Five reasons progressives should support Ed’s mansion tax


The most important (and the most substantial) part of Ed Miliband’s speech in Bedford today was his pledge to reintroduce the 10p tax rate and fund it through a mansion tax.

mansionNot only does it answer the deputy prime minister’s critics in that it provides some substance to Labour’s recent ‘one nation’ sloganeering, it also differentiates the Labour Party from the administration of Gordon Brown, whose scrapping of the 10p tax rate has been used against Ed Miliband’s party repeatedly since 2010 (and was used again yesterday).

Why should progressives support a mansion tax, though?

1. It would only target the very rich; it would only tax houses worth over £2million pounds. Many if not most young people will never get on the property ladder, let along own a house worth more than £2million pounds. Introducing a mansion tax would redistribute money from a small minority to 25 million working people.

2. It would offer less room for tax avoidance than other forms of taxation. In our globalised economy it is becoming easier to escape paying a fair share of tax. While it may be relatively easy for a person with the knowledge to move money into an offshore account, it’s more difficult to conceal a tangible piece of real estate.

3. It would raise significant sums for a future Labour treasury at a time when the nation’s finances are likely to be tight. Should Labour win power in 2015, it will take time to repair the damage done to the economy by the coalition. Money will be tight for several years even if the economy does begin to pick up again.

4. Spiraling property values make an unfairly low contribution to taxation receipts. Current taxes on property were introduced in easier times. As yesterday’s Office for National Statistics report showed, times have changed, and real incomes have been in decline for almost half a decade now. At the same time those who own property have seen a windfall. Our tax system should reflect that.

5. It is deeply unconservative. It taxes wealth that is often unearned and it returns money to working people.

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  • LB

    Redistribution isn’t growth.

    It takes money from one person and gives less to the receiver, after government charges.

    Given that quite a lot of the money being taken will come from the productive, to give to the unproductive, its going to be a negative for growth.

  • Edward Miller

    Re: reason 3. The reasdon why the British government is broke is because the Nazi thug Brown pissed trillions up a wall, mainly from about 2001 onwards.

  • procrastinating student

    6. one of the reasons properties are so overvalued is due to there being no capital gains tax on these investments, bad for two reasons: 1, people can’t afford houses 2, the growth obtained from house prices rising helps no one apart from the owner, unlike a factory that at least provides employment.

  • Old Albion

    If it is to cost ‘only’ £2bn the 10p tax rate will apply only to the first £1000 earnings above the threshold. So will probably cost more to administer than it gains in gov. revenue.
    If it was to be fully reinstated it would cost 7bn. Where will the other 5bn come from Ed?

  • Michael Hopkins

    If you lived in a 2million pound house would you a) Pay £40,000 a year extra in tax or b) downsize to a smaller house?

  • Mr Reasonable

    Ah, nice to see the Tory trollers are back after their weekend break swigging Bolly and urinating on the homeless down on the embankment. Milton Friedman rules, yah?

  • hobson

    Interesting post. I suggest you read Left Foot Forward’s analysis of the impact of cutting income tax to learn why progressives should oppose this measure. See: http://www.leftfootforward.org/images/2010/03/Think-Again-Nick-FINAL.pdf

    The paper looks at the Lib Dem’s plans to reduce income tax from 20p to 0p at the lower end of the income scale – not the same as Labour’s proposal to reduce it from 20p to 10p but similar.

    It makes the following points:”it excludes the poorest from help altogether. This is because it can only benefit those earning enough to pay tax. Yet many individuals and households in the UK have annual income less than the income tax threshold of £6,475.” (Yes, at the time the threshold was £6,475 – the argument is even more valid today that the threshold is £8,105, soon to be £9,440).

    The Left Foot Forward report also points out: “Another potential issue with the Lib Dem proposal is that, because the measure helps people through the tax system (which is individualised), richer households with two earners will gain more than poorer households with one or no earners.” Surely this is also true of Labour’s plan?

    It continues: “Because the policy would increase the incomes of those in the middle by more
    (proportionate to household income) than it would for those at the bottom, the result is
    that low-income households would fall behind relative to those in the middle.” And it adds: “In welfare terms, the gap between the bottom and the middle is a very significant
    inequality (arguably more significant than that between middle and top), since the ability
    of the poorest to participate in society is in important ways determined by how close or
    distant their household income is from those in the middle”. The good news is that Labour plans to lower the threshold for the top (40p) tax rate, so that the richest don’t benefit from the new 10p rate. The bad news is that middle earners don’t pay the 40p rate so this won’t affect them, and as Left Foot Forward explains, increasing the gap between the poorest and the middle has a damaging effect on society.

    Left Foot Forward does set out measures progressives should support. It states: “An even more progressive way to cut taxes would be to give larger tax cuts to those on lower incomes than to those on higher incomes. Thankfully, there is a mechanism that already does this: tax credits.” Tax credits, not a new 10p rate.

    Also “cuts in indirect taxation should be considered as another fairer alternative – for example, cuts in VAT.” And “Another fairer alternative would be to spend these resources on benefits or public services; as the analysis above showed, both of these can be of particular benefit to lowincome households.”

    But sadly, cutting income tax at the bottom end of the income scale is not progressive at all, according to this blog.

    Hope that helps.

  • hobson

    An alternative view comes from the Institute for Fiscal Studies, actually a pretty right-wing think tank but one that Labour has quoted endlessly in the debate about capping benefits and tax credits.

    It says: “A 10p tax rate would reduce taxes for those on low incomes and strengthen their work incentives. A far simpler and more sensible way of achieving these aims would be to spend the same amount of money on increasing the personal allowance – a policy on which the current government has already spent £9 billion a year. This would have virtually the same impact on individuals’ tax payments (see figure below), be slightly more progressive, take some people out of income tax altogether and avoid the complexity involved in introducing a new income tax rate. An even better alternative, which would help those who already pay no income tax because their incomes are below the personal allowance but do pay employee National Insurance Contributions (from April, there will be 1 million such people earning between £7,748 and £9,440), would be to increase the point at which individuals start paying employee National Insurance Contributions.”

    http://www.ifs.org.uk/publications/6606

  • blarg1987

    Growth is created by demand, at the moment their is no growth as their is no demand. Economic history has shown that demand is increased when the state sets a policy, be it build more houses, land a man on the moon etc. This creates a demand which the private sector invests in i.e. houses need to be built so we need to employ builders. it also encourages innovation, i.e. houses need to be more energy efficent so will use new materials.

    This will fuel growth as no one is willing to take risk unless their is a return, since their is no return nd the risks are to high business is unwilling to invest.

  • Mr Reasonable

    Honestly, Edward! “Nazi thug”? Brown? Really?
    (Oh, by the way, the banks are responsible. Even the Republicans admit this.)

  • http://truenewsuk.blogspot.com/ sarntcrip

    Th is no hollow clegg promise together with the 10p tax rate measures which will make a real difference to people’s lives, something the calamity coalition cares not one jot about

  • http://truenewsuk.blogspot.com/ sarntcrip

    Edward Miller,sounds like the sort of merchant banker who did cause the banking crisis which Gordon Barown did so much to avoid turning into a cataclysmic catastrophy

  • Mick

    By what, selling off more than half our gold reserves at boot sale prices, despite advice that it may come in handy later? Or by ignoring ‘prudence’ by spending, spending and spending again?

    Especially in the pre-election splurge he desperately tried to buy some popularity with.

  • Mick

    CORRECTION: ‘By what, selling off more than half our gold reserves at boot sale prices, despite advice that it may come in handy later?’

    That came earlier of course. Brown bailed out the same bankers you appear to moan about, spending much needed tax money on the very people Lefties hate a lot.

    Correction needed. Correction got!

  • John

    I think this is outrages – I own a two bed flat in Central London that I bought 27 years ago for just over £40,000, if i wanted to buy my flat today I would have to pay over £2M. I am not rich, I work full time and have a take home pay of £2,600 per month (that less than an MP). Anyone who calls a two bedroom flat a Mansion is mad!

  • LB

    So lets see.

    1. Spain. Big investments in housing and high speed rail. Just what you’re advocating. Evidence is that the policy fails.

    2. Japan. Big investments. 300% of GDP borrowed and spent. Economy has flat lined for 20 years.

    3. UK. QE is massive state borrowing and spending to increase demand. 375 bn borrowed by the state and spent. Massive boom? Nope. Bugger all effect.

    4. Ireland. Lots of house building. Must be booming. Hmmm, gone the other way.

    ….

    Where you are right is over taking a risk, and getting a return. However, we’ve a Labour wonk newbot castigating, calling people genocidal maniacs, for wanting a return for their cash. His approach, we should confiscate the lot. Lots in Labour are advocating that.

    So people have cottoned on. Why risk, when you take the return off them?

  • http://www.facebook.com/anotherfive1 Patrick Brennan

    Owners of property valued at £2M+ are very likely in the best position to ensure avoidance of any new mansion tax. Legislation will (somehow) have to be framed to ensure that such residences which are suddenly owned by corporations/businesses rather than their occupants do not escape the new charge. Never easy to ensure that Tax Law has the effect that politicians intend!

  • blarg1987

    irish housing boom was PRIVATE as was spainish housing boom. rail is long term i.e. 10-30 years so can look back at it then.

    Japan has been an odd economy, although I do not know exactly what the state has invested in so can not comment.

    QE is not investment, it is just buying assets like housing at a pre crash level and hoping the cycle continues. Real investment is if the BOE put up the money to build a new generation of social housing which are run for little profit.

  • mansion owner

    Err, I think the reason you like mansion tax is because someone will have to pay it. Personally I’m in favour of the elevator tax whereby everyone that uses an elevator instead of the stairs has to pay a levee. This is a much fairer way of raising revenuecas well as being good forvthe environment. It even has a snappy ‘mansion tax’ type label. It’s called ‘Lazy fat git tax’

  • mansion owner

    Personally I like the way mr Brown told everyone he was going to sell all our gold before hand. This ensured the gold price nosedived and made absolutely certain he would be selling it at its lowest ever real value. You just can’t make such genius up

  • mansion owner

    C) actually; create a ficticious granny flat from the top floor thus devaluing your house to a maisonette, and get a council tax rebate for it being unoccupied.

  • Mick

    ’5. It is deeply unconservative. It taxes wealth that is often unearned and it returns money to working people.’

    Ruling Lefties can think ANY wealth above certain arbitrary thresholds are ‘unearned’. That’s why Labour taxed the Beatles at 96% until they broke up. (They wouldn’t have tinkered with Apple otherwise.)

    And there’s unearned wealth right at the the bottom of the ladder. How many violent, tattooed, crass unemployables do you see going about in new fashionable clothes, even cars, and somehow finding the money to drink all day? Or get drugs or trade jewellery? Real-life stereotypes abound. Tax them too Left?

  • Mick

    ..And before the Left claim I’ve never met any, I once had a fleet of noisy, assaulting ‘chav-testibles’ living just upstairs to me!

  • Mick

    Talking of thugs, remember Prescott’s famous assault on a fellow leftie? Had that been a BNP man, imagine the outrage coming from him!

  • LB

    Real investment is spending that

    a) Generates more return than the cost of borrowing
    b) Generates more savings (cuts) than the cost of borrowing.

    Adjusted for a higher return, to cover the losses from the projects that fail.

    So if you want QE cash to go into investment by the state, you need to come up with a plan.

    1. 150 bn a year overspend. What cuts in spending to get that down to zero. Otherwise, you are just borrowing to spend.

    2. Which projects have a positive cashflow? See a and b above.

    For example HS2 is negative. It will never pay its way.

    Schooling? Well since it costs more in government spending than you get back in tax, on average we aren’t meeting the test.

  • BeeM001

    Small point LB. The people that you declare ‘unproductive’ are the ’90%’ and are the very citizens who provide over 90% of the revenue the Government receives, from N.I., tax, V.A.T. fuel duty etc…

  • Jack Johnson

    What a pathetic and poisoned view of economics you have.Try educating
    yourself with LSE blogs fuckwit.

  • Jack Johnson

    You know the cost of everything and the value of nothing.

  • LB

    So if the state employees are so productive they provide 90% of the tax. Then we can all have a tax cut to 5%. They can pay the rest.

  • Jack Johnson

    Don’t worry, if Labour build enough social housing to house the 2 million
    applicants on housing waiting lists the over priced value of homes will fall
    dramatically. lol

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