Killer Arguments Against LVT, Not (199)

For our pre-bicentennial episode, let's have a look at the propaganda being pumped out by The Spectator (emailed to me by Shineymart).

They go for four tried and tested, well worn to the point of being threadbare KLN's:

In reality, there are three main reasons why a mansion tax is unwarranted and potentially counter-productive, which I discuss in more detail in a Centre for Policy Studies report released today.

1. It would unfairly penalise the income poor, equity rich.(1) Arguments that such individuals are few and far between are flawed: our analysis shows that 31 per cent of London properties worth over £2 million have been in the same ownership for over 10 years,(2) 15 per cent over 20 years. Over those periods, house prices in the prime London markets have risen by 89 per cent and 426 per cent respectively.(3) There are plenty of long-term owners sitting on an asset that has appreciated in value beyond their wildest expectations, yet who would struggle to pay an annual levy.(4)

2. These houses are already heavily taxed.(5) Contrary to the political soundbites, top-end property already makes a disproportionate contribution to the overall tax take, through stamp duty and inheritance tax in particular. Sales of properties worth over £1m accounted for 1.6 per cent of all residential transactions in 2010, yet contributed 26 per cent of the resulting stamp duty. Similarly, the top 0.7 per cent of housing stock held at death contributes to 36 per cent of inheritance tax receipts from property.(6)

3. It would deter international investors. An additional annual levy risks becoming a deterrent to international entrepreneurs and investors already targeted by the non-dom levy, which itself will soon increase from £30,000 to £50,000 for some.(7)

On top of this, the administration of a ‘mansion tax’ could be a nightmare given the difficulty in accurately valuing property at the rarefied top end of the market. There is plenty of room for dispute, which would be both time-consuming and costly to administer and resolve.(8)

1) Poor Widow Bogey, yawn. Why not mention orphans, disabled, charity workers, decorated war heroes and nurses?

2) In other words, 70% of them were bought by their current occupants in the last ten years? He wants to exempt these 70% of people, who by definition can easily afford the tax, to protect the Poor Widows & Orphans? Can't we just exempt the Poor Widows & Orphans and collect the tax from those who can easily afford it?

3) By their own admission, these Poor Widows & Orphans have made capital gains of (at least) £942,000 over the last ten years and £1,620,000 over the last twenty years. Quite how said Poor Widows & Orphans rustled up the £1,058,000 to buy a mansion ten years ago (which is now worth £2 million) was unclear at the time of going to press.

4) Trade down, bank your winnings, avoid the tax. The same logic applies to Poor Widows & Orphans who've hit the land price jackpot as applies to Poor Widows & Orphans on Housing Benefit, who are now expected (quite rightly) to move to cheaper areas without a penny in compensation.

5) No they're not, they are heavily subsidised, or else why did their value rocket like this? How much income tax & NIC would you have had to pay to build up net savings of £942,000 or £1,620,000? That's what we call "heavily taxed".

6) 26% of annual SDLT receipts is about £2 billion, and 36% of annual Inheritance tax receipts is less than £1 billion, so between them, the taxes are as much as the TV licence fee.

7) No it won't, these "international investors" are not going to care less about a few thousand quid Mansion Tax every year, it will still be a lot less than on a comparable mansion in the USA or France. We know this for a fact because so many of them are happy to pay the £30,000 non-dom levy (a bad tax in itself, but it illustrates the point).

8) Lies, outright lies. Especially if we value these homes on pure land value alone, we know fairly accurately what residential land costs in the expensive parts of London; so if it costs £50 million an acre in Chelsea and there are twenty flats on a one-acre plot, the land value is £2.5 million per flat.