Mansion Tax is a controversial subject, designed to redistribute wealth from expensive property owners to low income earners. Here's our take on the topic.
It’s a pretty contentious subject, sparking emotional responses from those across the social spectrum. For every person advocating that a mansion tax is only “fair,” you’ve another disgruntled, asset-rich-cash-poor property owner, incessantly denouncing the levy.
But how will it work exactly? It’s not entirely clear at the moment and most likely will stay that way until after the general election in 2015. One thing we do know is that it’s unlikely that the Conservatives will introduce it – with David Cameron most definitely not in favour. It’s also likely that if it hadn’t been for his intervention, the Liberal Democrats would have already introduced it. If they decided to go into coalition again, there could be more discussions about this property tax considering the Liberal Democrats have emphasised their commitment to an annual tax of one percent on homes worth more than two million. They’ve also argued the most expensive homes should be hit with a super mansion levy!
The problem with this tax has been highlighted by reports warning that under the scheme, the objective of £1.7 billion would not be met. In fact it’s been claimed that the Mansion Tax would in have to be extended to homes worth more than a £1.25 million – doubling the amount of homes included. Also, with Labour creeping up the poll ratings, we could be looking at an Ed Miliband-led government come 2015. The Shadow Chancellor, Ed Balls, used his keynote speech at the party conference in September to state his support for the Mansion Tax and said that it would definitely be introduced if they win in two years. Promises of the money being used as a tax cut for low-income earners could seem appealing for some. He estimates he’d get some £2 billion in revenue – but said he’s concerned more modest properties will be pulled into the net.
The problem with Mansion Tax, is that as with any new redistribution scheme introduced in the interests of the rather indefinable concept of “fairness,” there’s always a long term price to pay for the average taxpayer. We only need point you in the direction of Stamp Duty and Inheritance Tax for two examples of how taxes set up with these grand ideals in mind ended up pulling middling earners into their rapacious nets. And, surprise surprise, both of these taxes are unlikely to rise anytime soon; as they ultimately give the Chancellor a nice little earner without having to introduce any new, unpopular taxes. Rampant inflation will simply up the amount of people pulled into the Stamp Duty/Inheritance Tax nets – a win-win for the Treasury.
So when it comes to Stamp Duty, beware of those promising gifts, as they say. After all, the road to hell is paved with good intentions….
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