Well Done Ed Miliband! A New Tax That Raises No Revenue!
This is a quite lovely political manouevre by Ed Miliband. He’s managed to find a way of making the rich pay more taxes without the Treasury actually having any more money to spend on the things we generally like to get from taxes. It’s this new mansion ta that he’s decided to have. Have a house worth more than £2 million and you have to pay an annual tax on that value. Not, on the face of it, actually a terrible idea. It’s what happens next that’s the problem:
Labour’s £1.2billion-a-year mansion tax haul could be virtually wiped out by plunging stamp duty, inheritance tax and running costs, experts warned last night.
Many prospective buyers desperate to avoid a new annual one per cent tax on properties worth more than £2million would lower their offers, research suggests.
Meanwhile, sellers wary of trying to market homes burdened with the mansion tax would be more likely to price them lower.
Even a 10 per cent fall in the value of properties priced £2million or more would trigger a £500million slump in tax receipts for stamp duty and death duties, analysis by estate agent Savills shows.
And when the annual cost of running a new valuation department is added to the money needed to pay owners’ appeal bills, the anticipated £1.2billion gain could be lost.
Now some of that could obviously be the usual chuntering on from the usual suspects. But by no means all of it is. It really is possible to design a tax so badly that it results in government having no new money to spend at all. We even know that we’ve got one of those, stamp duty on share purchases. If we abolished that then give it a couple of years and government would be making more money from other taxes.
It’s also true that sometimes taxes aren’t really there to try and raise money. We might want to stop people doing something (smoking, say) and that’s the reason to charge them. But in this case Ed’s already decided where he’s going to spend the money that he’s not going to get.
It’s just not a very well thought out plan really. The real problem is that the rate is just too low for the costs of trying to collect it. But you can’t have high rates on wealth taxes either, they just don’t work. All of which is a bit of a bind for those who want to tax wealth really.