The head of a campaign group opposing the mansion tax has had a face to face meeting with the Labour shadow chancellor Ed Balls - but, perhaps unsurprisingly, failed to change his mind on the issue.
FairHomeTax founder Howard Cox met with Balls at Westminster and showed reports which the campaign had commissioned from property consultancy CEBR.
The group says that alternative measures such as rebanding council tax could raise more money than the mansion tax.
It also claims that by 2020 an additional 2,163 households will be paying mansion tax, bringing the total number of homes to 98,755, and that the tax's revenues will fall far short of the claimed £1.2 billion per year because it will have the effect of reducing house prices in this sector of the market, which in turn would cut stamp duty receipts.
The campaign body also claims that, in its words, charging foreign buyers a higher rate of stamp duty would increase tax revenues by £491m in 2015-16 and a total of £3.3 billion by 2019-20.
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WHY LABOURS MANSION TAX IS ONE OF THE WORST IDEAS IN POLITICAL HISTORY:
1) ITS AN ECONOMIC FALLACY:
(a) Labour claims its Mansion Tax (MT) will raise 1.2b for the NHS. It wont. And heres why:
(i) 1.2b is the estimated GROSS REVENUE (the total revenue that is raised before associated costs and losses are deducted). The NET PROFIT (the actual sum of money that will be raised for the Treasury) will be very considerably less; and is calculated by deducting from the GROSS REVENUE both the administrative costs of operating MT and all consequential revenue losses; which includes (but is not limited to) significant leakage of STAMP DUTY, CAPITAL GAINS TAX, INHERITANCE TAX and INCOME TAX. Hence, even IF 1.2b GROSS REVENUE were to be raised by MT (which is not going to happen), the NET PROFIT (and hence the actual sum of additional money that will be available to be injected into the NHS) will be a mere fraction of this.
(ii) Substantially LESS than 1.2b GROSS REVENUE will in fact be raised. Labour have erroneously done their economic calculations as if MT will be operating within a vacuum; and in doing so have failed to take into account any and all causality effects that will transpire as a result of MT being brought into existence. Such as, for example, the fact that, for many reasons, the number of 2m+ homes will significantly drop.
(b) The NET PROFIT that MT will actually raise won't make ANY significant difference to the NHS whatsoever. Itll be wholly insufficient because the annual NHS bill = 95b, and its shortfall = 30b.
(c) A recent independent economic study by the Centre for Economics and Business Research (CEBR) has revealed fatal flaws in Labours Mansion Tax. The damning report shows that Labours Mansion Tax will cause a 2 billion slump in Stamp Duty. Furthermore, it confirms that the new tax will not raise the planned 1.2 billion for the NHS. The consequential drop in Stamp Duty alone, the report says, will likely be even greater than the proceeds of the new mansion tax rendering it pointless. Mr Cox, who commissioned the CEBR study, said: This report shows that Labour [have] got their sums wrong and suggests their calculations were written on the back of an envelope and not properly thought through.
(d) STAMP DUTYS recent comprehensive updating as part of the Chancellor George Osbornes Autumn Statement, has rendered Labours Mansion Tax redundant. Property expert Alistair Bingle, has said that it "takes away the need for the much maligned Mansion Tax". And yet, Labour are planning to push ahead with its plan for their Mansion Tax IN ADDITION to the considerable increase in STAMP DUTY with respect to properties valued at more than 937,500.
2) ITS MISTARGETED & UNFAIR:
a) 96% of homes affected are in London & SE;
b) Most not mansions but flats (38%) or terraced houses (46%);
c) Most people affected have already paid up to 70% total in taxes already as INCOME TAX, STAMP DUTY, IHT, VAT & CGT;
d) Many are cash-poor. Labours proposed deferral equates to additional STAMP DUTY and/or IHT, which are already highly taxed;
e) CEBR economists have warned that Labours proposed MT deferral will without a shadow of a doubt backfire, because people will simply never sell their homes as a result, blocking the property market and leaving the debts to mount up; and many homes would, as a result, will become unsellable because they would have to pay so much back-dated mansion tax;
f) Mortgages arent allowed for and tax threshold is 42K+ gross household income, so middle-income families with mortgages will be affected, who already have to work hard to be able to pay their bills, and wont be able to afford to pay the tax;
g) The tax penalizes families comprising 3+ generations who have chosen to live all under one roof to save costs;
h) MT taxes only property, not ALL assets, so the super-rich with millions in other assets get off scot-free. MT fails to ensure all the super-rich pay their fair share; some will pay nothing, while others have to pay more than appropriate. For example, with MT someone who owns a singular property worth 2m with a 700,000 mortgage and hence net wealth of 1.3 million will have to pay, but a guy who owns 400 million of assets including private jets, helicopters, luxury sports cars and expensive artwork, and lives in a gigantic castle in Scotland worth 1.8 million would not have to pay a penny. How in what universe is that fair!
3) ITS NOT JUST THE SUPER-RICH WHO WILL BE AFFECTED:
a) A significant number of the super-rich will move their businesses, their wealth and likely themselves too out of the UK, then the UKs economy will weaken and average person suffer as a direct result. The top 1% of the UK's population are responsible for circa 30% of the UK's total tax revenue. The elite class (= top 6%) are responsible for even more than this. Should they choose to move their businesses, their wealth and themselves out of the UK, this would directly cause a drop in tax revenue for the Treasury of UP TO 30%;
b) IHT when introduced was to be paid ONLY by the super-rich but now middle-class families have to pay it. The same will happen with Mansion Tax. Its just a matter of time. UPDATE: The recent independent economic study by CEBR has revealed that the MTs net WILL widen over time to include more and more homes, with 2,000 additional homes becoming affected by the tax within the first 36 months alone.
4) CHARITIES WILL BE HIT:
Lord Winston (Labour peer), who devotes a lot of his time to raising money for charities, has said about the Mansion Tax: It makes it extremely difficult to raise charitable donations. Because [those liable to pay the mansion tax] will start refusing one of the most important areas of [charity] giving, legacy gifts That will affect charities like Cancer Research UK, which relies on legacy gifts, which are in fact its primary source of income. (N.B. A legacy gift is a sum of money that is donated to a charity in a persons will, and hence paid to the charity upon their death).
With the Mansion Tax, with respect to individuals who are cash-poor / asset-rich, instead of EXEMPTIONS (which is what is appropriate and much needed) there will only be DEFERRALS of payments, which will accrue and be paid as a lump sum as and when the property owner dies and/or the property is sold. And therein lies the problem the Mansion Tax, being a government tax, will automatically take legal precedence over any such legacy gifts, even when still included in someones will. In other words, in the legal pecking order for receipt of funds the Mansion Tax will rank higher than charities, and hence monies that would otherwise be paid to charities will end up being used to pay the Mansion Tax bill instead.
5) IT WILL FORCE THE CLOSURE OF HISTORIC HOUSES:
The Historic Houses Association (HHA) has warned. MT will affect 1,590 mansions and castles that are a source of tourism and tourist-related income for the UK. These should be exempt but, as is, they wont be. Its a lose-lose, because if Labour makes them exempt then a big chunk of the 1.2b gross annual revenue that is claimed MT will raise will be lost, in addition to the items listed in (1) above. HHA also said the tax would push owners towards financial ruin. But there is a lot
more to it than that The houses have a big impact in their area because they provide employment. And such employment would cease, with THOUSANDS of individuals set to lose their jobs as a result. And then theres the local villages and the people living there, who thrive on the business they attain on the back of the tourists who visit and the marketing done by these open mansion houses and castles. Local hotels, B&Bs, restaurants and the like for example. They will be hit hard too.
The crux of the problems with the Mansion Tax is that there are too many flaws and problems, too many of the rich get off scot-free, and too little revenue will be raised to make it worthwhile.
Labours Mansion Tax wins the award for the worst tax idea ever, in that it has the most things wrong with it whilst at the same time raising comparatively an insignificant amount of money for the Treasury. The bitter irony here is that the pathetic sum that Labours Mansion Tax will actually raise, which in reality will only be a few hundred million pounds net profit, won't make ANY significant difference to the NHS whatsoever.