City AM on top form

1. Pub and restaurant group Greene King yesterday blamed recently tightened drink-driving laws in Scotland for flat sales.

The company, whose brands include Old Speckled Hen and Abbot Ale, plus the Hungry Horse and Loch Fyne chains, reported just a 0.4 per cent increase in sales for the 51 weeks to 26 April, but said sales were up 0.8 per cent, stripping out the effect of the rule change.

2. ... nestling among the thickets of algebra, there was an article entitled “Mansion Tax: the Effect on the Residential Real Estate Market”.

The authors, Wojciech Kopczuk and David Munroe, are both members of the prestigious economics department at Columbia University in New York. The article contains its fair share of technical material, but the main points are conveyed by some straightforward charts. The paper describes a detailed analysis of residential real estate transactions since 2003 in New York City and in the neighbouring state of New Jersey.

The taxes on high value property which they examine are nowhere near as punitive as the annual levy envisaged by Ed Miliband. But their impact has been both dramatic and detrimental. A so-called mansion tax has been in force in New York since 1989 and in New Jersey since 2004. It applies not on an annual basis to the property, but simply to transactions of $1m and over. The tax rate is 1 per cent and is imposed on the full value of the property – so that a $1m sale is subject to a $10,000 tax liability, while a $999,999 transaction is not subject to the tax at all.

a) So that tax is just like our Stamp Duty, but at much more tolerable rates. It is not a 'mansion tax' as the term is used here.

b) Of course the authors didn't look at 'annual levies' in New York or New Jersey, which on the whole are considerably higher than Ed's proposed Mansion Tax, both in absolute terms and as a percentage of the value without an upper limit. If they'd done so, they'd have been forced to admit that they can't see any detrimental effects whatsoever.