The Liberal Democrats are committed to creating a fairer, more equitable system of taxes which eases the burden of taxation on those on low and middle incomes but also ensures that those who are able pay their fair share and Heather Kidd today spelled out their position on the so called ‘mansion tax’.
Heather said “The Liberal Democrats aim for fairer not higher taxes. We seek to raise the income tax personal allowance to £10,000, cutting the average person’s income tax bill by around £700 and cutting pensioners’ income tax bills by £100. This would mean that around four million people on low incomes would no longer have to pay any income tax at all. Public finances are being squeezed by a combination of falling tax revenue and rising government borrowing and it is important, if this tax cut is to be seen as a credible option, to explain how it will be financed. he ‘mansion tax’ is just one proposal to support the introduction of a higher threshold for income tax payments. We propose introducing this property levy of 1% on the value of a property over £2million. As an example, the owner of a property valued at £2.1million would pay the 1% rate on the £100,000 above and beyond the initial £2million threshold. This would equate to £1000 per annum. It is right in principle to deal with the gross inequalities of wealth which have become even more extreme under Labour and much of which centres on property.
It remains the Liberal Democrats’ long term commitment to abolish the current unfair council tax and replace it with a tax based on people’s ability to pay. One of the most offensive aspects of the current council tax system is that a multimillion pound mansion pays no more council tax than an ordinary family home. We recognise that an alternative system will take time to be developed and will have to be piloted by volunteer councils. Once a suitable tax system based on the ability to pay has been created the ‘mansion tax’ could be abolished. All tax systems should have a tax base which reflect property or land values. Here in Shropshire we have pensioner couples who have a small pension and are therefore not given any Council Tax relief but are living in a Band E property and paying around £1700 – £1800 a year. They cannot afford it and it simply is not fair.
It has been argued that this property levy will be unfair on those who are wealthy but have little or no income. But those on low incomes will benefit from our overall tax proposals, seeing their income tax bill cut, or if they are earning less than £10,000 having to pay no income tax at all. In addition those currently eligible for council tax benefit would also receive relief from this new property levy and we would expect local authorities to allow pensioners without the cash to pay to ‘roll over’ the tax they owe until they, or their estate, are able to. In this way, pensioners would not have to pay the tax from their limited means, but could contribute fairly from their considerable assets. It is important to recognise that this is a measure to cut taxes for low and average earners and so, if there is a low earner living in a house worth over £2 million, they would often still be better off under our tax proposals.
Similar levies are successfully applied to property around the world, showing that this is a viable and workable tax. It is employed across the United States. The most accurate way to value the properties would be through the Valuation Agency based on the Land Registry Data. They already have responsibility for valuing property and are revaluing some properties on a continuous basis. There is already an appeals system. Based on land registry data we believe that around 1 in 400 properties in the UK are worth over £2million, this is equivalent to between 70,000 and 80,000 homes. It is worth noting that the average house price in England and Wales is now £161,554, and the average house price in the London region is £324,231.
Public opinion polls show strong support for the proposal and I sincerely believe that the policy is fair and viable. I hope that this letter has clarified any issues of concern. “