As part of the long-standing Liberal Democrat commitment to fair taxation, expressed so clearly by David Laws, the party has often called for a greater emphasis on wealth taxes.
As a direct result of these calls, it is now clear that the government is considering some form of wealth taxation to help deliver another long-standing Lib Dem tax policy – giving millions of low- and middle-earners a welcome boost by raising the income tax threshold to £10,000.
The precise nature of increased taxation on wealth is a topic of much discussion. Radio 4’s Today programme carried an interesting discussion of the merits of some of the options for wealth taxes – interesting for many reasons, not least that it took place between two leading Conservative figures. You can hear the discussion starting at around the 2hrs 21minutes mark in the link below:
Tories discuss wealth taxation on Radio 4’s Today
There are now very substantial economic and politcal arguments that favour significant shifts in how we tax wealth and income – and the biggest reason this debate is taking place at the heart of government is because Liberal Democrats are ensuring the case is heard.
With Spring conference imminent and the budget just around the corner, now is the time to keep the pressure up and to ensure that the Coalition acts decisively to make the tax system fairer.
* Prateek Buch is Director of the Social Liberal Forum and serves on the Liberal Democrat Federal Policy Committee
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8 Comments
We always hear (as indeed we did this morning) the “Little old lady in £2m house” canard.
Well – perhaps the “little old lady” should sell the £2m house thus adding more supply into the severely under-supplied (and continually over-priced) housing market.
Very true Tabman. For every little old lady sitting alone in a £2m house, there are 100 families and young people unable to get onto the housing ladder. But the Tories don’t seem interested in them…
In all fairness, although the “little old lady” argument isn’t that strong, we do need to exercise caution over the “asset-rich, cash-poor” element. Small though the number of such people may be, there will always be some who are caught at the margins of the £2m (if that’s what is implemented) who can’t afford to pay large amounts every month/year.
that isn’t an argument against a mansion tax, it’s an argument to make sufficient provision to ensure it’s implemented fairly.
Vince’s proposal was for the tax to be a percentage of the value above £2m., thus avoiding the ‘cliff edge’ problem. IIRC he also proposed that owners could set the annula charge against the value of their property if they were ‘cash poor’.
I also think the myth that there are lots of homes that ‘used to be worth tuppence ha’penny and are now worth £2m.’ needs to be challenged. In fact most of the properties now worth more than £2m. have always been relatively expensive properties.
“Well – perhaps the “little old lady” should sell the £2m house thus adding more supply into the severely under-supplied (and continually over-priced) housing market.”
I’m willing to look at wealth taxes, accepting that it is better to tax wealth than earnings, but not while idiocies like the 50p rate are considered a legitimate tax.
This is going to get interesting and about time too! Prof Michael Hudson gives some great background and joins a lot of dots in this video – 13.5 minutes but well worth it.
http://michael-hudson.com/2011/01/why-america-had-a-90-income-tax/
Liberal Eye – thanks for the link, very enlightening.
I support a land value tax and reform of the ridiculous council tax bandings, which do currently cut off at about £2m in England.
But the proposed annual tax rate of 1% pa is simply too high when rental yields on terraced houses in London are as little as 2% pa, so that a 1% mansion tax (if it applied to the entire value of the house) would either increase rents by half, or halve the freehold value, and bankrupt many London families with mortgages.
The other problem is that council tax represents less than 0.1% of the first £2m, so a 1% tax on the excess would simply produce a massive tax avoidance industry with families splitting themselves and their houses into two or three parts in order to avoid charges. It is not very liberal for the amount of tax you pay to depend on your domestic arrangements.
And finally most people who live in a London terraced house have no idea how much their property is worth, so fear of such a swingeing tax will affect many people who won’t have to pay it at all. We will end up with an arbitrary, disproportionate, discriminatory tax which raises virtually no money, lots of tax accountants, surveyors and lawyers very rich, and even more disillusioned and resentful ex-Lib Dem supporters.
Meanwhile, the really wealthy individuals, with a luxury flat in London worth £2m, a castle in Scotland worth £2m, a beach villa in Wales worth £2m, a cottage in the Lake District worth £2m, and a farmhouse in Devon worth £2m, as well as a £10m yacht, will pay ABSOLUTELY NOTHING.
Council tax represents less than 0.1%