The Tories are courting disaster by flirting with a tax raid on wealth – Telegraph.co.uk

Taxing existing property ownership much more heavily would turn freeholders into leaseholders, weaken property rights, change the historic relationship between state and citizen, and mortally damage the foundations of British society. It would be toxic for capitalism and conservatism, the two systems that it is this Governments historic mission to save.

Most economists believe that taxing property is less economically damaging than taxing income. They are wrong. People and companies arent prisoners in one country or home. Imposing a meaningful wealth tax would lead to massive, negative behavioural changes.

It is true that longstanding homeowners have made vast, untaxed capital gains as prices have shot up; but the answer to housing affordability is to build a lot more homes and, when appropriate, hike interest rates. Taxing unrealised capital gains via a mansion tax would see equity-rich, cash-poor pensioners forced to extract equity, sell up, or roll over their liabilities into a whopping inheritance tax bill.

Council tax was higher in real terms in the 1970s and 1980s, but that is no reason to return to those sorry days. Its purpose is to contribute to local services, not to confiscate wealth. Adding extra bands one version of the proposals discussed in recent weeks would mean revaluing all homes. Millions would pay more: it will make the poll tax look like a tea party. Local government finances need to be overhauled, but not in this way.

Hitting the rich with higher taxes is popular, but the Government is doing lots of unpopular things: HS2, retaining foreign aid, banning petrol cars and gas boilers, Huawei. Johnson has rejected populism in these areas, rightly or wrongly, and he should do the same on tax. None of his Northern voters backed him because they thought he would hit the better off: they just want their own families to prosper. They bought into the Tory message of levelling up, and rejected Corbyns socialist levelling-down.

The Government grabbed 43.6 per cent of the vote last year; its potential market is even greater if it can unite the centre-Right from North to South, Brexiteers and Remainers, graduates and non-graduates. While these groups disagree on much, such as the environment or immigration, one policy could unite all of them: keeping taxes low. A similar approach has helped hold the Republican coalition together in the US and saved conservative parties elsewhere.

In an interview with the Sunday Telegraph last year, Johnson quoted Ibn Khaldun, a great medieval Arab intellectual and early supply-side economist. The PM paraphrased him beautifully: If you cut taxes on the olive harvest, or whatever it was in 14th-century Tunisia, actually people grew more olives, and tax yields went up. It doesnt apply in every case but he is making a valid point. Johnson should ask Mr Javid, who also understands the role of incentives, to order every Treasury bureaucrat to read Khaldun, and then tear up their daft plans. Here is another golden rule: there can be no such thing as a successful tax-raising Tory government.

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The Tories are courting disaster by flirting with a tax raid on wealth - Telegraph.co.uk