At first glance, few will be worried about Labour leader Ed Milibands proposed new mansion tax. Most of us dont live in a mansion, so whats the problem?
But ordinary homeowners should be worried, especially if they live in London and the South East, or any UK property hotspot for that matter. Because eventually, the mansion tax could be coming for them.
Vote For Me!
This may seem a ridiculousthing to say, given thatLabour is only planning to impose the mansion tax on properties worth more than 2 million, if it wins the election next May.
That means just 100,000 of the 27.8 million homes in the country.
Since the tax will be shouldered by a handful of wealthy people, who everybody seems to hate these days, and the money raised will fund the NHS, which everybody loves, it looks a vote winner.
It may not be so popular in future.
Taxes have an ugly habit of spreading their tentacles far beyond their original reach.
When the UK first introduced income tax in 1798 to pay for the Napoleonic wars, it was set at the laughably low rate of 2p in the pound (they werent laughing at the time). Today, it can hit 45p.
Its a similar story with stamp duty, the tax you pay when you buy a home.
When that was introduced in 1998, just 17% of home movers paid it, according to figures from Lloyds Bank. This year, 83% of us will pay, rising to 99% in London.
Successive governments have refused to increase the stamp duty threshold in line with house prices, quietly dragging more people into the net.
If they had lifted it, the 0% rate would have more than doubled from 60,000 to 155,000.
And the 250,000 threshold would have increased to an incredible 645,000.
You can be sure the mansion tax wont rise in line with prices, either.
Bad Tax, Good Politics
This might be acceptable if the mansion tax was a good way of raising money, but it isnt.
All thosehigh-end properties will have to be valued. This will be expensive, especially sincehouse prices keep fluctuating. It willrequire an army of inspectors.
The mansion tax is also likely to knock house prices, especially around the 2 million mark, which means it will raise less money than Ed Miliband hopes. He may be forced to lower the threshold to make up the shortfall.
There hasalready been talk of setting it at1 million. In parts of London that would barely buy you a lock-up garage, let alone a mansion.
The tax would also be easy to evade. Simply divide a house in two, and call it separate flats.
Many people in their 70s or 80s who have lived in the same house for the decade and have little income will struggle to afford the estimated 12,000 a year this tax will cost.
Its not their fault London property prices have spiralled.
My Home Is My Mansion
Tax high-end property to fund the NHS by all means. But do it properly, by reforming the creaky and antiquated council tax system, which lets multi-million pound properties off lightly.
But this isnt about the NHS at all. Ed Miliband and Ed Balls calculate that the mansion tax will secure votes from the bash the rich sector of the electorate, and dont care how unworkable itis in practice.
History tells us what will happen next. Just like stamp duty, the mansion tax wont just be a tax on the rich. Every year, tens of thousandsmore ordinary people couldend up paying it.
One day, maybe even you.
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