Writing for the Spectator Coffee House blog Matthew Sinclair argues that a Mansion Tax would be an ugly political gesture and a huge burden on those forced to pay while the idea that capital income is ‘unearned’ is beneath contempt.
The Government is expected to raise around £550 billion in tax revenue this financial year. The Centre for Policy Studies estimates that a mansion tax (of £20,000 on properties of £2 million), would raise at most £1 billion, less than 0.2 per cent of revenue. The tax is, however, likely to weaken the market and reduce prices – reducing receipts from other taxes; so even the CPS’s static analysis is probably optimistic.
This proposed tax would be a huge burden on those forced to pay. The rate is not 1 per cent of the property’s value. The standard lifetime of a lease on a new build is 125 years, over which time the government will have confiscated 125 per cent of the value of a £2 million property. And there will be people who own a £2 million property, but can’t afford the £20,000 a year fee. It would be an ugly political gesture that forced them to sell their homes.