There was I, all set to wind down from the keyboard, when this inspirational news descends from politicshome:
The Independent says that Nick Clegg plans a new tax on homes worth over £1m in order to fund raising the basic starting-point for income tax.
It’s a wealth tax! A redistribution of taxation burden on to static capital accumulations and away from economically productive activity! Has anyone told Jock?
Woohoo! If the party adopts this, I’ll even overlook all that airbrushing nonsense…
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22 Comments
That’d be Politicshome not politics.co.uk
It is hard to imagine that it would raise enough to make much of a dent in income tax rates…
Does land value rating do much the same thing – you get an uplift in value just by doing nothing, back to the Lloyd George “God Gave Land To The People” stuff of the original Yellow Book.
Quite a lot of homes sell for over a million in a lot of Lib Dem constituencies…hmmm, you can’t say its not bold.
Oh, and another point…isnt Stamp Duty a wealth tax?
I thought raising income tax allowances was going to replace cutting the basic rate, and that all this was supposed to be already funded by other measures that were proposed years ago under Ming Campbell.
But maybe I’m being a bit stupid in trying to keep track of all these twists and turns in Lib Dem economic policy. Perhaps I should just set the alarm clock for next June and see where the party has ended up by then.
That’s at least another 10 Lib Dems seats lost to the Tories and any Lib Dem seat in the south highly vunerable.
And all this before we get Clegg’s main speech,he’s playing an absolute blinder.
I don’t think Jock will be delighted – it’s no land value tax and our Jock is a bit of a purist – but it is definitely a step in the right direction.
The person who will be chuffed is Giles Wilkes from Centre for Um who proposed precisely this in his recent pamphlet.
And this together with ‘savage cuts’. An object lesson in how to irritate all parts of the party. It probably means that the state of the public finances are dire. Perhaps worse than we know. Anyone been following the currency markets? I wonder what the political landscape will be like in June. Exciting times. Unfortunately.
PS. I am not a savage.
A great idea but has it been through our democratic policy making process?
Harrumph.
At pretty much the peak of the market the total number of homes in England and Wales valued at over £1m was estimated at 88,000.
There are roughly 23 million househholds in England and Wales.
I think (it’s late, my maths may be wrong) that means that roughly 0.4% of households are in homes worth over £1m.
Is this supposed to be a “progressive” idea? I’d need the little blue pill to show any excitement about this one I think!
Now, everyone go and buy their copy of “The Case for a New People’s Budget”. It only takes a few hours to read. And even I learned quite a lot about the possible effects of a proper land tax that I had not considered previously very important.
PS – this has been proposed several times before. Including IIRC during the Tax Commission discussions. It’s not new, it’s not clever, it’s not bold, it’s not “redistribution” in anything other than a token way, and it will look like the politics of envy rather than a broad bold new way of taxing everyone and not singling out any “enviable” group.
Gimme £100bn in land taxes and I’ll give everyone back £100bn more and then some on aggregate in the combined effects of lower housing costs and reduced other taxes (and if you are clever about the taxes you reduce or eradicate so they are the ones that most negatively effect the least well off you can skew that to their favour in a big way).
I’ve always believed that consistency is a virtue and hope that my party believes that too. Unfortunately the twists and turns in our economic policy make me wonder where our philosophy has gone. It seems that we are making bold statements just so that we get in the news. We seem to be wanting to irritate vast chunks of the electorate in the run-up to a general election, which hardly seems wise. We all know how the other parties will twist whatever we say. I watch the conference on BBC Parliament and I wonder how everything hangs together. Or is it just the media?
There are no “bold” statements here. Consistently timid is no good thing. 0.4% of households is hardly “vast chunks of the electorate”.
On a closer look, this looks like yet another silly bit of spin. The Independent article says that this proposed property tax would raise £1.1bn a year, out of £17.1bn for the total package that Cable is going to propose today.
The bulk of the money is to come from measures against corporate tax avoidance and changes to capital gains tax. It sounds as though this is essentially a re-jigging of the proposals that were originally going to fund the cut in the basic rate of income tax, with the green element now apparently dropped completely, and this headline-grabbing property tax – that only raises about 6% of the total – added as a garnish.
I’m reticent to back this initiative because I think Clegg and Cable have gone a lousy way about announcing this. But while I absolutely agree with Jock that there would be better ways of taxing wealth, this does represent a significant victory for those of us who have been arguing for years that the party needs to move away from this obsession with income tax.
I wouldn’t want to see this as a long term measure, but as a step towards a proper land value tax, it is welcome.
“The Independent article says that this proposed property tax would raise £1.1bn a year, out of £17.1bn for the total package that Cable is going to propose today”
Not that the rest of the media are aware of these niceties, of course. Here’s how the Guardian is reporting the story, under a headline of “Lib Dems vow to raise £17bn with tax on £1m-plus homes”:
The new tax on £1m-plus houses would be payable on an estimated 250,000 properties and raise more £17bn a year, the party said.
http://www.guardian.co.uk/politics/2009/sep/21/liberal-democrats-property-tax
Well I’m pleased about it – it’s a start! As the idea sinks in, people will come to ask “why cant we do this for all property”? – and the ball will be rolling 🙂
I disagree Mark.
First, it is not a land tax. It is a single band super-council tax with all the problems that we have spent four years as a party trying to explain makes the council tax a bad tax.
Second, the best way, in my opinion, to get a tax killed off for ever is to start it by targeting solely the wealthiest. Look at Inheritance Tax – they’ve manage to twist the truth of IHT such that when the Tories announced their changes almost everyone in the country who did not know better believed that everyone was getting a tax cut, not just the six per cent of households at the very top of the wealth table.
If we want LVT to be any kind of a success at all it *must* be introduced across the board. It must fit in with, for example, Adam Smith’s touchstone of what a “good” tax is in terms of transparency, equity and so on. You can offer a relief to the poorest households as ALTER are suggesting as something akin to the personal income tax allowance, but everyone knows that above that you pay *something*, you *share* the burden.
Introducing anything that pretends, even just in the public imagination, to be in any way related to LVT, as, first, a “super tax”, exclusively on the wealthiest will become either a status to hanker after or a valutaion to avoid, and damage the reuptation of the idea of better property taxes altogether.
Whatever they may write in support of ALTER, whether presidents, vice-presidents or patrons, it seems clear that if this is supposed in any way to presage a move to LVT they have not read any of the advice about how we would go about introducing LVT – for this is not it and risks damaging the whole idea.
It’s bonkers. Just get on and do LVT. It’s not like we’re in with a chance of actually implementing this idea, so we ought not to faff around with interim measures, but start explaining now why our real idea is far superior.
As I said – show me £100bn in land tax and I will give you back an extra £100bn to real peoples’ pockets, at least. Where’s the beef in that? How can you *not* *love* that idea. Government gets the same as now, people halve their living costs, banks earn less profit from them. The three key messages of recovery!
Why the arbitrary £1 million threshold? Are those in £999,999 properties not relatively well off and able to contribute too? And where’s the incentive to bring those 1 million empty (and largely untaxed!) homes back into residential use?
All we have to do is extend our existing policy for SVR to non-commercial properties as well. Simple – and Liberal. With deferments for the ‘asset-rich /income-poor’, a mere 5% national LVT rate (on annual rental, not capital, value) would raise enough revenue to fund the abolition of tuition fees. Instead, we’re about to relegate yet another vote-winning policy to the ‘aspirational’ league of pledges.
C’mon Nick and Vince; get a grip.
Are those in £999,999 properties not relatively well off and able to contribute too?
Well, those in £1,000,002 properties can probably afford more than the £1 a year they’ll be asked for under this proposal. It seems reasonable to me to start somewhere, that somewhere being quite a bit above what anyone could claim as needs.
Now, let us hear the voices of the vested interests making a noise about this, and probably using their usual “middle England” line i.e. pretending that something which benefits those in the middle at the expense of those at the top is an attack on those in the middle. So – if they do, turn round and say to the REAL middle England – “OK, we’re doing this so we can pay for your kids’ university tuition fees, do you prefer higher income tax?”. And say to the kids “This shows that politics does count, we are doing this for your benefit, and we’re getting stick for it – if you go off and say ‘oh, I’m not voting, politicians are all the same’, well don’t blame us when you’re stuck with debts you could have voted against when you had the chance”.
I’ve always supported LVT, but if there are cries of outrage over this, it will indicate just how hard it would be to sell that.
Matthew:
I completely disagree Matthew. This is not, in any clothing, Land Value Tax. Pretending that it is, or that it might be a “first step” towards it, will kill LVT dead indeed, but not because it is LVT, but because people will conflate it with it. LVT needs to be introduced across the economy, not be a special tax for one group of people; a group of people who have extraordinary clout as it is and will quite happily make a real meal of this, evade and avoid it as much as they can and then get everyone else (as I said, just as with IHT) to think it’s a tax that needs to be repealed because they will all pay it one day.
The people who must benefit from LVT are those who cannot currently afford the basics of life, i.e. shelter for themselves because of speculative monopoly rents. That can only be tackled by taxing the land that their homes are built on as well as SW1, WC1 and OX1 and 2.
This is not “a start” towards LVT, but it could very well be the end of it as an idea to sell to people. And that would be the greatest betrayal of the people this party is supposed to want to help than anything else we could possibly do.
Hmm isn’t £17bn divided by the 250 000 homes quoted, something like £68 000 per property above £1m? I think the Guardian might have done a little bit of simple arithmetic before publishing such an obviously erroneous headline.