Tuesday, 8 January 2013

"London's poor now subsidise its rich"

Simon Jenkins in the Evening Standard:

In addition, every year central government tries to win electoral credit by demanding, pleading, chiding and bullying local councils not to increase [Council Tax]. The result is absurdly regressive. The “spread” of tax payments under the old rates — the gap between the highest and lowest payments — was 1:100, making it reasonably progressive. The spread of council tax bands today is just 1:3. The effect of this has been a steady rise in the council tax burden on the poor and middle-income and it plummeting on the rich.

In the late Eighties, houses in Maida Vale, Mayfair and Kensington were paying £5,000-£8,000 a year in old rates. The same people now pay little over £2,000. Central government policy has led to a huge tax bonus for the London rich. In capitalist New York, residents of suburbs such as Westchester county pay $15,000-$20,000 a year in property taxes.

Back in the 1980s, Domestic Rates raised considerably more than its eventual replacement Council Tax, and Stamp Duty was only one per cent.

Would it really be so terrible if we turned the clock back a bit and reinstated these rules? If you index up the figures given for inflation, what Domestic Rates would amount to is a flat annual tax of something under one per cent on the market value of each home (like they still have in Northern Ireland). If the owners of multi-million homes in "Maida Vale, Mayfair and Kensington" end up paying £20,000 or £50,000 or £100,000 a year, would anybody really care? If the current owners can't afford it, then there'll be plenty of French tax exiles and Arab and Russian oligarchs happy to step in.

The more of these people we can encourage to come to London the better; even if the whole of central London became a playground for millionaires, so what? If we had another half a million of them spending half a million pounds a year each, that would turn our trade deficit into a massive surplus and increase our GDP by a fifth.

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