Mansion tax: A political keying for the middle

The Liberal Democrat conference showed us one thing – the Liberal Democrats are happy to put the boot in the squeezed middle

"Eventually, the rich'll have it up to here..."
Simon Miller
On 28 September 2012 14:48

I always thought that silly season ended when the City went back to work in September but I was obviously wrong.

With Mitchell whipping up a storm on his old maids’ bike, we had the unusual site of a sitting Prime Minister going on the David Letterman Show in a bizarre sales pitch to the US audience to visit Britain.

Dave played the slightly clever Brit to perfection but give the guy a break over the literal translation of Magna Carta, I mean he is an Old Etonian.

However, whilst he avoided the plebs by jetsetting across the pond, he also missed the Lib Dem conference.

It has been a confusing time for the Lib Dumbs. A party that has been in permanent opposition for over forty years, they have found themselves in power.

Now, all parties are a coalition, and with the Orange book members versus the bearded sandal wearers, the Lib Dems are no exception.

Liberals always liked to portray themselves as the ‘nice’ party but don’t be fooled, they would kick a puppy when it was down if it meant gaining another seat. From anti-Europe in Cornwall to pro-euro in metropolitan areas, this chameleon party has been everything to everybody in its bid for power.

However, with a job share application being frantically written out to the Labour party – and the third party of government looking at the polls and realising that they will soon become a fourth or fifth party of, er, something – the left of the party has been given full voice.

Despite having a top 10 percent in this country paying over 50 percent of taxes, the Lib Dems have decided that this is not enough. Nope, now they want a mansion tax.

But there is something fundamentally flawed with this idea - how do people pay it?

Outside of Cheshire, London, and the South East, this may play well, but what if you are retired and had bought your house in Notting Hill before gentrification? As much as the Notting Hill set love the area, their 2.5 set of Ciabattas and Gideons, their urban living, and the carnival, it should be remembered that it was a seriously undesirable area of London and was only gentrified in the 80s because housing was affordable.

So there’s the retired person, with his family home that he picked up for a pittance but is now worth £2m when he is sent a theoretical valuation and bill.

You see the major problem with a mansion tax is that a property’s value is only realised on selling or re-mortgage. A house in itself is not intrinsically valuable. It is only valuable to a purchaser or lender.

How does he pay the tax?

Of course he could sell the property, but why should he? Why should he give up all those years of memories just to satisfy the jealous itch of a government that cannot stop spending our money? Also, why would anyone pay £2m for his house if they are going to end up with another bill?

I know from personal experience that when trying to sell a flat when the £250,000 stamp duty was in action that I couldn’t sell above £249,999 for love nor money no matter what the estate agent sharks were saying. Despite this ridiculous idea of fairness in taxation, no-one wants to pay stamp duty if they can avoid it.

The wisdom of the Lib Dumbs is that this will raise money; the ‘rich’ will have to pay their fair share.

Nope, not in the slightest. If someone is selling a house worth £2m, they will reduce the price slightly to make it below the mansion tax threshold to make it more desirable to a would-be buyer. So, a lower price, less stamp duty.

And you know what happens next – the mansion tax threshold will be lowered bringing even more people into the net.

And that is if people keep their assets in this country. If you are hated, squeezed, and abused, why should you invest in this country? Why should you pay taxes to a government who are only interested in your wallet? Why not go to another country an pay their lower taxes, employ their workers, donate to their charities and so on.

It’s like being invited to pay for a party you're not invited to.

I know, some of you will be saying that my mythical working class man from Notting Hill got lucky – but so what?

Luck happens in all walks of life but it should be his choice where he lives and he should not be forced to leave his home because he cannot afford the mansion tax – or even worse at his mythical age, having to borrow to pay the bill.

It has been said that in America if you have a Ferrari, people will come up, congratulate you, and ask you what your job is. Over here that Ferrari is likely to be keyed.

What the Lib Dems are doing is politically keying. You cannot make the poor rich by making the rich poorer and you cannot get a country out of a financial mess by squeezing till the pips squeak.

Although I have used this mythical man as an extreme example, more and more people are already being sucked into the higher tax rate as it is. Already, thousands more people are being sucked into the inheritance tax trap purely because of house inflation and are having to sell family homes when they may not want to, just to satisfy the rapacious HM Revenue & Customs.

As Dave flies back for conference, I hope he realises that it is not the ‘rich’ that will get punished for this latest act of larceny; it is the middle that, as always, have to reach for their wallet.

Notting Hill used to be notorious for highway robbers, unfortunately nothing changes much.

Simon Miller is a Contributing Editor to The Commentator and Editor of Financial Risks Today. He tweets at @simontm71

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