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Forget fairness. This mansion tax is ideological cowardice Forget fairness. This mansion tax is ideological cowardice
(7 months later)
How can Ed Miliband be so right, and so wrong? The answer is by listening to Ed Balls on mansion tax. Balls is a long-standing apostle of Treasury brutalism, who capped and abused the local property tax for so long that he now wants a new one. He has chosen one so ham-fisted there is little chance of it being introduced.How can Ed Miliband be so right, and so wrong? The answer is by listening to Ed Balls on mansion tax. Balls is a long-standing apostle of Treasury brutalism, who capped and abused the local property tax for so long that he now wants a new one. He has chosen one so ham-fisted there is little chance of it being introduced.
Political archaeologists will gaze on the current British tax debate with awe. Was anything ever so stupid? Take mansion tax. In the mid-1980s British householders paid value-related rates which, in the richer parts of London and suburbs, could run from £2,000 to £10,000 a year. Many houses in swaths of Westminster and Kensington were paying over £4,000. That was in cash, and the payers were also probably paying income tax at 60%. Those were the booming, enterprising, high-tax mid-80s, rather than the triple-dip, low-tax 2010s. Nor was the largesse recouped only by wealthy councils, since redistribution shared revenue nationwide.Political archaeologists will gaze on the current British tax debate with awe. Was anything ever so stupid? Take mansion tax. In the mid-1980s British householders paid value-related rates which, in the richer parts of London and suburbs, could run from £2,000 to £10,000 a year. Many houses in swaths of Westminster and Kensington were paying over £4,000. That was in cash, and the payers were also probably paying income tax at 60%. Those were the booming, enterprising, high-tax mid-80s, rather than the triple-dip, low-tax 2010s. Nor was the largesse recouped only by wealthy councils, since redistribution shared revenue nationwide.
Adjusted for inflation, those rich rate-payers would today be paying from £6,000 to perhaps £30,000 a year on their houses. Yet they are actually paying H-band council tax in Westminster of a mere £1,369. Westminster collects more in parking revenue. Yet the rich are howling, as if a mansion tax were a revolutionary bolt from the blue that will drive them into emigration and starve the economy of their enterprise.Adjusted for inflation, those rich rate-payers would today be paying from £6,000 to perhaps £30,000 a year on their houses. Yet they are actually paying H-band council tax in Westminster of a mere £1,369. Westminster collects more in parking revenue. Yet the rich are howling, as if a mansion tax were a revolutionary bolt from the blue that will drive them into emigration and starve the economy of their enterprise.
Debate on tax in Britain is cursed by self-interest and political cowardice. We have had a hullabaloo over a new 10% tax threshold and abolishing a new 50p one. We have a national roar of outrage over tax evasion and avoidance. Margaret Hodge, who chairs the public accounts committee, yesterday gasped at "gobsmacking" avoidance costing the country £5bn a year – in addition to £12.5bn allegedly unpaid by British and foreign companies.Debate on tax in Britain is cursed by self-interest and political cowardice. We have had a hullabaloo over a new 10% tax threshold and abolishing a new 50p one. We have a national roar of outrage over tax evasion and avoidance. Margaret Hodge, who chairs the public accounts committee, yesterday gasped at "gobsmacking" avoidance costing the country £5bn a year – in addition to £12.5bn allegedly unpaid by British and foreign companies.
As for tax havens, I remain mystified at how the British flag can fly over "dependencies" that blatantly undermine the nation's fiscal stability. Jersey, Gibraltar, Grand Cayman and the Virgins must shelter some very powerful political donors. The EU tolerates Luxembourg, Liechtenstein and Monaco, presumably for the same reason. We could finance the EU from the lost revenue.As for tax havens, I remain mystified at how the British flag can fly over "dependencies" that blatantly undermine the nation's fiscal stability. Jersey, Gibraltar, Grand Cayman and the Virgins must shelter some very powerful political donors. The EU tolerates Luxembourg, Liechtenstein and Monaco, presumably for the same reason. We could finance the EU from the lost revenue.
Everyone has known of these fiddles for years, including Miliband and Balls when in office. They never had the guts to tackle them. The Treasury and Cameron still boast tax avoidance, or "favourable climate", to attract business to the City, even when the only noticeable "trickle-down" is to the London property market. George Osborne is at last making a start by seeking international co-operation on corporate tax avoidance. But letters in the press already show the fight on his hands from the dark arts of self-interest.Everyone has known of these fiddles for years, including Miliband and Balls when in office. They never had the guts to tackle them. The Treasury and Cameron still boast tax avoidance, or "favourable climate", to attract business to the City, even when the only noticeable "trickle-down" is to the London property market. George Osborne is at last making a start by seeking international co-operation on corporate tax avoidance. But letters in the press already show the fight on his hands from the dark arts of self-interest.
The mansion tax is a vignette of British politicians as fiscal babes in arms. It has taken Balls four years to copy Vince Cable's proposed levy on the value of a property above £2m. Under Cable's original scheme, the owner of a £2.5m property would pay £5,000 a year, and at £3m the tax would be £10,000. This is well behind the old rates, but steep enough to send the more spineless Tories running for the hills.The mansion tax is a vignette of British politicians as fiscal babes in arms. It has taken Balls four years to copy Vince Cable's proposed levy on the value of a property above £2m. Under Cable's original scheme, the owner of a £2.5m property would pay £5,000 a year, and at £3m the tax would be £10,000. This is well behind the old rates, but steep enough to send the more spineless Tories running for the hills.
Every conceivable excuse for not introducing the new tax has been trotted out. It would be unfair on little old Chelsea ladies. It would be costly to collect. It would "force" people on low fixed incomes to move from rich neighbourhoods. It would "force" people to switch savings from houses into jewellery and second homes. It would be the thin end of a wealth tax wedge.Every conceivable excuse for not introducing the new tax has been trotted out. It would be unfair on little old Chelsea ladies. It would be costly to collect. It would "force" people on low fixed incomes to move from rich neighbourhoods. It would "force" people to switch savings from houses into jewellery and second homes. It would be the thin end of a wealth tax wedge.
In fact it is just a silly version of the old rates. Valuation would be needed only in a few wealthier areas, and a few estate agents could do it in days through Zoopla or some such house-price index. Collection could be tacked on to the existing council tax regime. As for forcing people to move, the new tax would be puny compared with the rates. Life can sometimes be tough for the cash-poor rich as well as the cash-poor poor.In fact it is just a silly version of the old rates. Valuation would be needed only in a few wealthier areas, and a few estate agents could do it in days through Zoopla or some such house-price index. Collection could be tacked on to the existing council tax regime. As for forcing people to move, the new tax would be puny compared with the rates. Life can sometimes be tough for the cash-poor rich as well as the cash-poor poor.
In the past, hatred of property taxes by central politicians has been a psychosis. A local tax, raised and spent locally, represents everything the Thatcher, Major, Blair, Brown and Cameron governments have most detested and feared – local councillors having resources under delegated control.In the past, hatred of property taxes by central politicians has been a psychosis. A local tax, raised and spent locally, represents everything the Thatcher, Major, Blair, Brown and Cameron governments have most detested and feared – local councillors having resources under delegated control.
In 1990 they got rid of the old local rates in favour of a poll tax. They then got rid of that in favour of council tax, which they have also tried to get rid of ever since. The Lib Dems wanted to replace it with a local income tax, such as was awarded (though never implemented) to the Scots and Welsh under devolution. Now they want a mansion tax, but only if it goes exclusively to the Treasury, notionally to reduce income tax.In 1990 they got rid of the old local rates in favour of a poll tax. They then got rid of that in favour of council tax, which they have also tried to get rid of ever since. The Lib Dems wanted to replace it with a local income tax, such as was awarded (though never implemented) to the Scots and Welsh under devolution. Now they want a mansion tax, but only if it goes exclusively to the Treasury, notionally to reduce income tax.
As the redoubtable local tax expert, Tony Travers of the LSE, has pointed out, council tax is the undead of public finance, "withering away under assault from successive governments" – little more than a central tax locally garnered. David Miliband's refusal in 2005 as local government minister to revalue council tax bands left it as Labour's most regressive tax on the poor. Cameron trumped Miliband's cowardice by also pledging no revaluation. By now the rich were paying next to nothing.As the redoubtable local tax expert, Tony Travers of the LSE, has pointed out, council tax is the undead of public finance, "withering away under assault from successive governments" – little more than a central tax locally garnered. David Miliband's refusal in 2005 as local government minister to revalue council tax bands left it as Labour's most regressive tax on the poor. Cameron trumped Miliband's cowardice by also pledging no revaluation. By now the rich were paying next to nothing.
Mansion tax is an ideological response to that cowardice. Its revenue would be trivial, £1.7bn on just 74,000 houses, and not conceivably worth the political hassle. It contrasts with Osborne's "stealth" VAT rise in 2010, which clipped £12bn off high street spending, suppressed demand and ensured double-dip recession. But mansion tax is not about revenue; it is about supposed fairness.Mansion tax is an ideological response to that cowardice. Its revenue would be trivial, £1.7bn on just 74,000 houses, and not conceivably worth the political hassle. It contrasts with Osborne's "stealth" VAT rise in 2010, which clipped £12bn off high street spending, suppressed demand and ensured double-dip recession. But mansion tax is not about revenue; it is about supposed fairness.
If politicians really want a more progressive local property tax, there is no problem. They should use the one they already have: council tax. The Welsh introduced an upper I band in 2005, with no revolution of the rich. England could be given half a dozen extra bands above the H-band threshold of £1m, capped at 0.5% of value. It would be less penal on the lower bands than mansion tax, would spread the burden and raise far more money.If politicians really want a more progressive local property tax, there is no problem. They should use the one they already have: council tax. The Welsh introduced an upper I band in 2005, with no revolution of the rich. England could be given half a dozen extra bands above the H-band threshold of £1m, capped at 0.5% of value. It would be less penal on the lower bands than mansion tax, would spread the burden and raise far more money.
The sole reason for not going down this route is that people like Balls and Cable see any extension of the local tax base as anathema. They would rather talk about a clodhopping, low-revenue mansion tax that is unlikely to happen than a fair, easy and lucrative extension of council tax, over which they would have less control.The sole reason for not going down this route is that people like Balls and Cable see any extension of the local tax base as anathema. They would rather talk about a clodhopping, low-revenue mansion tax that is unlikely to happen than a fair, easy and lucrative extension of council tax, over which they would have less control.
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