There are problems with wealth taxes but avoidance, for once, isn't one of them

Taxing illiquid assets is, well, taxing.

Fraser Nelson, editor of the Spectator, has a column in today's Telegraph arguing that George Osborne needs to learn the lesson that "wealth taxes simply don't work". He writes:

The problems involved were fairly basic. Do you tax people’s worldwide wealth? If so, those much-needed businessmen will stay away. Do you tax only British wealth? Then people will move their investments abroad. The Treasury warned Healey that the proposed wealth tax was “political dynamite” – and not in a good way. At a time when Britain was in a desperate economic state, it risked dragging the country down further still. Healey gave up, saying he could not find any wealth tax that would be worth the political hassle.

This is disappointing, because Nelson is largely duelling with straw men here. It is indeed true that a tax on overall wealth could well lead to tax avoidance by the relatively simple tax planning strategy known as "keeping your cash in a Swiss bank account". The thing is, that isn't actually that much of a problem. After all, people avoid income tax as well, yet somehow we struggle on.

The measure for a tax is never "will everyone pay it rather than put their energy into avoiding it?", but "will enough people pay it to make it worth our while?" That's a different calculus, and one which Nelson doesn't address.

But the real disappointment is that, for all Nelson talks about the rising support for a wealth tax, he neglects to mention that most of that support is for taxing a very specific type of wealth: property. It's a shame, because that sort of tax – a "mansion tax", a "land value tax", or whatever form it takes – has its own set of problems which are under-discussed.

The important thing to note about property taxes do is that they completely fix the problems Nelson is concerned about when it comes to wealth taxes in general. You can keep money overseas, but a house in Britain is rather stuck where it is. To the extent that such a tax it increases the cost of living in Britain, it may keep wealthy foreigners away – but only those who haven't already been put off by the extraordinary cost of the sort of houses wealthy foreigners buy.

The thing is, land and property taxes aren't the golden bullet that many on the left like to think, for the key reason that houses aren't particularly liquid assets.

We've all heard the sob-story of the elderly pensioner who could be forced to sell the house he's lived in all his life to pay the land value tax (although we rarely hear it alongside its counterpart, the elderly pensioners who are being forced to moved out of houses they've lived in all their lives because of benefit cuts), but the key concern with such a tax is related to that problem.

If you are taxed, say, 20 per cent of your cash holdings, you pay that tax by handing 20 per cent of your cash to HMRC. If you are taxed on 20 per cent of the value of your land, you can't just hand a wing of your house over to the taxman. You either have to have the cash equivalent available, or sell your house.

Taken individually, that's not the end of the world – few will cry too hard if the odd landowner has to sell a few acres to pay the bill. The problem comes if the tax is set high enough that that sort of sale becomes commonplace.

If too many people end up trying to sell their mansions or land at the same time, then you're stuck with a sadly inevitable collapse in the price that land can go for. That's not just unfair – it means you would be taxing people on assets which are no longer worth what they were when you assessed them – it's also staggeringly inefficient. A well-designed tax should not encourage a fire-sale of assets.

These problems aren't insurmountable, by any means. But they do give pause for thought when considering the truely radical proposals like Peter Tatchell's plan to set the wealth tax rate at 20 per cent. Although back-of-the-envelope calculations suggest such a tax would generate truly staggering revenue, a more modest rate would be a better idea – at least at the start.

This mansion, in Kensington, London, was once the most expensive in the world. What'd the tax be? Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

A National Trust property. Photo: Getty
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The National Trust is right to bring gay history out of the closet

If you want to explore the history of Britain, you can't ignore its LGBT citizens.

Imagine seeing a monument to executed gay men and thinking literally anything other than, “how sad and poignant”. In September, the National Trust unveiled exactly such a memorial at one of their properties in Dorset. Kingston Lacy was once owned by William John Bankes, a man whose sexuality, in nineteenth century Britain, was a capital offence. The NT’s moving tribute to Lacy and so many others persecuted for being queer was deemed a “PC stunt” by the Daily Mail. Tory MP Andrew Bridgen somehow managed to find the monument “totally inappropriate”, adding that he looks to the Church for moral guidance – not the National Trust.

 But let me backtrack. I’m in the darkened vault of the Tower of London where the Crown Jewels are kept. The tour guide has just made a joke about vibrators.

The last time I was here, I was about nine and I was on a day out with my grandma. She made no mention whatsoever of sex toys. I wonder, actually, if this is the closest to this ceremonial bling a joke about vibrators has ever been made. I also wonder if there’s ever been a tour of the Tower of London where the guide – as my one did about fifteen minutes ago – has quite overtly slammed British imperialism. One thing I know for certain though: this is the first ever official LGBTQ tour of the Tower, organised by none other than Historic Royal Palaces – the charity that manages several of the UK’s grandest former homes.

 Earlier, at Traitors’ Gate, me and a tour group of about twenty people were told about Irish republican Roger Casement, who was executed, here, in 1916. Casement was dedicated to speaking out against the atrocities of imperialism, and was rumoured to be gay. But it wasn’t his alleged homosexuality that landed him in this thousand-year-old fortress-turned-prison, rather his involvement in the Easter Rising. King James I though – I later learn – was almost definitely gay or bi, having a number of “favourite” male courtiers. “Favourite” seeming to be a particularly coy seventeenth century euphemism for “gay lover”.

 The tour lasts about an hour and, although at times it seems to be slightly scraping the barrel for queer content, the pure effort of it is nothing short of heroic. The Crown Jewels section focused in on Queen Victoria, and all the anti-gay legislation introduced during her infamously prudish reign. On this tour, her freakishly tiny crown becomes a symbol of oppression rather than a cutesy royal knick-knack. Which, I can only imagine, would have the “gay agenda”-fearing monarchy groupies of middle England in a Faragean frenzy.

 This year marks the fiftieth anniversary of the 1967 Sexual Offences Act, which partially decriminalised (male) gay sex in England and Wales. And with the sheer number of events, like the queer Tower tour, at palaces and historic institutions – from Hampton Court to the British Library – you’d think it was the Queen’s platinum jubilee.

Now for some word association.

 “National Trust”.

 Pensioners? Fruitcake? Dust? Anarchic genderqueer hook-up joint?

 Not so much that last one? Well then, it may come as a surprise that it was the fusty old National Trust, working alongside the National Archives, that recreated a historically accurate covert 1930s London gay bar. For a couple of nights in March this year, Soho’s Freud Café was transformed into “London’s most bohemian rendezvous”, the Caravan club. In a spectacularly and appropriately theatrical evening of incense, cocktails and vintage drag queens, the NT totally nailed the “illegal den of queer iniquity” thing. This was preceded by a historic LGBTQ tour of Soho, which, like the Tower tour, didn’t gloss over the brutality of the British establishment. The Soho tour was rightfully heavy on harrowing stories about police raids on queer venues. In fact, it was through police reports collected by the National Archives that the NT was able to recreate The Caravan (which was shut down by the police in 1934).

Further north in London, another LGBTQ event hosted by the National Trust was “Sutton House Queered”. If the idea of a Tudor manor house in Hackney isn’t surreal enough, in February the grade II listed former home to aristocracy was the setting of a queer art exhibition. Think – richly wood panelled great room containing a painting of Henry VIII in full bondage gear. This was also the debut of the first gender-neutral public toilet in an NT property.

And, in a display of borderline hilarious inevitability, the Daily Mail … raised objections. “Preserve us from a National Trust that’s so achingly right-on”, quacked a Mail headline in December last year, after the NT announced its plans for a series of “Prejudice and Pride” events marking the 50th anniversary of the Sexual Offences Act. This July, the NT came under attack from the Mail, yet again, for outing late aristocrat, Robert Wyndham Ketton-Cremer. Ketton-Cremer left his Norfolk home to the Trust in 1969, and was supposedly outed as gay in a recent film for the “Prejudice and Pride” series. Whether or not the NT’s decision to discuss Ketton-Cremer’s sexuality was ethical, it’s a refreshing sort of controversy: the kind where an old British institution is actually quite blasé about gay sex, and the Mail goes nuts.

 Throughout this year, my inbox has been almost quite alarmingly full of press releases for queer-related events and promotions. From rainbow hummus (yes.) at the Real Greek restaurant, to “Pride at the Palace” at Hampton Court, more than ever, everyone seems to want a slice of the gay action. The Tate Britain’s “Queer British Art” exhibition, which opened in April, showcases a century (1867—1967) of sexually subversive works by LGBTQ artists. Although overwhelmingly male and posh, it’s hard to play down the importance of such a simultaneously harrowing and celebratory retrospective. In one room, A large and imposing portrait of Oscar Wilde stands right next to the actual door to his prison cell in Reading Gaol, where he was imprisoned for the absolute non-crime of “gross indecency”. Even if Britain’s cultural institutions are just playing up to a trend, a very big part of me is into it.

 In July, I went to a panel discussion organised by Opening Doors London, a charity that provides support for older LGBTQ people. A group of queer people who were adults when the Sexual Offences Act was passed spoke about what this anniversary means to them. When I asked panellist Jane Traies, the author of The Lives of Older Lesbians: Sexuality, Identity & the Life Course, what she thought about the likes of the National Trust taking on queer history, she was understandably wary of the possible faddy-ness of it all.

“It’s good, though, that history itself should come out of the closet,” she said.

                                                                                       

Eleanor Margolis is a freelance journalist, whose "Lez Miserable" column appears weekly on the New Statesman website.