I am not sure I believe this story. Wingnuts have a tendency for making these things up.

Remember Peter Lilly and his famous French next door neighbour that turned out to be horse shit.

But lets us assume it is true……..

If he was in the military, his salary was paid for by the tax man, and so was his pension, So he lived off the govt. Funny how these people begrudge paying tax.

I know someone like that. Retired Civil servant, Daily Telegraph reading staunch little Tory. Both sons in the Army. One a Major on good salary, one retired on army pension after making a very good living. The whole family has been living of the teat of govt for about 50 years, but they don’t approve of the welfare state. Oh no siree.

Furthermore if he lived off pensions for 27 years doesn’t look like he even worked to acheive the estate he had at his death. I really don’t understand the argument about inheritance tax- ultimately it is a tax on the people who can most afford it in society and it still lets their children have a massive windfall (they still inherited over 300,000 pounds!)- if you plan well ie use both of your exemptions as a married couple you could escape being taxed on an estate which was worth more than 600k!

Perhaps David Blackburn would be less horrified if capital gains tax was levied on all profits made from rising house prices.

Say what you mean Don, why was he able to build up an estate without being taxed enough to benefit the poor already, right?

If the guy decided to sell his estate before he died, and had lived longer, he would have been able to purchase schooling for his grandkids, or whatever. Regardless of your apparent attitude that these four kids don’t deserve better education than they would have had because some other kids that weren’t descendent of someone with a £500k estate deserve it more in your mind, giving kids “better” education is not a bad thing for any individual to do…even if the only thing it does is ensure the family unit is not worrying about finances and easing their child’s development away from those stresses.

But because he died and his estate is passing hands that cannot be done.

This is why inheritance tax gets it’s bad rep. I remember once I think Unity was arguing about how we always pay tax for passing on wealth, value added tax, etc…so this is no different. But it is entirely different, it’s entirely wrong in my mind that someone has no recourse to keep what they worked hard to earn and save do what they intended, and for a state government to have to rely on this kind of rather desperate and nefarious tax.

“Before we decide that families who inherit half a million pounds shouldn’t have to pay a penny of it in tax, and every family which inherits over £1 million should get a £280,000 tax cut, shouldn’t we use the tax system to give more help to the people on middle and lower incomes who have actually worked hard and earned their own money?”

How about make a tax system that everyone from the poor to the super rich, from libertarians to socialists, can live with first, rather than exclaiming that these particular people’s lives are irrelevant in the grand scheme of things?

Er, Don.

I don’t think you realise a few BASIC PRINCIPLES. You stoopid leftie/commie/fascist.

It is completely fair that the children/grandchildren of a dead person should get their house/money completely tax free, even though they did not actually do anything at all to earn it, or make it happen.

For example, my Dad (who was in the army and therefore boss) bought a house 40 years ago, after he rode a pit-pony to freedom and became a super-successful entrepreneur and did loads of hard work and stuff. Anyway, that house was originally just a piece of wood propped above some bricks, but since then it has appreciated in value (through absolutely no effort of mine) to be worth a million quid. I want a million quid, and my dad worked hard, and he wanted me to have it.

Likewise all the money he made from being a wealth-creator doing deals in The City (what powers our economy as you will remember) has sat in a bank account and worked really hard to earn interest, and now I want that too and it’s only fair because I grew up being told I could have it.

What’s more, I want it all. I don’t want to make a social contribution at a rate of just 40% over a threshold of £350,000. It’s mine! I did nothing for it!

p.s. I promise I haven’t been sat on my arse not doing anything, safe in the knowledge I’ll get a juicey inheritance. No, the reason I’m a useless layabout is because I wanted to be an entrepreneur but then ZaNuLiebor put up the top rate to 50% so now I don’t see why I should bother being a successful businessman cos like all my moneys gets stolen by teh evul governments.

You bastard. I hate you lefties and your greed.

shouldn’t we use the tax system to give more help to the people on middle and lower incomes who have actually worked hard and earned their own money?

What makes you think rich people haven’t worked hard? I get so sick of hearing about all these nasty rich people with cushy jobs blah, blah, blah. Shut up. If it’s so easy to run a business with large profits then why don’t you stop moaning, go out there and do it yourself?

On inheritance tax – I’d much rather give the money to the rich person, who may then pay the middle earner to do work for him, who will then pay the lower earner to do up his kitchen etc etc rather than give it to the government where it’ll just get sucked into the welfare bill (oh yeah, if you want to support hard workers then we ought to stop taxing them and giving that money to people who don’t work at all).

“it’s entirely wrong in my mind that someone has no recourse to keep what they worked hard to earn and save do what they intended, and for a state government to have to rely on this kind of rather desperate and nefarious tax.”

Stop me if I’m wrong, but inheritance tax is designed to target transfers of wealth between the dead and the living. (the 7 year moritorium is to stop tax-dodgers).

So, how can inheritance tax take from those people who “worked hard to earn and save” when they are…dead?

Hi Lee,

“How about make a tax system that everyone from the poor to the super rich, from libertarians to socialists, can live with first, rather than exclaiming that these particular people’s lives are irrelevant in the grand scheme of things?”

I might be misunderstanding, but this seems like a completely impossible task to me. Any changes in the tax system will benefit some people, and disadvantage others. For example, if we change the tax system to reduce this ‘desperate and nefarious tax’ then other people have to pay more in tax.

(The same dilemma applies if you decide to reduce government spending and cut taxes, there are decisions about who should benefit from the tax reductions).

I do appreciate that it is unfortunate for this family to receive only £420,000 rather than just over £500,000 in inheritance, to have to choose that one of their children doesn’t receive a private education, and not to be able to buy a bigger house.

But given the choice (and I don’t see how the choice can be avoided), I think it is a higher priority to reduce taxes on income which people earn through their own efforts, and to help families who, for example, are struggling to afford their rent or mortgage payments or who regularly skip meals because there isn’t enough money for them to buy food for themselves and their children. Wouldn’t you agree?

“On inheritance tax – I’d much rather give the money to the rich person, who may then pay the middle earner to do work for him, who will then pay the lower earner to do up his kitchen etc etc rather than give it to the government where it’ll just get sucked into the welfare bill (oh yeah, if you want to support hard workers then we ought to stop taxing them and giving that money to people who don’t work at all).”

And if the market fails and aggregate demand makes it such that there is a high rate of unemployment, fuck the poor because they’re clearly lazy anyway. I mean, why else would they be poor?

“Perhaps David Blackburn would be less horrified if capital gains tax was levied on all profits made from rising house prices.”

Or levy capital gains tax on all Beneficiaries of inheritance and scap inheritance tax. That way the dead pay no tax but the people who get the money pay a capital gain.

The sooner you people accept that middle England is where the majority of your votes come from the better.
Inheritance tax is an abomination and should be scrapped altogether. The Tories policy on IT is a massive vote winner, as we have all seen from the polls re: the botched November election.

You really need to wake up.

Hi Mark,

By happy coincidence, Paul S managed to parody your argument before you even posted it (that’s how diabolical us libruls are), but just quickly:

- I didn’t say that rich people didn’t work hard.
- Rather than giving the money to the government, I suggested cutting the taxes of working people on low and middle incomes.

Because, you see, we’ve tried the ‘trickle down’ economics that you’ve suggested, and in the real world it turns out that your theories don’t work – the rich get astronomically richer and the people in the middle and at the bottom get screwed.

So instead, let’s try a bit of ‘trickle up’, where the rich get to contribute a bit more money to the society which they benefit from, and the people who work for them get to keep a bit more of the money that they’ve earned, and where people get on in life because of their own efforts, rather than just because their daddy was rich.

Hi Andrew,

61 per cent of marginal voters say the Tory plan to raise the inheritance tax threshold to £1million shows they “mainly want to help the rich, not ordinary people”.

You can find out more about the real Middle England at:

http://www.liberalconspiracy.org/2009/05/28/where-is-middle-britain/

“The sooner you people accept that middle England is where the majority of your votes come from the better.
Inheritance tax is an abomination and should be scrapped altogether. The Tories policy on IT is a massive vote winner, as we have all seen from the polls re: the botched November election.

You really need to wake up.”

Dear Tory Troll (astroturfer?)

I recommend Andrew Rawnsley:

http://www.guardian.co.uk/commentisfree/2009/nov/29/tories-inheritance-tax-gordon-brown

But call me Dave keeps saying along with his idiot shadow chancellor that the most important thing he has to deal with when he takes office is the deficit.

So why cut taxes for the wealthy middle classes?

Surely you need that money to help pay down the deficit. But then cutting taxes for the Right is more important than life itself. Unless you are a fetus of course.

IHT is an interesting tax – the exceedingly rich employ expensive advisors and as a result their estates through complex and often expensive planning are able to avoid it altogether or consinderably reduce the marginal rate.

In my experience, the people whose estate’s pay most by way of inheritance tax are those with assets but relatively modest incomes – very often the assets have increased exponentially in value as a result of misguided economic and other Government policies – and their children come to seek advice on how to reduce the tax so that they don’t have to sell Mum and Dad’s home – their childhood home.

The reality is that IHT is a tax on aspiration – I know we have disagreed on this before, but from my experience, I believe that it is. It is the children and grandchildren who pay it out of residue and it often results in cherished assets (often what was a family home) being sold during the administration of the estate. It is also seen as a tax on assets that have often been acquired out of taxed income. Now if you talk about reforming CGT and eliminating IHT could result in what was objectively a fairer taxation of capital gains than the current position and I’ll listen …

who remembers Gladstone?

@12 Don

If I could just quote you again “shouldn’t we use the tax system to give more help to the people on middle and lower incomes who have actually worked hard and earned their own money?”

Now, if you were saying that rich people also work hard then you ought to correct the article as the implication from this sentence is that lower and middle income workers work hard while the rich just sit there sipping champagne, eating caviar and watching their money grow on trees.

And with regards to the ever witty Mr Sagar’s parody, just because he knows what the counter arguments are doesn’t mean that laughing at them makes them any less valid.

I agree on the point of a society where the lowest earning workers pay no tax. It would seem you still have to convince the great comedian at #9 though. You support helping the hard workers, he appears to support hosing money at anyone without a job. Perhaps you two could discuss how best to reward those hard workers who’ve been left without a job without giving lots of money to those who can’t be bothered.

The righties should look on the bright side – more IHT = less trustafarians.

19 – idiot. Trustafarians by definition haven’t been subject to IHT. Inheritance Tax is effectively entirely optional. That’s why about 30% of estates are technically liable to IHT (in the ‘hit by a bus’ scenario) and yet only about 7% of estates actually are subject to it.

A good tax raises money without changing behaviour too much, IHT does precisely the opposite.

@19 – humourless idiot.

Abolish the trusts, abolish an environazihippytrustafain!

“And with regards to the ever witty Mr Sagar’s parody, just because he knows what the counter arguments are doesn’t mean that laughing at them makes them any less valid.”

Er, when the counter arguments are reduced to such stupidity then it seems fair to say that they do, in fact, become less “valid”.

“The reality is that IHT is a tax on aspiration”

What, the aspiration to sit on your backside and wait til Mummy and Daddy pop it so you can inherit what they had, but what you never did a thing to earn?

You’re right, that’s exactly the sort of aspiration we don’t want to discourage.

As for “oh the children lose their childhood homes!” cry me a fucking river.

Paul, we’ve had this disagreement before – and yes, it is a tax on aspiration because people earn money (as they see it) and want to advance the interests of their children and grandchildren and so resent the tax on what they see as part of the legacy that they can pass on … it is a tax on aspiration because people who are subject to the tax see it in very similar terms but from the other end of the rod.

The problem is that increasing numbers of families are finding themselves subject to the tax – yes it is small in comparison to the totality of the estates. But these are families that also tend to be socially motivated if not active. They are increasingly seeing IHT as a tax that their children/grandchildren will have to bear while realising that the very rich manage to avoid it, if not in its entirety, then nearly so. They consider the tax to be ‘unfair’ on them … and yes, that is a selfish motive, but it is also a powerful one.

Refusing to recognise, or empathise with, that motive and motivation won’t make it disappear or reduce it – and if we end up with taxation that is considered unfair, whether or not you claim it is in fact ‘fair’ because by taxing such assets you reduce a transfer that entrenches privilege and increases inequality, we will end up finding it more difficult to raise the revenues necessary for all the things that Government needs to pay for in the course of a year.

@10 good idea

I thought the op would bring out the politics of greed and that, now defunct, idea of the ‘trickle down effect’
From what I have read, the majority of people who have found themselves to be in the inheritance tax bracket, are those whose houses have increased so much since they were purchased. Hard work? – they just sat on their arses and watched as the pounds mounted up, Meanwhile, the local school cleaner, earning the minium wage, is supposed to pay tax, while people whose property, by good fortune, gave them a tidy investment, do not.
Reading some of the arsehole posts on this thread make me proud to be a socialist,

21 – Oh I see – a joke. Most amusing.

Your solution is to ‘abolish trusts’? Lets assume that was a joke as well shall we?

Not a penny tax paid on the soldiers house?

What were the authorities up to that they allowed this ex soldier to earn money without paying tax on it? They should all be fired.

My house is different. I have paid tax on all the money I used to buy it, and on all the money I used to do it up, and keep it done up.

And no, I have never received mortgage relief as I saved up for thirty years, living in rented accommodation, and paid cash for it. I NEVER borrow money.

I never quite made it, but I have never been against the millionaires of this world as I have constantly strived to join them. I wouldn’t want the tax authorities to tax me twice for my house, once on every penny I earned, and twice with death duties. So I put it in trust for others the day I bought it. And that is well over the seven years required.

Actually, inheritance tax is a red herring. I would guess that Cameron knows his Eton buddies avoid it with trusts. It is the people lower down the scale he is helping and he knows he will get votes because of this. I hate the bastard, but I don’t allow this to cloud my judgement.

Most people want to live in poverty. I know this as if it were not true, most people would try to better themselves rather than condemn all who do better than they.

Ampers.

“What, the aspiration to sit on your backside and wait til Mummy and Daddy pop it so you can inherit what they had, but what you never did a thing to earn?”

What makes you think all children of rich parents sit on their backsides doing nothing? I bet most of them work.

“As for “oh the children lose their childhood homes!” cry me a fucking river.”

Yikes, and the Right get called insensitive and nasty.

@26 – Yes Tim, that was a joke, too.

See, how it works is on the one hand, there’s group (a) who strongly believe they should be allowed to hand all their money down to their ancestors.

Then there’s group (b) who dismiss any kind of activist/environmentalist type as a ‘trustafarian’ – ie. a monied layabout who has nothing better to do than worry about knitting yoghurt and lesbian whales’ rights and twiddling their dreadlocks.

Now, there’s a significant crossover between group (a) and group (b), who must at some point feel a get a little dizzy from holding what seems – to most normal people who live outside group (a) or (b) – two opposing viewpoints at the same time.

Hopefully you understand now?

“Because, you see, we’ve tried the ‘trickle down’ economics that you’ve suggested, and in the real world it turns out that your theories don’t work – the rich get astronomically richer and the people in the middle and at the bottom get screwed.”

Gosh, that’s amaaaazing! You really should write that up you know. There’s a Nobel awaiting someone who can prove that.

The poor are not getting poorer and the middle is not getting poorer while the rich soar away. Inequality might be rising (rising within country inequality is a global pheneomenon over the past 30 years, given that it is global might well have a global cause….like globalisation for example. Something which has had the useful and desirable effect of reducing absolute poverty globally and also reducing global inequality) yes, but this is not the same as stating that “the bottom get screwed”. It is stating solely that the rich are benefitting more from economic growth than the poor are. The poor are still getting richer as are the middle.

And there’s reasonable evidence that this is in fact desirable as well. Assuming that economic growth is what you want (I certainly do, how about others?). In the long term economic growth comes from investment. For more investment we need more savings (leaving aside some slightly odd neo-Keynesian ideas who seem to think that investment causes savings). We know that the rich save more of their income than the poor, thus a rise in the income share of the rich should lead to a higher savings rate…thus more investment thus more long term growth.

A recent paper showed the effects of this “trickle down” approach. A 1% rise in the income share going to the top leads to a 0.12% rise in GDP growth (ie, from, say, 2% to 2.12%) which, with compounding over the years leads to pretty big changes over a generation.

Now, you can make perfectly legitimate arguments over the ethics or morality of this: you can decide that fairness now (to your definition of fairness of course) is more important than greater wealth for our children to enjoy. I might disagree but that’s fine. But what you’re really not supposed to do is invent your own facts.

The last 30 years have seen the incomes of the poor and of the middle rise.

As to inheritance tax, the best argument against it is the inheritance tax we have now. The rich don’t pay it. Someone owning a modest suburban semi in the SE of England does. Whatever you might want to call that it ain’t a tax on the rich (especially since family owned companies don’t pay it, farmland doesn’t pay it, unlisted shares (ie, AIM) don’t pay it and so on). It’s a tax on the modestly wealthy at very best, the sort of wealth that can indeed be earned in a lifetime by working at a job and saving.

In short, as it is at the moment, it’s a tax on the bourgeoisie, not the plutocrats or the capitalists.

I love Inheritance Tax.

Not only is it the most justified of taxes but it sends Tory voters heads into an absolute tizzy and makes them belch the most ridiculous, away-with-the-fairies arguments in their support of its abolition / mitigation!

IHT can do enormous damage to conservatism if handled well by Labour / Lib Dems. Voters are naturally repulsed at the blatantly self-indulgent tripe rightwingers spew out in any argument against it.

“What makes you think all children of rich parents sit on their backsides doing nothing? I bet most of them work.”

I never said – or thought – that all children of the rich are such.

But if the claim is that inheritance tax is a tax on aspiration, then the only aspiration it can be taxing are those who seek to inherit wealth they themselves did nothing to earn.

As for the remark about about how it’s a tax on the parents’ aspiration to leave something to their child:

http://badconscience.com/2009/07/01/the-fairness-of-inheritance-tax/

31
Perhaps you can let us all know which paper suggested that ‘trickle down’ works, and more importantly, where those figures came from.
Tax is tax, whoever pays it, whether it is the working-class or the gourgeiosie (I’ve left the typo as it’s an appropriate freudian slip)
And please could you explain why the overall effects of globalization have anything to do with why tax should not be levied on profits from house purchase or massive lump sums received by those who inherit estates? Most people who purchased those homes did not make a concious investment, it was merely a happy accident, nothing to do with wishing to make a contribution to economic growth.

” Really big fortune, the swollen fortune, by the mere fact of its size acquires qualities which differentiate it in kind as well as in degree from what is possessed by men of relatively small means. Therefore I believe in a tax which is far more easily collected and far more effective—a graduated inheritance tax on big fortunes, properly safeguarded against evasion and increasing rapidly in amount with the size of the estate.

We are bound in honor to refuse to listen to those men would make us desist from the effort to do away with the inequality, which means injustice; the inequality of right, opportunity, of privilege. The man of great wealth owes a peculiar obligation to the State, because he derives special advantages from the mere existence of government.

The inheritance tax, however, is both a far better method of taxation, and far more important for the purpose of having the fortunes of the country bear in proportion to their increase in size a corresponding increase and burden of taxation. The Government has the absolute right to decide as to the terms upon which a man shall receive a bequest or devise from another, and this point in the devolution of property is especially appropriate for the imposition of a tax.

No advantage comes either to the country as a whole or to the individuals inheriting the money by permitting the transmission in their entirety of the enormous fortunes which would be affected by such a tax; and as an incident to its function of revenue raising, such a tax would help to preserve a measurable equality of opportunity for the people of the generations growing to manhood.”

- Teddy Rousevelt, (Republican) President of the United States.

http://economiclogic.blogspot.com/2009/12/do-rising-top-incomes-mean-higher.html

I love Paul Sagar’s posts on this – more please!

My mother sadly died in 2007. She left an estate worth about £475K. Horror of horrors we had to pay inheritance tax. But the 3 children were still left with over £390K of entirely unearned income to share between us.

The Tory campaign on inheritance tax is an abomination; if anything the rate of IT should be increased,

I spend some of my working time dealing with issues relating to the estates of dead people. As a result, I actually talk to people who are dealing with the reality of the administration of the estates of their dead relatives. My views on IHT come from over 10 years of dealing with people at this point in their lives …

Please do assert that inheritance is a ‘bad’ thing and that as such we should aim to remove all inequalities arising from it – what about other types of inheritance? How do we ensure that children don’t benefit unfairly from the education or experience of their parents? We can all indulge in the politics and arguments of the absurd – it may be fun but it doesn’t actually deal with the problems associated with what are percieved, rightly in my view, as unfairness in particular types of taxation – IHT is one of these. If you look at the website for my Chambers you will realise that members write the books on IHT and the legal avoidance of it … and the people that benefit most from that are the very very rich – most of whom you will never have heard of. That it is unfair for the very very rich to avoid paying a tax that people who consider themselves to be pretty average (even though they are not, when one looks at the statistics for national incomes and wealth) is in my view clear.

Similar things can be said about CGT when used as a means to avoid (legally) income tax … but then that’s what happens when arguments about taxes become political rather than technical.

Evan’s (and Tim W’s) point is the main one here – IHT is an optional tax. It is easily avoidable in ways that are very hard to control – even if such control is desirable. That’s why it raises so little money – estimated at only 2.3bn this year. By way of comparison, fuel duties raise more than ten times as much.

Efficient taxes raise money without drastically altering the behaviour of the taxed. IHT signally fails to do this. That’s why arguments like Teddy Roosevelt’s above (and I must remember how much store LibCon sets by Republican Presidents) are almost irrelevant to British IHT.

Really big fortune, the swollen fortune, by the mere fact of its size acquires qualities which differentiate it in kind as well as in degree from what is possessed by men of relatively small means. Therefore I believe in a tax which is far more easily collected and far more effective—a graduated inheritance tax on big fortunes, properly safeguarded against evasion and increasing rapidly in amount with the size of the estate.

Really big swollen fortunes don’t pay IHT. Just as Labour’s reliance on fiscal drag has meant that deputy town clerks and paralegals are now top-rate tax payers, so IHT now affects people who are not, on any traditional definition, rich.

The layabout who can’t be bothered working and lives off money from an inheritance contributes no more to society than the layabout who can’t be bothered working and draws benefits. Arguably less. In both cases, the gift of money has stunted aspiration.

So why should anyone be absolved of the need to contribute to the world as a result of the accident of their birth? How does it benefit them to know that, if they mess up their lives, it doesn’t really matter because they can look forward to an inheritance?

So let each individual be responsible for maximising education and opportunity for their children up to the age of 18- after that they should be permitted to make their own way and compete for rewards on the basis of a level playing field. Ultimately, that is better for all.

I have no problem, therefore, with a high rate of inheritance tax, and the trust loopholes in the system used by the wealthy to avoid it should undoubtedly be closed down.

Actually, has anyone ever thought about the irresponsibility of a really wealthy person working, thus taking a job from someone who needs to earn money?

Seems the people here want to create more unemployment.

Salyl@ 2 “I know someone like that. Retired Civil servant, Daily Telegraph reading staunch little Tory. Both sons in the Army. One a Major on good salary, one retired on army pension after making a very good living. The whole family has been living of the teat of govt for about 50 years, but they don’t approve of the welfare state. Oh no siree”.

If you put it like that then everry bike riding, vegetarian, 30 something, talent-free, girlie fast streamer working for a pointless nu-labour quango is “living off the state”.
You only live off the state if you do nothing in return for the state’s money, getting shot at in return for a salary hardly qualifies. I suppose you think that the police, doctors, nurses, social workers all just “live off the state” too ? Or would you rather that all public services were privatised ?
People like you (trustifarians/privelidged middle class who don’t need to work) simply don’t understand the concept of having to work, rather than doing it as a lifestyle choice

“See, how it works is on the one hand, there’s group (a) who strongly believe they should be allowed to hand all their money down to their ancestors.”

Do they use a Tardis?

Actually, has anyone ever thought about the irresponsibility of a really wealthy person working, thus taking a job from someone who needs to earn money?

Lord Finchley tried to mend the electric light
Himself. It struck him dead and serve him right.
It is the duty of the wealthy man
To provide employment to the artisan.

“Do they use a Tardis?”

Hey, anything’s possible when you’re a Master of the Universe.

36
Is this meant to answer my question? You might just as well refer to ‘Alice in Wonderland’ In fact I think some other posters have drawn their arguments from that amazing child’s story.

The trickle down argument only works on a global scale. It does nothing to advance local or even national economics, as money earned in the UK and liberated from tax is often spent in other countries.

As a Global citizen who buys stuff from America and Hong Kong, I’m relatively untroubled by this, but it shouldn’t be the duty of HMRC to allow people to spend more of their own money in other countries.

I’d favour a lessening of the tax system if – instead of childcare vouchers, the fabulously wealthy were provided with non-exchangable British Business vouchers.

But that’s obviously impractical (and contrary to EU guidelines) so I’m happy taxing the pips for now.

Bottom line is that this money is not the state’s, it belongs to the families. This is a matter of principle. It is obnoxious that the state intervenes in this way over someone’s death.

See post 10 Arthur, capital gains tax would impact on the living not on someone’s death.

TIdiot troll “Bottom line is that this money is not the state’s, it belongs to the families. This is a matter of principle. It is obnoxious that the state intervenes in this way over someone’s death.”

This comment is so stupid it is almost funny.

What always winds me up about this debate is that the left rant and rave about “unearned wealth” but will then vigorously defened unearned income being handed out to chavs to spend on satellite dishes, cheap lager and fags.

Inheritance tax should simply be scrapped. It was enacted when hardly anone owned property and few would accumulate significant assets during their lives, the idea being to take a significant amount of money from a few people. IT belongs in a bygone age, before mass home ownership. There is no logical or moral justification for waiting until someone dies and then taking anything they have accumlated from them and giving it to the government. The objective of the tax system is to raise money for services which the public want, not to redistrube the wealth of dead so that everyone starts with a “level playing field”, (which is a practical impossibility, even if it were desirable). If that is the intention then why not just outlaw asset accumulation in the first place. If someone wants to leave their estate to their kids/Battersea dogs home/or their pet budgie that is entirely up to them.

But you people winge about all forms of taxation.

There is a lobby to get rid of fuel tax. There is a lobby to get rid of stamp duty on share dealing. There is a lobby to get rid of stamp duty on property purchase. There is a constant winging lobby to reduce business tax. There is a lobby to reduce VAT. There is a lobby to reduce income tax.

What the honest consevartive has to tell us is how much you are going to cut in spending, and where those cuts will fall. Then you can tell us what taxes you are going to cut.

51
Can you explain why you feel that a tax should be scrapped, only on the basis that more people are affected by it? It could be argued that income tax and VAT are scrapped simply because there is a growing population who are going to pay.
I do not rant about unearned wealth but attempt to put a rational argument about why it should attract taxation. Yes all people should pay tax on unearned wealth, including the lower paid. Presumably you have missed this, the suggestion was, a capital gains tax paid by the living.

@52 – Sally, you’ve got it the wrong way round. The only justification for taxing anything is that it provides services that the public are willing to pay for. The default position should be that nothing is taxed, and as and when public services are needed taxes are imposed to raise them.
I personally wouldn’t follow the tradional “lets cut x% off this departments budget and y% off that one” I’d look at what all departments actually do, and whether there is a legitimate reason for government to be involved in that activity. What you fail to realise is that government, just like any economic entity, eventually hits a wall which economists call “diminishing marginal returns to factor” which basically means beyond a certain growth point, for every £ that you put in you get progressively less output. Government (as a whole) hit that point at least 5 years ago.

@53 see above – can you explain why it shouldn’t ? You are just making an argument for ever increasing government at ever increasing costs, at what point would you stop taxing, would you wait until the economy goes into reverse because there isn’t enough wealth being generated to support a bloated state ? And how exactly do you propose to tax the unearned wealth of the idle classes – given that what they are receiving is a tax handout anyway ?

54 ” I’d look at what all departments actually do, and whether there is a legitimate reason for government to be involved ”

Cop out!

54
All adults pay tax, whether it be VAT, council tax, tv licence etc. My mother, a pensioner, is one of your ‘idle class’ members I suppose.
Capital gains tax is not new, I am not proposing a new piece of taxation, rather, that those who made a great deal of profit on house purchases, or their decendants who inherited, should pay, These people did not participate in creating economic growth they were merely fortunate. To suggest that taxing those people would create a bloated state or send the economy into reverse is nothing but hyperbole.
Neither would it deter people from purchasing their own homes, who would refuse a large sum of money for nothing because it included a 40 percent tax rate?

@timw

“as to inheritance tax, the best argument against it is the inheritance tax we have now. The rich don’t pay it. Someone owning a modest suburban semi in the SE of England does”

1. Only 6% of estates pay inheritance tax http://www.hmrc.gov.uk/stats/inheritance_tax/table12-3-iht-sept09.pdf. It’s a strange concept of “rich” you have – is the “middle” the top 1% in your opinion?

2. The threshold for inheritance tax is £325,000. What do you define by “a
modest suburban semi in the SE”? Is it the “median”? Because the median value is £190,000 in the SE http://www.nationwide.co.uk/hpi/downloads/Semi_Det.xls. Even if your definition of “modest” stretches to twice the median value to go with
your definition of “middle” you would only pay £22,000 inheritance tax – a tax rate of 5.8% with the family “only” keeping £358,000. However will they cope?

3. Correct me if I’m wrong Tim, but aren’t the best taxes those which distort behaviour least? Most wealth (especially among the upper
middle class who get worried about paying inheritance tax) is owned as housing wealth – something that is heavily favoured by the tax system versus
other consumption and more productive investments as it is. This has shot up in price due to supply being artifically constrained by government intervention through the planning system. The increase in housing wealth is completely unearned (unless you feel all that hard work resisting new devlopment and keeping supply inefficiently deserves some reward?). Surely taxing this rather than, say, income is less distorting and good for the economy?

I’d expect better from you – I thought you would believe that the Government has a duty to tax in less distorting ways.

Round of applause to Matt Munro (#42) for his services as stooge for my posts at #19 and #30. Take a bow, son!

“I might be misunderstanding, but this seems like a completely impossible task to me. Any changes in the tax system will benefit some people, and disadvantage others. For example, if we change the tax system to reduce this ‘desperate and nefarious tax’ then other people have to pay more in tax.”

Yes, some people that should be paying more tax to be equitably paying to the state are not…they do as it happens tend to be rich land owners…that, nor the difficulty in reforming the taxation system, doesn’t make this tax any more justifiable.

“But given the choice (and I don’t see how the choice can be avoided), I think it is a higher priority to reduce taxes on income which people earn through their own efforts, and to help families who, for example, are struggling to afford their rent or mortgage payments or who regularly skip meals because there isn’t enough money for them to buy food for themselves and their children. Wouldn’t you agree?”

No, I don’t think I would, ignoring your obvious loading of the question. Income tax should be reformed, as should many other areas of tax. However taxing a dead person (by proxy) of an amount of money that they have paid tax on to live in, tax on to buy and tax on to earn the money to buy is one tax too far.

The idea that it’s an income for the deceased’s family is not one I abide by because it abandons he principle of family. And I don’t even mean that in the solely traditional sense, people that could purchase goods or services on behalf of another during life should not be penalised by the state for having died before it practically happens.

But then after all it is only poor people that deserve to have someone other than themselves supporting them to reach their relative aspirations…and we all know that society should operate only as high in aspiration as the weakest link in the chain. How dare a bit of a well to do family should have appropriate aspirations for their class, wealth or upbringing. They should instead be aspiring to be able to afford a Tesco shop and any excess cash can go to everyone else, they deserve no more than that, right?

It’s nice to see that your prejudices aren’t something you shy from.

“but aren’t the best taxes those which distort behaviour least?”

Correct, but IHT is hugely distortionary as pointed out upthread. People go to absurd lengths to avoid it (Jimmy Goldsmith was carried, dying, in an ambulance across the Pyrenees to make sure that he didn’t die in France and thus his estate would be subject to French taxation). Now, we might all think that it isn’t distortionary, that it’s the fairest tax and so on (as many do above) but the lengths which people will go to to avoid it show that the public seem not to agree. And that makse it distortionary for people do tie themselves into knots to avoid it.

“This has shot up in price due to supply being artifically constrained by government intervention through the planning system.”

Sure, I regularly rail that we should reform the planning system. It is indeed absurd.

“something that is heavily favoured by the tax system versus
other consumption and more productive investments as it is.”

That’s actually a difficult one to support. We get more of our tax revenue from property than any other OECD country. Something like 11% of the total take comes from property taxes whereas the average is something like 5% (from memory, so don’t shout at me). So given that we tax property more than everyone else does claiming that it is undertaxed is a tough one to sustain.

What most seem to miss is that while there is not tax on profits from a home there are high (relative to others) taxes on the possession of a home. We’re not taxsing the disposals, sure, but we are imposing large carrying costs.

“These people did not participate in creating economic growth they were merely fortunate”.

I disagree, the property market is (or was) a significant engine of economic growth.
People who make money on property often spend at least some of it, and they support a huge industry (estate agents, surveyors, lawyers right down to the pople who actually build the houses). Plus of course the government who take a nice cut from all property transactions.
And if we are going to start penalising people who benefit from “luck” then it’s pretty much everyone in a capitalist system.

@TimW

“Correct, but IHT is hugely distortionary as pointed out upthread. People go to absurd lengths to avoid it (Jimmy Goldsmith was carried, dying, in an ambulance across the Pyrenees to make sure that he didn’t die in France and thus his estate would be subject to French taxation)”

So your argument is that if the super-rich manage to exploit loopholes to avoid a tax we should abolish it?

Tell me, which taxes would we have if this was enacted? Income and business taxes would certainly be out.

Surely it is the impact on work incentives we should we concerned about – and the evidence that inheritance tax damages work incentives is weak.

Are you telling me that abolishing inheritance tax (costing £2.8 billion 2008-09 http://www.hmrc.gov.uk/stats/tax_receipts/table1-2.pdf) and, say, putting the higher rate of income tax up by 3p to recoup the revenue (recouping £0.91 billion per 1p increase) http://www.hmrc.gov.uk/stats/tax_expenditures/table1-6.pdf would reduce distortions in your opinion?

I could agree with you that, say, a poll tax would be less distorting – so abolishing inheritance tax and introducing a flat-rate tax of £47 on every man, woman and child in the UK would be less distorting, provided this is levied on everyone with no exemptions. Is this what you would suggest?

“Sure, I regularly rail that we should reform the planning system. It is indeed absurd.”

What if this is not possible (as the current Government has found – too many people who benefit hugely from this unearned property value gain who live in the marginal seats that win or lose you elections)? Then you are left with a lot of unearned wealth – surely there is a case for Government to recoup this?

“That’s actually a difficult one to support. We get more of our tax revenue from property than any other OECD country. Something like 11% of the total take comes from property taxes whereas the average is something like 5% (from memory, so don’t shout at me). So given that we tax property more than everyone else does claiming that it is undertaxed is a tough one to sustain.”

Surely possible that other OECD countries also under-tax property? Doing so has many political attractions in a democracy where most households are owner-occupiers.

I would argue that housing is under-taxed. Consumption taxes on rent//imputed rent (council tax) are lower than the 15% rate of VAT levied on other goods, and especially low for those in higher bands. Taxes on imputed rent income from owner-occupied housing are nil – compared to taxes of 20%/40% on savings and income from shares. Taxes on capital gains from owner-occupied housing are nil – compared to taxes levied on capital gains from shares of 18%.

And reform to make it better is possible even keeping tax-take constant, Simply do the following while adjusting the rates to maintain revenue neutrality. Which neo-classical economist could disagree (unless the economic principles are only valid if they are winners)?

* Abolish stamp duty (it’s plainly massively distorting).
* Make council tax a proper tax on housing consumption equialent to VAT that is levied at a flat-rate of acual property value (proxying for imputed rent)
* Levy taxes on capital gains on housing at the same rate as capital gains of other investments (to avoid distorting investment decisions)

But – in the absence of this – the under-taxation of property gives an additional reason why inheritance tax is a good thing

61
As I have already pointed-out, those people who made massive amounts on property did not do so with any conscious intention of stimulating economic growth, your argument is a strawman. I do not support capitalism, but even those who do justify profit, do so by arguing that it is a gamble, therefore, such gambles should be rewarded.
But returning to profit on property, (I don’t mean commercial property developers) who should pay tax on those profits, why should those who did so by accident be excluded from tax.?
Finding that you have accidently made a large amount as a house-owner, or you have inheritted a large amount from someone, whose house increased considerably in value. is surely fortunate.
Imagine opening the door to great uncle Henry, who has decided to sell-up and give you all his fortune, how annoying to find that 40 per cent has been paid in tax.

“did not do so with any conscious intention of stimulating economic growth”

Erm, you’ve rather missed a point. No one, ever “intends to stimulate economic growth”. They look out for their own self interest: sell pears, buy peaches, buy a house to live in, start a company to make a profit.

Economic growth is the side effect of these self interested actions.

@timw

“Erm, you’ve rather missed a point. No one, ever “intends to stimulate economic growth”

Aren’t you missing the point?

I agree with you that in general this is likely to be true, provided a number of assumptions hold (perfect information, competition rather than oligopoly, no externalities, no tax distortions etc). And that where they do not hold the preferable response is regulation (ideally using institutional arrangements that allow market forces to operate if such a system could be effective and isn’t too expensive).

But housing is a long way from this. There are clearly distortions in the system that caused the housing boom. This is not wealth
creation – the “wealth” is a transfer of resources from poor to wealthy, with a lot of waste to estate agents etc. The tax distortions clearly distort prople’s behaviour from investing in productive things (like investment in industry) to unproductive things like property speculation and home extensions.

Remove the distortions and I’d be with
you. But you cannot seriously argue that the previous housing boom was “wealth creation”. Maybe you weren’t and I misunderstood the narrow “laugh at the economically illiterate lefties” point?

Sirs, the arguments about inheritance tax will rage forever and a day. However, it is worth noting that any inherited money “works for society” at some point in time. Whether that comes from educating children in a private school is immaterial. Their education will enable them to give back to society. In terms of the example of an army person given, they contributed to the safety of the nation and anything gained as a result should not be begrudged.
Inheritance tax is totally unfair. It is for one a tax aimed at a minority. The minority may not be prejudiced historically in the same way in which religious, ethnic and gender legislation has been formulated to protect – but they are nonetheless a minority and should be free from persecution simply because they are financially successful.
If people really want to be fair about these things then they should consider everyone being treated the same.
So for instance, a person dies, their family lives with the support of benefits. The house left to them is worth 80,000 including assets. Would they be willing to pay an inheritance tax on what they were bequethed?
It’s kind of funny, in a tragic way, how we always begrudge someone their success. However this person could just have easily been a factory owner who by their careful endeavours ensured hundreds of people had a job. Or a man (or woman) who laid down their life for our country. Or an entrepeneur who’s business acumen contributed so much to the lives of others.
If people want inheritance tax to stay then at least make it fair. Apply it to everyone. That way it will not discriminate and no one can be accused of bias.
The old value of inheritance taxation from the days of oliver cromwell when people lived off the backs of others without contributing anything back are long gone. So too should be the prejudices that the era spawned.
There are people who are undeserving of a free ride at the other end of the work / life spectrum who make no attempt to get off the welfare benefit system that they exploit. These people make no real contribution to society yet cost everyone who pays tax an arm and a leg.
That’s the real cost of inheritance. Inheriting a society that accepts a workshy scrounging culture, whilst penalising those that give their all.
For those who did not see the article on Stephen Byers a few years back, Alistair Darling commented that Inheritance Tax brings in about £3.2Billion a year and was fair and not money we could afford to give away. Funny that. When this government just bailed the banks out for £87Billion and have borrowed £176Billion to help rescue the economy, whilst guaranteeing a national debt for the next 10 years (if we are lucky).
I suppose that inheritance tax must be really important to ensure all those workshy scroungers are looked after while the rest of us have to work twice as hard for half as much.
People should challenge and comment on the way our society is run. A bit of colour in the overall picture might help though.

66
I agree that all people should pay IT.and as I have already pointed-out, all people should pay capital gains tax on profit made from houses, why should it be that only commercial property developers pay tax, it’s quite illogical to believe that accidental profit makers should be immune.
IT may benefit society in some way, but the tax from IT WILL benefit society. We all pay tax througout our lives (even people on benefits) so why single out any individual or group and argue that because of this they should be immune from IT?
You mention the ‘workshy’, whoever they may be – does this include the seriously disabled soldiers sent to an illegal war?, or the families of dead soldiers who have been thrown out of their homes by the MOD? Taxation of the better-off is designed to assist those people’
But I probably agree with you in many ways, taxation taken from the rich, actually plasters over the deep inequalities in our society, it might be better to give nothing to all of those hard-working people who have lost their jobs becaus of the inept handling of the financial sector by greedy bankers. Perhaps when the stark reality of the circumstances they find themselves in. compared to those who created the problems, become clear, the system will changed.

Nick Grady, surely Inheritance Tax does apply to all? I mean, there is a certain amount in the beginning which is tax free.

Although I agree with your sentiments a lot, I think if you carry this argument forward and suggest the tax should start at £1 instead of £350,000 or whatever, then surely it is only fair to apply the same rules to income tax? And have everybody pay income tax on any earnings over £1 a year?

Your own arguments that passing wealth down encourages thrift is a good one though.

Correction. we do have a tax system that applies to all already. It’s called VAT.
We also have excise duty which applies to fuel, beer, cigarettes etc and imports. Any guess as to how much of our everyday lives we import?
Our savings are taxed, our pensions are taxed, our benefits are taxed (NI contributions are deducted before you get them).
Anyway enough of the frivolity over some things that will never change.
But a tax on death!!!! surely that’s just a tad morally reprehensible.

People don’t get wealthy from sitting on their arses (unless you win the lottery) But how many people can just sit on their arse and not pay taxes – as you see from my opening – it’s just not possible not to.

Question is – at what point does your contribution become enough? And that is the problem with socialism (or ‘democracy’ as New Labour is fond of calling it). You have to deprive someone of something to give to someone else (That’s probably why the old USSR had the world’s largest black market economy – it was the only way to be successful and have a chance of keeping some of it). Under Labour the more you’ve got the more you pay.

This government is so bankrupt of ideas that it’s latest wheeze is to include associated charity’s finances in NHS accounting. No doubt a wheeze to publish an ‘expenditure saving figure’ somewhere. If there is one thing this government has never failed on – it’s creative accounting – they make the ‘Masters of the Universe’ in the city look like Robin Hood and his band of merry men.

Anyway. dug these figures up. Thought all of you might like to read them.

Thanks to those that have replied. I have done a bit of research. Complicated to say the least and far from being a tax on the rich that Gordon Brown and his cohorts would have us believe.

As this article explains, people on more modest incomes who give “gifts” are, for taxation purposes still taxable in death if their assets including gifts added together, going back 7 years and meet the threshhold.

http://www.hmrc.gov.uk/manuals/IHTmanual/ihtm04010.htm

This is why Inheritance Tax (IHT) is so unfair as compared to Capital Transfer Tax (CTT).
An article here is also noteworthy

http://business.timesonline.co.uk/tol/business/law/article2473399.ece

and explains further the unholy unfairness of the present system.

A few facts.

1914-1946 Estate (or death duty) was £100
1946-1972 the levels were raised at unequal intervals to £15,000
1975-1985 It became Capital Transfer Tax and rose to £67,000

In 1986 under Mrs Thatcher – it became the system that applies now (but see below about GBrown).
1986-1992 rose to £150,000
1992-1997 rose to £215,000
1997-2010 rose to £325,000

Tax transfer and “Trust” rules allow for transfer of property value and deferment of value. But civil partnerships are not recognised for Tax purposes and one case is currently before the European Court.

Upto 1985 the only real asset of tax was one of property in the sense of building.
After that it emcompassed a little more in way of asset value. Gordon Brown widened the range (to include everything) including gifts 7 years prior to death in which calculation could be done to arrive at Nett value for taxation purposes (many people including myself are bitterly opposed to this “look back” period since it applies to gifts for which there are already separate taxation laws and threshholds (so why apply secondary taxation in death).

House prices as a national average moved:
1952 £2,107
1959 £2,560
1969 £4,848
1979 £26,124
1989 £71,515
1999 £86,141
2009 £163,534

From the above it can be seen that for property the limits have risen in line with twice the average property market value for nearly 50 years (it was raised to £10,000 in 1969)

The real unfairness is that the system now applies to everything. Savings, pension transfer value, stocks and shares, all household property from paintings and heirlooms down to the kettle and clothes on your back. So the threshholds have depreciated in real terms. For some people the property may not even be the most valuable asset.

Lets say for instance you are a stamp collector in business. Worked all your life paid all your taxes. Your son inherits and decides he wants to keep the stamps as an heirloom. What do you think his chances are under the present system?

Or what about that picture that’s been handed down through the family, you know – the rare one by some well known artist. It could be a valuable antique that you’ve always admired and never gave a second thought to. Now are you getting the picture. Tax on the wealthy?… kiss my ****

And not to put to fine a point on things, there are at present over 1 million households in this country which qualify for tax purposes. (assumed from an average survey of 29000 properties, done recently.) So it’s not just hitting the wealthy but most of middle britain and some of the working class who have ‘made it’.

An Inheritance Tax it most certainly is not.
It’s a success and thrift tax. (and in heirlooms a tax on your birthright). Make a life for yourself getting by with no propensity to make it good or better yourself to any large degree and the state will give you a whole range of benefits for your trouble.
Dare to want to have more and guess what… there’s no escape from your ‘uncle Gordon’.

Don’t think it can be any clearer than that.

For those who think fair enough that’s how it should be, think on this.

Levelling the playing field is the doctrine of socialism, but more easily defines a communist state.
If you keep persecuting people for wanting to be better, wanting to make more of themselves, what happens when they get sick of it. Who’s going to run our businesses, who’s going to want to lead us, what’s the point of holding any high office or position of well paid responsibility? Where does the aspiration to drive oneself for the betterment of society go. What good will a better education do for instance?

People really should read George Orwell (amongst others) (or perhaps asimov’s science fiction work “Earth and Foundation” series.) Same thing different time sphere – but describing exactly what we are seeing today.

The Conservatives have seen the danger to our present taxation systems. It’s turning us all into grey non-entities, where our everyday lives starts when the alarm clock on the CCTV outside our house signalling it’s time to get up, all through our “big brother watching out for you day” to when we go back to bed – safe in the knowledge that we don’t have to worry about freedom anymore because the state has turned us all into clockwork sheep.

As for those working or non-working I referred to in an earlier post. Think on this. When people do get fed up and give up. Whose going to fund your benefit culture then. Didn’t think about that one I bet.

Now for me – a country based on a solid manufacturing and self supporting base. Creating wealth for all, lowering taxation and promoting people to value themselves and the contribution they can give to society. A society that is self-reliant enough not to penalise success, that in turn drives people to succeed and thereto support those around them. Now that’s somewhere I want to live.
But it ain’t here, not today, not tomorrow and certainly not under a labour government. They bankrupted the country under Callaghan (any one remember the winter of discontent when even the dead couldn’t get buried?) and we’re nearly bankrupt again under Brown. Some things never change.
It’s always the same. When a country’s under-performing success becomes a penalty.
A penalty caused by bad management by a bad government that has not got a clue, so tries to buy as many votes as it can in the forlorn hope that something will turn up.
(When I say bad government, I do mean ALL of them – Parliament Today’s website where you can watch any parliamentry session at your leisure makes some of the best comedy I have ever seen and all for a fraction of what they pay that ignorant Jonathan Ross. But since the Labour party spends most of it’s time insulting people’s intelligence, no surprises there).

PS. Ironically, I voted Labour for their first 2 terms but stayed at home for the 3rd. I went through the GDP and CAPEX reports in 2005/2006 and they were terrible even then. I know people really want Labour to be our saviours – but trust me it will never happen under the dictatorship of Brown. He’s f****d up but would love the chance to be our saviour. But it’s the same old record going round and round. Personally I don’t think DC has the fire to rescue us, (though I would love to be proved wrong) I don’t care which party leads. As long as they do (lead) and their policies make sense and benefit our country.
If only there was a Maggie T type out there……….. oh well! One can dream…. at least the government hasn’t got a tax for that yet.