In my Father’s house…
The Times yesterday reported that “Treasury figures ‘reveal cost of mansion tax as £36,000 a year’”, reminding us of the stubborn persistence of the spectre of this unfair and malicious proposal. The figure is an average sum for the estimated 55,000 houses affected; as these already suffer council tax at the top rate of £2000 per annum, this represents an average increase of 1800%: a hike for which I can think of no precedent. Many excellent points are made in today’s edition by an economist from the Centre for Policy Studies, to which I refer you before adding my ha’p’orth.
To those who argue that the rich should pay more, there may be good sense in opposing the reduction of the top rate of income tax from 50% to 45%; but there can be no justice in a measure that would instead arbitrarily (and without affecting many who have benefited from the reduction) impose an effective tax rate of over 100% on the incomes of some families who have lived for many years in neighbourhoods where prices are currently inflated. They will be obliged to lose their homes.
You may think they are all wealthy: but some may live in a 1000 sq. ft, two bedroom flat in Kensington (an area which does indeed contain many mansions), on retirement incomes that have been destroyed by the government’s policies of artificially low interest rates (“decimated” means losing one-tenth; base rate has fallen by nine-tenths in a few years, a penalty for which I can think of no stronger word than “oppression”). They can only qualify for your jealousy by selling their homes: and surely that is the time to tax the proceeds. But no government would dare to impose capital gains tax on domestic residences.
Not all of the current price level is attributable to foreign wealth of dubious origin: the profits of our own kleptocracy – bankers’ bonuses, the very sums nominally taxed at Mr Osborne’s reduced rate – have contributed as much to the bubble, as will the chancellor’s insane Help to Buy programme.
The Times quotes the Lib Dems’ Treasury spokesman as saying “For the 95 per cent of people that do not live in mansions, this is a popular policy.” The blatant cynicism of that approach needs no further comment, but it is certainly not how I interpret the message of tolerance in John 14:2.
My letter to The Times on this topic, penned on Monday, appears today (11 July; firewall). See also the comments below.
This issue won’t go away. Merryn Somerset Webb (“The perfect tax?”, Financial Times, 28–29 September) proposes a land, or location, value tax, a thinly veiled version of the mansion tax, and selectively cites Adam Smith’s approval for its efficiency. In a lengthy discussion of various types of land tax, Smith is quite clear that, where property ownership is not changed, tax should only be charged on “some part of the revenue arising from it”. Any system, whether called an LVT or mansion tax, that is charged on people living in property that has gone up in value more rapidly than their income offends against one of his four fundamental maxims with regard to taxes in general, viz. that “Every tax ought to be levied at the time, or in the manner, in which it is most likely to be convenient for the contributor to pay it.”