“A move from a 50p income tax rate to a mansion tax would be a move from one bad policy to another. Serious work suggests that the 50p rate raises a trivial amount of money and the long-run effects on economic growth may be such that no money is raised at all. Indeed, after allowing for indirect taxes, those paying the 50p rate pay almost two-thirds of their income in tax. Given that those who pay the 50p tax rate pay 28% of all income tax, it would be very dangerous indeed to erode this tax base.
“However, a mansion tax is no replacement. This would be grossly unfair on those who had bought houses many decades ago in areas where property prices have risen and also act as a double tax: people would pay tax on their incomes and then tax on the houses that they bought with their income. There is also no clear case for taxing wealth accumulated in houses and not - for example - yachts.
“The government should, however, consider a complete overhaul of the system of property taxation. This may lead people with large houses to pay more tax but action should be taken in a considered and coherent way not in an ad hoc, politically motivated attempt to deal with frictions within the coalition.”