair that a tax should target comparatively modest houses in London and the South East (you can bet that once introduced, the £2 million threshold will be lowered in real times by house price inflation, if not in absolute terms as well).

It would also be costly to administer, because you would have endless arguments with those whose house values were on the threshold, particularly if house prices fell significantly.

Far more logical would be to remove the CGT exemption, allowing for stamp duty already paid to be set off.

David Ossitt

I will try to keep this post very simple; all of the above Ross Clark post is just complicated codswallop.

Just as; no intelligent person who has lived in the UK for the past fifteen years would believe anything that Anthony Charles Lynton Blair has ever said, or trust with money the sad, mad, bad, Gordon Brown, no one of any intelligence can think that the LibDems are to be trusted to design a fair and workable tax system.

Whatever the LibDems come up with, whatever path they want to go down, please believe the exact opposite and take the path that is diametrically opposite to the one that they are recommending.

They are unique as a political party in that they are invariable wrong on everything, the sooner this coalition is over the better.

JohnBUK

"Buy a house and live it and, when you come to sell up, you will not owe the taxman a penny, regardless of how big the profits you have made. Moreover, the exemption on capital gains tax on a main home lasts for three years after you have moved out, so you can in fact earn capital gains tax-free profits on two homes at once."

So the tax is predicated on "profit". Perhaps you's like to explain where the "profit" is, or are we really talking about an "envy" tax after all?

Dimoto

Another "trojan horse" from the vindictive socialist wing of the LibDems.

Is there anyone out there who actually believes "income taxes would come down" or that Labour (or a Lib-Lab coalition) wouldn't make an immediate beeline for this tax, as soon as the opportunity arose, to punish "the rich", raise government spending even higher and extract more revenue from London and the south (to further subsidise their heartlands) ?

It would certainly be electoral suicide for the Conservative party.

Why is this futile Liberal conference dragging on and on and on.
Every day, a new part of the economy that some jumped-up LibDem luminary pledges to "get tough with".
And with every repetition, the tone gets more strident.

Be really interesting to see the post-conference polls.

2trueblue

Maybe we should not bother to buy a house, pay the mortgage, and maintain it. We could all apply for ouncil houses.

The 'envy' tax, very aptly named.
The LibDems are presenting themselves to be the party to promoteit. As an MP durin the property boom in Liebores time you bought a house on the taxpayer and then declared it as your main residence and sold it on with profit and that was wrong. But real people did not get the opportunity to do so and I object to any MP fron any party to talk of taxing a person when they sell their own HOME. THat is the difference. Not dificult to understand.

The finanial problems that this country is going through would not be as bad if the government of the previous 13yrs had not presided over the most corrupt parliament, kept a better eye on the countrys finances and not grown the public sector to such a level that was unsustainable. That is part of the reality. Borrowing was the way to go, it was presented as a sure bet, with no caution as to what level it should be. There was little done in the way of measuring whether we were getting value for our money, buildings were put up to provide schools, hospitals, roads were built and PFI was the best thing out, with no reconcilitation of the books. So I need no politician to lecture me about economics. THey have no idea what it is about. Cable is such an upleasant little, small minded man who has discovered that he lives in a time that he has a catch phrase to patter out in a time of envy. The real way out of this mess is good economics and hard work.

A pensioner

It may make sense to you, but if my house, through inflation over which I have no control, becomes worth over £1m, there is no likelihood of my pension increasing commensurately to pay the extra tax. It does not mean that I have suddenly become rich. Why should I be forced to sell (always assuming I could find a buyer) because I can't afford the money to fill the coffers of Westminster which they will waste on the feckless or send abroad?

daniel maris

In a rational world we should certainly move to a property tax as one of our main sources of government revenue.

With a progressive property tax (PPT), we could move to a flat rate of 20% for income tax.

One great advantage of the PPT: the rich can't avoid it or evade it.

However, if PPT were to become a general tax we should have a long transition period during which people can choose whether to pay income tax or PPT, with people no diobt choosing whichever offered them the lower tax burden.

Axstane

All new taxes remove money from the private person or private investor who might use it wisely and puts it into the hands of the state who will surely misuse it.

Whatever the amount of money accrues to a national treasury it will be spent,and overspent.

The problem with Western economies is not that they do not tax enough, or fairly enough, but that they spend unwisely.

On the basis of those 3 verities any idea of a mansion tax will be harmful to the economy. The Law of Unintended Consequences will ensure that.

John

I don't suppose anyone can see the full list of unintended consequences, but we know what has happened with previous tax raids on property. The window tax - windows were bricked up. Inheritance Tax - many fantastic heritage houses were (& still are) demolished or butchered as there was too little cash left a generation or 3 later to pay 40% of the physical asset each time. Sure enough, socialism destroys all aspiration and the road to hell is paved with good intentions.

Craig Strachan

California has an annual property tax of actually a bit more than 1% of assessed value in most counties. Doesn't seem to have prevented real estate bubbles and bursts here.

Dick Barton

David B

"A tax based on asset appreciation is inherently unfair."

Especially when without a proportionate increase in salaries and wages the currency is being deliberately debased and inflation knowingly increased by "Quantitative Easing", i.e. reckless printing of vast amounts of fiat currency unbacked by anything of value.

Why is the Spectator giving blog after blog of attention to this runt of a party anyway? Do the wets at the magazine really think the Coalition has a future or are they just trying to draw attention away from UKIP?

Peter From Maidstone

Craig Strachan, California income tax levels seem very much lower than in the UK. If a property tax were introduced here we could be certain that income tax would not be reduced for any who would be paying the property tax.

Envy has no bounds when it is nurtured in the souls of little men.

We need to start with the assumption that all taxation is theft and work up from there, rather than the present assumption (shared by the Conservatives) that all income belongs to the state and that allowances should be offered by way of pocket money.

Fergus Pickering

The point of a property tax is that it is almost impossible to evade. Of course no one with property likes it but who likes paying tax. This is not a new tax; it is an extension of an old tax. I have a huse and I pay more tax than somebody with a smaller, cheaper house That sems fair. However, someone with a much bigger, much more expensive house does not pay more than IOdo. That doesn't seem fair. Of course the term 'mansion tax' panders to our envy. What's wrong with envy. pray? Many of the rich are stupid, lazy and unpleasant. So are many of the poor, granted. But soaking the rich, if it can be done so as not to discourage enterprise and all that, is an eminently sensible thing to do. And, hey, it's fun. If you want to pay less tax then live in a smaller house, why don't you?

Chris M

I'd only support this if houses in the north had a lower band at which they are charged.

Baron

not again, please, what's wrong with it?

The idea is predicated on the need for more tax revenue, yet what has got us into the shite we’re in ain’t a lack of tax revenues, it’s too much spending by any Government of any colour on social engineering, the green nonsense, useless quangoes, outreaching and stuff. The maligned Tea Party in the US gets it right, both over the pond and here we have to cut public spending, not boost the Government coffers.

If the boy buys this malignant proposal, we’ll be well on our way of becoming a society of equal, equal in poverty, just what the Red Menace of the East managed to do before it got kicked out.

Acacia Avenue

How long do you think it would take for a property tax on £2m homes to become £1m, £500k ... Labour couldn't resist the temptation and the soak the rich mantra would provide the political cover. The plan is a Trojan horse.

As for the idea that the rich could not escape, think again. They will simply sell up and move their funds elsewhere. Make no mistake, this tax is a slow burner aimed at the middle class.

Spin-off effects would likely reduce the propensity of folk to 'improve' their houses as doing so would move them towards higher tax bands. And bang would go the profits and jobs of a lucrative building trade.

If it does happen the cheaper pied-a-terre by the river will likely sell well, along with second homes in France and Spain. Property improvement spending would likely flow abroad.

A nifty bit of inflation could produce a timely increase in the tax crop..

Why not tax fancy watches, cars, boats, wine, horses etc costing over £10k?

In London there are semis selling for over £2m - are these prices an indication of rich people or merely a result of bad interest rate decisions by the Bank of England combined with Brown economic distortions?

Will such taxes be linked to inflation? I doubt it. Sneaky inflation and currency devaluation is exactly how we are being robbed at the moment.

William

Now, where did I put that poll tax?

dorothy wilson

Another possibility would be to charge CGT when a house was sold on any increase in value other than that attributed to inflation. With a proper computer program this would be reasonably easy to calculate.

Alternatively, we could have a local income tax. But then look at the trouble the Poll Tax caused!

michael

why a 1% property tax makes sense makes sense:
The rush to down size will make a mockery of any house building as smaller properties values sky rocket. Rental values will soar as both the tax is passed on and starter houses become less accessible.
-Time for the moneyed to buy small properties, lots and lots of them.
The ensuing building boom and land grab means that a small number of very rich developers will be filling our newly /readily available green and pleasant with bar*atbox gap-linked estates. All of them sold on the same old get-rich-quick fable. -Off we go again.
Might be a good time to invest ... Just speculating.

NewBritannia

You don't have to be a communist to see the benefits of higher property taxes - but it helps.

Nicholas

I find it fantastic that supposedly sane and mature adults are considering this proposal seriously when the real questions that should be asked are - why is so much tax required and what is it being wasted on?

What a superb decoy this "cunning plan" is to those questions. The political elite dreaming up more and more imaginative ways to increase our tax burden (with convenient demons "the rich" and "mansions") and the useful idiots of the totally apathetic and cowed British public making suggestions to help them do it.

Bill Brinsmead

We once had a sensible property tax ..

DOMESTIC RATES ..

..it was fair, based on the notional income derived from property, but scrapped by the Conservatives as they were afraid of the fall out from rate revaluations.

It still works for business property. Bring it back and can the absurd Council Tax.

Thucydides

What is it with you people? By all means have a discussion about the level of tax and spend, but that does not mean that there is no room for consideration of the best way to raise (in the sense of levy, not increase) taxes. Good grief.

toni

Fergus Pickering appears to be making the reasonable case for more council tax bands at the top end.
I'd also advocate another couple of bands at the bottom of the scale, it's highly unfair that those living in a bedsit or one bed flat are charged the same rate as a two bed terrace house with garden.

Baron

Nicholas @ 11.07:

by far the best point made on the subject, sir.

wakeuptheworld

Do you suppose the really rich will stand for a property tax, they will sell up and rent, moving their funds overseas. The result is that property prices would crash and the middle class would become negative equity holders in the only asset that has not been decimated.

Their pensions have been robbed, their savings are gone and return less than inflation, their stock and shares are too risky. It would be a political blood bath.

They would all leave for Europe or other calmer places, leaving the workers to pay all the tax and welfare they demand.
Perhaps not a realistic prospect, nor a healthy one. Yet it would leave the people in the UK very unhappy, prone to riot and dramatic political swings, even to the extent they would accept a World Government to spread the load on their shoulders.

Perhaps that is what our masters want?

Stewart

Hallelujah! The Spectator sees economic sense - a shift in taxation that the right wing and the left wing should be able to agree on, an engine of growth, a moderator of inequalities. And yet, judging by the comments posted, people just do not get it. And, more depressingly, they are not even prepared to try and engage with it on an intellectual level, or even understand the basic tenets. It would replace taxes on income, for a start. And, if it did so, most people would pay less tax over all.

Tom Ramsbottom

At last, someone starting to think through how taxation could sensibly shift away from labour taxes.

Mark Wadsworth

WakeUpTheWorld: "Do you suppose the really rich will stand for a property tax, they will sell up and rent, moving their funds overseas..."

That's comedy genius, when you say "sell up and rent" what do you mean? Will they rent their houses back from the people they jsut sold them to?

It's difficult arguing with people like you, as to your comment that "workers will pay the burden of the tax" well firstly, they already do (along with businessmen and proper investors) and secondly they WON'T, it will be landowners who pay the tax. Clearly, if the workers, businessmen and proper investors own the land, they will pay the tax, but get this... they will own the land! So they might be paying the same amount in tax as before but AT LEAST THEY'LL BE IN THE NICE HOUSES!