The Mansion Tax’s House of Cards

By Zak Mir

This may be something of an urban myth, but I am led to believe that until the late 19th century, a time when Great Britain was at its greatest, there was no general income tax. However, it would appear that socialist minded people managed to convince us that society would be a better place if everyone had to pay for the less fortunate.

Of course, 150 years on we do not know whether it is tax which has improved living standards, entrepreneurialism, or whether technological advances such as antibiotics, or central heating would have done the trick anyway?

The alleged advantage of the tax everyone policy was that it would get the bloated rich off a pedestal of greed, a principle which at first glance seems to be a correct one. This is especially the case as it ties in with the idea that everybody pays tax in order that everyone receives benefits.

Of course, what we have seen in the wake of the HSBC/Swiss tax avoidance debacle, is that the rich simply do not pay their fair share. Therefore, it is only the poorer majority who spend half the year getting to the point where they are not simply working for HMRC. The system is complicated, unfair and inefficient.

But it does work in one obvious sense.

Taxation as we have heard on many occasions lately is built on the principle of rich envy, and while it is in need of total reform, has this as it greatest asset and greatest flaw. The Mansion Tax is simply an echo of, and the latest manifestation of this flawed system. Indeed, the likelihood is that we will start off with a tax on assets above £2 million, and will end up as a universal tax. Just like the way that VAT is an ever rising burden in percentage terms.

The concept of taking money from those that can afford it may appear to be genuine but to disregard the fact that it simply does not work, due to issues such as avoidance, is clearly folly. The worst aspect is that the Labour Party is set to lose the next election on the basis of the Mansion Tax, precisely on the opposite basis that the Conservative Party will win, as it managed to engineer a housing market boom over the past five years.

There is however no need to take my word for it.

The Centre for Policy Studies, which is admittedly not a very Labour sounding organisation, has suggested that the Mansion Tax is punitive and leads to uncertainty. It suggests that such a tax would have a detrimental effect on the UK economy especially amongst the now infamous “buy to leave “real estate brigade.

The real issue which our Labour friends have not underlined is the way that most of the profits from our principal house are the result of a long-term investment which has carried the risk of the market and the cost of paying a mortgage over many years. The Mansion Tax would be a double tax, rather as in the way that Inheritance Tax is.

The super rich have pushed up the price of London real estate to ridiculous levels. But it may very well be that market forces and present methods such as stamp duty are a better way of doing things than enforcing a new tax which is likely to be questionable in terms of results, other than being a possible vote winner at the general election.