Is tax Britain’s problem? No – it’s housing

In obsessing over the mansion tax we risk ignoring the real issue.

Amid talk of mansion and jewelry taxes, it’s interesting to reflect on The New York Times’ recent piece "The Myth of the Rich Who Flee From Taxes".

Rather than moving to avoid tax, the paper reports that:

A large majority of people move for far more compelling reasons, like jobs, the cost of housing, family ties or a warmer climate. At least three recent academic studies have demonstrated that the number of people who move for tax reasons is negligible, even among the wealthy.

One of those studies, "Tax Flight Is a Myth", is particularly notable. It finds that, although there are huge discrepancies between tax rates in different US states, under a third of US citizens change their state of residence over their lifetime.

Some people certainly do move for financial reasons – only not the ones that we might assume. New Jersey introduced an annual additional tax on those with incomes over $500,000 in 2004; by the end of 2007, no more than 70 tax filers had left the state and New Jersey was a net $3.75bn better off than under the old tax system.

It is property prices that are much more important. Consider the case of Florida: with no state income tax, you might expect the state to be flooded with those wishing to escape taxes. Except, in the late 2000s, Florida’s population actually declined. Lack of state income taxation might have been appealing, but it couldn’t make up for Florida’s rapidly rising housing prices.

What can the UK learn from these studies? Retaining the 50p tax rate probably wouldn’t have led to the wealth exodus that George Osborne feared. And for something labelled “socialist” the proposed mansion tax is striking in its caution: someone with a house worth £3m would pay only £10,000 extra a year. It wouldn’t raise the redistributive sums the left hopes, and nor would it punish successful businessmen as the right fears.

In obsessing over the mansion tax we risk ignoring the real issue. As in the case of Florida, Britain’s economy is undermined by the exorbitant cost of housing. According to Halifax, the average age of first-time house buyers is now 30, and it is 32 in London (pdf). Rather than debate the morals of taxing houses, we need to focus on how to make housing more affordable.

Taxing homes like this wouldn't have the impact either the left or right predict Photograph: Getty Images

Tim Wigmore is a contributing writer to the New Statesman and the author of Second XI: Cricket In Its Outposts.

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Leader: Trump and an age of disorder

Mr Trump’s disregard for domestic and international norms represents an unprecedented challenge to established institutions.

The US presidency has not always been held by men of distinction and honour, but Donald Trump is by some distance its least qualified occupant. The leader of the world’s sole superpower has no record of political or military service and is ignorant of foreign affairs. Throughout his campaign, he repeatedly showed himself to be a racist, a misogynist, a braggart and a narcissist.

The naive hope that Mr Trump’s victory would herald a great moderation was dispelled by his conduct during the transition. He compared his country’s intelligence services to those of Nazi Germany and repeatedly denied Russian interference in the election. He derided Nato as “obsolete” and predicted the demise of the European Union. He reaffirmed his commitment to dismantling Obamacare and to overturning Roe v Wade. He doled out jobs to white nationalists, protectionists and family members. He denounced US citizens for demonstrating against him. Asked whether he regretted any part of his vulgar campaign, he replied: “No, I won.”

Of all his predilections, Mr Trump’s affection for Vladimir Putin is perhaps the most troubling. When the 2012 Republican presidential nominee, Mitt Romney, warned that Russia was the “number one geopolitical foe” of the US, he was mocked by Barack Obama. Yet his remark proved prescient. Rather than regarding Mr Putin as a foe, however, Mr Trump fetes him as a friend. The Russian president aims to use the US president’s goodwill to secure the removal of American sanctions, recognition of Russia’s annexation of Crimea and respect for the murderous reign of the Syrian president, Bashar al-Assad. He has a worryingly high chance of success.

Whether or not Mr Trump has personal motives for his fealty (as a lurid security dossier alleges), he and Mr Putin share a political outlook. Both men desire a world in which “strongmen” are free to abuse their citizens’ human rights without fear of external rebuke. Mr Trump’s refusal to commit to Nato’s principle of collective defence provides Mr Putin with every incentive to pursue his expansionist desires. The historic achievement of peace and stability in eastern Europe is in danger.

As he seeks reconciliation with Russia, Mr Trump is simultaneously pursuing conflict with China. He broke with precedent by speaking on the telephone with the Taiwanese president, Tsai Ing-wen, and used Twitter to berate the Chinese government. Rex Tillerson, Mr Trump’s secretary of state nominee, has threatened an American blockade of the South China Sea islands.

Mr Trump’s disregard for domestic and international norms represents an unprecedented challenge to established institutions. The US constitution, with its separation of powers, was designed to restrain autocrats such as the new president. Yet, in addition to the White House, the Republicans also control Congress and two-thirds of governorships and state houses. Mr Trump’s first Supreme Court appointment will ensure a conservative judicial majority. The decline of established print titles and the growth of “fake news” weaken another source of accountability.

In these circumstances, there is a heightened responsibility on the US’s allies to challenge, rather than to indulge, Mr Trump. Angela Merkel’s warning that co-operation was conditional on his respect for liberal and democratic values was a model of the former. Michael Gove’s obsequious interview with Mr Trump was a dismal example of the latter.

Theresa May has rightly rebuked the president for his treatment of women and has toughened Britain’s stance against Russian revanchism. Yet, although the UK must maintain working relations with the US, she should not allow the prospect of a future trade deal to skew her attitude towards Mr Trump. Any agreement is years away and the president’s protectionist proclivities could yet thwart British hopes of a beneficial outcome.

The diplomatic and political conventions embodied by the “special relationship” have endured for more than seven decades. However, Mr Trump’s election may necessitate their demise. It was the belief that the UK must stand “shoulder to shoulder” with the US that led Tony Blair into the ruinous Iraq War. In this new age of disorder, Western leaders must avoid being willing accomplices to Mr Trump’s agenda. Intense scepticism, rather than sycophancy, should define their response.

This article first appeared in the 19 January 2016 issue of the New Statesman, The Trump era