Friday, 20 February 2015

Mansion Tax Fun

What riles me is when people contradict themselves several times in the space of one article:

Leading think tank the Centre for Policy Studies slammed the annual levy and said it would damage the UK’s investor-friendly reputation, deter workers in sectors such as financial services from moving to London, and chase away high net worth individuals from doing business in Britain...

There's no real life evidence for any of that; quite observably, high corporation tax rates discourage people from "doing business in Britain" and high income tax rates and Inheritance Tax rates chase truly wealthy people away, but all the evidence is that they are heartily indifferent about the cost of owning a home.

Or else they wouldn't be willing to pay £2.4 million for the terraced house in Fulham pictured in the article, or to pay the property tax in New York ($100,000s a year on the most expensive ones) or to pay the Swiss lump-sum tax (instead of income tax, you can opt to pay a fairly hefty property value tax, about 5% - 8% of what your Swiss main residence is worth).

There is plenty of evidence to support what I say: there are plenty of wealthy non-doms in the UK who are willing to pay £50,000 each in exchange for paying a very low rate of income tax, and as many again who are paying the the ATED charge on their home of up to £218,200 for a £20 million-plus home.

But never mind, everybody is entitled to their 'opinion'.

The paper also accused a mansion tax of being “crude” and not distinguishing between those who have the means to pay it and those who do not.

Ah, so they'd prefer higher income tax? Which genuinely does chase truly wealthy people away and by osmosis, attracts lower income people?

At the very top end of the scale, those individuals who buy multi-million pound homes through companies will just soak up the extra tax, said Mr Moran.

Faced with the choice of paying £7,000 Mansion Tax (their estimate) if they own the home personally or £23,350 if they own it via a company..?

So can he make up his mind; the truly wealthy will pay it out of petty cash or they'll pack up and move abroad? It's one or t'other, moron.

“It will be the lesser valued properties for whom [homeowners] suddenly every year will have to find an extra £3,000, and we’ll see a lot of elderly homeowners selling up, which will make people very angry.”

Nice diagonal comparison there!

Why would anybody get "angry" about this; the elderly who cash in and buy themselves something equally lovely but somewhere less fashionable and have a million quid spending money? Their heirs? The people who can now buy in London for a lower price? The estate agents who get some extra commissions and the painters and decorators who tart it up for the new owners? Who?


Lola said...

I have just been reading that 'report' You did note it was written by Savills...?

mombers said...

Who can take the Telegraph seriously any more? They've twisted the facts nicely by conveniently excluding the $1tn in property tax that the US collects, because it's state and not federal tax...

Mark Wadsworth said...

L, yes, that's the infurirating thing. He must know that what he is saying is not true and it would be very much in his interest to goad some people into selling up. So either he is really stupid or really, really corrupt.

M, not me, it was always poison, even twenty years ago.

Ben Jamin' said...

The only economic effect of the MT is to lower selling prices and rental income.

Why would this put off "wealth creators"?

If this is a deterrent to anyone, the UK would without doubt be better off without them.

Mark Wadsworth said...

BJ, that is what they are really scared off - they introduce the Mansion Tax and nothing bad happens. The same as with ATED.

Then they will look pretty stupid and most KLN's demolished by the facts.

Bayard said...

I think the Wealthy Individual Scared Off by LVT has to join the Poor Widow in a Mansion in our gallery of mythical beasts. Mind you at least we have some people who say they would be WISOLs should the need arise, unlike the truly mythical PWIMs.

"BJ, that is what they are really scared off - they introduce the Mansion Tax and nothing bad happens."

Nah, I doubt it. Today's news, tomorrow's chip wrappers. No one would even remember their stance on MT if they weren't reminded of it.

Mark Wadsworth said...

B: "think the Wealthy Individual Scared Off by LVT has to join the Poor Widow in a Mansion in our gallery of mythical beasts."

No, proveably it is a mythical beast.

What you must realise is the really wealthy non-dcms have been happily paying £30,000 a year flat non-dom charge per person to live in the UK for years, and has been paying £14,000-plus a year under the ATED charge (Mansion Tax for foreigners).

And they are still here...

Further, if such people really like living here etc, there would be nothing to stop them trading down to a smaller/cheaper home where the annual tax is negligible.

End of.

Random said...

Are the interests of two opposite?
High income/low property vs low income/high property

Mark Wadsworth said...

R, yes entirely opposite and opposed.

The former prefers LVT to income tax; the latter prefers income tax to LVT.

Even if LVT were an additional tax, the former group can afford it better than the latter, so assuming the latter group all clear off, there are more homes in nice areas for the former group to snap up.