Tory tax plans: what the experts think
● Soak the rich?
Who’d have thought it, said Polly Toynbee in The Guardian. The “triumphant Tories” may be toying with the idea of taking “a leaf out of Jeremy Corbyn’s defeated manifesto”. The Chancellor, Sajid Javid, is reportedly eyeing up a “mansion tax” on expensive houses and a raid on pensions tax relief in the forthcoming Budget, to help finance the Government’s “levelling up” strategy. Any new tax on property is “risky”. But pensions tax relief is an obvious target: “it costs the state almost £40bn, and 40% of it goes to the top 10% – those earning £80,000 or more”. What’s more, it’s incredibly unjust. While average earners in the lower tax band get just 20p tax relief on “each pension pound saved”, those on more than £50,000 get 40p. Limiting everyone to 20% would not only save the Government £10bn, it would also send a powerful message.
Half-baked
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Unsurprisingly, both proposals have come under fire from the financial experts, said The Daily Telegraph. “A mansion tax in isolation would be half-baked,” according to accountant George Bull of RSM. How, for instance, would it work vis-à-vis the council tax, which similarly needs reforming? It would also be “very unpopular”, as Paul Johnson of the Institute for Fiscal Studies points out, because “it wouldn’t be based on a flow of income, as income tax is – the money would just come straight out of your bank account”. Pensions experts declare themselves to be equally aghast at the prospect of higher-rate pensions tax relief being abolished, describing the idea as “an act of fiscal hooliganism”.
● Levelling down
They’re right about that, said Alex Brummer in the Daily Mail. “Taxing pensions is a false economy”, because it would “fatally damage” a savings culture already “badly holed” by previous tax raids. And the history of property taxes is “complicated”, to say the least. When the former Tory chancellor, George Osborne, introduced “a penal level of stamp duty” on house sales in 2016, the yield from stamp duty actually fell because the market froze. The political strategy behind these proposals is clear. “But far from levelling up, a Budget dominated by tax rises would be tantamount to levelling down.” It would “devastate wealth creation”.