They had a chance and failed, yet again!

Surely you would accept that someone with a 1m home and a 200k mortgage is better off than someone with a 1.2m home and a 500k mortgage? (ceteris paribus)

Hence Vince’s idea (and let’s be clear, this is an idea, not party policy) is a very blunt instrument and an extremely poor proxy for a tax on wealth

Interesting though it is to read about sanbikinoraion’s household income, it’s really not very relevant to this thread …

Well, this particular “mansion tax” isn’t going to influence anything significantly, because it’s too small – only about £1bn a year for a limited period.

If you wanted a more extensive tax that would reduce property prices in general, then that would benefit first-time buyers, it would disadvantage people at the other end of the process, selling inherited property, and it wouldn’t have much practical effect on those in the middle (though it would give them an enormous “feel-bad” factor).

In any case, it wouldn’t magically free up a lot of extra money for investment in other things.

We have a culture in this country of chronic underinvestment in business, (compared, say, to Europe) because we tend to put our money into bricks and mortar, to buy always the most expensive house we can afford. Often this is entirely rational given our expectations of the property market.

A mansion tax will influence that rational decision in the direction of investing more in business and less in property at the point when somebody who can afford a very large house is deciding how large a house they want.

What it wouldn’t do is enable ordinary home-owners to transfer part of the value of their property into other investments, as sanbikinoraion suggested above. The value of their property would simply be decreased.

But ordinary people don’t “invest in property”, they buy a place to live. And they’ll still need somewhere to live, whatever the tax regime.

But splitting larger properties into flats still doesn’t solve the problem.

Apparently what you’re trying to achieve is a transfer of money from property ownership to other forms of investment. But if the property is still there, essentially the same amount of money is going to be tied up in its ownership. Obviously dividing a million-pound house into two half-million-pound flats wouldn’t do anything to change that. If they turned out to be £600,000 flats, you would end up with more money tied up in property!

I think this is one of those arguments which is superficially attractive, but which on closer examination turns out not to have been thought out at all.

You may succeed in depressing prices at the upper end of the property market a little bit, but I don’t think you’ll succeed in shrinking the average size of a house.

That would be fine if there were a magic way to convert half the value of your house into ready cash, but as far as I know there isn’t (I wish there were!).

(Is that a muddled enough combination of glibertarianism and tubthumping socialism for you? )

Surely income is a useful thing that we want to encourage? Surely much better to minimize income tax because, as a transaction tax, the higher it is the more potentially beneficial transactions it is ruling out. On the other hand, a wealth tax taxes stockpiled income that isn’t being used for anything productive. Much better that someone live in a £500k house and invest £500k in their own business than just living in a £1m house.

(At least, I *think* that’s what Keynes said…)

I’d be happy with a system whereby income was actually taxed. The problem with the system (as well documented) is that too many people are able to avoid paying income tax. It’s one of the superficial attractions of a Unitax system.

Taxing fixed assets is considerably easier in practical terms as no-one has yet managed to move a Knightsbridge property to a tax haven.

This is what puzzles me a bit about some of those who are keen on shifting taxation from income to property.

Your justification of the proposed “mansion tax” is apparently that people who live in valuable houses generally have large incomes. In that, there seems to be an implicit recognition that, after all, the natural criterion for the fairness of taxation is income. So why not just tax income?