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.