Azara Blog: The Lib Dems come up with yet another property tax proposal

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Date published: 2009/11/30

The BBC says:

The Liberal Democrats have doubled the threshold at which they say homeowners should pay an annual "mansion tax".

Properties will now have to be worth at least £2m to incur a 1% charge - the previous plan was to charge 0.5% a year on a property's value above £1m.

The party is also pledging to raise tax thresholds to £10,000 a year, taking four million people out of income tax.

Party leader Nick Clegg said the plans "would put £700 back in the pockets of the vast majority of taxpayers".

But four million top-rate taxpayers would lose out as they will no longer be able to claim tax relief on their pension contributions at the higher rate.
...
He insisted the party had not been forced to do a U-turn on the mansion tax policy after complaints from Lib Dem MPs in marginal constituencies in the South of England, who feared it would harm their chance of re-election.

"It is not a U-turn. A U-turn would be abandoning the policy," said Mr Clegg.

Instead, he said the party leadership had "looked in more detail" at property values before deciding that a tax aimed at the owners of "very high value properties" should be levied at £2m.

"We don't want family homes caught up in local property bubbles to be hit. We want to ensure that only the very wealthy pay this tax - pay their fare share so that we can offer tax cuts for everybody else," said Mr Clegg.

He said the £2m mansion tax "does what it says on the tin" and would generate more money than the original £1m proposal, as it was a 1% annual levy.

The £1.7bn raised would help pay for tax cuts for low-paid workers - making the Lib Dem proposals the fairest of the three main parties, he added.
...
The new proposals would affect 70-80,000 properties, compared with about 240,000 under the original policy.

The Lib Dems in a muddle as usual. They have spent the last decade telling everyone how evil the local property tax is, and now they see it as a way of promising the vast majority of the country that they can have services but they don't have to pay for any of it because the super rich will come to the rescue. Needless to say, whatever money they claim they will raise from such measures, they will end up making a lot less because of tax avoidance. So, with properties, it is quite obvious that couples will split their property in two, and so only properties worth more than 4 million will be affected. And even on the issue of tax relief on pension contributions, if people get less tax relief then it is a no brainer that they will put less money in (official) pension schemes, so the tax raised will be a lot less than claimed. It is unfortunate that most of the Lib Dems seem not to have taken Economics 101 (well, to be fair, the same is true of most politicians).

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