As you may know, I am not mad about the idea of a wealth tax. But that isn’t because I think it is in any way worse than any other taxes.
Instead it is partly because I don’t think we need any more taxes at all. Seems to me that the government should be able to find a way to make do with the 50%-odd of GDP they control already.
It is also partly about the fact that if we do end up with a mansion tax or a wealth tax, we won’t get it instead of the 50% rate (which I don’t like), stamp duty (which I hate) and inheritance tax (which is pointless because the rich don’t pay it). We’ll get it on top of them.
And that is just too much – inheritance tax is already a wealth tax (just one collected on the dead instead of the living) so I can’t for the life of me figure out why the government won’t just cut the loopholes everyone exploits on that and be done with it.
However there is one thing that a property tax might be good for – dealing with the housing problem. At a seminar for clients of a wealth management company this week I was asked what I would do about the lack of supply of housing in the UK. Many of the attendees are worried about their children – given how expensive houses are, and how few of them there are about, how will they ever get a place of their own?
I’m not sure I approached the question with that much sympathy. Why? Because many of the people who make up part of the cause of the problem, such as it is (I’m not convinced there is a shortage of housing in the UK), were sitting right in front of me.
There are around a million empty houses in the UK – around 300,000 of which are holiday homes. There are probably many hundreds of thousands more being lived in by people who just don’t need all of them – one elderly couple in a four-bedroom house for example.
So when they wonder what the government is going to do about the problem, they are looking at the wrong thing. They should be asking what they are going to do about it. If the affluent all moved out of their big houses into small houses and put their second homes on the market, supply would rise and house prices would fall in a flash. Problem solved.
I can’t see anyone doing this voluntarily – it isn’t the kind of solution my audience were looking for. However, if everyone agrees that the supply of housing is too low and that Something Must Be Done, then it seems entirely reasonable to chuck a few property taxes into the mix.
You could tax spare bedrooms, tax houses over a certain square footage or tax houses over a certain value. And you could put a horribly punitive annual tax on any home not used as a primary residence (not that you’d get that one past the MPs.). It wouldn’t be long before most people just had one house with no more bedrooms than they have family members and before most people could afford – should they still want to – to buy a house with said number of bedrooms.
An extra benefit would be that all these taxes would get the non-doms who are currently knocking around in vast London houses and paying not a penny in tax towards the upkeep of the infrastructure around them.
I’m not suggesting we do this (although if we dumped stamp, IHT and the 50% rate, and the government looked to be attempting to live within its means, I wouldn’t be against it) but it would be a pretty quick way to get the UK’s affluent to solve a problem that both bothers them and which they have at least in part caused.
However I wouldn’t call it a mansion tax or a wealth tax. I’d call it a luck tax. Why?
Because most people work hard. But whether working hard turns into being well off or not is often a function of the environment in which you work. And this tax would be primarily paid by those who bought their houses when they were cheap and who made their money during the fabulous years for wealth creation before our great crisis.
And because it sounds nicer.