London's Rich People Are Becoming Completely Unhinged About Their Mansions Being Taxed

London mansionREUTERS/Stefan WermuthA 45-bedroom mansion is seen in the upscale Knightsbridge neighbourhood of London.

Two of the UK’s major political parties are proposing some version of a “Mansion Tax” on very high value homes, and the owners of those homes are reacting about as well as you would expect.

There is an amazing story in a London newspaper called “Ham & High” on Wednesday about an anti-Mansion Tax campaign group.

The campaigners, most from leafy Hampstead, are opposing the tax proposed by Labour and the Liberal Democrats on “humanitarian” grounds.

“It targets people who in many ways are not going to be in a position to pay such a tax,” a retired medical advisor leading the Stop the Mansion Tax campaign, told the website.

According to the same site, Hampstead’s NW3 postcode has the 10th highest property wealth of any postcode in the UK (which has 3,108 postcode districts). The campaigners are “not ruling out a protest march,” according to the article.

There are actually a bunch of good arguments against the tax. It could be overly complicated, and the costs of administering it, not to mention any potential legal challenges, might make it a poor choice for the Treasury. But it’s not a humanitarian issue.

There is some understandable concern from people who own expensive houses but do not have a regular income, such as retired or widowed owners. But the people proposing the tax have tried to address this argument. Lib Dem leader Nick Clegg suggested people could defer the payments until they die if they cannot afford it, and Labour economic spokesman Ed Balls says you will not have to pay it if you have an income of less than £42,000.

London houses have gone up quite a bit in value — at least 229% in the last 40 years even after accounting for inflation. So even if these caveats did not exist, most owners could safely access a bit of equity to pay off the taxes, and will still have some massive capital gains when they eventually sell.

There is also another section of the “Ham & High” article that attracts a bit of attention:

Last week, Labour peer Lord Melvyn Bragg joined Labour’s Hampstead and Kilburn MP Glenda Jackson in opposing the mansion tax, describing it as a “crude weapon” and warning it could have “wiped out Hampstead as a Labour seat”.

The name rings a bell because Glenda Jackson’s son, Dan Hodges, wrote against the Mansion Tax in the Telegraph on Tuesday.

He is similarly outraged that the proposals have anointed him as “part of the landed gentry” for owning a house worth more than £2 million. Lots of people living in ordinary-looking houses in London might feel the same, but it’s worth spelling out just how rare these houses are.

Homes worth £2 million or more are in around the priciest 0.2% of the UK dwelling stock. Of about 27.8 million UK residential properties, property experts Knight Frank think there are about 55,000 worth more than £2 million. It is hard to calculate exactly, but it’s likely that Hodges is way up in the top half of the top 1% the UK in terms of property wealth.

Hodges also says the tax is “politically toxic” in London, which seems more like wishful thinking than anything else. Polling suggests that taxes on properties worth more than £2 million are very popular in the UK, and has more than twice as many supporters than opponents in London.

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