We’re putting our house in London on the market this week.
Ever since we moved to the North East, it’s been rented out to a very nice American family with two children. It’s suited them well and given us some extra income. But now it’s got to go.
Ed Miliband’s to blame.
He’s jumped on the Lib-Dem bandwagon and says he wants to impose a mansion tax. It’s a crazy, dangerous and misguided idea.
Let me make it clear: our little house is not a mansion – it is a cottage with three bedrooms and a sitting room, or at least that’s how the agent described it when I bought it for a couple of hundred thousand pounds back in the 1990s. But since then, property prices in London have gone through the roof, taking our house with it.
I don’t particularly want to sell it: it’s my pension, you see. I know it’s increased in value, and I’ve always planned to sell it eventually and live off the proceeds. At that time I’ll have to pay a awful lot of capital gains tax to the government on the increase in value, which is perfectly fair. I could have put my hard-earned savings into stocks and shares: instead I kept it in a house. In the meantime, I’m paying 40% income tax on every penny of the rental income I receive. But, under the Lab/LibDem proposals, overnight my cottage will be promoted to mansion status, so it’ll become too expensive to keep.
Labour, which had every opportunity to fix our inequitable property taxation system whlle they were in power, and were too afraid of Middle England to do so, are now proposing something that is both ludicrous and wrong. And the Lib-Dems are trying to outgun them by suggesting that people should be taxed on their jewellery as well. They want to squeeze even more tax out of those who’ve paid a proportionately higher share of the nation’s tax bill all their lives.
This is a Robin Hood tax that steals from the rich and gives to the king. What we need is a fair property tax that takes a lot more from the rich than it does from the poor, and gives it to everyone.
There is a fair solution – but it’s five thousand miles away from the mansion tax.
In America, property tax is simple and equitable.
Basically, everyone who owns a home pays an annual tax to their local authority, calculated as a percentage of the property’s real value. So, in California, if your house is worth $500,000 dollars (£300,000), you pay 1% of that a year - around $5,000. If you’re lucky enough to have a house that’s worth two million, you pay $20,000, and so on.
And for that everyone gets the same services – their litter is collected once a week in giant bins, they get water and drainage, and the streets are paved and cleaned. You get policemen and nice public parks, schools, theatres and libraries. The more expensive the house, the more you pay – but the services are the same for all. This isn’t Federal Government money - it’s local authority income. It’s fair, and it’s the kind of system we should have over here: a local tax for local government.
In Britain, we have an antiquated and discredited Council Tax regime, with banding based on valuations done on 1st April 1991. That’s years before I even bought my cottage in London. So my tenants currently pay a fraction of local tax that would be deemed fair in any other civilized country. As Americans, they can’t believe their luck. No wonder the local authority is closing down the local library, and the local police station is already shut.
This coalition government is doing everything it can to destroy our local services. In 2015 Labour has a golden chance to restore the balance with a proper overhaul of our property tax system.
And Ed Miliband has just blown it.