Half-baked?

In effort to capture more of the left wing of the Labour Party, or pander to their own, the Limpdems are proposing that owners of all houses worth over £1 million should pay an annual wealth tax of half of one per cent. If people own more than one house, including those who rent out properties, will there be aggregation, and if so by what mechanism?

This, of course, is on top of all the other costs and charges that such owners have to face, - highest band council tax, high maintenance costs, stamp duty and inheritance tax, etc.

Given that many owners of country homes are already struggling to maintain large country houses, I can foresee the National Trust increasing its holdings, or more dereliction. The lefties would welcome this, but when a widow living on an inadequate income has to sell her family home, it is not so attractive.

It should be remembered that many houses in London and the S.E. are in this price range. T. Blair will have to give another lecture to cover the cost, but many will not be able to. This tax will fall disproportionately on that region.

There are other serious problems with the proposal.

Who is going to evaluate the houses, and who will pay for this? Will owners be able to challenge the valuation. It will presumably be re-valued annually, because house prices are unpredictable and volatile. Some of the houses are unique, and any valuation will be arbitrary.

What effect will this have on the labour market? Could high fliers be content with a sub-£1 million house and instead buy accommodation elsewhere. Could this be the final fleecing which makes some creative people look for jobs elsewhere.

What effect will this have on the housing market generally? Properties worth just over £1 million will have sale prices depressed, which in turn will depress prices of properties not quite so good which are not fetching £1 million. There could be a trickle effect all the way down.

The whole thing seems an ideological argument made for political purposes, with all sorts of implications, and replacing one sort of inequality with others.

Taxing capital is not a good idea. It is far better to tax incomes, because these may be renewed.