Today, the CPS released Taxing Mansions: the taxation of high-value residential property. It picks apart the arguments made by those who advocate a new wealth tax - including the ideas that it would target a few super rich and that it would raise significant amounts of revenue.
But one common response from the advocates of this new tax is to simply state that it is 'fair' or 'the right thing to do'. Too often this line of argument goes unquestioned.
Taking a levied wealth tax on all those in properties 'worth' over £2 million, one of our readers sent in a list of questions which I challenge Lib Dem (and Conservative) proponents of the tax to consider.
1. Who is wealthier?
A. Person with £5m house with a £4m mortgage = £1m net wealth
B. Person with £1.9m house with no mortgage = £1.9m net wealth
Under Lib Dem plans, A would pay the tax and B wouldn't.
2. Who is wealthier?
A. Person owns London house £1.9m and Country House £1.9m
B. Person owns London house £3m
Under Lib Dem plans, B would pay the tax and A wouldn't.
3. Who is wealthier?
A. House worth £5m, paid £2m, 10 years ago
B. House worth £5m, paid £6m last year
Under Lib Dem plans both would pay the tax, even though B has lost on his investment.
4. What is wealth?
Under Lib Dem plans, wealth is the value of your property.
5. What happens if a £3.8m house is in 2 names (partners) as opposed to 1 name?
Neither partner is 'wealthy' if live in houses below £2m 'benchmark but 'together' they are?
6. What happens if the house is also a place of business eg B&B or a care home?
Would the owners of the property have to pay the levy?
7. What if the house is worth £0.5m - hardly a mansion - but the land is worth £4m?
8. Why would any sane homeowner with a property value of just under £2m ever do anything to improve its value, creating a future tax liability for themselves?
9. Equally, why wouldn't anyone with a house valued >£2m engineer a deterioration in their current house to reduce the value below the threshold?
This is an ill thought-through policy which is unfair, unconservative and will have perverse incentives. Commentators continue to discuss it as if it is a straight choice between having this or the 50p income tax rate. The fact is, we don't need either. Cutting spending would allow us to fund tax cuts for all. In the build-up to the Budget, we'll be setting out how.