When is a mansion tax not a mansion tax?

Talk of a “high value property levy” collected via the council tax system has led some to wonder what’s happened to the Liberal Democrat policy of introducing a mansion tax. The answer is simple: the principle is the same but the details are being filled out.

At heart, what is a mansion tax? It’s a tax on the value of the richest properties. Details such as whether the tax is levied on the exact value of the property or whether properties are put in bands and a tax applied to each band don’t vary the principle.

They make a huge different to the practicality of the tax (having to put a property in a band rather than agree an exact value is much easier and can be done less frequently). But it’s still a tax on property and it’s still a tax on those who own the most expensive properties.

Hence using the council tax banding and collection mechanism doesn’t stop the mansion tax being one. It just happens to be a sensible way of implementing the idea.

What the Liberal Democrats are proposing is in one crucial respect different from ‘adding higher bands to council tax’ as the Lib Dem plan is to use the council tax collection mechanisms but the revenue will go to central government (to pay for extra NHS spending principally) rather than to local government.

Then there’s the matter of the name. “High value property levy” is rather clunky but there is something about “mansion tax” which does rub up some voters the wrong way.

I’ve been surprised how many people I’ve come across in the last year (mainly in more expensive parts of London, it is true) who say something along the lines of “a mansion tax is wrong as that’s just picking on people who live in areas where house prices have gone up a lot, but taking more money from the richest via council tax is fair”.

This is not a matter of a subtle argument about taxing richer people more to fund local government being ok, but to fund the NHS isn’t. Rather it’s about council tax being a familiar system and also the word “mansion” having an edge to it when applied to properties that aren’t in any normal sense of the word a “mansion”. It’s their location rather than their size and grandeur which pushes them over the threshold into being liable to mansion tax.

Which is why I’m not fussed about the name either way. What’s important are two principles – first, that it is a tax on land rather than income (as we need to shift more of the burden of tax from income to wealth) and, second, that it is a tax on people with assets way, way above the average for the population (as we do need to find more tax revenues for the NHS and other vital services, and that’s a fair way to do it).