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Statistics, injustice and mansions

4 July 2014

I suspect few people were executed for impiety in eighteenth century France; but that statistic played no role in Voltaire’s decision to adopt the cause of the chevalier de La Barre. Injustice is not justified by infrequency.

It is all the more surprising to find in this morning’s Financial Times an article by Chris Giles entitled “Boost for mansion tax plan” which purports to summarise the latest Statistical Bulletin from the ONS entitled Wealth and Income, 2010–12. Giles’s report contains a startling number of non sequiturs in support of its headline and the suggestion that the ONS “have removed one of the obstacles to a mansion tax”. This, he claims, follows from the revelation that “only a very small number of poor British households live in very expensive properties.” The ONS report makes no mention of mansion tax.

It is irrelevant (as well as being obvious) that few very poor people live in very expensive properties. In fact very few people across all income brackets live in £2m properties (some 0.15% of the population): but that does not justify inflicting upon them an arbitrary tax that bears no relationship to their ability to pay. Measured in terms of income, some people on modest pensions will face effective taxation in excess of 100%.

Chris Giles also fails to report the ONS finding that poorer households have more of their wealth tied up in illiquid property than the wealthier: for some of them, selling their homes will be the only option to meet unexpected demands for cash.

Deferral schemes suggested by politicians to deal with this will run into numerous technical problems, and are likely to be quietly forgotten after an election: the arithmetic of compounding is a little more complicated than seven times eight, and the logic of taxing estates is better applied to reforming and strengthening inheritance tax for all (a move which directly contradicts the policies of all parties).

The revenue raised by a mansion tax will be tiny, and will do little to fund the stated aim of reducing tax rates for others. Taxes whose burdens fall so unequally are the tools of blind populism, and have no place in a civilised society.

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From → Justice, Tax

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