So today’s Independent tells us that Ed Balls now agrees it’s time for a proper wealth tax, and he’s willing to have a look at a mansion tax on properties worth over £2 million.
Part of me was delighted (even though I disagree with it) that the Shadow Chancellor has finally proposed a policy that would contribute to closing, rather than increasing the deficit. But then I read the second half of the first sentence of the piece – ‘to safeguard the NHS and invest in the economy’.
Our paper earlier this year showed the Lib Dem proposed mansion tax would raise at most £1 billion revenue. That’s 1/683 of this year’s forecast public expenditure. I know that Labour thought that they could make the bank levy go a long way, but the potential accomplishments of this mansion tax are truly spectacular.
Of course, this could all be good politics. Let’s hope so. We explained why the mansion tax, in particular, is a bad idea. I’ve written about how a mansion tax or other new wealth taxes are unnecessary. I’ve written about how the mansion tax fails even on the left’s own warped definition of fairness (that the wealthy should pay more and more). Bernard Jenkin has exposed how wealth taxes more generally do not work in reality. And everyone who’s looked at the concept of wealth taxes, from Denis Healy in 1975 through to Geoffrey Howe right up to the present day has found the same thing. In fact, the conclusions of ‘The Right Approach to the Economy’, written by Howe and others, still holds today:
“We can see that if there were an opportunity in an ideal and simplified world to redesign the entire tax system, there might be a place for a wealth tax instead of other capital taxes. In Britain today, with its multiplicity of different ownership patterns, varied investment forms, property rights and existing taxes on capital and investment, we believe a wealth tax is out of the question. Either it would be crude and unjust, leaving a mass of loopholes to be exploited by the ingenious, or it would be equitable and level handed, in which case it would be extremely expensive to run.”