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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Will the House of Lords block Brexit?

Process, and a desire to say "I told you so" will be the real battle lines. 

It’s the people versus the peers, at least as far as some overly-excited Brexiteers are concerned. The bill to trigger Article 50 starts its passage through the House of Lords today, and with it, a row about the unelected chamber and how it ought to behave as far as Brexit is concerned.

This week will, largely, be sound and fury. More peers have signed up to speak than since Tony Blair got rid of the bulk of hereditary peers, triggering a 200-peer long queue of parliamentarians there to rage against the dying of the light, before, inevitably, the Commons prevailed over the Lords.

And to be frank, the same is ultimately going to happen with Article 50. From former SDPers, now either Labour peers or Liberal Democrat peers, who risked their careers over Europe, to the last of the impeccably pro-European Conservatives, to committed Labour and Liberal politicians, there are a number of pro-Europeans who will want to make their voices heard before bowing to the inevitable. Others, too, will want to have their “I told you so” on record should it all go belly-up.

The real battle starts next week, when the bill enters committee stage, and it is then that peers will hope to extract concessions from the government, either through defeat in the Lords or the threat of defeat in the Lords. Opposition peers will aim to secure concessions on the process of the talks, rather than to frustrate the exit.

But there are some areas where the government may be forced to give way. The Lords will seek to codify the government’s promise of a vote on the deal and to enshrine greater parliamentary scrutiny of the process, which is hard to argue against, and the government may concede that quarterly statements to the House on the process of Brexit are a price worth paying, and will, in any case, be a concession they end up making further down the line anyway.

But the big prize is the rights of EU citizens already resident here.  The Lords has the advantage of having the overwhelming majority of the public – and the promises of every senior Leaver during the referendum campaign – behind them on that issue. When the unelected chamber faces down the elected, they like to have the weight of public opinion behind them so this is a well-chosen battleground.

But as Alex Barker explains in today’s FT, the rights of citizens aren’t as easy to guarantee as they look. Do pensions count? What about the children of EU citizens? What about access to social security and health? Rights that are easy to protect in the UK are more fraught in Spain, for instance. What about a British expat, working in, say, Italy, married to an Italian, who divorces, but wishes to remain in Italy afterwards? There is general agreement on all sides that the rights of Brits living in the rest of the EU and citizens of the EU27 living here need to be respected and guaranteed. But that even areas of broad agreement are the subject of fraught negotiation shows why those “I told you sos”  may come in handy sooner than we think.

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