SOME QUESTIONS ON THE MANSION TAX
As the possibility of a new wealth tax appears to be returning to the agenda ahead of the Party Conference season and the Autumn Statement, a new briefing note published today by the Centre for Policy Studies highlights many of the inherent flaws in proposals for a Mansion Tax. These include:
NOTE: The author of this briefing note is Tim Knox, Director of the Centre for Policy Studies. Data supplied by Savills Research.
Tim Knox, Director of the Centre for Policy Studies, commented:
“The most recent attempt to introduce a wealth tax was made by Denis Healey in 1976. In a memo marked “secret”, HM Treasury then advised that the proposed wealth tax “would produce little revenue, be extremely difficult to administer and risk serious damage to the economy”. Denis Healey later noted that: “We had committed ourselves to a Wealth Tax: but in five years I found it impossible to draft one which would yield enough revenue to be worth the administrative cost and political hassle.” We now have the extraordinary spectacle of a Conservative-led Government considering the possibility of introducing a tax dismissed as unworkable 36 years ago by a Labour Government.”
Lucian Cook, Director of Residential Research at Savills, and author of Taxing Mansions (published by the CPS earlier this year) commented:
“‘The common perception is that owners of high value homes pay a disproportionately low level of taxes. Our analysis suggests quite the contrary, especially given the recent changes to the stamp duty land tax regime. A mansion tax, with a fixed threshold, would distort market dynamics and really create a threshold at the £2 million mark. And at a human level, it would hurt those cash-poor long-term owners whose homes fall into the so-called ‘mansion’ bracket only by dint of house price increases."
Liberal Democrat Leader Nick Clegg's calls for the tax and the CPS argument against were outlined in a Bloomberg news article. Mayor of London Boris Johnson has since had his say on the issue: "I Iike Nick Clegg but... He knows it. I know it. The idea of a mansion tax is crazy."
Several prominent commentators cited the facts and arguments outlined in the briefing note:
Simon Jenkins, The Guardian: Council tax: the easy way to make mansion-dwellers pay
Allister Heath, The Telegraph: If you want the rich to pay more tax, let them grow even richer
Fraser Nelson, The Telegraph: Won’t George Osborne learn the lesson? Wealth taxes simply don’t work
Allister Heath, City A.M.: The Liberal Democrats’ attack on middle class will backfire
Fraser Nelson, Coffee House: The dangerous attraction of wealth taxes
The CPS has been making the case against the Mansion Tax since the publication of Lucian Cook's initial report 'Taxing Mansions: the taxation of high value residential property' in March.