Ed Miliband’s mansion tax in tatters

As the major political parties in the UK begin campaigning for the May election Ed Miliband is already under pressure from his own supporters. Time and time again he rolls out the potential of introducing a mansion tax to fund each and every area of public spending. We have seen the mansion tax suggested as a means of paying for austerity measures, tax reductions, apprenticeships, increase in the minimum wage and now apparently it will fund an extra 1000 nurses in Scotland. However, a number of Labour stalwarts have already dismissed this as nothing but an attempt to grab the headlines.

Why is the mansion tax so controversial?

The basis of the idea of introducing a mansion tax in the UK insinuates that those with houses worth millions of pounds should for some reason pay more into the government coffers when times are hard. This tax would impact those with properties worth in excess of £2 million which may seem a lot in some parts of the UK but is not necessarily high end across the likes of London. If we flip this around, would the Labour Party be willing to cancel the mansion tax as and when the UK economy recovers and government coffers are replenished?

Very few would pay this proposed tax

The Labour Party itself has already suggested that those with relatively expensive homes, who would pay the tax as and when it was introduced, would be able to apply for a reduction or exemption depending upon their income and their wealth. This would leave just a relatively small number of individuals paying the tax and that is before we even contemplate the cost of collecting the mansion tax.

In many ways this could backfire on the Labour Party as someone who acquired a property 30 years ago in London for a relatively modest amount could be sitting on an asset worth in excess of £2 million. Aside from the fact, as mentioned above, that they could potentially apply for an exemption it would be seen as an attack on not only the excessively rich but also those who have saved to secure their future. The idea that such attacks across London would only hit Tory supporters is certainly misguided and has proven to be incorrect.

Why does it always come down to property?

Time and time again governments seem to revert to type and look to milk the property sector as a means of covering their own mismanagement of national finances. Let’s not forget that governments of the day have on many occasions helped support the property market and improve property prices purely and simply as a means of currying favour with voters. To then turn around and say that you have benefited from the rise in property prices and now you must “pay” seems rather absurd to say the least.

Perhaps the authorities should look again at the general UK tax system and the fact that many wealthy individuals continue to take advantage of loopholes in the law to escape paying their fair share of taxes. The mansion tax has been mentioned on so many occasions that invariably investors ignore the potential implications and will only address these as and when it is ever introduced.