Tuesday, 6 March 2012

50% tax rate or mansion tax?

It would be nice to both have our cake and eat it, but alas that is rarely possible, and almost impossible, I suspect, in a political coalition. So I suppose we must swallow our frustration when Liberal Democrat leaders declare that the we are not ideological committed to the 50% tax rate (what's happened to the fairness agenda and all being in it together?) and accept its abolition in return a mansion tax. Indeed, there is a sense in which a shift away from taxes on income and towards taxes on assets, especially unearned ones, and including land and property and wealth, is to be welcomed

The main problem, if such a bargain is reached, will be to make sure that the Tories don't abolish the 50% rate now and then somehow wriggle out of the mansion tax at a later date. We've been out-manoeuvred in the past: let's hope our negotiators are moving up the learning curve.

When I asked Vince Cable, at the Liberal Democrat Birmingham Conference last September, why he advocated a new mansion tax rather than extra bands to the already existing and therefore more acceptable, though flawed, council tax, he dismissed the idea. It was therefore gratifying to hear him on the Today programme this morning concede that extra council tax bands are an alternative worth considering. Pity neither he nor his department bothered to answer my letter on this topic of last September (see post of 3rd October, http://keynesianliberal.blogspot.com/2011/10/mansion-tax-or-mor-council-tax-bands.html,)in spite of the Department's promise to do so within 15 days.


  1. Given that the much-derided "one percent" at the top already contribute 26% of the country's income tax receipts - paying their way then, 26 times over - how many more times do you think they need to do that before the rest are satisfied that they are sufficiently "in this together" with us?

    I'm disappointed that neither Dr Cable nor his department paid much attention to your eminently logical suggestion. Despite his portrayal in the media as a thoughtful if eccentric intellectual, he seems to come across more and more as just like any other politician.

    The only part of council banding I'm uncertain on is how it affects high value areas, such as London. Surely the same logic that decried benefits being capped to the point that an area was devoid of certain people could similarly apply to families priced out of homes in a market where they have a hyperinflated value?

  2. When I put the "extra council tax bands" option to Vince Cable in Birmingham last September he replied that most of the revenue would go to a very few London boroughs rather than the Treasury. I don't see that as a problem: the Treasury could easily make arrangements to take it off them and share it out, as I believe thy do with the business rate.

    The two most obvious problems with the mansion tax are that they leave out all the houses with values between abut £300 000 and £2 000 000, and of course they give a massive incentive to price those houses around the £2m mark at just below it.

    I see the "extra council tax" bands as a temporary measure until a comprehensive land value tax is introduced. This has been Liberal/Liberal Democrat policy for over a century and makes much more sense than ether a mansion tax or the latest flavour of the month, "tycoon taxes."