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
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Why Labour's rise could threaten Nicola Sturgeon's independence dream

As the First Minister shelves plans for a second vote, does she join the list of politicians who bet on an anti-Brexit dividend that failed to materialise?

The nights are getting longer, and so are generations. The independence referendum sequel will happen after, not before the Brexit process is complete, Nicola Sturgeon announced yesterday.

It means that Scottish Remainers will not have the opportunity to seamlessly move from being part of a United Kingdom in the European Union to an independent Scotland in the European Union. Because of the ongoing drama surrounding Theresa May, we've lost sight of what a bad night the SNP had on 8 June. Not just because they lost 21 of the 56 seats they were defending, including that of their leader in Westminster, Angus Robertson, and their former leader, Alex Salmond. They also have no truly safe seats left – having gone from the average SNP MP sitting on a majority of more than 10,000 to an average of just 2,521.

As Sturgeon conceded in her statement, there is an element of referendum fatigue in Scotland, which contributed to the loss. Does she now join the list of politicians – Tim Farron being one, and Owen Smith the other – who bet on an anti-Brexit dividend that failed to materialise?

I'm not so sure. Of all the shocks on election night, what happened to the SNP was in many ways the least surprising and most long-advertised. We knew from the 2016 Holyrood elections – before the SNP had committed to a referendum by March 2019 – that No voters were getting better at voting tactically to defeat the SNP, which was helping all the Unionist parties outperform their vote share. We saw that in the local elections earlier this year, too. We knew, too, that the biggest beneficiaries of that shift were the Scottish Conservatives.

So in many ways, what happened at the election was part of a bigger trend that Sturgeon was betting on a wave of anger at the Brexit vote. If we get a bad Brexit deal, or worse, no deal at all, then it may turn out that Sturgeon's problem was simply that this election came a little too early.

The bigger problem for the Yes side isn't what happened to the SNP's MPs – they can undo that with a strong showing at the Holyrood elections in 2021 or at Westminster in 2022. The big problem is what happened to the Labour Party across the United Kingdom.

One of Better Together's big advantages in 2014 is that, regardless of whether you voted for the Conservatives, the Liberal Democrats or the Labour Party, if you believed the polls, you had a pretty reasonable expectation that your type of politics would be represented in the government of Britain sometime soon.

For the last two years, the polls, local elections and by-elections have all suggested that the only people in Scotland who could have that expectation were Conservatives. Bluntly: the day after the local elections, Labour and the Liberal Democrats looked to be decades from power, and the best way to get a centre-left government looked to be a Yes vote. The day after the general election, both parties could hope to be in government within six months.

As Tommy Sheppard, the SNP MP for Edinburgh East, observed in a smart column for the Herald after the election, one of the reasons why the SNP lost votes was that Corbyn's manifesto took some of the optimistic vote that they gobbled up in 2014 and 2015.

And while Brexit may yet sour enough to make Nicola Sturgeon's second referendum more appealing on that ground, the transformation in Labour's position over the course of the election campaign is a much bigger problem for the SNP.

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to domestic and global politics.

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