Tories should support more property taxes if proceeds are used to cut other, more harmful taxes

By Tim Montgomerie
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It's not unreasonable to see Nick Clegg's call for an emergency tax on Britain's wealthiest people as (i) another attempt by him to shore up his beleagured position within a very unhappy party and (ii) another sign that the Coalition will drift to the Left. Tory backbencher Bernard Jenkin certainly sees Clegg's intervention as a sign of the politics of envy. He told the Today programme that if we keep increasing taxes we will kill the goose that lays the golden eggs.

Regular readers will know that I support a shift in the nature of taxation, away from the taxation of wealth creation and towards the taxation of accumulated wealth. I think it's the policy position I hold which is most unpopular with readers! In particular I support extra council tax bands for larger properties and a special tax on the sale of large properties. Many people got wealthy during the boom years not because of great ingenuity on their part or through hard work but because they invested in Britain's highly state regulated property market. They benefited from state intervention and that benefit should now be taxed by state intervention. I don't want to confiscate all of their gain - or even most of it - but I think it's right that the propertied wealthy make a bigger contribution to the Exchequer.

I want the Conservative Party to get into this debate for three big reasons:

• Wealth taxes (especially on property) are harder to avoid than income taxes.
• If there is going to be higher wealth taxes - and there is considerable public support for them - then they need to satisfy three key criteria:
  • They should be levied at a reasonable rather than a socialist rate;
  • They should replace other more harmful taxes (especially income taxes) and not be used to simply increase the size of government;
  • As much as possible they should be imposed on flows rather than stocks of wealth (sales of expensive properties rather than annual mansion tax-style levies).
• Wealth taxes are part of a huge fairness agenda. Not just fairness between the wealthy and those without but about the tax burden between north and south and between the old and the young. A reasonable wealth tax can be used by the Conservative Party to signal that we are not the party of the privileged and already propertied in the South East but also the party of the young northern entrepreneur* or homebuyer who is starting out in life. More taxes on mansion owners in the south to fund less taxes on younger people starting out in life. If the Conservative Party embraces such a policy it's the nearest thing we have to a Clause IV moment.

On this subject by the way it's worth reading yesterday's Deep End blog. The Deep End editor argued that we should be more worried about state subsidies for the rich rather than making the rich pay. I agree with that too.

* Paul Goodman writes at length today about our northern challenge.