Amid preparations for the UK’s first post-Brexit budget, there have been reports that the Conservative Party is considering an idea that many in Boris Johnson’s party regard as most un-Conservative: a so-called mansion tax.
Ignoring the emotive label, a “mansion” tax is essentially an adaptation of Britain’s system of property taxes, known as council tax, which are levied to finance local government. The existing system is regressive, not merely in terms of income but in terms of wealth; that is, occupiers of more valuable properties pay a smaller proportion of the value of their asset than those whose homes are less valuable.
The British council tax was introduced with little regard for international comparisons or progressive values. Conservative prime minister John Major brought it in almost 30 years ago to replace Margaret Thatcher’s hated poll tax . Proposals to make the structure more progressive by adding a series of additional bands were seen as an attack on “aspiration” and criticised as causing hardship for the asset-rich but income-poor elderly. The first reflects a particularly British concept of wealth creation through housing inflation rather than through innovation and investment.
The appeal of a tax on higher-end properties — perhaps of 1% annually on properties worth more than £2m — for a politically secure Conservative Party is obvious. For a government that has sworn off income-tax increases, it could raise much-needed revenue to fund a important expenditure programme.
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