October 01, 2007

Conservative conference – Inheritence Tax

The Conservatives tried to grab headlines today to support their flagging pre-election campaign through, primarily ‘aspiration taxes’ (inheritance tax to you and me).

It is very easy to get into arguments about the moral standing of taxing the estates of the deceased, and one that isn’t easily finished. To me, it’s the prime example of where taxes should be used, but that’s beside my main point.

Instead of waffling on about how the government is taking advantage of the hard-working ‘middle englander’ and how the Conservative will come to the rescue, we should tell it how it is. This would be a tax cut for the top 6% most priveleged members of our society.

It is no good talking of how increasing house prices will mean Joe Public will now be facing a charge, since this is simply not the case. The housing boom has near enough peaked, in some areas starting to reverse, and still only 6% of estates pay the taxes.

If the people to whom inheritance tax is a travesty against hard work accepts this reality, I am very willing to have a discussion, but otherwise there is not much point.


- 15 comments by 1 or more people Not publicly viewable

[Skip to the latest comment]
  1. The Republicans in the US are using the same intellectual dishonesty to try to scrap inheritance tax over there as well (although if I recall correctly, the thresholds there are even higher and property values lower so even fewer people pay it).

    01 Oct 2007, 13:57

  2. well, it’ll be a slight tax cut, they’re not getting rid of the tax all together, just raising it to £1million… That means that a lot more people will avoid it all together who we wouldn’t call “super rich” (and indeed many people who we wouldn’t call rich get hit by it as well). Still, for your average billionaire very little will change.

    I happen to think that inheritance tax is a good idea (though I think it should be at about 100%, with some caveats for spouses and young children), but it’s important to note that a lot of people (rightly or wrongly) don’t like it. It seems hard to maintain that we should be living in a democracy and yet be prepared to ride over the will of a significant section of society (I suggest more than 50% of voters).

    Don’t forget anyway, Brown is doing the same thing (although to a slightly lesser extent).

    The amounts of money we are talking about anyway are actually pretty low – about £3.5billion per annum. Which isn’t really a lot if it makes a significant amount of people happier than they are now, and doesn’t seem enough to ride over a democratic will.

    01 Oct 2007, 16:56

  3. I happen to think that inheritance tax is a good idea (though I think it should be at about 100%, with some caveats for spouses and young children)

    What? I have no idea how you think that would be workable.

    It seems hard to maintain that we should be living in a democracy and yet be prepared to ride over the will of a significant section of society (I suggest more than 50% of voters).

    Do you mean that more than 50% of voters are for taxing beneficiaries 100%?

    01 Oct 2007, 18:21

  4. Hamid, I meant that over 50% of voters would vote for reduced inheritance tax, or perhaps none at all.

    I think personally that 100% could be workable and would be a pretty good way of raising revenue, even if it does encourage more spending in life then it would also increase tax revenue because of increased employment for people producing goods, and for people selling goods (which generates income tax), not to mention VAT, companies tax, etc. Although I suspect that a lot of people would continue to live as they do now and the tax would generate a fair bit of money to pay for better public services. People might even see it as a nice way of giving back to the country (without which, of course, they would have no education nor security anyway). Also because the earth belongs to the living (perhaps just in usufruct but we won’t discuss that here…) then we can quite legitimately tax the dead’s property away.

    01 Oct 2007, 18:48

  5. For those without a comprehensive knowledge of legalese:

    Usufruct is the legal right to use and derive profit or benefit from property that belongs to another person, as long as the property is not damaged. In many legal systems of property, buyers of property may only purchase the usufruct of the property. (curtesy of Wikipedia, fountain of all knowledge)

    01 Oct 2007, 19:15

  6. In defence of the tax we need to look at the practicalities of the issue. For instance in a blog article I wrote on this topic a little more then a year ago I cited the following statistics: People with estates of over £2M accounts for on 19% of the revenue collected by the tax, while estates worth less then £500,000 account for 71% of the people paying this tax and 25% of the revenue collected.

    These statistics seems to imply that, in effect, these taxes are fighting against the forming of an [upper] middle class. The moderate income people don’t have to pay it while the very rich can escape it, thus leaving those in the middle being taxed. The long run consequences of this is that a class of lesser millionaires (e.g. families with £1M-£2M) is unlikely to develop in this country. This isn’t good as they can act as a bridge between the moderately wealthy and the very rich, their presence could sustain institutions that would stop these two classes of people being alienated from each other (with alienation being bad as it could then lead to unproductive class warfare).

    02 Oct 2007, 10:35

  7. Tories tax?

    With respect inheritance tax under this government has gone up as a stealth tax. Instead of re-evaluating the tax level against inflation rates in the housing markets, GB has let the 300,000 threshold stay.

    This means that most peoples’ homes are at risk of entering the tax bracket. For the super-rich there are ways and means but for the middle classes and those who have aspirations to pass hard work on to their children there is no choice but to pay.

    Scraping the tax eleviates this burden and allows for people to get a better start oif they have worked hard to pay off their mortgages.

    The question should not be about whether it is right to reduce the inheritance burden but whether this cut can be afforded. It’s false economy to suggest that the top 6% will benefit – the super rich under labour certainly have not got poorer and those within that bracket can afford to hire expensive lawyers and accountants to hide their capital. Any reduction will have to be met with increases elsewhere if services aren’t to be cut. The tories have proposed reduction in personal tax and potentially an increase in green taxes.

    It is rather naive to suggest such an important political party had not balanced the books on this issue and that such a reduction would not be popular amongst the electorate,.

    02 Oct 2007, 11:08

  8. I don’t even know where to start with what Johnathon Rose is saying in his two comment. Someone with too much tiome on their hands can take that job, please? I hope it’s trolling, is what I will say.

    02 Oct 2007, 17:15

  9. RE: anonymous post 7

    FYI the threshold has not remained at 300,000, but increased recently to that amount, and also with further plans to increase it to 350,000 by 2010, which, by my calculations is 5.3% a year (in anybody’s books this is currently a reasonable return on a large portfolio of assets).

    Yes it hasn’t gone up at the same rate as house prices, but in my view this is a tax on the distortion of asset wealth. Higher house prices = higher asset wealth = higher distortion. Yes increase the threshold in line in inflation (the planned increases are in fact well above expected inflation), but increasing it inline with asset prices just doesn’t make any sense.

    02 Oct 2007, 19:03

  10. oh, and also, “most people” do not have houses, never mind estates worth over 300k, and priveleged children of the middle classes have not “worked hard” to pay off their parents mortgage. Perhaps we should filter the estates of the upper/middle classes down the real “hard working” children who grow up in care homes, have abusive parents or are forced to attend to attend inner city schools were acedemic achievement is met with ridicule and violence by their peers.

    02 Oct 2007, 19:11

  11. Tories tax?

    You admit then that it didn’t go in line with the rate of house price inflation. This means you are always going to have more people falling into the bracket.

    What you say about ‘distortion’ and asset wealth is nothing but a cover for saying you don’t like the fact that some people have more than others. If you were to follow your line of thought about having a reasonable tax on those ‘priveleged’ then you would agree that a fair tax here would be one in line with the inflation of house prices – the same people pay the same money. Fact is you don’t.

    Alone as a tax the cost would not be too burdensome but it is the context of a high tax, high spend Labour policy squeesing hard working families which does nothing more than add fuel to the bonfire of costs.

    Asserting the idea that middle class households at risk of being hit by the 300,000 rate, and highlighting the plight of those wishing to pass on their assets for future generations to enjoy is not the same as not being concern for the welfare of others. It’s stretching the meaning of the argument beyond its context – reduction to the absurd.

    02 Oct 2007, 20:26

  12. “If you were to follow your line of thought about having a reasonable tax on those ‘priveleged’ then you would agree that a fair tax here would be one in line with the inflation of house prices – the same people pay the same money. Fact is you don’t.”

    That’s actually your line of thought not mine. If you look at my comment, I argue that, in the current scenario of hugely over-inflated house prices, generating massive asset inequality, having a tax designed to address this moving in line with house price inflation would be ridiculous.

    “Alone as a tax the cost would not be too burdensome but it is the context of a high tax, high spend Labour policy squeesing[sic] hard working families which does nothing more than add fuel to the bonfire of costs.”

    This is a standard Tory catchphrase style argument that I can never really understand. Who are these “hard-working families”, and why do double income households always take precedance in conservative thought?

    I’m not actually arguing against your opposition to tax-and-spend since that would take hours. I’m a socialist you seem to be a conservative… I don’t think there is much need to go further.

    03 Oct 2007, 08:34

  13. Ian

    Your comment 10 is absurd, I think there are far more people in the country that do have houses worth over 300k than were abused by parents and grew up in care homes!!

    The whole point of inheritance tax, when it was introduced, was that is was supposed to be a tax on the very rich whose wealth had been passed on from generation to generation. With the current limit, this is no longer the case. It is now a tax on people who have worked hard all their lives, saved some money and want to do the best for their children.

    It absolutely must move in line with house price inflation, since this is the only asset that most people have to pass on, and house prices are now about 3 times what they were 10 years ago.

    For example, my brother is an electrician (he left school at 16 and did an apprenticeship, is now 35). He brought his first house with a 70k mortgage, and due to the house price rises, now has a house worth £250k, but never increased his mortgage. In 5 years, he will have paid off his mortgage. Hence with over 25 years of his working life left, he is rapidly approaching the 300k mark – I don’t think this is the type of person inheritance tax is aimed at!!

    03 Oct 2007, 10:30

  14. Mmmm I’m not really up with the law on Taxation but I’m guessing that your brother can escape the tax either by declaring his first house the marital home (and therefore passing into possession of his wife on death) or by setting up a trust with his wife/you as trustee for his kids.

    03 Oct 2007, 10:59

  15. Ian

    Kinda made a good point for me there, in that there are so many holes in the law as it stands, many people (especially the richest) can avoid paying the tax, whereas other people who can’t hire expensive lawyers get screwed out of their hard earned money, which they have already paid tax on once (when earning it!!!!!!)

    I think there are much fairer ways to tax the really rich, whilst still providing incentives for normal people to work hard and save some money.

    03 Oct 2007, 11:28


Add a comment

You are not allowed to comment on this entry as it has restricted commenting permissions.

Our Society

This is the blog of the International Current Affairs Society at Warwick. Any member can contribute, and anybody at all can comment on the entries.

Please see the ‘About Us’ link to find out more information about what we do.

October 2007

Mo Tu We Th Fr Sa Su
Sep |  Today  | Nov
1 2 3 4 5 6 7
8 9 10 11 12 13 14
15 16 17 18 19 20 21
22 23 24 25 26 27 28
29 30 31            

Search this blog

Blog archive

Loading…

Most recent comments

  • Perhaps the monitors were paid more because they would need to be relatively strong and smart. If yo… by on this entry
  • these 'firms' would hire a 16th man, who would typically be paid more then the others It would inte… by on this entry
  • Many one–way systems in this country have been designed with only motorists in mind. In countries su… by on this entry
  • I think the funniest thing about this was boris johson's responce. When asked what he thought he sai… by Scott on this entry
  • all part of getting rid of the small farmers independence. example, USA 1930's. on my travels, i not… by cal on this entry

Tags

Tracker

Not signed in
Sign in

Powered by BlogBuilder
© MMXIX