Tax Rich People, Not Expensive Homes

Liberal Democrats are proposing a new property tax on homes worth more than £1 million.

Vince Cable, their Treasury spokesman who has become something of a national treasure himself, stresses that this would be a "small annual levy" of half a penny in the pound.

If I've got my maths right, that's £5,000 a year.

I don't really understand property taxes. Making the most wealthy pay more sounds reasonable enough, but if that's the aim then why not simply tax people on their incomes?

The trouble with taxing property values is that they may have little connection to how wealthy the householder really is.

If you can afford to buy a home for £1 million, then it's a safe bet you're not short of a bob or two, even if it involved a hefty mortgage.

But there are people who are not rich at all, but have simply stayed in the same home they bought 20 or 30 years ago and watched the value of their property shoot up.

In theory, anyone who owns a property worth £1 million is extremely wealthy.

In practice, of course, they can't get their hands on the cash unless they sell it.

And if you've lived in the same place for most of your life, possibly raising a family there, that may be the last thing you want to do.

Admittedly, this is more of a problem in the south east, where property prices reached ridiculous levels before the credit crunch.

But not everyone who lives in an expensive home in Solihull or Sutton Coldfield is going to have £5,000 a year to spare. And they should not be forced to move home simply because the property market spun out of control in the years since they moved in.