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A mansion tax is a common name for an annual
property tax
A property tax or millage rate is an ad valorem tax on the value of a property.In the OECD classification scheme, tax on property includes "taxes on immovable property or net wealth, taxes on the change of ownership of property through inheri ...
on high value homes, although the term itself is widely regarded as a misnomer. The tax was only a proposal in the United Kingdom, but proved very controversial and received widespread media coverage. It did not go ahead.
Many US states levy a surcharge on the highest-value homes or have a
progressive taxation
A progressive tax is a tax in which the tax rate increases as the taxable amount increases.Sommerfeld, Ray M., Silvia A. Madeo, Kenneth E. Anderson, Betty R. Jackson (1992), ''Concepts of Taxation'', Dryden Press: Fort Worth, TX The term ''progre ...
in their
real estate transfer tax
Real estate transfer tax is a tax that may be imposed by states, counties, or municipalities on the privilege of transferring real property within the jurisdiction.
Rates
In the USA, total transfer taxes can range between very small (for exampl ...
system, sometimes referred to as “mansion taxes.”
Original concept
In the United Kingdom, the concept of a mansion tax is widely attributed to
Vince Cable
Sir John Vincent Cable (born 9 May 1943) is a British politician who was Leader of the Liberal Democrats from 2017 to 2019. He was Member of Parliament (MP) for Twickenham from 1997 to 2015 and from 2017 to 2019. He also served in the Cabinet a ...
. In its original form, proposed in 2009,
Cable suggested that all properties valued at over £1 million would be taxed annually. He raised the proposed threshold to £2 million in January 2012.
[
]
Budget 2012
In an accommodation with Coalition
A coalition is a group formed when two or more people or groups temporarily work together to achieve a common goal. The term is most frequently used to denote a formation of power in political or economical spaces.
Formation
According to ''A Gui ...
partners, the proposal was modified and a 7% rate of Stamp Duty Land Tax
Stamp duty in the United Kingdom is a form of tax charged on legal instruments (written documents), and historically required a physical stamp to be attached to or impressed upon the document in question. The more modern versions of the tax no l ...
was levied on house sales over £2 million, following George Osborne
George Gideon Oliver Osborne (born Gideon Oliver Osborne; 23 May 1971) is a former British politician and newspaper editor who served as Chancellor of the Exchequer from 2010 to 2016 and as First Secretary of State from 2015 to 2016 in the ...
's 2012 budget. In contrast to an annual "mansion tax", this one-off tax is only paid when a property is bought.
Liberal Democrat conference motion 2012
Support for the original proposal re-emerged at the Liberal Democrat
Several political party, political parties from around the world have been called the Liberal Democratic Party or Liberal Democrats. These parties usually follow a liberal democracy, liberal democratic ideology.
Active parties
Former parties ...
2012 conference.
The motion called for "an annual mansion tax on the excess value of residential properties over £2 million as a first step towards wealth taxation designed to reduce inequality". It was passed in a vote of over 200 delegates, with two against.
Despite this, the Liberal Democrat's coalition government partner, the Conservatives, ruled out the introduction of a Mansion Tax; Chancellor of the Exchequer George Osborne said in October 2012: "We are not going to have a mansion tax, or a new tax that is a percentage value of people’s properties. Before the election they will call it a mansion tax, but people will wake up the day after the election and discover suddenly their more modest home has been labelled a mansion."[
]
Labour Party embrace concept
On 14 February 2013, the Labour Party leader Ed Miliband
Edward Samuel "Ed" Miliband (born 24 December 1969) is a British politician serving as Shadow Secretary of State for Climate Change and Net Zero since 2021. He has been the Member of Parliament (MP) for Doncaster North since 2005. Miliband ...
said that he would, if in government, introduce a mansion tax and then re-introduce a ten pence tax rate for low earners. However, there was no commitment to put this policy into the Labour Party manifesto and there was also criticism of the fairness and practicality of the proposal. However, Miliband reiterated this policy proposal at the 2014 Labour Party Conference and it is now a firm commitment. Labour claimed the policy would raise £1.2 billion a year which would be used to fund the National Health Service
The National Health Service (NHS) is the umbrella term for the publicly funded healthcare systems of the United Kingdom (UK). Since 1948, they have been funded out of general taxation. There are three systems which are referred to using the " ...
. Based on an estimated 100,000 homes valued over £2 million, this means each property would be liable for an average bill of £12,000.
On 20 October 2014 in response to widespread publicity about the proposal, the Shadow chancellor Ed Balls published further details. He confirmed properties valued between £2 million and £3 million would pay £3,000 per annum, but properties over £3 million would pay considerably more. Commentators have suggested that in order to raise the projected £1.2 billion, the mansion tax payable on homes over £3 million would have to be £28,000.
Liberal Democrat Party moves away from a mansion tax
In October 2014, the Liberal Democrats abandoned plans for a new tax on high-value homes, opting instead for a change in the existing Council Tax system. Nick Clegg, speaking on the BBC during the Liberal Democrat Party Conference 2014, said: "I went off, big time, the idea that you have a fixed levy as a percentage over a certain value. The more I looked at it, the more I thought, 'That’s very crude.' It leads to eye-watering amounts of tax being paid. What we should do is go with the grain of the council tax system and apply bands to higher properties."[
]
Autumn Statement 2014
On 3 December 2014 George Osborne announced changes to stamp duty
Stamp duty is a tax that is levied on single property purchases or documents (including, historically, the majority of legal documents such as cheques, receipts, military commissions, marriage licences and land transactions). A physical revenu ...
. These measures included large increases in tax for more expensive houses. A buyer of a house at £2 million would now have to pay £153,750 in stamp duty. In his speech he alluded to this being his alternative to Labour's mansion tax.
Criticism
Critics have said such a policy would hurt pensioners, as according to analysis by the think-tank the Centre for Policy Studies
The Centre for Policy Studies (CPS) is a think tank and pressure group in the United Kingdom. Its goal is to promote coherent and practical policies based on its founding principles of: free markets, "small state," low tax, national independe ...
, almost one third of all properties worth over £2 million have been in the same ownership for over ten years.
The phrase mansion tax has been described as a misnomer as 10% of properties in London valued at £2m-plus are one- or two-bedroom flats.
Labour review policy after election defeat
After Labour's May 2015 election defeat, Labour leadership candidates began to distance themselves from the policy. Andy Burnham said the mansion tax had been too "symbolic" and played into a public dislike of the "politics of envy". Mary Creagh, another candidate for the leadership, said: "It alienated a whole bunch of people who said we were against them getting on and doing well".
Variants
The tax could be structured in a number of different ways. One possible variant is to limit the scope to non-resident, non-British owners of property. This would be intended to discourage foreign ownership of dwellings and free up housing stock for residents. Such a modification to the mansion tax has been suggested by Mark Field, an MP in central London, where overseas ownership of property is commonplace. There are perceptions that the high cost of housing in London is in part due to a disproportionate amount of residential property being owned by non-resident, non-tax paying foreigners, and that a modified mansion tax may alleviate this issue. Limiting the scope in this way would also limit the valuation exercise that the introduction of a mansion tax would require, as fewer properties would be impacted.
See also
* Council Tax
Council Tax is a local taxation system used in England, Scotland and Wales. It is a tax on domestic property, which was introduced in 1993 by the Local Government Finance Act 1992, replacing the short-lived Community Charge
The Community C ...
* Land value tax
A land value tax (LVT) is a levy on the value of land (economics), land without regard to buildings, personal property and other land improvement, improvements. It is also known as a location value tax, a point valuation tax, a site valuation ta ...
References
{{Reflist, 30em
Taxation in the United Kingdom
Housing in the United Kingdom
tax
A tax is a compulsory financial charge or some other type of levy imposed on a taxpayer (an individual or legal entity) by a governmental organization in order to fund government spending and various public expenditures (regional, local, or n ...