Why is there a lot of talk about a mansion tax at the moment? The short, obvious answer is because the budget is imminent.

Liberal Democrats have long held the belief that it is better to tax wealth than income. This position was reaffirmed at Spring Conference. A belief in the desirability of a mansion tax is not restricted to the Libdems. You can even find the odd Tory who is sympathetic to the idea.

In the context of the budget the Libdems were campaigning for a switch to a mansion tax to accompany a reduction in the higher rate of income tax. Not a reduction in the overall tax burden for wealthier households but a change in its composition. Moving taxation to wealth reduces the disincentives on productive effort. Taxing high value property is seen as also having the advantage that it is harder to avoid or evade than taxes on income. That has got to be true, assuming that it is possible to curb the ruse of setting up offshore companies to hold property and avoid tax. While the property itself can’t easily be hidden, a bit of creativity over legal ownership can reduce or remove tax liabilities. Continue Reading →