As Tom commented here yesterday, ahead of his party conference speech, Vince Cable announced that the Lib Dems' plans for a 0.5% annual levy on homes worth more than £1m.
No-one explains why this is such a terrible idea as well as the Lib Dems themselves, who have long campaigned against a Council Tax based on property values. As their own website convincingly argues:
The tax "is based on value of your home and takes no account of a person's income and their ability to pay," whereas “fair taxation is based on ability to pay or income."
The argument applies just as well here. A levy on expensive homes would not target those most able to pay. It would target those who happen to live in London and the South East. It would target those who get caught up in property booms, and feel no positive effect from a rise in the nominal value of their house. It would target those who have previously worked hard and prefer to stay in their lifelong homes after they retire. It would target those who choose to live in larger houses with an extended family. And inevitably, it would force some of these people out of their homes.
More generally, the question we should ask is this: should home-owners, who have paid taxes on their income throughout their lives, and who will pay tax on their estate when they die, be made to pay a yearly sum to remain in their own homes? The Lib Dems' website is right: of course they shouldn't.
What's more, according to the Lib Dems, the tax "is costly to collect and administer."
In order for the tax to be levied, homes must be regularly and accurately valued, a laborious and expensive process. Valuations would have to be made for many homes that would not even reach the threshold, and could at best be an informed guess of what a home would really fetch on the market. Protestations and appeals over valuations would no doubt be commonplace. The Lib Dems are quite right: property taxes are deeply unfair and extremely costly. They would do well to listen to themselves, and drop the idea.