One problem with mansion tax is that you have to pay it from income you do not have.
The house may be worth a lot, but it does not itself provide you with any income to pay the tax from.
It is not like income tax, inheritance tax or capital gains tax where you pay a portion of money that you have coming in. Or even the new stamp duty which you can factor into your purchase price. With manstion tax, you will simply have to find an extra £3000 a year on top of your existing outgoings. This is what, in my opinion, makes it unfair.
Though I admit my family is far better off than a lot of the population (let's not get into the what-is-rich debate), the fact is I would struggle to pay an extra £250 a month. I am not saying I will starve, or that it is the biggest problem in the world, but it seems arbitary and mis-guided to tax people's homes with no regard to their wealth, because the huge increase in the house's value does not provide cash to pay bills.
Of course once it's on the books, the rates will rise in the future. (Think what happened with say, university tuition fees, getting them in is hard, but raising rates is easy).
There is likely to be an interest rate rise in 2015. This will make mortgages more expensive. Adding that plus £250 a month to my outgoings will be painful to me and I'm sure to a lot of people.
Actually there are lots of problems with mansion tax:
- it will lower ALL house prices as houses just above 2m will reduce in value. This will have a knock on effect on houses just below 2m (ie most of BTC). Ok good for some buyers in the short term, but it will cap their price growth, so good for nobody medium/long term.
- it will be hard to assess
- it will stop people doing home improvments (why make your house more valuable if it then becomes more taxable?) so no more lofts, basements and side returns so the area will stop getting nicer
- the area will change and actually get less diverse as you will have to be cash rich to live here. At the moment many people here who do not have huge incomes moved in before the house prices went crazy, but they could now be forced out.
- it's not just a tax on billionaire oligarchs in Knightsbridge as people think, it's a tax on hard working families living in terraced houses (hard for people outside London zone 1 and 2 to appreciate)
It's a bad idea overall. Populist and badly thought through. I certainly hope that Labour does not get into power and that we will not have mansion tax.