Cable told BBC Radio 4: “If the 50p rate were to go – and I and my colleagues are not ideologically wedded to the 50p tax rate – if that were to go, it should be replaced by taxation of wealth because the wealthy people of the country have got to pay their share particularly at a time of economic difficulty.
“How exactly that is configured is a detailed matter for negotiation but that principle must be upheld and the mansion tax is actually a very economically sensible way of doing it. But there are different ways of approaching it.”
Cable did not rule out new, higher council tax bands on multimillion-pound properties.
He said: “There are vast numbers of extraordinarily valuable properties now around the south of England netting very large gains for their owners, many whom come from abroad, incidentally, and it is not taxed at all.
“Basically you get people with multimillion pound properties paying exactly the same council tax as somebody in a three bedroom semi. So the system doesn’t work.”
Boris Johnson, major of London, has repeatedly called on the 50p rate to be scrapped but balked at the idea of a mansion tax.
He said: “Obviously in a city like London...you’re going to find many more people who might be hit by such a tax.
“I’d much rather that we stop focusing so much on bashing people and start thinking what we can do to help people into work.”
Tracy Kellett, director of BDI Home Finders, said: "While only part of the current high cost of fuel is down to government duty, Vince Cable's plans are a clear assault on those with larger homes.
“Calling it a "mansion tax" is a clever political wheeze. What MP would vote against something with such a loaded name?
“But whatever the spin doctors may term it, the mansion tax is merely another attack on the squeezed middle.
“My big worry is for older workers who have been careful over the years, paid off their mortgage and seen their properties rise in value over time. Just as they are starting to contemplate retirement, they are hit by another tax.
Currently the 50p tax rate affects people earning £150,000 and over.
Last year George Osborne launched a review of the 50p tax rate which would report privately to him ahead of the budget.
The Institute for Fiscal Studies made suggestions on what people could do to avoid the 50p tax rate which included: Investing in tax avoidance, and leaving the country or not coming here in the first place.
The report from the IFS said: “In fact, it is not clear whether the 50% rate will raise any revenue at all. There are numerous ways in which people might reduce their taxable incomes in response to higher tax rates; at some point, increasing tax rates starts to cost money instead of raising it. The question is, where is that point?”
