The mansion tax isn't just a short-term revenue raiser - it’s also popular
Peter Mandelson’s description of the ‘mansion tax’ as a ‘crude, short-termist measure’ is the most recent denouncement of Labour’s proposal to tax properties worth over £2m.
His criticism can be added to that of the ‘opposition chorus’ of others who’ve criticised Labour’s moves, and who have cited reform of council tax as a more sustainable revenue stream and a less divisive tax reform for the party.
From a policy perspective, comparing council tax reform with the introduction of the mansion tax as interchangeable property taxation alternatives doesn’t quite make sense. However this very comparison is one being made by politicians and voters, and an intelligible pros and cons list is hard to find.
So today we’ll look at the much maligned ‘mansion tax’ and tomorrow we’ll assess council tax reform.
PROS
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Popularity: The idea of a popular tax might seem a contradiction in terms, but Labour’s ‘mansion tax’ has a staggering 72 per cent approval rating, reflecting statistics which indicate a public preference for increased spending on public services (even at the cost of borrowing and tax increases) – perhaps even echoing the idea that ‘voters actually love tax’.
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Hypothecation: Complicated-sounding, but fairly simple, ‘hypothecated’ or ‘earmarked’ taxes are those which have their revenue assigned to a particular end. Labour has earmarked the revenue generated from the ‘mansion tax’ to the NHS ‘Time to Care’ fund of £2.5bn to fund an additional 20,000 nurses and 8,000 GPs by 2020.
Indeed, the estimated contribution of £1.2bn to the fund is part of its popularity, as polling this month indicates that the NHS has overtaken immigration as the top priority for voters.
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Short-term: Cited by Mandelson as a criticism, the ‘short-term’ nature of the tax is actually one of its strengths, with its potential to raise much needed revenue quickly a very positive one. In addition, the tax is simple to administer and difficult to avoid.
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Fairness: Despite fears to the contrary, the tax will target only the very top tier of homeowners. Irrespective of Conservative claims of a ‘family homes’ tax, this is a tax on the very wealthiest alone: indeed, only 6 per cent of UK homeowners own a house worth more than even £500,000. It will also be graded and proportional, with at least three bands at £2m, £5m and £10m.
CONS
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Sound-bite over soundness?: The need for comprehensive and fair property tax reform, especially of council tax, has been widely explored from report to report. It is possible, in the long-term, that this specific hypothecated tax might detract attention from the need for a comprehensive review of property taxation. It is this ‘short termism’ that Mandelson and others have criticised.
However it is also possible that a mansion tax will comprise the first step in fuller property tax reform. Indeed, the introduction of a mansion tax and reform of council tax are not necessarily mutually exclusive options.
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The party of increased taxes: Irrespective of the tax’s popularity, Labour needs to be wary of avoiding the Conservative’s ‘tax and spend’ mythologies of old.
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The repercussions: It’s been claimed that the tax will hurt the UK’s attraction for international entrepreneurs and investors, a familiar criticism whenever any progressive reform is mentioned. And it is perhaps unsurprising that this suggestion has come from the Thatcherite Centre for Policy Studies.
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Enemy of the elderly: Myleene Klass’s claims that the tax would hit the ‘little grannies’ has been echoed by politicians like Tessa Jowell who fear the effect on the elderly who are ‘asset rich but income poor’.
However the £2m threshold will see only 100,000 liable to pay, while mechanisms will ensure that those on incomes of less than £42,000 could defer the charge until the property is sold, somewhat cooling these fears.
It seems that despite any drawbacks, and the criticisms of high-profile Labour figures, the mansion tax is not only a much-needed, short-term revenue raiser – it’s also popular (a huge achievement for a new tax).
Indeed, in the context of the Conservative promise to cut taxes for 30m people, a party that prioritises public spending and wisely links its spending plans with clear revenue sources shows itself to be the most ‘cautious’, in the words of the Institute for Fiscal Studies, and the most principled, in the face of considerable public scrutiny.
It may just be this sort of moral compass that sees Labour secure voters’ confidence in May.
Daisy-Rose Srblin is research fellow at the Fabian Society. Follow her on Twitter
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36 Responses to “Mansion tax vs Council tax: don’t believe the hype”
Guest
No, you’re trying to defend the merely city millionares. It’s quite simple.
You then try and use only income tax data, rather than looking at total incomes. As you cry for the poor people on only 160k.
And you should be audited, and tax loopholes closed. Let’s spend 10 billion more on tax collection, it’ll pay off.
Riversideboy
“Typical £3million London Semi” have a word with yourself mate, out of touch doesn’t come into it. Try Bury, Middlesbrough, Gateshead or Grimsby. If you think people are going to feel sorry for people wallowing in vastly overpriced property in a country called London that’s established its self inside Britain you are certainly very wrong. Let the house prices fall to what they are in those real
BRITISH towns mentioned above and they won’t have the problem.
Guest
No surprise you want far less doctors, so the peons can’t have healthcare, as you cry as usual for stopping the 99% from crossing borders.
Lorne Gifford
ok mr Guest,
Your first point – absolutely bang on correct
Your second point – not poor, and 1% of the population do not own 50% of the wealth, 85 people in this world own 50% of the wealth.
Your third point – surprisingly if you cared to google my name you’ll find I haven’t worked for 25 years in ‘the city’ and I am far from ‘retirement’. You’re talking about the 9000 bankers that I personally think should be lined up against a wall and shot for their reckless stupidity.
Fourth point – surprisingly mathematics is the only language you can’t lie in, as accurately pointed out by a couple of others here I did get some of my maths wrong, but the key maths is absolutely bang on correct.
Fifth point – I doubt it. Council tax goes primarily to the local council and not into the infinitely deep bucket that is big government. This is why Ed & Ed want a whole new tax.
Lorne Gifford
Middlesborough where they hung a monkey for being a French spy? Been there and quite liked it. Gateshead, not been there as I hate shopping. Grimsby – spent rather a long time there once, and hated it.
Do I want anyone to feel sorry for me? No, not really. I couldn’t give a t@ss what most people think
Do I want a taxation system in this country that is fair, proportional and representative – Yes.