Head of Economic Research Ryan Bourne writes for The Times on the latest calls for a Mansion Tax.
To read the full article, visit The Times website (£).
Chumbawamba policy (“It gets knocked down, but it gets up again”). No matter what evidence has been thrown at it, the Liberal Democrat and Labour idea for an annual mansion tax on the value of properties worth more than £2 million keeps re-appearing in public debate. It’s worth pondering why.
Is it because it would solve our deficit problems? Hardly. Liberal Democrats claimed an annual levy of 1 per cent on properties above £2 million would generate £2 billion in revenue. Yet new research from the Treasury has shown that this revenue ambition would require an average annual charge of £36,000 on the 55,000 eligible homes — a very punitive measure that would close less than 2 per cent of our annual deficit.
Perhaps instead, the Lib Dems and Labour think it is time to reform our tax system away from income and towards wealth? If so, it’s unclear how a mansion tax would fulfil their ambitions.
Person A might have a £3 million home with a £2.5 million mortgage and be subject to the tax; whereas Person B might have five homes worth £1 million each, with no mortgage, and escape the mansion tax completely.
As planned, the tax would not take into account the value of other assets. It is, therefore, a consumption tax that targets valuable homes rather than, say, yachts or other luxury items. It cannot be justified as a wealth tax.
It’s worth noting that where wealth taxes have been tried they have been abandoned — in Sweden, Germany, Finland, Denmark, and the Netherlands, for example.
Perhaps property, or high-end property, in the UK is simply under-taxed anyway? Well, not according to the OECD. Its tax statistics show that the UK has the highest property tax burden (4.1 per cent of GDP) of all OECD countries. While council tax is not highly progressive, the stamp duty land tax and inheritance tax are. Sales of homes worth more than £1 million yielded over a quarter of all residential stamp duty land tax receipts in 2010, while the top 0.7 per cent of housing stock held at death contributed just over a third of inheritance tax receipts from residential property.
There would be practical difficulties in imposing another new tax. It would be difficult and expensive to value all relevant properties (which would then be open to legal disputes).
To read the full article, visit The Times website (£).
Date Added: Tuesday 9th July 2013
