From the FT:
Statisticians removed one of the obstacles to a mansion tax on Thursday, showing a very small number of poor British households lived in very expensive properties. The Office for National Statistics reported that only 1 per cent of households with incomes in the bottom 40 per cent had property wealth of more than £500,000...
The question of asset-rich, income-poor households has dogged proposals to introduce steeper property taxes on expensive homes for years, and has been one of the reasons cited by Conservatives for refusing to introduce such a levy...
Labour and the Liberal Democrats have suggested that elderly people without high incomes will be able to make any liabilities to a mansion tax payable at death, rather than being faced with an annual charge. The ONS data suggest that few households will need to take up that option so long as the mansion tax bills are not too large.
I think £500,000 is the top ten per cent or so of homes, so another way of expressing this is that only 4% of households who are in the top ten per cent by landownership are in the bottom 40% by income; seeing as there is a high correlation between income and wealth there will be barely households with low incomes who own houses in the new, higher Council Tax bands (i.e. ATED or Mansion Tax or whatever you want to call it).
The whole thing is dumb, instead of people coming up with these pathetic arguments against, we should be debating which other taxes should be cut as a quid pro quo (I nominate the bad taxes on land and wealth - Inheritance Tax, Stamp Duty, capital gains tax).
From the ONS report itself:
Median household wealth was about seven times larger than median household gross annual income.
• The distribution of wealth was more unequal than the distribution of income.
• Households in the top income quintile held 44% of aggregate total wealth.
• Whilst over half (55%) of households in the lowest income quintile had no property wealth, 7% of households who found themselves in this bottom income group had net property wealth of £250,000 or more.
Seeing as most "wealth" is land, it is inevitable that in the absence of LVT or similar, wealth will become ever more concentrated, far more so than incomes.
Think about it, if you earned £40,000 this year, what are the chances that you will earn less or nothing next year? It can and does happen, and we all have to retire sooner or later. So averaging out the population, your next year's wages will be barely higher than this year's.
But if you own land worth £200,000 this year, what are the chances it will be worse less or nothing next year or generate no income or benefit for you next year? Small to negligible. It is far more likely that it will go up, and by more than wages.
And "land" is not really net wealth in itself, it is a measure of the flow of income or benefits from non-landowners to landowners. So the latter group is getting richer at the former's expense, non-landowners have to run to keep still, while paying far too much tax on their earnings etc.
Thursday, 3 July 2014
From the FT: