Right. The mansion tax. Here we go again. You can read my previous blogs on this here. But a few points to add today.
The problem with our property market is not that people living in expensive houses are too rich and that this isn’t fair. It is that our property market is artificially supported by a host of government policies designed first to keep our banks’ bad debts on hold while they have a go at rebuilding their balance sheets, and second to allow every billionaire in the world to hedge their global bets by holding empty London properties for nothing but the cost of a cut-rate council tax.
Our house prices, as Hugo Rifkind points out in The Times today, are “a disease”. They infect everything, preventing people from starting their lives properly, constantly widening the gap between rich and poor, prompting huge welfare payouts in housing benefits and the like, and making us all commute for hours to get to work (I am writing this on my frequent four-hour train ride from Scotland to London).
We’ve always had this problem to a degree, but the credit-driven property bubble in the run up to 2008 drove it to new heights – heights from which our politicians are terrified to let it fall. A mansion tax will make no difference to any of this – “however much you tax a house worth £2m, your kids’ primary school teacher still isn’t getting a garden”, says Rifkind.
A government that devoted its energies to something other than preventing house prices falling in nominal terms (cutting the size of the state perhaps…) might.
Regular readers will know that I have no particular problem with a property location tax. In fact, in isolation, I think it would be a wonderful thing. If we were dumping other taxes (such as the hideously distortionary income-tax system, for example) to put in place what is effectively a location tax (most people with houses over £2m have paid not for bricks and mortar but for the location of those bricks and mortar).
And if we were doing that because a location tax is efficient and fair, the mansion tax idea would be all well and good. But that isn’t the plan.
Instead, our idiot politicians want to put their mansion tax in on top of all our other wealth taxes (think capital gains tax, stamp duty and inheritance tax (IHT) for starters), and they want to do it, not to improve efficiency, but to show their voters that they hate ‘rich’ people more than all the other parties.
If you aren’t convinced that this is all about the battle to hit the rich, read this New Statesman blog which makes it clear that the whole idea is to produce a great unfairness “against this generation of the rich.” Pathetic really, isn’t it?
It seems to me – and you must be as bored of hearing it as I am of repeating it – that failing a total overhaul of our entire tax system to take account of the fact that income taxes are bad and location taxes are better, we should just recognise that windfall property gains are undertaxed by putting a capital gains tax on primary properties and be done with it. The (excellent) arguments for this are discussed here: Two steps towards solving the housing ‘crisis’.