The problem with a mansion tax

Is that it\’s more of a tax on geography than anything else.

The business secretary, Vince Cable, has confirmed the 50p rate on tax will be abolished – and revealed the government would consider bringing in a \’mansions tax\’ to ensure the wealthiest pay their way.

From one website, there are 791 properties over £1 million in central London. Including, as an example, a 2 bed flat.

There are only 23 over that price in Gwynedd, all of which seem to be either mansions or large farms.

This isn\’t, by the way, to argue against an LVT. Rather, it\’s to argue against some arbitrary limit above which such should be imposed. Such would mean that it becomes a distinctly regional tax, given the regional differences in property values.

Perfectly happy with the idea of an x% tax on the underlying land of all property, something which would of course hit London more than Gwynedd. But much less so on one that arbitrarily decides that someone in a two bed in Chelsea is \”rich\” while someone in an 8 bed in Wales is not.

14 thoughts on “The problem with a mansion tax”

  1. Following Laffer on this:

    Would this not lead to an increase in house prices just outside London when all the wealthy Londoners move into big but relatively cheap houses to avoid this tax?

    This would mean a degeneration of central London and the top end of the housing market would take a hit.

    I suppose that Labour and their supporters would approve of this, it could reduce the concentration of yuppies in London.

  2. Maybe they could set the rate based on the number of rooms in the property. However counting the number of rooms would be time consuming and labour intensive so they could just count the number of windows on the property instead.

  3. It’s not that arbitrary though, is it. The people with two bed flats in Chelsea actually do have an asset with a significantly greater value than those owning an 8 bed house in Wales.

  4. The ‘mulakkaram’ was probably easiest in that you didn’t even have to look at the houses, you could just examine the taxpayer (or his wife). It also encourages toplessness.

  5. I’m not a fan of a tax on property values. One objection would be that in a lifetime, one could, depending on the rate, pay more in tax than a property is worth and then, when you pop your clogs, the bastards tax it again.

    Gutbucket, having such an asset does not mean they have the ability to pay tax on it. I hope most would agree that it would be fundamentally wrong for people to have to give up their home due to an ability to pay a property tax. Often people live in homes that had a low value when they bought them but which have skyrocketed for reasons beyond their control.

  6. They might as well go full circle and bring back the old property rates, as used to apply. Of course, I would also restore the old property qualifications for the franchise, so that the propertly-less peasantry could not vote, but I have this mean streak in me.

  7. I note the distinction “50p tax rate WILL be abolished”… “government will CONSIDER bringing in”. Sounds as if they’ve realised the higher tax rate is actually costing the government money but need to give the LibDems some political cover. Bet it never happens.

  8. Russian oligarch buys up 8 adjacent flats in SW7. Each flat would have paid modest Westminster CT of about £1,400 per year. Oligarch creates single 30,000 sq. ft. mansion worth £150 million which now pays single CT of £1,400 per year. If this was an office block the Business Rates would be about £900,000 per year. A Mansion Tax at half a per cent would be £750,000 per year and would knock about 10 per cent off the CV. This is what is known as a sitting duck.

    However, a Mansion Tax would be the final nail for many listed houses outside the wealthy south east (see Country House Rescue for details).

  9. Mansion Tax is the easiest way to explain LVT to the layman. It’s not perfect, but as Voltaire said, don’t let the perfect be the enemy of the good.

  10. rech – given the variety of shapes the male body is known to take, I have to say that “encourages toplessness” strikes me overall as a fault, not a virtue.

  11. I’m a bit puzzled. You seem to be implying that a £2m house in London isn’t really worth more than a £500k house in Wales because the latter is more spacious and has more rooms?

    An abitrary limit is silly, but it’ s not silly because of some geographical issue.

  12. Er, hang on.
    Aren’t most of the mansions in London currently occupied by Afghan refugees on housing benefit, getting their rent paid to mysterious landlords who also turn out to be Afghan refugees living in council flats somewhere else? Somebody is going to have fun trying to find out who to tax…

  13. This really is a bizarre blog.

    Are you suggesting that it is unfair to tax people who have wealth of at least £1m more than those who have wealth of only £250k?

    By any standard somebody who owns a 2 bedroom flat in Chelsea is rich compared to 98% of the rest of the country. Why do you think Putney and Clapham are so popular now? Because only rich people can afford to own and live in property in Chelsea.

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