Is the Mansion Tax the best policy on offer for city economies?

Two main criticisms are made of the de-centralisation argument. One that it still doesn’t provide any idea of the policies that a public authority would adopt – the policy choices still have to be made, whether at national or local level. The other that some places will gain whilst others lose out.

The second is easy to deal with. After all, where’s the great success in spreading wealth and opportunity that characterises the one nation politics of today? And anyway, is that all that matters? Doesn’t the Scottish independence debate boil down to a question of whether more autonomy and a bit less wealth would be a better way to live?

The first presents more of a challenge. But here’s three.

Firstly – a locally guaranteed income so that every citizen is provided with a minimum income to do with as they wish.

If that’s one ‘of the left’ then here’s one from the other end of the political spectrum: switch taxation away from business. Why do we tax business anyway? We know that a proportion of these costs are passed on to consumers, and the rest comes out of profit hence future investment. And we know it’s totally ineffective – that large corporations, especially in a world where production is spatially dispersed, have become adept at avoiding tax by channeling revenues across the world. The chances of a supra-national solution to this are so slim given the lobbying power of the corporates that the – albeit laudable – efforts of UK Uncut and the like are doomed to fail.

If we don’t like what it is that businesses produce we should do something about that in a sharper way, either by regulating or – if that is too costly, bureaucratic or blunt – by taxing at point of sale. The obvious example being a carbon tax. Another would be to levy a tax related to the disposal / landfill costs of end products.

Granted, ending business taxes seems perverse but here is how it could turn out for the better. Firstly, it would lower the cost of supply – assuming some level of competition that would lead to lower prices – and so an increase in real incomes. Sure, the lost tax revenues would have to be recouped from somewhere. Part of the loss would be made up from taxes at the point of sale, which could be set in ways designed to nudge consumer choices – switching to taxing the ‘bads’. Since the tax is applied at sale not production it is more easily administered by local administrations – New York taxing soda drinks for example, or London charging to drive in the centre of the city.

The third idea has to be that local governments are able to keep more of the revenues that they generate. And the big revenues would have to be generated by taxing residence.

Hang a minute, you might say, that means a huge increase in Council Tax?

But remember it would come along with a (let’s assume) equivalent reduction in income tax / prices.

Ah, but it would mean a regular re-rating of property values, would it not?

Is this so difficult in a world of constantly updated property search sites?

But doesn’t that make a nonsense of the preceding idea of a citizen’s income. It simply means citizens giving with one hand and receiving with other. Why not just subtract one from the other?

Because what is being taxed is not income but the value of the property you choose to occupy.  Though in practice they probably could be combined – reducing your tax bill by ‘relinquishing’ the right to a citizen’s income for the year.

What about  ‘rent extraction’ by property owners?

Yes, as businesses are not occupiers but owners they would gain when property prices go up due to local development or new infrastructure, without them as much as lifting a finger. But if we follow the trail, the the increase in the value of properties will lead to an increase in tax on residence, hence the cost of renting. So the owners will have to reduce rents, though admittedly not by as much as the tax if the up-grading of the local areas has made it more attractive. And the local authority would seek to increase supply, by releasing more land for retail development, knowing that the proceeds of that development would come back to it.

So what will business contribute, exactly?

Beyond the social benefits of whatever it produces, and the employment it provides, not much. The only tax from retail uses would come from locally collected sales taxes. But this should be seen as an advantage – it stops administrations becoming beholden to the wishes of business in the way Anna Minton describes Business Improvement Districts.

In which case best policy on offer from the mainstream parties at the moment is a mansion tax

More ideas to follow …

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