politics: October 2007 Archives
It's funny that abolition of inheritance tax is so popular.
First, it affects hardly anyone: 6% of estates would be liable to it and 0.1% of the population end up paying it. The majority of people supporting its abolition will never experience it either as a dead person or a beneficiary.
Second, it's only levied after a hefty, generous zero-rated allowance of £300,00 and only on the value over that hefty, generous zero-rated allowance. There's none at all to pay if the beneficiary is a spouse. But if someone were to leave £310,000 when they die, £306,000 would be left after inheritance tax. Hardly a small sum.
Third, why pay tax when you're alive when you can pay it when you're dead? It's a death tax - it's levied on the estate not the award any beneficiary receives. I'd rather pay tax when I'm dead. If I had a choice, I'd like to pay all my tax when I'm dead. When do you want to pay tax?
Then there's the argument that it's already been taxed; I shouldn't have to pay more tax on it. But why not get rid of VAT, beer and tobacco duty, road tax? We've already paid tax on the money we spend, right? Fact is, the gubmint needs to collect tax. It collects it on transfers of money from one party to another mostly. Either they collect it all on income tax or a bit on VAT, a bit on inheritance, a bit on income tax and so on. They need to collect tax. That's how they have money to spend.
Inheritance is intrinsically unfair. It leads to social and economic malaise. The aristocracy were built on it and people can only now think (incorrectly) that they can climb the intergenerational greasy pole game because inheritance has been reduced to a minor economic phenomena in the past century. A hundred years ago they would be a lot clearer about how hopeless it would be to think oiks like them could compete with the Dukes of Westminster and their ilk.
Interestingly Bill Gates and George Soros were against abolition in the USA. Two of the richest men in the world with a lot to give away in their wills. They know that self-made men like themselves would be up a creek had they had to compete with generations of wealth collating aristocracy. They also point out that it deters philanthropy, and Gates' Foundation's work shows how valuable intelligent, successful people can be to the world of charity.
I find it unhealthy that so many people expect inheritance. How about earning a living? Give each child a (more) level playing field and if they do well, good, and if they arse about, and land on their arse then that's their choice. Given some a pile of cash they haven't earned makes taking part so much more pointless for those that don't receive such. Fears that your children can't compete in the housing market are fears of the symptoms of inherited wealth (I can't think of anyone my age who has bought a house without parental handouts). The cure is not more inheritance but better population management and market regulation (the free market isn't a good mechanism for housing as it doesn't increase supply and doesn't decrease demand).
The current allowance is generous, it's easily avoidable, it does the economy and society good, and it means we pay less tax when we're alive. Abolition of inheritance tax is a non-issue wrapped in bubble headed economic short termism.
First, it affects hardly anyone: 6% of estates would be liable to it and 0.1% of the population end up paying it. The majority of people supporting its abolition will never experience it either as a dead person or a beneficiary.
Second, it's only levied after a hefty, generous zero-rated allowance of £300,00 and only on the value over that hefty, generous zero-rated allowance. There's none at all to pay if the beneficiary is a spouse. But if someone were to leave £310,000 when they die, £306,000 would be left after inheritance tax. Hardly a small sum.
Third, why pay tax when you're alive when you can pay it when you're dead? It's a death tax - it's levied on the estate not the award any beneficiary receives. I'd rather pay tax when I'm dead. If I had a choice, I'd like to pay all my tax when I'm dead. When do you want to pay tax?
Then there's the argument that it's already been taxed; I shouldn't have to pay more tax on it. But why not get rid of VAT, beer and tobacco duty, road tax? We've already paid tax on the money we spend, right? Fact is, the gubmint needs to collect tax. It collects it on transfers of money from one party to another mostly. Either they collect it all on income tax or a bit on VAT, a bit on inheritance, a bit on income tax and so on. They need to collect tax. That's how they have money to spend.
Inheritance is intrinsically unfair. It leads to social and economic malaise. The aristocracy were built on it and people can only now think (incorrectly) that they can climb the intergenerational greasy pole game because inheritance has been reduced to a minor economic phenomena in the past century. A hundred years ago they would be a lot clearer about how hopeless it would be to think oiks like them could compete with the Dukes of Westminster and their ilk.
Interestingly Bill Gates and George Soros were against abolition in the USA. Two of the richest men in the world with a lot to give away in their wills. They know that self-made men like themselves would be up a creek had they had to compete with generations of wealth collating aristocracy. They also point out that it deters philanthropy, and Gates' Foundation's work shows how valuable intelligent, successful people can be to the world of charity.
I find it unhealthy that so many people expect inheritance. How about earning a living? Give each child a (more) level playing field and if they do well, good, and if they arse about, and land on their arse then that's their choice. Given some a pile of cash they haven't earned makes taking part so much more pointless for those that don't receive such. Fears that your children can't compete in the housing market are fears of the symptoms of inherited wealth (I can't think of anyone my age who has bought a house without parental handouts). The cure is not more inheritance but better population management and market regulation (the free market isn't a good mechanism for housing as it doesn't increase supply and doesn't decrease demand).
The current allowance is generous, it's easily avoidable, it does the economy and society good, and it means we pay less tax when we're alive. Abolition of inheritance tax is a non-issue wrapped in bubble headed economic short termism.
