Friday, 23 January 2015

I was surprised to see this in The Times

Emailed in by MBK.

The first bit is boilerplate Homey:

Labour’s proposal for a mansion tax, under which all properties above a market value of £2 million would be subject to a levy, is a third way in taxation...

The real purpose is political. This is not a tax on property so much as a tax on the southeast of England. Of the 95,000 homes in the UK that would qualify, 95 per cent of them are in London and the southeast. The whole of Britain north of, and including, Birmingham would pay little more than 2 per cent of the total.

This is taxation as pure political calculation.


But then he lets loose with this, it's hard to disagree:

Not that I wish to discredit the notion of an impost on property. On the contrary, the case for taxing property more heavily than we do in Britain is persuasive.

Unlike income, property is hard to hide and a levy upon it correspondingly difficult to evade. It would generate a lot of money from foreign owners who are contributing little to the exchequer. Revenues would usually rise with prosperity and if the volatility of the housing cycle were flattened a little by heavier taxation, then so much the better.

The case is intellectual as well as practical. The state takes £700 billion a year in taxation and that sum should ideally be collected according to a principle that is widely agreed to be fair. Income, which is directly earned, should be taxed lightly and a party by the name of Labour ought to be the most vocal proponents of low income tax.

The bonanza of house price inflation, though, is not income that I have genuinely earned. It is a reward that, in JS Mill’s arresting image, falls into my mouth as I sleep. There is a case for returning to the principle that informed Lloyd George’s “people’s budget” of 1909. This is an argument that, with enough time, can be joined and won.

Taxation in Britain has no such philosophical order... Only 5 per cent of the tax take comes from land and buildings.

The beauty of the green and pleasant land as a taxable asset is that it retains its value because there is a fixed supply of 60 million acres and the maker has stopped making it. The windfall gains from land are often the result of public infrastructure development, which should be taxed. A levy of 1 per cent on the land would yield £50 billion. Once the deficit had been cleared, income tax could be cut by a third or corporation tax abolished.

A truly radical Labour party would have been making this case for years... The place to begin in policy terms is not a crude, cliff-edge mansion tax but a revaluation of the council tax that is still, absurdly, calculated on 1991 prices.

As to the wailing about Mansion Tax or SDLT or LVT or anything else being "a tax on London", well that's because they are taxes on land values and land values are highest in London, or on various beaches along the south coast. You might as well say that income tax is a tax on London because people have the highest wages there.

Savill's did a breakdown this month; the total value of all UK housing is currently £5,750 billion (which includes a very low estimated market value for social housing units of £72,000 each).

Housing in greater London is one-quarter of the total, and the South East is another one-fifth, so between them, you'd expect about half of taxes on land and buildings to be raised from London and the South East.

Those two areas generate 'not enough' in Council Tax but 'too much' in SDLT (people in those areas also probably pay or generate 'too much' income tax but 'not enough' in VAT, to be honest). If you treat the £1 or £2 billion Mansion Tax as Council Tax Bands I to M it nudges their share to roughly 45% or a half, or whatever, so big deal.

It's nice to see the 1% = £50 billion calculation mentioned, I helped launch that one.


Bayard said...

"This is taxation as pure political calculation."

Surely that is always the case: as the French 17th century statesman Jean-Baptiste Colbert said, the art of taxation consists of trying to extract from the goose the maximum of feathers with the minimum of hissing.

Jim said...

the problem with the proposed mansion tax is of course its another tax, not a replacement one.

Bayard said...

Well the main problem as I see it is that it doesn't need to be another tax, the same effect could be achieved by having Council Tax bands all the way to band Z and carrying out a re-rating exercise, but that wouldn't keep the Labour class warriors happy.

Ben Jamin' said...

The MT lowers rental income/selling prices by as much as it raises. So not a tax on Londoners discretionary incomes i.e it won't make them poorer.

You could of course say the same about any tax on income/capital, but, whereas the MT increases efficiency, they reduce it. So, they make everyone poorer.

BTW, I was surprised by the accuracy of the 1% figure when I read it this morning. Should have guessed.

Mark Wadsworth said...

B, no he means it quite differently. JBC didn't want people to notice how much they are paying, with Mansion Tax it is quite clear who is paying.

And from Labour voters' point of view 'they' are paying, not 'we'.

J, agreed.

B, agreed on Council Tax Band Z. If you want to keep the class warriors happy, you could call Bands A to T "council tax" and bands U to Z 'mansion tax'. Comes to the same thing.

BJ, it's a 'tax' on whoever owns the land when it is introduced.

You are quite right that people in future won't pay it, but those who have to pay it today pretend that people in future will pay it as well.

Random said...


Bayard said...

"If you want to keep the class warriors happy, you could call Bands A to T "council tax" and bands U to Z 'mansion tax'"

It shows how right-wing Blair's government was that they did nothing about a tax that was so obviously mainly paid by the poorer elements in society.