Mansion tax
Amansion taxis a common name for an annualproperty taxon high value homes, although the term itself is widely regarded as a misnomer.[1]The tax was only a proposal in the United Kingdom, but proved very controversial and received widespread media coverage. It did not go ahead.
Many US states levy a surcharge on the highest-value homes or have aprogressive taxationin theirreal estate transfer taxsystem, sometimes referred to as “mansion taxes.”[2]
Original concept
[edit]In the United Kingdom, the concept of a mansion tax is widely attributed toVince Cable.[3]In its original form, proposed in 2009,[4]Cable suggested that all properties valued at over £1 million would be taxed annually. He raised the proposed threshold to £2 million in January 2012.[4]
Budget 2012
[edit]In an accommodation withCoalitionpartners, the proposal was modified and a 7% rate ofStamp Duty Land Taxwas levied on house sales over £2 million, followingGeorge Osborne's 2012 budget. In contrast to an annual "mansion tax", this one-off tax is only paid when a property is bought.
Liberal Democrat conference motion 2012
[edit]Support for the original proposal re-emerged at theLiberal Democrat2012 conference.
The motion called for "an annual mansion tax on the excess value of residential properties over £2 million as a first step towards wealth taxation designed to reduce inequality". It was passed in a vote of over 200 delegates, with two against.[5]
Despite this, the Liberal Democrat's coalition government partner, the Conservatives, ruled out the introduction of a Mansion Tax; Chancellor of the Exchequer George Osborne said in October 2012: "We are not going to have a mansion tax, or a new tax that is a percentage value of people’s properties. Before the election they will call it a mansion tax, but people will wake up the day after the election and discover suddenly their more modest home has been labelled a mansion."[4]
Labour Party embrace concept
[edit]On 14 February 2013, theLabour PartyleaderEd Milibandsaid that he would, if in government, introduce a mansion tax and then re-introduce aten pence tax ratefor low earners.[6]However, there was no commitment to put this policy into the Labour Party manifesto and there was also criticism of the fairness and practicality of the proposal.[7]Miliband reiterated this policy proposal at the 2014 Labour Party Conference and it became a firm commitment. Labour claimed the policy would raise £1.2 billion a year which would be used to fund theNational Health Service.[8]Based on an estimated 100,000 homes valued over £2 million, this means each property would be liable for an average bill of £12,000.[9]
On 20 October 2014 in response to widespread publicity about the proposal, the Shadow chancellor Ed Balls published further details. He confirmed properties valued between £2 million and £3 million would pay £3,000 per annum, but properties over £3 million would pay considerably more.[10]Commentators have suggested that in order to raise the projected £1.2 billion, the mansion tax payable on homes over £3 million would have to be £28,000.[11]
Liberal Democrat Party moves away from a mansion tax
[edit]In October 2014, the Liberal Democrats abandoned plans for a new tax on high-value homes, opting instead for a change in the existing Council Tax system.[12]Nick Clegg, speaking on the BBC during the Liberal Democrat Party Conference 2014, said: "I went off, big time, the idea that you have a fixed levy as a percentage over a certain value. The more I looked at it, the more I thought, 'That’s very crude.' It leads to eye-watering amounts of tax being paid. What we should do is go with the grain of the council tax system and apply bands to higher properties."[4]
Autumn Statement 2014
[edit]On 3 December 2014 George Osborne announced changes tostamp duty.These measures included large increases in tax for more expensive houses. A buyer of a house at £2 million would now have to pay £153,750 in stamp duty. In his speech he alluded to this being his alternative to Labour's mansion tax.[13]
Criticism
[edit]Critics have said such a policy would hurt pensioners, as according to analysis by the think-tank theCentre for Policy Studies,[14]almost one third of all properties worth over £2 million have been in the same ownership for over ten years.
The phrase mansion tax has been described as a misnomer as 10% of properties in London valued at £2m-plus are one- or two-bedroom flats.[15]
Labour review policy after election defeat
[edit]After Labour's May 2015 election defeat, Labour leadership candidates began to distance themselves from the policy. Andy Burnham said the mansion tax had been too "symbolic" and played into a public dislike of the "politics of envy". Mary Creagh, another candidate for the leadership, said: "It alienated a whole bunch of people who said we were against them getting on and doing well".[16]
Variants
[edit]The tax could be structured in a number of different ways. One possible variant is to limit the scope to non-resident, non-British owners of property. This would be intended to discourage foreign ownership of dwellings and free up housing stock for residents. Such a modification to the mansion tax has been suggested by Mark Field,[17]an MP in central London, where overseas ownership of property is commonplace. There are perceptions that the high cost of housing in London is in part due to a disproportionate amount of residential property being owned by non-resident, non-tax paying foreigners,[18]and that a modified mansion tax may alleviate this issue. Limiting the scope in this way would also limit the valuation exercise that the introduction of a mansion tax would require, as fewer properties would be impacted.
See also
[edit]References
[edit]- ^"David Lammy stands firm on opposition to mansion tax despite Balls concessions".Newstatesman.com.20 October 2014.Retrieved22 February2016.
- ^Scheuer, Florian;Slemrod, Joel(1 February 2021)."Taxing Our Wealth".Journal of Economic Perspectives.35(1): 207–230.doi:10.1257/jep.35.1.207.ISSN0895-3309.
- ^"The UK is already taxed to death - a levy on wealth would be the last straw".Telegraph.Retrieved4 October2012.
- ^abcdPrimeResi."A potted history of the Mansion Tax".PrimeResi.Retrieved4 October2014.
- ^Hope, Christopher (25 September 2012)."Lib Dems demand £2m mansion tax for the 'stinking rich'".Telegraph.Retrieved4 October2012.
- ^"BBC News - Ed Miliband backs 'mansion tax' to fund 10p tax rate return".Bbc.co.uk. 14 February 2013.Retrieved21 September2013.
- ^"UK Mansion Tax: Report Reveals Full Impact".Forbes.Retrieved21 September2013.
- ^"Labour conference 2014: housing roundup".bbc.co.uk. 25 September 2014.Retrieved26 September2014.
- ^"How would a mansion tax work?".BBC News.6 October 2014.Retrieved22 February2016.
- ^Joe Murphy (20 October 2014)."Ed Balls: Mansion tax will cost homeowners £250 a month | Politics | News | London Evening Standard".Standard.co.uk.Retrieved22 February2016.
- ^Simon Jenkins (21 October 2014)."Simon Jenkins: Ed Balls's sums don't add up – we must raise council tax | Comment | London Evening Standard".Standard.co.uk.Retrieved22 February2016.
- ^PrimeResi."Lib Dems abandon 'crude' mansion tax in favour of new Council Tax bands for high value homes".PrimeResi.Retrieved6 October2014.
- ^"Analysis: Osborne's political pitch".BBC News.3 December 2014.Retrieved22 February2016.
- ^"Some questions on the Mansion Tax: A briefing note"(PDF).Cps.org.uk.Retrieved21 September2013.
- ^"Labour's mansion tax plans condemned by estate agents".TheGuardian.com.23 September 2014.
- ^Jim Pickard (19 May 2015)."Labour set to abandon mansion tax".Financial Times.Archivedfrom the original on 4 March 2023.Retrieved22 February2016.
- ^"Mark Field MP: The deeper discontent beneath the mansion tax debate".Conservativehome.blogs.com. 23 February 2013.Retrieved21 September2013.
- ^Hammond, Ed (3 August 2013)."Foreigners buy nearly 75% of new homes in inner London".FT.com.Archivedfrom the original on 4 March 2023.Retrieved21 September2013.