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
-
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’.
-
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.
-
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.
-
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
-
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.
-
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.
-
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.
-
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
To reach hundreds of thousands of new readers and to make the biggest impact we can in the next general election, we need to grow our donor base substantially.
That's why in 2024, we are seeking to generate 150 additional regular donors to support Left Foot Forward's work.
We still need another 124 people to donate to hit the target. You can help. Donate today.
36 Responses to “Mansion tax vs Council tax: don’t believe the hype”
Riversideboy
monkey hanging… Hartlepool mate. I’ve spent a lot of time in London and I feel sorry for ordinary decent working Londoners taken to the cleaners by property spivs. When you say middle class do you mean Nurses Teachers, NHS workers who can’t afford to live in the overpriced dump?
Lorne Gifford
Yeah , you’re right, but it is close enough to go for the monkey hangers joke.
London is as you say a bit of a dump, but when it comes time to retire i’d like to be able to sell my house for something close to what I paid for it and not 40% less just so Ed & Ed can win an election by dividing a country. I don’t think that is decent behaviour on their part. It’s not even as if mansion tax will raise money.
disgruntled
Most of the people that will be caught by this tax will be those that are on a reasonable salary and have bourght their home on taxed income. It is wrong to hit them twice. As for avoiding tax it is not those on c£100k that avoid tax but those on millions and let us not forget to earn £100k u have to work hard. Just envy and mis-directing anger away from the super rich like Blair who are the only ones that Labour protects
Guest
So you are, once more, calling your 1% “middle class”.
And I see, DIRELY poor merely millionaire, blah blah…
Ah, so you’re plain rich and young. Okay. And? Of course you’ll shoot the ones in the *other* firms. Why, they’re the competition.
Guest
So you demand that you get all your cash back, and that people not rich like you not be able to afford houses, as you try and divide the country between rich and poor even more sharply than today.
Not decent to try and make you pay tax, right, as you try and convince people you’ll, what, firebomb your mansion? Yea, right.