Hi Don,
I couldn’t agree more with what you wrote.

However, may i say that the Lib Dem conference -in my opinion- has been a total fiasco.

Like I wrote here…this “£1m mansion tax” are they going to shelve it in a year or two? Like they did with the 50p in the pound after Charles Kennedy was ousted? Or like with their “scrap tuition fees” pledge that is also been ditched? Or like their past support for voting system reform now virtually invisible? The axe-the-council-tax campaign?

This is why potential Lib Dem voters don’t get them seriously, not because Nick Clegg doesn’t ape Tony Blair’s or David Cameron’s style enough.

I’m afraid the “normalisation” of the LibDems under Nick Clegg is going to backfire big time.

Not me but I’m all for people who earn more paying more taxes and other such Communist nonsense.

However, it does concern me a wee bit that it hits London harder due to how overpriced gaffs are here.

But why do it on house price value when you could do it on income? Wouldn’t that make slightly more sense?

Shall we commission further polls, eg on immigration or capital punishment or EU withdrawal?
Or only on issues where you believe the public agrees with you?

I have some sympathy with the land value tax idea, though the LVT campaign themselves were not at all happy with Cable’s on-the-hoof idea.

http://www.landvaluetax.org/latest/libdems-put-their-foot-in-it-with-qmansion-taxq-proposal.html

As an advocate of Land Value Taxation, I also dislike the idea. Pity, because Vince is onside with the long term desirability of LVT. I just don’t think this moves it forward one inch and potentially because of the reaciton you mention Don sets it back by leagues.

noughtpointzero: there is a much (pdf) better correlation between top earners and property value held and bottom earners and lack of property held.

Why on earth would one want to tax what people get off their arses and go and “earn” or the returns to what they “invest” in “social production” when there is a species of wealth in land values that they do not earn, indeed which is in reality a tax on the rest of us who cannot use that same land, perhaps more efficiently.

Jock: I suspect that the Mansion Tax could be a gateway to LVT. It gets people used to the idea of property taxes in a country which doesn’t really have many of them at present (council tax is a pseudo-property tax, based on very out-dated valuations and also comes from a tradition of paying for services rather than being an outright tax). The MT would necessitate creating some new infrastructure to administer the valuation of properties and deal with any challenges to those valuations. All of this could be seen as groundwork for the later implementation of LVT. Based on past performance, there’s also a half-decent chance that either Labour or the Tories will ‘borrow’ the MT policy and end up doing the hard work themselves.

Hi cjcjc,

“Shall we commission further polls, eg on immigration or capital punishment or EU withdrawal?”

There are polls on all of these subjects – e.g. the YouGov from just after the Euros.

From memory, large majority support restrictions on immigration, sizeable minority support EU withdrawal and dunno about capital punishment.

In contrast, I don’t know of any polling about the mansion tax, only assertions that it will be unpopular. Which since most polling shows that people support taxes which they think that they won’t have to pay, I find unlikely.

Why not add additional bands to the council tax-£300K-£750K,£750K-£1M,£1-2M,
£2-5M, over £5M?

Two things Charlie2:

1. That would make them “slab” payments again and one of the ideas behind this is to make it a properly “progressive” property tax.

2. More importantly, it is not for local government spending.

Rob, I think we’ll just have to disagree on this one! It is valuing the wrong thing – land is so much easier to value in many ways than land+improvements, the latter will lead to complaints about more snopping into properties and so on, just as it did when it was suggested in the Northern Ireland local tax review a coupel of years back. The fact that it hits one particular group of asset owners, people who generally are reasonably successful and have the perception at least of more clout means that they will try and persuade otehrs, as with the IHT stuff, that this is a tax they will all eventually pay when you are in the million pound house you’ve always dreamed of and so on.

The real benefits of LVT, which are the things that are going to cause a liking for it to be embedded in society as a whole, are only apparent when you tax all land, which is when land becomes more affordable for less well off people to be able to afford their own homes more comfortably.

The thing is, I know Vince understands all that (and said as much in his later platform speech I believe), so I just cannot understand why this is even on the table.

If you ask “should someone who is not me pay more tax, so that I will pay less, and a nice school will be built” then you may get a high yes response. . Why not have 60,70,80% tax on high earners (say over £250k) as your policy, after all most people will never get close to having to pay it. The same principle applies as Don postulates above.

But you would be deeply mislead to believe the poll that said it.

How people vote on taxes depends a lot on how they feel at the time

In 1997, people felt good about their circumstances, and although the knew Labour would up their taxes, they felt reassured that Labour would not go mad and go back to the ‘bad old days’ That was TB’s great achievment. The felt able to afford the Labour party, and they were damn certain they want rid of the Tories.

I suggest that all the polling indicates that people want a change. They may not be convinced wholeheartedly by Cameron, but they are not scared of the Tories anymore. The one thing they are sure of, is that Labour have screwed up (it does not matter whether its a fair vierw or not), and that over time, they feel that the tax burden has crept up on them. (council tax, beer, petrol whatever).

So now they feel like they are beginning to be overtaxed (i put it no more strongly), they know more taxes are coming, and they do not want to pay yet more.

It does not matter if you think the policy proposed would have a good effect on low and middle income earners, it is the direction of travel and the message that is being sent that is out of tune with the times. The overall impression is of a trend to further higher taxes. No amount of explaining it will take that impression away.

Working voters, feeling the pinch, perceive thay simply cant afford to vote for higher taxes, even if reality the higher taxes were going to fall on someone else.

Then of course there are quite a few voters in marginals would are going to be affected and do know it. That seat in Liverpool you save for liberalism, will be more than offset by the several in the South East you will lose.

Dontmindme:

“The overall impression is of a trend to further higher taxes.”

If that *is* the impression either intended or generated, then it is worse for LVT. The intention of LVT is always to *replace* not add to the existing tax burden. One of the most common moans when one talks of LVT is “oh, not yet another tax” to which the answer is “no, a replacement for less economically efficient taxes you already pay”.

The ‘mansion tax’ sits oddly with the Lib Dem policy of scrapping the only personal property tax there is (Council Tax). How come it’s appalling to assess a tax based on property ownership, except when the property is really big?

A better solution would be to completely rejig council tax so that, instead of being banded and assessed, it was reorganized as a proportion of the absolute capital value of property – the value to be set by the local authority when making its budget. With suitable rebates for households with low incomes, that would be a fair tax system, would avoid the stupidities of local income tax, and would be very easy to revalue because each local authority could be revalued separately on a rolling programme.

10 – dontmindme, that’s an excellent point that people might support individual policies, but not the parties which propose them.

e.g. large majorities supported william hague and michael howard’s tories on immigration and europe – but didn’t like the overall impression of the tories as nasty and xenophobic.

similarly, i can imagine substantial majorities supporting higher taxes for high earners, but not voting for the party that proposes them, both because they feel that party is against people getting on and being successful, and also because such a party would get unrelenting hostile press coverage, lack of donations from wealthy donors etc.

*

on a related note, only anecdotal, but i know quite a few people switching from labour to tory because they feel overtaxed and they think they will pay less tax under a tory government. i think they are in for a nasty surprise.

Only on the land value though please David. It is wrong to count the capital value of “improvements” – buildings etc, as that discourages the development of such assets and therefore the overalll reduction in house prices so more people can more easily afford them.

Personally I think you are right on the LIT issue. This tax is probably intended as an almost “off the cuff” response to “but you’re removing all property taxes and are not ready with something to replace them”.

“Why not add additional bands to the council tax-£300K-£750K,£750K-£1M,£1-2M, £2-5M, over £5M?”

because then you would have to revalue all properties, which (rightly or wrongly) would be quite staggeringly unpopular.

11. Jock

I am not trying to beat up on Mansion tax or LVT. I was commenting on what might be described as ‘ the mood of the times’. One thing is consistent in all times. Any mention of a new tax, even if in reality it genuinely is a revenue neutral replacement for another tax, is always perceived as a tax increase. Sometimes it is acquiesed in, but I dont think this is one of those times.

@3 Dear Noughtpointzero,

“But why do it on house price value when you could do it on income? Wouldn’t that make slightly more sense?”

To answer you, I can’t do better than quote Winston Churchill speaking in 1909:-

“Roads are made, streets are made, railway services are improved… – and all the while the landlord sits still… To not one of these improvements does the land monopolist as a land monopolist contribute, and yet by every one of them the value of his land is sensibly enhanced.”

So I’ll reverse your question. Why tax income, discouraging work and enterprise? Wouldn’t taxing land values make more sense?

@5 Jock,
Thanks for the link! The essential point is that property ownership is far more skewed from top to bottom than income (although both are very skewed). Income tax erodes the asset base the low to middle income earners more effectively than does property tax. That’s why some familes have remained rich from the Norman conquest to the present, and others have remained poor.

Three cheers for the Mansion Tax!

donpaskini @ 15,

Why would it be as unpopular as you claim?

They’d only have to revalue properties that fell within the new bands.

And it would let the property and income rich folk pay, yet capital or income poor people off the hook.

It seems to me that the idea of punishing the rich, with ammendments, is in no way an unpopular option.

We have, in fact, evidence to suggest that fat bankers and the like are rather shunned these days.

Taxing on the basis of income (as opposed to land value) wouldn’t discourage work and enterprise… for the simple reason that the other countries, in Europe and North America, are mostly harsher than us on high earners. Talent wouldn’t leave the country en masse.

So I still like the alternative idea of doing it on the basis of income… though I still support the current move.

I have a lot of sympathy with a LVT, but the Mansion Tax is more like council tax. Basically the Mansion Tax is a disincentive to development (accepting that a five bedroom pile isn’t prime development land), whilst a LVT applied broadly is an incentive.

Get more productive value out of a piece of land and yield increases. The Mansion Tax is the opposite.

Are the Greens in favour of LVT? I ask because it should encourage density, something the Green Party aspires to.

The problem is that the type of house which costs a £1million varies considerably across the UK. In many parts of London, all you will get is a fairly normal terraced property. In Surrey where I live, it will get you a 5 bed detached house – but hardly a mansion. In many parts of the country, it really will buy a mansion.
It would have been far better to propose adding one or two extra bands at the top end of the council tax, if the money has to be raised based on property.

Also, new taxes like this tend to creep …. if the housing market takes off again, a house currently worth £800,000 will top the £million barrier fairly quickly.

It is a bad idea.

I must say that I agree 100% with the tax.

[17] “So I’ll reverse your question. Why tax income, discouraging work and enterprise? Wouldn’t taxing land values make more sense?”

Perhaps, but who’s going to independently estimate the value of a person’s home? And what happens if a home owner disagrees with the valuation?

I disagree with the idea of taxing on estimated land value because what happens if a person on a mid-income inherits a large house from their parents, and can’t afford the tax payments? The idea of taxing on ability-to-pay goes out of the window if you start taxing land value.

Also, in the above situation the solution for that person would be to sell up, but owning a home valued above £1m that person may struggle to sell because demand will be down because of the tax.

Mark M asks what happens if a person on a mid-income inherits a large house from their parents, and can’t afford the tax payments?

In this case the person has two options. Mark mentioned the “sell” option. And many people would quite happily do that and pocket the cash. However those who want to keep the property just need to rent it out. By doing that they will earn at least enough to pay the tax. So it doesn’t matter whether they’re high, mid or low income. The house will pay for its own tax burden and they will still be better off because they will be able to pocket the surplus rent after paying the tax and maintenance.

@20 “Are the Greens in favour of LVT?”

Oh yeah, baby. See how a serious party takes on this vital issue: http://policy.greenparty.org.uk/mfss/mfssld.html

@26 MarkM: Read, inwardly digest, then reconsider (you daft plonker).

I’ve deleted a couple of off topic comments, but apart from that thanks for all comments – a good discussion.

douglas asked why it would be unpopular to revalue all properties worth over 300k – firstly any revaluation is a good excuse for the newspapers to run stories about government spies coming to check if people have put in conservatories etc., and secondly there are a lot more properties which are or might be worth over 300k, so lots more losers (all of whom will get lots of coverage like the 0.01% of poor pensioners in million pound houses or whoever it is that we are meant to be feeling sorry for).

[24]
Derek – Wow, no room for sentimentality on the left. Never mind that they have inherited the family home, where they may have many great memories. If you can’t afford to pay your tax, you’re out (either renting or selling). Not being sarcastic, just pointing out the situation. I’m not going to say whether either opinion is right or wrong on that.

[25] Strategist – can you debate please? Name calling and ‘reconsider your opinions’ don’t make for a very good environment in which to decide whether a mansion tax is workable or fair. What is it in my point that you would like me to reconsider?

To go to Claude @1,

I like how the Lib Dem’s can do nothing right on this situation. Personally I think the idea that a party can’t change it’s policy, ESPECIALLY when that party is the only one to actually function in anything like a democratic manner when it comes to party policy, is abhorrent.

I think the departed SB said it best that it is quite frankly scary that anyone is able to portray an ability to change policy at the whims of the majority of those with a say as some kind of negative.

Yes, leaders and influential people may be the ones leading the change…but it only happens if the membership want it too. It’s easy to paint this as Clegg wanting to scrap this or change that, or that Cable will shelve this or that later…but they CANNOT do so without the party backing them up on that.

As for the tax issue, after hearing yet more anecdotal stories that compare people living in flats only miles away from those in small mansions paying only slightly less (more, technically, in relative terms) in council tax; I can’t understand why there wouldn’t be a better time to make the situation more equitable. Unlike the whole non-dom or offshore taxation issue which is murky to the point people can claim they’ll “get tough” without ever actually needing to, land tax is one area that millionaires and those better off cannot escape what is required of them.

@27 “What is it in my point that you would like me to reconsider?”

- @23: “I disagree with the idea of taxing on estimated land value because what happens if a person on a mid-income inherits a large house from their parents, and can’t afford the tax payments? The idea of taxing on ability-to-pay goes out of the window if you start taxing land value.”

If you’ve got an asset worth a miilion quid plus, you’re good for credit, ergo you’ve got ability to pay. Why should the population who don’t inherit million pound assets subsidise (through income tax, VAT etc higher than they otherwise need to be) those who do?

“can you debate please…to decide whether a mansion tax is workable or fair?”

Frankly no. Have a look at the comments thread under the original mansion tax post. There’s a limit to the number of times I can be bothered to go through this again and again. (Did you actually read the link to the Green Party text I bothered to provide?)

I strongly support the idea of a ‘mansion tax’, though I feel the Lib Dem proposal is ill-conceived.

My grandparents live in a seven-to-eight bedroom ‘house’ in Dorset which I would conservatively value at £1.5 million. They live out of two or three rooms on the ground floor and only the concerted efforts of my many relatives keep the place from going to ruin (metaphorically).

Meanwhile, first time buyers haven’t a hope in hell of securing a place to live anywhere nearby and most of the house lies empty. (I now live in Liverpool, where property prices are somewhat less extreme and, coincidentally, the ‘wanker per capita’ quotient decreases markedly.)

The effect is that there are no services for the few children that live nearby; the village stagnates and becomes yet another ‘Daily Mail’ enclave. It achieves nothing and is a colossal waste of time.

Such a property would make an ideal children’s hospice; alternatively, it could provide communal housing for several families. So tax the unproductive asset and build some affordable housing nearby.

If you can’t afford the tax, you’re out – quite right. ‘Fond memories’ (of which I have many) are no justification for prolonged inequality and social injustice.

Incidentally – why the peculiarly British fascination with property?

@23 Mark M

Your question on “ability to pay” has been answered by other posts. You might also consider the equity release option, if you don’t want to rent. I’m sorry, but although I symphathise with the position of someone who has inherited a beloved (but expensive) family home, I have better things to do with my money than subsidising him. Not all liberals are of the “bleeding heart” variety.

You also doubt the possibility of doing property valuations. The best answer to that can be found in Mark Wadsworth’s blog:

http://markwadsworth.blogspot.com/2008/02/rebutting-tory-arguments-against-land.html

He’s a strong LVT advocate and a UKIP supporter, so you won’t find much bleeding heart liberalism there either.

[31]Thanks for the link David. He did make some interesting points, although on ‘ability to pay’ he does say “What about ‘ability to pay’? [...] Pensioners would be allowed to defer LVT to be repaid by their heirs. Which is why Inheritance Tax and Stamp Duty Land Tax should be scrapped as a quid pro quo.”

I don’t recall Vince detailing plans to scrap IHT and Stamp Duty when he set of the LVT, so the heirs ability to pay question still stands. Let’s not forget that the value of a person’s inheritance will be heavily hit if he/she tries to sell up.

For example, let’s say someone inherits a £2m home from their parents. They can’t afford the £5,000 a year tax so decide to sell up. A buyer comes in to view and sees that the seller is a young couple, and rightly assumes they are selling up to avoid a tax they can’t afford. Knowing they are desperate to sell, and that the number of buyers in the £1m+ will have fallen off as a result of the tax, he offers them well below the market value. If they feel they’ve no alternative but to sell then the net result of the tax is that the person who is actually rich gets a home for well below the market value and can use the savings from the purchase of the home to pay the tax, whereas the less well off person, who was forced to sell up, has massively lost out, although they would still see a decent amount of cash.

[31] & [29]
“I have better things to do with my money than subsidising him”
“Why should the population who don’t inherit million pound assets subsidise those who do?”

Not taxing someone for something is not a subsidy. The government is not subsidising the first £6,479 I earn – they’re just not taxing it.

One other point I would have is don’t you think that the rich will find ways of avoiding paying this, or offsetting this tax through other methods. Think about all the layers of tax collection we have that are designed to make the rich pay more tax as % of their income – and then remember last year’s “Net effect of taxes and benefits” report that showed the top 20% pays 35% of their gross income in tax, compared to the bottom 20% who paid 39%. I’m not saying that it’s right that they do that, but that is what happens.

Shocker! Hold the Front Page!

“And yet for all that, I am willing to bet that if an opinion pollster asked people “Do you support or oppose a ‘Mansion Tax’ on homes worth over £1 million?” then a majority would support it, and if you asked “Do you think the government should introduce a new tax on homes worth over £1 million to pay for income tax cuts for lower and middle earners?” then an even bigger majority would support it.”

Or: “Should other people pay more tax so that you can pay less?”

“Yes please”.

Blimey, the things you can find out if you pay attention.

@32 Hi Mark M

I totally agree. Inheritance tax and stamp duty are distortive easy to avoid for the very rich, and must be scrapped as soon as possible. To be replaced by Land Value Tax.

Mansion Tax is a good start, but does not go far enough.

Regarding tax avoidance, I believe that LVT (and mansion tax) will be very hard to avoid, since it is based on the property itself. Much harder to avoid than income tax (the super rich register their income elsewhere), and transaction taxes such as stamp duty and inheritance tax (which can be avoided by placing the owership offshore).

Incidentally – why the peculiarly British fascination with property?

Perhaps because we have not had civil war for 350 years and have not been invaded for close to a thousand years. Consequently people have not had to flee their homes;had the experience of seeing them occupied; or destroyed by a conquering force, or by nature. British property law is very strong and there is little experience of governments confiscating property. Magna Charta included clauses which safeguarded property from arbitrary confiscation by the monarch
In the Middle Ages ,the property owning middle classes were larger and more respected in Engliand than in Continental Europe and included husbandmen , franklins/ yeoman famers, merchants, weavers and ironmasters. A knight normally owned more than 100 acres yet yeoman framer could own anything rom 40-120 acres. In continental Europe land was largely owned by the monarch, aristocracy and the Church, there were very few small landowners such as in Englandand Wales.

I think you will find a property owning middle class existed from before 1215. The ability of someone to represent a borough or a shire from the first Parliament in 1295 required property ownership. Parliament fundementally was about raising tax for the monarch. Tax was levied on assets and therefore only those who paid tax could have a voice in running of the country.

Will the ducks have to pay mansion tax on their duck houses?

There was already a poll question about this in the Mail on Sunday:

http://ukpollingreport.co.uk/blog/archives/2273