Lib Dems talk sense (and nonsense) on tax

From The Daily Mail:

Nick Clegg yesterday demanded a £9billion tax raid (1) on ‘serious unearned wealth’ (2) to pay for tax cuts for low and middle income earners. (3)

The Deputy Prime Minister pointed out that billionaire oligarchs with £20 million properties do not pay much more council tax than people in homes worth a fraction of that price. (4) He also pushed for new taxes on air travel and pollution. (5)

The Liberal Democrats are privately backing ‘super’ council tax bands above the current top band, I, which kicks in on homes which were worth more than £424,000 when the bands were created in 1991. (6) This is a variant of the party’s demand for a ‘mansion tax’ on properties worth more than £2 million, which has been rejected by the Tories.

Mr Clegg insisted that his planned reforms were aimed at the super-rich. He said: "I know the mansion tax is controversial, but who honestly believes it is right that an oligarch pays just double the council tax of an average homeowner, even if their house is worth 100 times as much? And who seriously thinks we would kill aspiration through a levy on the 0.1 per cent of the population who own £2million homes? (7) The mansion tax is right, it makes sense and the Liberal Democrats will continue to make the case for it. We’re going to stick to our guns."

However, local government secretary Eric Pickles is opposed to tinkering with council tax bands because he fears it will spark a nationwide revaluation process that the Tories have promised to avoid.(8)

1) Some people refer to all taxes as "a raid". Meaningless.

2) It's a big mistake describing the rental value of land as 'wealth', that allows the Home-Owner-Ists and Faux Lib's to confuse the issue. While it is a good measure of the wealth of the whole economy, land rental values are themselves not net wealth at all, as one man's benefit is another man's burden. This does not apply to any other form of true wealth: does anybody get poorer if my neighbour gets a pay rise and buys himself a nice new car?

3) Hooray! That's a sensible adjunct to reducing people's benefits slightly.

4) At the very least, they could slap a Mansion Tax on all housing owned by non-UK resident persons (as somebody suggested to me yesterday), and in the interests of fairness and administrative simplicity, scrap the £30,000 levy on non-domiciled UK residents.

5) I don't agree. The best tax on air travel is on the value of the landing slots, this has little to do with the environment, as such.

6) I love this bit! Doing the revaluation/rebanding would, by The Morbidly Obese One's own admission only cost around £5 - £10 per home, HM Land Reg have got all the information they need on its databases. All that remains to be decided is

a) Whether homes will be banded by capital or rental values; and whether those should include the value of the bricks and mortar or just the land.

b) What the total receipts will be. Council Tax currently raises +/- £25 billion, so if he wants an extra £9 billion to pay for higher personal allowances, that'll go up to £34 billion. £1 million+ homes in Band Z would end up paying £10,000+ a year in New Council Tax, so people will then (correctly) point out that Stamp Duty Land Tax and Inheritance Tax are double taxation (at the moment they aren't - they merely tax the value unaffected by Council Tax), so let's scrap those as well (increasing the required total receipts from New Council Tax to +/- £40 billion), and so on and so forth, the resulting tax bills would end up at +/- one per cent of the current value of a home, so much the same as Council Tax for most homes.

To put that in perspective, £40 billion is about 6% or 7% of all tax revenues, i.e. not a huge amount, really, and still a lot less than income tax, VAT or National Insurance Contributions.

7) Good question. Allister Heath from City AM claims that this is entirely justified, and he can't be the only one.

8) When Council Tax was introduced in 1991 - it only took them a few months to do the valuations and get everything in place, of course, and it'd be even quicker nowadays with computers and everything - was there a promise that the bandings would never, ever be reviewed or updated? Methinks not. In other countries (most US states, for example), all houses are revalued annually, or certainly very regularly.