The rich are a repressed minority
It will not be fun to be rich in 2010. Labour plans a 50 per cent tax on earnings above £150,000; the Tories propose a £25,000 annual levy on non-domiciles and the Liberals pledge a 1 per cent tax on properties worth over £2m. Whoever you vote for, they’ll get you.
With luck you won’t get caught by every extra tax, however. If the LibDems win you might face the Mansion Tax but not the 50p tax rate. The Tories are in no hurry to abolish Labour’s 50p band but that won’t affect the non-doms. Or if Labour wins the higher income tax rate stays but your home stays safe.
So it’s the voters’ choice, but there is a real danger in asking the majority to sanction a tax on a minority. Given the chance of making everyone called Smith pay double tax, the Joneses, Browns, Robinsons and everyone else would approve the move to keep down their own bill – and the Smiths would change their name to evade the unfair tax.
But asking for people without a £2m home to approve a tax on such properties, or asking those paid under £150,000 to vote for higher taxes on higher earners is an electoral no-brainer unless the majority fear they may become the next repressed minority.
The Libs originally proposed a 0.5 per cent tax on all homes over £1m. That would have hit 250,000 owners, however – many with votes the party wants. So the new version doubles the rate and doubles the threshold to produce a 1 per cent tax on £2m homes that affects only about 75,000.
But it remains an unfair tax because it puts a levy on gross assets rather than net (the £2m house owner could have a £2.5m mortgage and be in negative equity) and assumes asset-rich owners have income. The widow who inherited a £3m home would have to pay £10,000 on top of her other taxes while the £5m owner faces a £30,000 annual tax bill.
But the 4m people who would benefit from the Libs’ plan to axe tax for people earning under £10,000 vastly outvote the 75,000 living in £2m homes. That the mansion tax would yield only 10 per cent of the £16.5bn cost of axing the low-paid’s income tax is another matter: reducing pension reliefs to the lowest income tax rate and raising capital gains taxes to the highest would help bridge the gap and still affect only the outvoted minority.
Whoever is in government by mid-2010 will have to raise bucket loads of tax but all parties should attempt to do it fairly. It is a political decision whether to spread the burden evenly or make those that benefit pay, but simply taxing the rich because they don’t have many votes fails every test.
