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.

Photo: Getty Images
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What do Labour's lost voters make of the Labour leadership candidates?

What does Newsnight's focus group make of the Labour leadership candidates?

Tonight on Newsnight, an IpsosMori focus group of former Labour voters talks about the four Labour leadership candidates. What did they make of the four candidates?

On Andy Burnham:

“He’s the old guard, with Yvette Cooper”

“It’s the same message they were trying to portray right up to the election”​

“I thought that he acknowledged the fact that they didn’t say sorry during the time of the election, and how can you expect people to vote for you when you’re not actually acknowledging that you were part of the problem”​

“Strongish leader, and at least he’s acknowledging and saying let’s move on from here as opposed to wishy washy”

“I was surprised how long he’d been in politics if he was talking about Tony Blair years – he doesn’t look old enough”

On Jeremy Corbyn:

"“He’s the older guy with the grey hair who’s got all the policies straight out of the sixties and is a bit of a hippy as well is what he comes across as” 

“I agree with most of what he said, I must admit, but I don’t think as a country we can afford his principles”

“He was just going to be the opposite of Conservatives, but there might be policies on the Conservative side that, y’know, might be good policies”

“I’ve heard in the paper he’s the favourite to win the Labour leadership. Well, if that was him, then I won’t be voting for Labour, put it that way”

“I think he’s a very good politician but he’s unelectable as a Prime Minister”

On Yvette Cooper

“She sounds quite positive doesn’t she – for families and their everyday issues”

“Bedroom tax, working tax credits, mainly mum things as well”

“We had Margaret Thatcher obviously years ago, and then I’ve always thought about it being a man, I wanted a man, thinking they were stronger…  she was very strong and decisive as well”

“She was very clear – more so than the other guy [Burnham]”

“I think she’s trying to play down her economics background to sort of distance herself from her husband… I think she’s dumbing herself down”

On Liz Kendall

“None of it came from the heart”

“She just sounds like someone’s told her to say something, it’s not coming from the heart, she needs passion”

“Rather than saying what she’s going to do, she’s attacking”

“She reminded me of a headteacher when she was standing there, and she was quite boring. She just didn’t seem to have any sort of personality, and you can’t imagine her being a leader of a party”

“With Liz Kendall and Andy Burnham there’s a lot of rhetoric but there doesn’t seem to be a lot of direction behind what they’re saying. There seems to be a lot of words but no action.”

And, finally, a piece of advice for all four candidates, should they win the leadership election:

“Get down on your hands and knees and start praying”

Stephen Bush is editor of the Staggers, the New Statesman’s political blog.