Controversial ‘Mansion Tax’ Courts Criticism

The Controversial ‘Mansion Tax’ courts increasing criticism ahead of LibDem Conference

Following Labour’s backing of Lib Dem proposals for a £2m mansion tax last Thursday, The Mail on Sunday has discovered consultation papers within Nick Clegg’s party that outline plans for levies on second homes and a wealth tax on certain personal assets, including jewellery and paintings. One Lib Dem MP responsible for the consultation paper, Tessa Munt, appeared enthusiastic – describing the proposals as ‘interesting idea[s]’. The paper comes ahead of the Liberal Democrat’s 2013 Conference in early March, which will see the precise details of mansion tax proposals under debate.

Boris Johnson issued a rallying cry on Sunday for those who oppose the 1% levy advocated by both Labour and the Liberal Democrats, stating:

…the message of the Miliband [and Clegg!] policy is that Labour is once again hostile to one of the deepest instincts of the British people: to show the energy, enterprise and ambition to want to improve your own home and to raise its value.’

Other objections to such a tax include the UK already having ‘by far the highest property tax take of any OECD country’ (according to the Centre for Policy Studies), and that the levy does little to increase Treasury revenues (estimates vary at around 0.25%). Writing in The Spectator yesterday, Matthew Sinclair (Director of The TaxPayers’ Alliance), also highlighted the moral bankruptcy of the ‘earned/unearned income’ distinction, remarking:

The idea that capital income is ‘unearned’ is beneath contempt. You earn the returns on an investment by working, delaying gratification and saving. The argument that an inheritance is ‘unearned’ (so that we can take what we like in Inheritance Tax) is just as weak: someone earned the money.’

More recent arguments against the mansion tax take the familiar form of simply citing the existence of the Laffer Curve. Writing in response to Tim Montgomerie’s piece in The Times in which he advocates a mansion tax, Telegraph columnist Toby Young referenced the UK’s extortionate property tax take:

Does Montgomerie really believe you could increase the total tax take by raising property taxes even further?’

In the context of such criticism from many right-wing commentators, The Financial Times has portrayed the mansion tax as a political trap set by Ed Miliband for the Liberal Democrats. Visiting Eastleigh, Mr Miliband challenged the Lib Dem leader:

[The Lib Dems] claim to be in favour of a mansion tax as they used to be against tuition fees, and they broke that promise…Is he [Clegg] going to vote with Labour to force George Osborne to do it in the budget or is he going to do what he has done for two and a half years and prop up a failing Conservative Government?’

Although Business Secretary Vince Cable has indicated that the Lib Dems could support Labour in a Commons vote, others within the party are not so sure. Mark Thompson of Lib Dem Voice (a popular website for Lib Dem supporters) predicts that:

…the party’s MPs will (largely – a few backbenchers may peel off of course) vote with the government on any opposition motion of this nature.’

More concrete proposals for an opposition motion are likely to be revealed in the coming weeks, and it will only be then that Labour finds out whether mansion tax will be a compromise too far for the Coalition’s junior partner. 

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