Why I like the 'mansion tax'
I support Vince Cable's plan to tax homes worth more than £1m.
Vince Cable's plan to introduce an annual 0.5% tax on expensive homes makes a lot of sense to me.
In fact, I very nearly suggested an increased property tax in my blog post last week: Which taxes should go up? I held back because I thought it just wouldn't be politically feasible, but Vince Cable's courage has emboldened me to say my piece.
So here's why I support a mansion tax:
- A tax on property is hard to avoid. High-earners can employ fancy accountants who are good at keeping tax bills down, but there's not a lot accountants can do about property taxes. OK, rich folk could always leave the UK to avoid the tax, but I suspect that a 0.5% tax isn't going to trigger a big migration of talent. And plenty of other countries have property taxes anyway.
- Taxes on income are a disincentive for hard work and enterprise. The harder you work, the more tax you pay. Property taxes are different.
- A property tax might make a small dent in the British obsession with property. Too many people think that property is the best way to build a fortune. It's worked for some people, but if we are to build a successful economy for the long-term, we need to shift some of our talent - and our capital - to other areas.
- The government needs to boost its tax revenues. A property tax can help with this.
- Yes, some people who live in expensive homes but have low incomes might be forced to move. Especially some pensioners. You could get round this by saying there's an exemption for people over 70. Or you could be brutal and introduce the tax across the board. It might force some people to sell their homes, but that would help to stop a new house price boom from taking off.
Do I think a mansion tax will be introduced in the near future?
I suspect it would be an extremely unpopular move. Even amongst Brits who will never be able to buy a £1m house.
I also think the Lib Dems haven't done much joined-up thinking on this. Since the party's inception in the late 80s, its policy has been to introduce a local income tax and not have any local property tax. I oppose that shift away from property taxation, but it does seem strange that the Lib Dems want to abolish local property tax at the same time as introducing a national property tax.
Valuation would also be a challenge. A new national property valuation would probably make the tax even more unpopular.
Moving away from property tax, I'm conscious that I said last week I'd write a post on public expenditure cuts. I haven't written it as quickly as I intended, but it will appear eventually.
Read more of my blog posts here.