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Vince Cable reveals mansion tax negotiations

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7th Mar 2012
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Business secretary Vince Cable has confirmed that negotiations to replace the 50p income tax rate with some form of wealth tax, or “mansion tax”, are ongoing within the coalition ahead of the Budget.

Cable added that the Liberal Democrats were not "ideologically wedded to the 50p tax rate" as the Chancellor comes under increasing pressure to abolish it later this month.

He told BBC Radio 4's Today that while the exact nature of the tax was currently being negotiated, a mansion tax on expensive homes was an "economically sensible way” of replacing the 50p rate.

"If that were to go, it should be replaced by taxation of wealth, because the wealthy people in the country have got to pay their share, particularly at a time of economic difficulty," Cable said.

"How exactly that is configured is a detailed matter for negotiation. But that principle must be upheld, and a mansion tax actually is a very economically sensible way of doing it.”

Chancellor George Osborne has asked HMRC to see how much the 50p rate is raising and to find out whether avoidance measures mean it is not bringing in extra money.

Conservative MP Malcolm Rifkind has come out in opposition to a mansion tax trade off, arguing that it would hit middle-class Londoners, with an overwhelming proportion of the affected properties - estimated to be 81% of the national total - in London.

He said: “Such a levy would be arbitrary, unfair and unaffordable for many of those required to pay.”

The Liberal Democrats have warned against axeing the 50p rate too soon, and Cable has also said that the Lib Dems' tax priority remained increasing the level at which people started paying tax on their earnings to £10,000.

Replies (15)

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By tedbuck
07th Mar 2012 15:02

Mansion Tax

If you want a crazy idea go to the Cable Zone.

Can you imagine the costs of trying to collect such a tax?

In my mansion I have a grown up son. When  the mansion tax comes in I shall sell him the third floor as a flat, thus reducing my mansion to a house and another building, the flat.

On the other hand my footie team's star player may find that a bit difficult so he tells me that he will join a foreign team and turn his house into an HMO for out of work civil servants.

This is politics of the madhouse, an appropriate place for its architect. Even his leaked letter suggests that he is the problem he is complaining about.

If we ran businesses the way politicians run the country there would be no businesses left.

A simple way to plug the hole in the country's finances? Why not CUT spending, waste, bureaucracy, unnecessary regulation, Civil Service salaries and pensions, payments to people too idle to work, junkets to foreign countries to see how they spend their money, wars that can't be won,interventions where we aren't wanted and our membership of the ultimate waste of money - the European Union..

And if Vince wants a way to make the world fairer why not tax all benefits as income - that way people earning £18,000 a year won't be subsidising those receiving £26,000 a year for doing nothing quite so much. And, shock, horror, those whose incomes exceed the measly basic rate band will not lose the benefit but just pay tax on it. Quite right too.

 

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By carnmores
07th Mar 2012 17:54

what utter nonsense - this is adding little to the debate

On the other hand my footie team's star player may find that a bit difficult so he tells me that he will join a foreign team and turn his house into an HMO for out of work civil servants. 

 

 

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By ShirleyM
08th Mar 2012 10:49

Won't this star player be better off anyway?

He won't be paying 50% tax anymore will he? Or is he earning below the threshhold for 50% tax ... or maybe he has a very expensive tax advisor who makes sure he pays no tax at all and the footie star wants to keep it that way!

I wonder how he manages to afford his mansion, but it may be something to do with the UK general public who pay high ticket prices to watch him!

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Replying to Rebecca Cave:
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By frustratedwithhmrc
08th Mar 2012 21:04

The Wilt Chamberlin thought experiment - by Robert Nozick

ShirleyM wrote:

I wonder how he manages to afford his mansion, but it may be something to do with the UK general public who pay high ticket prices to watch him!

Indeed Shirley, this is an almost perfect rendition of the Wilt Chamberlin thought experiment as set forth by American political philosopher Robert Nozick.

"This is the one where people all start off with the same amount of wealth in an egalitarian community. Along comes Wilt Chamberlin (talented American basketball star); people are willing to pay to see him play, and as a result, Mr Chamberlain ends up very wealthy, from free, uncoerced exchange.

To keep an egalitarian pattern, Nozick points out, a state would have to use its coercive tax power to keep taking from someone like Chamberlain. In other words, as he put it, a socialist state would have to ban capitalist acts between consenting adults. It is one of the best one-liners in political philosophy."

http://www.samizdata.net/blog/archives/2012/03/post_68.html

We saw how well that worked out in the former Soviet Union.

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By ShirleyM
08th Mar 2012 22:07

lol

I don't know why you put that interpretation on my words!

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By Eddystone
09th Mar 2012 12:38

Even Labour....................

...................gave up plans for a wealth tax at the eleventh hour (I believe they even had offices etc.) as they thought it too complex.  Living in a mansion doesn't mean you have loads of cash !

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By edmundwright
09th Mar 2012 13:34

Vince Cable the Economist - economical in thinking properly...

Vince is being, as he is completely aware, economical with the logic of his Mansion Tax. A tax on property is only one of two things, part of a tax on wealth generally, or a tax on services used by the property.

To deal with the second point easily, a tax on the services used by a property was the basis of the so-called Poll tax, where the more services you used, based on the number of people in a property, the greater the tax. Very logical, but people are very....transient, and the tie up to an address was the only way they thought of to create a point of reference and collection. As people do move around, some a lot, on regular bases for all sorts of valid reasons, administratively this was a nightmare, as well as upsetting people for creating a tax just because they were alive. (In fairness, all of us use local services somewhere, so paying for them this way was not illogical....)

A major element in the Poll tax's demise was that there was no straight forward link to Income, and critics seized on this as "Can't Pay - Won't Pay"

As to the Mansion tax, it has the same failing, - no link to income, as Malcolm Rifkind correctly points out.

Further, if the tax in not one on Income, OR Services, what is it? Just a tax on perceived wealth, but Cable is trying to disguise this as it is too obvious that a Wealth Tax would simply kill off all aspiration of anybody willing to work, (we already have a tax of this nature, it's called Inheritance Tax). Further more a Wealth Tax would drive away all those foreigners who bring income money and their expensive lifestyle to UK, benefiting VAT receipts and Paye on staff and all the infrastructure that serves them.

There is nothing to recommend a Mansion tax EXCEPT, houses do not upsticks and move, every other rational thought says its a crazy idea. Vince knows this, but how else can he take out his ire on the Conservatives? Clegg should tell him to grow up and stop wasting our time.

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Replying to ollie:
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By J Lessels
09th Mar 2012 15:47

We don't really have a wealth tax at all. "Inheritance Tax" is a bit of a joke. A married couple have a joint nil rate band of £600K. There actually aren't many people with 600K. Those who do have 600K probably also have advisors to arrange their affairs so as to avoid paying IHT. IHT is the ultimate voluntary tax.

As to whether a wealth tax would "kill off all aspiration", that might depend on thresholds and rates. I believe most european countries have wealth taxes and they still seem to have aspirations, they even have industries.

As to the foreigners, wasn't "trickle down" largely discredited in the last century?

But yes, a proper wealth tax would be more sensible. The "mansion tax" just smells of a half baked bit of politicking.

 

 

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By User deleted
09th Mar 2012 18:01

Can we all agree on a starting point ...

These are the current facts on domestic rates:

There is a cap on the highest band (H)Higher value properties and being subsidised by lower value ones

Example:
Band H (over £320k at the time) - £2,176 (actual Hammersmith Figs 2012/13)

Property of £320k = £2,176 - Rates 0.68% of property valueProperty of £1m = £2,176 - Rates 0.21% of property value

Therefore the greater the property price the less the percentage of the rates .v. property value

With the above points in mind it follows that those with higher value properties are not paying the same percentage of their property value in rates

Is the an equitable situation?

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By chris.cpwtax.co.uk
12th Mar 2012 09:59

Starting Point

Domestic rates are there to pay for services provided by local council, with bits added in for police, fire and ambulance services.

Why then does it matter what value is put on a property in order to determine the rates when it is in reality the number of inhabitants that matter.

If you want to charge people on the basis of what you can get out of them, then just do that and see who votes for you.  As someone in an earlier post pointed out, a P&L is made up of income and expenses, so why are we so fixated on income where it is clear that the xpenses side of the equation offers as great a reward for less effort !!

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By User deleted
12th Mar 2012 10:17

Something tangible ...

@chris.cpwtax.co.uk

Properties are tangible assets and are easily identified as such, whereas occupants are far harder to pin down and open to yet more abuse in the system.

One would assume from the response that it is acceptable for those lower down the scale to pay proportionally more of the value of their property in rates than the better off.

That of course is fine but lets spell it out and tell it like it is, rather than going round the subject

If you want those at the bottom end to pay proportionaly more then just say that they need to subsidise the better off - simple

Yes, controlling expenses offers a greater reward but income & expenses are not mutually exclusive approaches and both should be addressed to maximise the situation

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Replying to free-rider:
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By chris.cpwtax.co.uk
12th Mar 2012 10:35

Something tangible

I thought I had spelt it out.  Rates are an amount you pay for a service.  All I am saying is that if my council says it cost £10 per week to collect my rubbish then that is £10 whether my property is worth £100,000 or £200,000.

If I go to Sainsburys to buy a bag of apples, I pay the same as the unemployed person or the partner in a law firm. Are you now suggesting that every item has a different price tag based on what you earn ?

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By justsotax
12th Mar 2012 11:52

@chris - i think the answer is probably yes...

In the end we have a system that is trying to be fair for all, providing those who need support with a basic standard of care, and those with the most providing an appropriate contribution.

 

 

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By ShirleyM
12th Mar 2012 14:48

Disposable income

I think that the biggest earners are (or should be) the ones with the most disposable income. If you put taxes up for everyone, then the lower earners simply have no choice but to reduce spending, which reduces the tax take from their 'suppliers' and creates a vicous circle.

This has been the problem with the current government. Their intentions were good in trying to reduce the deficit, but they have squeezed people so hard that everyone has had to make cuts in personal expenditure, and those that do have disposable income dare not spend it in case they get squeezed further or lose their job.

I still say the 50% tax rate is right for now, with a view to abolishing it when times are not so hard. Few business owners (and job creators) will be paying it as most can organise their affairs to avoid it.

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By tedbuck
12th Mar 2012 16:58

A new form of taxation?

At present income taxes are related to income and capital taxes to capital which seems logical.

If I earn £100,000 I pay more into the system than does the earner of £25,000 which isn't unreasonable.

What is unreasonable is that the earner of £25,000 pays tax into the system whereas the benefit recipient of £25,000 does not. So all we workers are paying to keep the indigent in comfort. Mmmmm not a good idea although, of course there will always be cases which are deserving. Most of the ones I've met aren't deserving - one able bodied person commented that he was lazy and the benfits were too good for him to bother to work. Why should I support him?

The other side of wealth is that if I save for my old age (which is here now incidentally) whilst my friend goes down the pub every night and drinks his savings why should my savings be plundered to pay his pension?

I don't have a problem with wealth if honestly earned but it should be fairly taxed. That's not to say at more than 50% at worst but it ought to be taxed not stuck in tax schemes to avoid the responsibility of paying your share. Back to the Footie Players again. In effect we are paying their taxes for them and they can afford it better than we can. The same really applies to the Bankers - if they earn their money well and good but let them pay tax on it like the rest of their countrymen. Then we can all feel that we've done a good job and paid our whack.

I'm all for paying as little tax as I legally can but I wouldn't touch a 'scheme' with a bargepole as basically most of them are just a wangle round the law with a short life before HMRC catches up with them.

BUT as I suggested at the start of this thread why not CUT EXPENDITURE it can't be difficult, waste is blatently obvious in every government department whether local or central - surely someone has the wit to cut it. My local police force was employing temps at 4 times the hourly rate of employees to avoid taking them on becasue of the pension implications and one needs hardly to mention PFIs.

The trouble is vested interests and the likes of Motor mouth Vince haven't the 'Shadow Chancellor' to do anything about it. Too busy supping ale in their subsidised bar at our cost I expect.

Tedbuck

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