Tag Archives: mansion tax

Griff Rhys Jones: Golden Goose

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Our book, Flight of the Golden Geese, will be out in February 2015. Its message has leaked out early. The wealthy are tired of being taxed ‘until the pips squeak’. We are warning that these geese that lay golden eggs are gathering in numbers, preparing to fly away to more welcoming tax jurisdictions. Every time a populist politician dreams up a way of robbing the rich, more of the wealthy are making plans to escape.

“You can’t make the poor richer by making the rich poorer”: a quote attributed to both Abraham Lincoln and Winston Churchill. Having money means you are able to fight back, and the simplest way is to leave, so the Treasury not only fails to gain from the new taxes, they lose the huge amounts that they would have made from taxes the leavers would have paid.

The Mansion tax, touted in the UK by both Labour and the Lib-Dems in order to win votes from the vindictive losers in society, is but the latest example.

Griff Rhys Jones, the well-known comedian, summed up his position, like so many self-made men and women. “I mustn’t equate my own personal angst about the mansion tax with a national policy angst. No way. It’s quite likely that the population is very keen on seeing rich people squeal. So I’m not going to squeal to make them feel better.”

He said he’d sell his large house in Fitzrovia, which he bought fifteen years ago as a slum, and renovated the property. If labour wins the next general election he says he will move overseas.

Sol Campbell, the former England soccer star, called the tax “a cheap and easy way to extract money from people who have done well.” He has gone so far as to put his house on the market for £25 million.

If enough of the wealthy follow suit and sell up, and significant numbers of foreigners reverse the trend of buying property (in London), then we will see a slump in house prices. A good thing for the first time buyer? Not necessarily. The high level of property prices, increases the scale of repayable debt among the population and maintains the value of the capital assets of the state, which in turn underpins the strong value of sterling. A drop in house prices leads to huge negative equity, consequent reneging on debt a la the US subprime mortgage debacle of 2008, less house building, increased unemployment, a lowering of the tax take, and entry to a vicious circle of calamity for the economy.

But what the hell. “Don’t tax you. Don’t tax me. Tax the guy behind the tree.” What do you mean the guy behind the tree has flown away?

Mansion Tax madness

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Hardly a month goes by without some new tax being floated by politicians idea for ripping off the wealthy in the UK; a mansion tax, presently a pipe dream of greedy politicians, is gaining support in both Labour and Liberal Democrat parties. The Liberals are even taking a person’s full property portfolio into account to levy a tax on total assets worth more that £2 million. Knight Frank, the up-market estate agents/realtors, has interesting points to make. “If the £2m threshold were adopted and not increased in line with house price inflation, over the next 25 years a total of 775,500 properties would be dragged into the mansion tax net, including all properties with a current value of £540,000 or more. This means that some first time buyers buying through the government’s help to buy scheme (upper limit £600,000) would be paying a mansion tax before they finished their mortgage term.” Some politicians are even considering taxing jewellery. No surprise then that the rich, the people I call Golden Geese, are running for cover. The politics of envy is making Britain unattractive to the worlds rich. And when they fly away, they take their spending with them.

However, the situation is far worse than the rich leaving. The Knight Frank report is being wildly optimistic. Once a new tax has settled in place, two things happen. Both the threshold level will go down, and the rate being levied goes up. We won’t have to wait a quarter of a century for £2 million to be down to $500,000 (in today’s money), which will drag in many ‘ordinary’ houses in the South-East of England into the net. And expect 1% to become 1.5% and then 2%, and up and up. In order to pay it many householders will have to sell up – the simple fact is that many people living in ‘mansions’ do not have income sufficient to pay the tax demands. The result is a ‘fire sale’ of property, trickling down to a crash in house prices.