Mansion taxes are much in the news. Both Labour and the Liberal Democrats in Parliament have chosen £2m as the witching level which turns a home into a mansion. Fortunately most homes in my constituency are below that valuation. If the aim is a wider asset tax you will have to be careful if you have a decent home and a reasonable pension, as you could soon be over the ceiling of the Wealth Tax. If it is anything like the Coalition’s approach to pension saving, the level of £2m would soon be cut anyway, were such a tax ever to be introduced.
There is an underlying unfairness about a “Mansion Tax”. If you own a 1000 square foot 2 bedroom flat in Central London it might well be worth £2m. Conversely, if you had £2m to spend in parts of the north and west of our country you could be buying an enormous mansion with many rooms in its own grounds. One person paying the Mansion Tax may have a low income, with the tax taking up all or most of their pension or pay, whilst another in Mansion tax territory might be on a mega salary and so quite able to pay a 1% Wealth tax. You could be tripped into paying the tax by a sudden burst of house price inflation. If you have just the one home and want to stay living there, the house price inflation does not make you any better off. Instead the tax comes along to make you much worse off.
The UK’s problem is not that we tax too little, but that we produce too little. The UK has got poorer since 2007. Higher taxes and the threat of even higher taxes does not help get us out of the hole we are in, but makes it worse. The Coalition is right to take more people out of Income Tax altogether, but is dragging too many people into 40% tax. It is right to cut Corporation Tax to tempt more businesses to set up and stay here, but wrong to favour dear energy which makes it less easy for manufacturers to flourish. It also hits people’s living standards.
I am asking the Chancellor to avoid all suggestion of a Mansion tax in the budget. He needs to do more to lower the cost of living, and to make it more worthwhile for people to work at all levels of income. I will put in my proposals soon to the Treasury.