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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Paul Nuttall is like his party: sad, desperate and finished

The party hope if they can survive until March 2019, they will grow strong off disillusionment with Brexit. They may not make it until then. 

It’s a measure of how far Ukip have fallen that while Theresa May faced a grilling over her social care U-Turn and Jeremy Corbyn was called to account over his past, the opening sections of Andrew Neill’s interview with Paul Nuttall was about the question of whether or not his party has a future.

The blunt truth is that Ukip faces a battering in this election. They will be blown away in the seats they have put up a candidate in and have pre-emptively retreated from numerous contests across the country.

A party whose leader in Wales once said that climate change was “ridiculous” is now the victim of climate change itself. With Britain heading out of the European Union and Theresa May in Downing Street, it’s difficult to work out what the pressing question in public life to which Ukip is the answer.

Their quest for relevance isn’t helped by Paul Nuttall, who at times tonight cast an unwittingly comic figure. Pressing his case for Ukip’s burka ban, he said earnestly: “For [CCTV] to work, you have to see people’s faces.” It was if he had intended to pick up Nigel Farage’s old dogwhistle and instead put a kazoo to his lips.

Remarks that are, written down, offensive, just carried a stench of desperation. Nuttall’s policy prescriptions – a noun, a verb, and the most rancid comment underneath a Mail article – came across as a cry for attention. Small wonder that senior figures in Ukip expect Nuttall to face a move on his position, though they also expect that he will see off any attempt to remove him from his crown.

But despite his poor performance, Ukip might not be dead yet. There was a gleam of strategy amid the froth from Nuttall in the party’s pledge to oppose any continuing payment to Brussels as part of the Brexit deal, something that May and Corbyn have yet to rule out.

If May does manage to make it back to Downing Street on 8 June, the gap between campaign rhetoric – we’ll have the best Brexit, France will pay for it – and government policy – we’ll pay a one-off bill and continuing contributions if need be – will be fertile territory for Ukip, if they can survive as a going concern politically and financially, until March 2019.

On tonight’s performance, they’ll need a better centre-forward than Paul Nuttall if they are to make it that far. 

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

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