Impact on other sources of revenue
In addition to the loss of stamp duty revenue discussed in section nine of the report, other sources of
revenue may be impacted as well. Although difficult to quantify, there may be a loss in revenues from
income tax collection as the mansion tax deters the migration of wealth into the UK overall, and London
The migration of wealth into the UK may be additionally affected in lieu of the announcement that
overseas owners of second homes in the UK will be subject to a higher payment. The share of prime UK
properties currently owned by foreigners stands at around 50%. This segment of buyers will likely be
deterred from investing in the UK by the proposed scheme, but also by the signal which it sends-that
taxes levied on foreign citizens are to increase.
Weak link between wealth and value of owned property
All of the mansion tax proposals, both on the Lib Dem and Labour side, have envisioned and presented
mansion tax as a form of wealth taxation meant to reduce inequality. This is evidenced further by the use
of the word “mansion” in the policy name. At a September 22
Labour party conference, when asked
about the notion of class envy that the phrase evokes, Ed Balls remarked that the phrase was coined by
the Liberal Democrats.
However, none of the proposed versions of the policy, including the most recent one, necessarily target
wealth. For example, a landlord that owns ten flats valued between £1m-£1.5m each would pay nothing
in mansion tax, while a homeowner in London that purchased his property decades ago for a modest
amount becomes subject to a minimum £3,000 per annum payment. As this example illustrates, the link
between wealth and value of owned property is not as direct as suggested by the proposed policy.
Hence, the mansion tax taxes the consumption of housing, more than wealth itself.
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