Proceeds from Labour’s so-called ‘mansion tax’ should be retained by London and used to fund a pan-London housing authority chaired by the Mayor, according to Hackney MP Diane Abbott.
The party is planning to impose a new property tax on homes worth £2m or more if it wins next year’s General Election and says any money raised would be spent on the NHS in England.
However with more than 90% of homes likely to be hit by the tax based in London, a number of senior London Labour figures – all potential Mayoral runners in 2016 – have criticised the proposal.
Ms Abbott has previously branded the idea “a tax on London” and, speaking at the LSE last night, said it would be very hard to sell the policy to London voters.
She suggested it would be easier to win public backing if, instead of being taken by the UK treasury, the money raised was hypothecated for a new pan-London housing authority which worked with boroughs to build new homes and lent mortgages to key workers.
The veteran Labour MP told her audience that ensuring nurses could afford to live in London was at least as important as ensuring the capital had enough nurses.
She also suggested a fairer approach would be to revalue council tax which is still based on valuations from the early 1990s but said this would be too politically unpopular for any government to implement.
Last night’s speech was part of a series of events being organised by the Government Department at the LSE.
Neil Wraith says
LABOUR’S MANSION TAX IS AN ECONOMIC FALLACY:
1) It won’t raise £1.2 Billion of net profit.
Labour have mistakenly done their calculations as if the Mansion Tax will be operating within a vacuum. The £1.2 billion is in fact the estimated GROSS PROFIT. The NET PROFIT will be much less due to the following resultant revenue losses:
A) The number of £2m+ properties will reduce because they will:
i) Be undersold at £1,999,999
ii) Be split up into multiple less-than-£2m properties
iii) Be divided into multi-tenure leasehold / freehold titles with each component worth less than £2m
iv) Become shared ownership, with different family members owning different parts of the property, with each share worth less than
£2m
B) The admin costs associated with operating the Mansion Tax
C) The huge loss of revenue due to leakage of Stamp Duty, Capital Gains Tax and Inheritance Tax
2) £1.2 billion is not enough to make much difference to the NHS. Last year’s NHS bill was £95 billion and the shortfall £30 billion
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LABOUR’S MANSION TAX IS POORLY TARGETED AND INHERENTLY UNFAIR:
It’ll affect too many of the wrong people and not enough of the super-rich, for all the following reasons:
1) 96% of all properties affected are in London & Southeast. It’s a tax that focuses specifically on these areas, as opposed to equally across the whole of the UK; and is thereby discriminatory.
2) The majority of properties affected are not in fact ‘mansions’ at all. 3/4 of the properties affected in London are either flats (38%) or terraced house (36%)
3) Most people living in a £2m+ property have already paid more than their fair share of taxes.
They’ve already paid potentially over 70% of their family’s hard-earned income as INCOME TAX, STAMP DUTY TAX and INHERITANCE TAX. And then there’s also VAT and possibly CAPITAL GAINS TAX too! Not to mention COUNCIL TAX. That’s 6 taxes already! Someone’s net worth may be £2m, but if they and their family earned £6.7m and have ALREADY PAID TOTAL £4.7M IN TAXES leaving only 30% left, they’ve already paid more than their fair share.
4) Many people living in £2m+ homes are cash-poor asset-rich. They may be comparatively rich, but they are NOT the super-rich.
Labour’s proposed fudge of allowing such people to defer payment of the Mansion Tax (as opposed to be exempt) is akin to a huge addition to STAMP DUTY TAX and IHT, both of which are already high taxes. If they can’t afford to pay the tax then they’re clearly NOT the ‘super-rich’ and so shouldn’t have to pay it at all!
5) It fails to take MORTGAGES into account.
Someone who owns a £2.5m property with £700K mortgage and £1.8m net equity will not only have to pay the tax, but also pay the same amount as someone who owns a £2.5m property outright.
6) There will be far too many innocent casualties.
For example: A family I know purchased a house for £2m+ and spent a huge sum converting the house to be disabled-friendly for their paraplegic daughter. They will have to sell the house making a huge loss, as the disability modifications do not add value to the house; and as a result they they will have to sack the daughter’s carer and won’t be able to pay her future hospital bills.
7) MIDDLE INCOME families will be affected.
Middle-class families who are living in a property valued at £2m+ will have to pay Labour’s Mansion Tax if they earn as little as £42,000 GROSS ANNUAL INCOME or more. The majority of these individuals and families have mortgages on their properties and have to work hard to be able to pay their bills. They are by no means the ‘super rich’ and quite simply will not be able to afford to pay the Mansion Tax.
8) Too many of the ‘super rich’ won’t be affected.
A wealth tax on assets should not be selective and only target properties. It’s unfair to tax only those who have (wisely) chosen to invest their wealth in property and not others who’ve invested theirs in other assets. For example:
A) A guy I know is worth £485m. Aside from his huge annual income, he owns a property valued at £1.9m, plus a fleet of luxury sports cars worth £20m, a private jet worth £8m, a helicopter worth £2.1 million, and paintings worth £20m; with a combined total asset value of £52 million (which by no means is the extent of his assets); and yet he will not be liable to pay anything extra whatsoever. Whereas, someone who owns a single property valued at £2m+ would.
B) Someone who owns 100 properties each valued at £1m, totalling £100 million, would not be liable to pay any additional tax whatsoever. Whereas, someone who owns a single property valued at £2m+ would.
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IT’S NOT JUST THE ‘SUPER RICH’ BUT THE AVERAGE
PERSON WHO WILL BE AFFECTED IF THE MANSION TAX IS IMPOSED.
Why? For the following reasons:
1) It’s so unfair that the ‘super rich’ won’t tolerate being forced to pay it and will avoid paying via many plausible avoidance methods. Many of the ‘super rich’ will cash in and move their wealth and likely their businesses and themselves too out of the UK.
This will result in the country’s economy taking a consequential nose-dive and a huge loss of revenue for the Treasury. Taxes affecting YOU will have to be substantially increased; AND due to the, so will public spending be significantly cut, which will inevitably mean a curb on benefits.
2) When INHERITANCE TAX was originally introduced it was promised that it would affect only the rich, but now even the average person has to pay it; and so will the very same thing inevitably happen with respect to the Mansion Tax.
The net is already wider and will encompass far more people that people realize; and it will indubitably get wider still, exactly as happened with INHERITANCE TAX which. Don’t be so naïve to think Labour’s ludicrous mansion tax will not affect you! It will. It’s just a matter of time.
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And this is just the tip of the iceberg regards why
Labour’s mansion tax is a terrible idea!
Rant over! ;-D