Why a mansion tax? Why now?

Left Foot Forward makes the case for a mansion tax based on the fact that within the current council tax system the rich do not pay their fair share.

Ed Miliband announced yesterday that a future Labour government under his leadership would reintroduce the 10 pence starting rate of income tax rate scrapped under his predecessor Gordon Brown and pay for the subsequent reduction in revenue to the exchequer through a mansion tax .

Left Foot Forward agreed with this progressive measure, and we set out why here.

It’s also important, however, to look at why the current system is unjust.

At present, a person who owns a house worth tens of millions of pounds can pay the same amount of council tax as a person living in a modest suburban home.

This is because council tax banding is at the same level it was in 1991.

Banding may have stayed the same, but since then property prices have more than quadrupled. The average price for a property in London now sits at a whopping £445,651.

In the table below is the council tax banding for the Royal Borough of Kensington and Chelsea for the financial year 2012/13.

The average house price in this, one of London’s wealthiest boroughs, is just short of one and a half million pounds.

This means that a resident of Kensington and Chelsea, such as Goldman Sachs boss Christoph Stanger, who owns a £7 million pound property in Kensington’s Palace Gardens, pays an annual council tax bill of just over £2,000 – the same as a middle class family owning a property in the neighbouring borough of Tower Hamlets, where the average property costs £367,068 – and also the worst area for child poverty in London.

Band Council Tax Range of values
A £717.15 up to and including £40,000
B £836.67 £40,001 to £52,000
C £956.20 £52,001 to £68,000
D £1,075.72 £68,001 to £88,000
E £1,314.77 £88,001 to £120,000
F £1,553.82 £120,001 to £160,000
G £1,792.87 £160,001 to £320,000
H £2,151.44 over £320,000

Communities secretary Eric Pickles has also ordered officials to destroy data collected by previous governments that could allow a widespread rebanding of properties. This one of the reasons we now need a mansion tax, because the current system is incredibly unfair.

As for the objection that a mansion tax will force older people out of properties which, due to the house price boom of recent years, are now worth more than £2 million pounds, we could quite easily say that, if you are past a certain age, you can switch your mansion tax into inheritance taxes, paying nothing while you are alive and staying in your house.

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