A friend of mine who sadly passed away a few years ago proudly boasted that he never let the truth get in the way of a good story. I am reminded of this today as I see the Labour Party’s latest piece of populism. I am referring of course to the proposed mansion tax.
The stated purpose of this latest wheeze is to fund a re-introduction of the 10% tax rate. It is to be introduced on homes worth £2 million or more. It is a very silly idea and I will tell you why.
First of all, it is a basic principle of taxation that it should be fair. One of the reasons that the recent child benefit changes have been so unpopular is the obvious lack of fairness in a system where a family with one member earning £90,000 loses out whilst another family with two members each earning £45,000 does not.
The proposed mansion tax is equally unfair because one family can be living in a single property now worth £2 million and will have to pay the tax, whilst another family which has built up a portfolio of say four £500,000 properties will not.
What makes it even worse is the fact that it will not even come close to achieving its stated purpose.
At the level suggested it is estimated by the Treasury that the tax will bring in £2 billion. To bring back the 10p tax rate, again according to Treasury estimates, will cost £7 billion. You do not have to be a brilliant mathematician to see that leaves a £5 billion shortfall about which there has been a suspicious silence. No doubt at some stage, in a replay of their scorched earth policies when Gordon Brown was in charge, the Milliband/Balls duo will seek yet more ways to tax the wealth creators and to mortgage our children’s future with still more borrowing. Forget the inconvenient and incontrovertible truth that higher tax rates destroy the economy and actually produce less revenue for the exchequer. That will not stop Labour who never, ever learn the lessons of history.