We are developing the social individualist meta-context for the future. From the very serious to the extremely frivolous... lets see what is on the mind of the Samizdata people.
Samizdata, derived from Samizdat /n. - a system of clandestine publication of banned literature in the USSR [Russ.,= self-publishing house]
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Samizdata quote of the day Inheritance taxes are of course loved by Jacobins of various hues, or by those well-meaning folk who imagine that we have to recreate an economic ‘level-playing field’ with each new generation. On that basis, it is more meritorious for a person to gamble away his millions than to give it to his children or friends. How perverse is that?
– Johnathan Pearce
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Who Are We? The Samizdata people are a bunch of sinister and heavily armed globalist illuminati who seek to infect the entire world with the values of personal liberty and several property. Amongst our many crimes is a sense of humour and the intermittent use of British spelling.
We are also a varied group made up of social individualists, classical liberals, whigs, libertarians, extropians, futurists, ‘Porcupines’, Karl Popper fetishists, recovering neo-conservatives, crazed Ayn Rand worshipers, over-caffeinated Virginia Postrel devotees, witty Frédéric Bastiat wannabes, cypherpunks, minarchists, kritarchists and wild-eyed anarcho-capitalists from Britain, North America, Australia and Europe.
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I think it’s perverse that the income tax-funded welfare state gives millions of retirees the ability to force society to fund their livelihoods, despite the fact that they have an enormous amount of capital locked up in bricks and mortar that they could quite easily draw upon to support themselves in their twilight years.
In principle, I am against inheritance tax, however – in the current unhappy context we find ourselves in – I’d rather a heavy inheritance tax and a light income tax. If we must have overbearing taxation, I’d prefer a system that incentivizes people to be less dependent on the resources of the state than more. I cannot understand why the idea of an inheritance tax, out of all the government imposts, is such an anathema for liberals – it’s better than most of the alternatives. With the current arrangement, we have the bizarre outcome of taxpayers subsidising the inheritance of the next generation.
Well, I am arguing both against the principle of inheritance tax – which is usually nothing more than a policy driven by envy posing as justice – and inheritance tax in principle. The idea that a person cannot bestow what they have earned on their descendants because it violates some social engineer’s view of how the world should work is monstrous.
Of course we should have a tax code that incentivises people to be less dependent on the state. So how does the forcing of elderly people from their own homes to pay an inheritance tax bill fit with that? How does the destruction of family businesses to avoid the impost of inheritance tax do that?
If we are going to argue over a choice of evils, I would clearly cut income taxes first, but the idea that we should cut one and raise the other is not acceptable if you believe that people are entitled to build up wealth not just for their own immediate use, but for that of future generations. It is a mark of civilisation that people and their families build for the long-term and not just the short-run.
Sorry James, but on this occasion, I cannot agree with your reasoning at all.
Inheretance tax is perhaps even more pernicious than Johnathan indicates. If it were at a 100% rate (confiscation) it would indeed make sense for someone to simply gamble it away. However, at any lower rate it simply forces a couple to save even harder if they wish to leave something worthwhile to their offspring. This problem is greatly magnified if they wish to leave a family home (valued above the threashold) to their children – for every £ above the threashold they have also to save cash to pay the tax, or the home has to be sold instead.
Indeed – the income tax is easily more economically pernicious and iniquitous than inheritance tax, and bears direct responsibility for the size of government reaching such presently towering levels.
How come tories (and some libertarians) are so keen to take to the barricades over, say, a single digit inheritance tax, yet will basically cop a 40%+ top marginal income tax without so much as a murmur? The disproportionate attention paid to the former is not rational.
I can almost understand 70 year old tories having a quasi-religious attachment to inherited wealth, along with an objectively socialist attitude to people who actually work for a living, but I am mystified that anyone else would share these biases.
Jeez James you still havent got this one yet have you?
Do the sums, like I said on an earlier thread.
fifty Million people, or there abouts, work and pay income tax, sales tax, VAT etc.
Around 600,000 die each year. And most of those wont be subject to the tax.
I repeat. Our Socialist Kleptocracy needs every penny it can get. The Labour party may well be declared bankrupt in the next month or so. If they cant run the petty cash (relatively speaking) of the Labour party, what the hell are they doing on a nationwide scale??!!
No, the Tax is an old Labour piece of spite, designed to smash the Tory landed rich in the fifties, which currently only raises about three billion. The same amount we lose to housing benefit fraud etc etc or the amount Blair tossed back to Brussels in a “OH go on then have a bit more budget money”
The pain and disruption to our national fabric caused by this tax, is out of all proportion to its income benefit to the state.
But that was always the point of it.
“Inheretance tax is perhaps even more pernicious than Johnathan indicates. If it were at a 100% rate (confiscation) it would indeed make sense for someone to simply gamble it away. However, at any lower rate it simply forces a couple to save even harder if they wish to leave something worthwhile to their offspring.”
I was under the impression that a high national savings/investment rate was positively correlated with economic growth (the most important economic indicator in my opinion). Ergo, things that increase the national propensity to save are generally beneficial, not harmful. Any economists care to comment?
RAB, I could not agree more. I was just pointing to what I thought, on the face of it, is the absurdity of a world-view that says consumption in the short run is somehow okay, but building up wealth for children, grandchildren, or whatever, is somehow evil.
There is also a streak of puritanism in all this, mixed up with the guilt of an affluent middle class infected with socialism. Such people have often been the biggest supporters – at least in public – for death duties (in practice, such folk are as adept as anyone at using offshore bank accounts).
I must say that much of my hatred of inheritance tax is not driven by the economics, but by my revulsion at what this tax represents: contempt for the wishes of the dead, and an assumption that a person’s wealth falls forfeit to the State.
On social engineering:
Yes, most social engineers do end up being left-wing nutjub asses; however, consider this hypothetical example:
In one hour, everyone in your country is about to shoot themselves in the face. Mohammad springs from the ground and uncharacteristically offers you the opportunity to prevent these people from shooting themselves in the face; what do you do?
Personally, I would save them all, not necessarily because I have much love for them, because I do not (though I would for some, and I do derive some enjoyment from the existance of some as well), but because as the lone survivor, I would be unable to fend off any DPRK, PRC, or jihadi attack. Whether you are willing to admit it or not, we are all bound together by some sort of collective which ensures our individualism and continued individualist existance; if that collective commits suicide, we as individuals die with it (barring fleeing to another country, but if most western countries commit suicide, there is not much choice).
If you answered yes to Mohammad’s question, then you may be in favour of social engineering. If (for the sake of argument) certain societal factors lead to the widespread production of Paris Hiltons, anarchists, and Marxists (all suicidal), would it not make sense to attempt to remove these societal factors? Furthermore, if you oppose social engineering, you may be mistaken that that choice will lead to no social engineering occuring; however, it is quite obvious that other factions are actively engaging in social engineering, so by refusing to do so yourself, you are not stopping social engineering, but rather allowing others to reach their own social engineering goals unhindered. Thoughts?
SteveEdwards, I dunno how long you have been reading this blog, but I can assure you that our hatred of taxes is across the board. I certainly will “murmur” about current income tax rates, and other contributors to this and other libertarian blogs have done so, such as over the issue of the so-called “Flat Tax” championed by the Adam Smith Institute.
Inheritance tax bugs me on a personal level because my parents will probably have to leave their home of many years. Having been successful businessfolk all their lives and having paid a huge whack in taxes, that grates.
“I must say that much of my hatred of inheritance tax is not driven by the economics, but by my revulsion at what this tax represents: contempt for the wishes of the dead, and an assumption that a person’s wealth falls forfeit to the State. ”
Is any other sort of tax not instead contempt for the wishes of the living? Given the choice between the wishes of the living and the wishes of the dead, I would sooner dishonour the wishes of the dead, rather than vice versa.
As for a death tax “I must say that much of my hatred of inheritance tax is not driven by the economics, but by my revulsion at what this tax represents: contempt for the wishes of the dead, and an assumption that a person’s wealth falls forfeit to the State. ”
Is any other sort of tax not instead contempt for the wishes of the living? Given the choice between the wishes of the living and the wishes of the dead, I would sooner dishonour the wishes of the dead, rather than vice versa.
As for a death tax < 100% (which actually worked), it would not actually prevent the transfer of wealth from one generation to another, but rather make it more difficult. Those two things are completely different. Furthermore, while I do not personally wish to see the disintegration of the family unit, it could be argued that an extremely high death tax and attempts to do so are merely attempts at ultra-individualism, where the collectivist entities known as "families" are destroyed. Thoughts?
“Inheritance tax bugs me on a personal level because my parents will probably have to leave their home of many years. Having been successful businessfolk all their lives and having paid a huge whack in taxes, that grates.”
If the fact that they already paid a highe whack in taxes bugs you, you could also approach the problem from the other end: oppose the “huge whack in taxes” that people are forced to pay before death. How exactly does the inheritance tax force living people to leave their house (I am not familiar with the actual implementation thereof)?
I just had a thought: Assume that income and consumption taxes were reduced, while the death tax was not. People would then be able to make more money while alive (lower costs for consumers, higher revenue for producers depending upon the elasticity of the demand curve). Therefore, even if the government still took the same % death tax as before, the next generation could actually be left with more $ due to an increased productivity of the parents while alive. This is all hypothetical of course, but still… Thoughts?
There are several insightful comments and debate on the same subject in the thread from which the original quote was taken.
I’m very happy to make a pact with the state: they are welcome to all my possessions upon my death in exchange for a lifelong exemption from income tax.
Seriously, although it costs more in admin, a wide distribution of different taxes, including inheritance tax, is the fairest way the bastards can steal our money.
Our Socialist Kleptocracy needs every penny it can get. The Labour party may well be declared bankrupt in the next month or so.
No doubt why the situation remains that money left to your children can be taxed at 40% while UK political parties have the status of “Exempt beneficiaries” and can receive the goodies tax free……
This problem is greatly magnified if they wish to leave a family home (valued above the threashold) to their children – for every £ above the threashold they have also to save cash to pay the tax, or the home has to be sold instead.
It’s worse than that. Because in Britain neither cash in the estate nor the sale of inherited assets pays the tax. The tax must be paid before probate is granted, which means most of those subject to the tax now have to borrow large amounts and pay appropriate interest in addition to any tax. … Another way the tax bears less heavily on the rich.
Why that rule survives, save to satisfy the cruelty and suspicion of HM Customs and Revenue, I cannot understand – particularly since lifetime gifts remain taxable but unfrozen. (… Another way the tax bears less heavily on the rich.) Surely it should be an open goal to any Chancellor courting popularity.
And it is not just children who may find themselves homeless. Anyone living in property they share with its owner is at risk unless they are the spouse or registered partner.
Lock him up in a lunatic asylum, obviously.
Get real you hi-faluting prats!
Instead of tossing around abstract arguments which go nowhere, consider the actuality.
Inheritance tax was ‘reformed’ in the late 1890s to take large sums from the estates of mega-rich landowners – and diminish their political influence at the same time.
Modern IHT is a different matter altogether, as Mr Brown has grasped brilliantly. It’s a sure-fire means of raising ever-increasing tax revenue by ripping off the middle class and the aspiring middle class, particularly in southern England.
The treasury makes great play of the allegedly small number of estates liable for IHT. What the treasury does not mention is the huge number of (not particularly wealthy) people who will be very soon be sucked into the IHT bracket because of the Chancellor’s refusal to increase the IHT threshold in line with property price rises.
My mother has a semi-detached in Kent – bequeathed by my father – plus some modest savings. She was a secretary. He was a van driver. Neither could possibly be considered ‘rich bastards.’ Neither ever paid tax at more than the basic rate.
But the total of my mother’s estate slightly passes Mr Brown’s limits, therefore it will be liable to tax at 40% over the IHT threshold.
(Remember: my parents paid tax on their incomes and were taxed again on the interest from any investments they made. A fine way to reward saving and ‘prudence’ indeed.)
This story will be repeated over and over again in southern England during the coming years.
Indeed, you may feel that the Chancellor has decided that, as the southern English largely don’t vote Labour anyway, he’s safe in raiding our wallets with a ever-increasing tax on death.
As a former colleague, a local government expert, said to me last weekend: “Inheritance tax was meant to catch people like the Duke of Norfolk, not the likes of your mum.” Quite.
Meanwhile, I have reluctantly become accquainted with the way the tax works. In my naivete – as a working class lad made good – I had assumed that the Revenue took its cut from the deceased’s estate, then released the rest.
That’s wrong, of course. You have to pay the Revenue before they’ll release the estate, even if you have to sell the family home/take out considerable loans/virtually bankrupt yourself/ in the process.
As ever, the very rich will avoid IHT by the use of very clever schemes devised by very clever lawyers and accountants.
Meanwhile, folks like my parents – who worked like crazy to build a better life for themselves and their children – will be penalised.
How typical of New Labour, whose approach to IHt is symptomatic of an overweeing attitude. The treasury encourages welfare dependency and/or dependency on the state, in its northen,Scottish and Welsh heartlands. At the same time, it clobbers the provident, the prudent and those who who want to improve themselves.
That’s what this debate should be about.
Well in fact that pretty much is a major part of the ‘our’ position on the issue (in so far as Samizdata has positions on things). IHT is utterly pernicious even from a utilitarian perspective.
The primary purpose of significant inheritance taxes is to give collectives (unions, corporations, political parties, governments) an advantage over individuals by compelling individuals to start from scratch while collectives grow in perpetuity.
The income derived is superficial. It’s about social engineering in its most elemental form.
The inheritance or estate or death tax debate never leads anywhere. Everything is just based on emotion.
To expect agreement on what is ‘fair’ is fantasy.
The tax, whatever it is called, is a tax on the transfer of wealth. Income taxes and capital gains taxes are also taxes on the transfer of wealth.
So the government is really just deciding which people will pay dearly when they acquire wealth, and which are to pay little or nothing.
To me the wishes of the dead mean nothing in regard to taxation. I am sure my departed mother didn’t want me to be taxed for anything the rest of my life.
Three points:
1.) I don’t know what the situation is in the UK, but I believe that in the USA it costs the IRS $3 to collect every $1 due in inheritance taxes.
2.) Most of the truly rich have long since hidden their wealth in trusts and whatever, well-shielded from the IRS. So the inheritance tax is funded (mostly) by small business owners’ descendants and the modestly-wealthy. (This is probably also true in the UK.)
3.) What’s truly amazing about this tax is that it is universally hated by people who will, in all likelihood, never have to pay the thing. In other words, most people know that inheritance taxes are enormously unfair/legalized robbery.
The only people who do support it are either the super-rich like Ted Kennedy, Warren Buffet and Bill Gates (all of whom have long since inured their heirs from the tax), or else pure socialists, for whom wealth envy is an integral part of their political philosophy, and who don’t care how badly the thing works, as long as they feeeel they’re doing something to stick it to the rich.
Arguably, all taxes, given that they are forms of theft, are also forms of contempt. Inheritance tax, however, explicitly tells a person hoping to pass on wealth: to hell with your wishes. What you have earned was never really “yours” so we are taking it.
Nice try but no cigar. If this happened, in practice, IHT would go up, so folk now having to sell off homes, close family businesses and go through the annoyances and costs of tax planning would be no better off.
Another piece of absurdity from this character:
The idea that IHT is motivated by individualism, support for liberty, is so insane that I think this poster is probably just a troll. The family has often been the most effective bulwark against the State, and anti-statists have long realised that bolstering the family unit by allowing the acquisition and transfer of property down the generations is one way to encourage that.
Kevin writes:
Thios applies not just to IHT but to most taxes generally, which is precisely why I favour cutting tax rates as well as the overall burden because it is the middle classes, and not the uber-rich, who tend to get most of the pain.
RAB, you obviously didn’t read my collary on the earlier thread, otherwise you’d realise that I’ve dealt with your contention previously.
Johnathan –
Fair enough, but let me tell you what bugs me; as a young person, I face a lifetime of incrementally rising taxes to pay for the healthcare and livelihoods of the ageing baby boomers – the same people who did so much to build the hideous welfare edifice we have today; a system that will eventually collapse as the beneficiary/contributor balance becomes so disproportionate. I estimate that when this occurs, I’ll be somewhere between my late 30s and late 40s. So, I face the likely prospect of painfully high taxes running up to the climactic and undoubtably messy dissolution of the welfare ancien regime. Not only does this event pose a threat to whatever meagre provision I’ve been able to make for my retirement in the preceding high-tax years; after the collapse of the welfare state, I only have a couple of decades to set myself up for retirement – when I can be absolutely sure that there’ll be none of the state-provided benefits that, for most of my life, I coughed up for others to enjoy. Now that grates. In the current environment, I would rather pay a hefty chunk of my legacy to the state than a hefty chunk of my fortnightly pay packet. Of course, I’ll never be allowed to make such a choice, so when I state that I support an inheritance tax over what we have now, it’s just me sayin’.
As a less ambitious measure, I would like to see an inheritance tax that discriminates between self funded retirees and those who hold considerable assets at the time of their deaths, yet have relied upon state welfare for support after their retirement. The latter group should not be allowed to have their cake and eat it too. I’m not saying people should have to sell their homes to fund their retirement (although that is an option), but they should use the collateral in their homes to – say – buy an annuity to support them until death before they go cap-in-hand to the state.
I don’t expect this sort of inheritance tax to raise much revenue – its primary objective would be to disincentivize people from turning to the welfare state for support during their retirement when they have existing assets they could utilise.
Not sure if I made this clear – wholly self-funded retirees should be exempt from inheritance tax.
Indeed.
You still seem to be arguing that IHT can somehow reduce welfare dependency. I find that argument, to put it gently, downright bonkers. How is breaking a family business, for example, going to reduce reliance on the welfare state? If we want to reduce reliance on said, we should cut it back. If people are forced to sell off possessions to fund their retirement, well and good. But I suspect that IHT has not got anything to do with reducing welfare dependency. Look at how many people now rely on welfare benefits as a result of Gordon Brown’s tax and benefit policies, and tell me how IHT somehow ameliorates this. It doesn’t.
Johnathan – IHT certainly could reduce welfare dependency; it depends how the tax is targeted (and I certainly doubt the British government is utilising the model I have in mind). Regarding your example, I see no reason why “passing on” a family business is some absolute, unexpungeable right – even if doing so means the owners burden themselves on others (namely, taxpayers). I think that is bonkers. If the owner/s of a family (or any) business haven’t made adequate provisions for their retirement, yet refuse to sell off/break up a business that could provide them with funds, why should they have recourse to the welfare state? A prohibitively high inheritance tax on the estates of those who require welfare in retirement would go a long way towards solving this problem.
They should not have such recourse. I would not say they should, although I would add that such folk had already been paying other taxes all their lives and are therefore entitled to a return on that forced expenditure. Does not that count for something?
Given the kind of libertarian model of small government I favour, I would focus on pushing people towards funding their retirement privately anyway without the damaging weapon of IHT. You still have not explained to me how IHT encourages self-reliance. If a person needs income in old age, they may sell off all or part of, say, a house, and move to a smaller one, but I fail to see how IHT plays a positive role in this. It is largely a wrecker tax, and also encourages a large industry in legal and tax planning, of dubious economic value.
A lot of old people are spending their capital (via “equity release” schemes and other such).
Being self funded in old age is getting harder and harder.
For example, many occupation pension schemes are failing (partly because of government regulations and taxes) so people who think they have saved for their old age find that there is no money.
This problem will get worse over time. After all the basic financial system is a credit bubble – bound to go sooner or later.
As people get too old to work (for fit old people the “retirement age” will become a thing of the past) some will have the courage to take the “coward’s war out” (whoever thought up that stupid way of describing suicide clearly did not understand the courage it requies to kill one’s self). But others will look to the state.
In the old days people looked after their children in their youth and were looked after by them in their old age (and childless people were looked after by their kin’s children). There were also the vast web of secular and religious associations (from Fraternities to Churches) – which have so greatly dimmished.
However, the state took over the role of providing first money and then such things as medical care to the old (so the cultural tradition of people looking after their parents or their kin, went into decline – as did the cultural practice of voluntary assocation).
As we all know the state systems (in the United States Social Security and Medicare) are not sustainable.
My guess is that they will finally collapse at about the same time as the credit bubble (and the private investments that our bound up with it) go.
Of course it is possible that cultural traditions will come back – but for the present generation things will be hard.
Lots of people living (for a while – till sickness and so on kill them off) on the street and seeking food from refuse.
Of course some may not wish to live a life of humilation and pointlessness – but they will find that the “coward’s way out” requires a strength of character that most people do not possess.
Paul, a bleak picture. I am not sure I share your pessimism.
Another point overlooked by the supporters of IHT is that a person who inherits a ton of money or even a modest sum, such as for helping them to start a small business, say, is less likely, other things being equal, to be a burden on the state.
Anyway, I think I have flogged this issue to death for the time being.
May I come in here?
Seems to be fair enough to consider this now as a discussion in which we’re assuming that one’s life wealth is taxed in one way only, and discussing what we think that method of taxation should be – sort of, if I have to have only one tax, which should it be?
Well, on the one hand we are presented with a choice of being taxed once, at death (alternatively view, my wealth being taxed every time one of my relatives dies, and I inherit their wealth).
On the other hand, we can be taxed as we used “stuff”.
On the third hand (this may get a little Buddihist in the number of hands), we can be taxed on a fixed rate, over a fixed time period (eg flat tax, flat rate tax etc).
As for my view, one objection I do have to the death tax is, on a personal level, its relative randomness. Against other taxation methods, its harder to predict when I’ll need to pay it on behalf of my relatives.
From the states point of view (and I would want to encourage good financial management on their part), fund-raising by death taxes is that much harder to plan for.
Unless of course, we’re proposing to put into the hands of the state a financial incentive to “manage” the death rate. Does this appeal to anyone?
Yes Nick I had the same macabre thought last night.
Somewhere in the bowels of Govt- the Granny Squad!
“Higgins we are a bit short of cash for the party funding. Here is a list of the top ten estates and the owners addresses. You’ve read your Shipman training manual havent you? Jolly good! Got your Hypos? Exellent! Off you go then- and make it look natural!”
One other issue: residences among all assets are the only one exempt from capital gains tax, though subject to the stamp duty turnover tax. If the reality is that most IHT results from middle-class houses, then this is simply an alternative to lifting the CGT exemption but “stealthily”. Houses are not productive assets, so tax if anything should be higher on houses than investing in equities and bonds.
Tax should be cost effective and economically rational. Eliminate corporate taxes first, move to a progressive consumption tax, reduce CGT and income taxes over time.
Does anyone have a “cost effectiveness index” for UK tax gathering.
Simple. It says “spend what you’ve got before you come at us with your hand out. If you don’t do this we’re gunna take from you what you took from us after you cark it”, but much more sensitively.
But James, if a person has paid tax all his or her life, they have already paid for the welfare services they think they are entitled to, right? So why tax them twice? There is a basic injustice here.
The way ahead is to incentivise people to save for their old age as much as possible, while restricting state aid to the genuinely destitute. I do not see how IHT helps this process. In fact, if a whole block of people inherit wealth, they are – other things being equal – less likely to need state aid in later life, since they can use that inherited money to buy shares, pay for their kids’ schooling rather than use the state system, etc.
Sorry James, you are on a losing wicket with this one.
I don’t agree.
The point is that you don’t tax them twice because they’re incentivized to draw on their assets first, instead of relying on the welfare state. If they don’t draw the old age pension, their remaining legacy doesn’t get taxed.
I certainly do not offer the inheritance tax as a liberal solution, however it would improve the current welfare system by quickly reducing the number of recipients, which I think is a relatively more liberal outcome. The fixes you suggest are fine, however they will have no effect for decades and would need to be incrementally phased in over a number of years, starting a number of years from now – as it takes many years for people to make such provisions. Such long-sighted measures are likely beyond the term-length vision of our governments. The inheritance tax I propose is a far quicker way of clearing the oldies off the pension ledger, because an enormous number of retirees today could afford to support themselves if they utilised the equity in their homes.
Okay – allow me to clarify my position with reference to a couple of questions.
1) Are you an anarcho-capitalist? Yes or no?
2) If no, and you therefore support some kind of state, which taxes (assuming they are compulsory) are the most defensible on economic/utilitarian criteria?
Income and company taxes are the least defensible impositions on the planet. Inheritance taxes, while not worth celebrating, are far less damaging as they are not direct impositions on trade between households in the same way as the former.
I can understand why our correspondent may not like inheritance taxes – I don’t exactly love them myself. But if you are not an anarcho-capitalist, opposing inheritance taxes (ceteris paribus) sounds to me like a way of objectively supporting income taxes, without saying so openly.
Equity release does not need IHT to galvanise it. There is already quite a market for this, although this can only work for one generation since it is often not a trick that can be used twice. IHT, in this context, can be seen as nothing more than a short term stick to hurt the ageing Baby Boomer generation that you – understanderbly perhaps – dislike so much for creating the original welfare state. I personally prefer measures such as raising the state pension age, encouraging people to work for longer, slashing all taxes on long-term savings, etc. I think the bad side of IHT, which I have already listed several times, outweigh the goods. I’d add that IHT tends to hurt middle earners more than the very rich, who, as someone already pointed out, usually manage to get round the system anyway.
Steve, since you ask, I support consumption taxes.
That would only be true is income taxes were the only other option. Usage fees plus just having less to damn well spend on is a far better way in my view rather than just appropriating estates.
Oddly enough even for those people who accept the need for a state taxation MIGHT not follow – for example (I am told) some city states (Hamburg seems to enter my semisenile brain) with voluntary donations for quite a while.
Still I doubt the story.
So taxes may indeed be needed. However, inhertiance taxes are one of the most stupid ways of trying to raise revenue. Although captial gains taxes are just about as stupid.
As for the welfare progams – no one is “entitled” to them and no one has “paid for” them in advance.
Things like government pension schemes are not “investments” (the idea of a trust fund and so on is just a big lie) they are more like chain letters.
Mr Pearce is techically correct.
Both the financial system and the Welfare State could be reformed.
Actions could be taken to put the financial system on a solid basis (and avoid collapse), and actions could be taken to get people away from dependance on the Welfare State (and, therefore, to avoid the collapse of that).
All these things are possible in theory.
However, I see no sign of them being done in practice.
Take the financial system. Who (bar Ron Paul) has any much understanding of this in Congress?
Or take the Welfare State – Bob Kerry (not to be confused with John Kerry) was the last Democrat to have some understanding of the problems.
Many Republicans understand them – but they are too gutless to discuss the problems in public.
As for Britian – the political situation is so bad here I am not even going to bother typing anything about it.
Jeez, Johnathan, Perry and Paul,
We have tried , have we not, to explain the paltry economics of this tax to the above, but they still wont see it for what it was designed to be. towit-
A nasty piece of spite directed at a specific target.
The very rich .
It was not designed to fill the coffers of the Chancellery, but specifically to piss people off.
Thing is, those who were the targets, the very rich, have moved. And keep moving. Their money is already offshore.
Those who are caught by this tax now are the hard working middle class who didn’t even see it coming.
Napoleon said we were a nation of shopkeepers, and he was right. But if all you’ve got to look forward to after lifetimes work and bringing up a family, is the state confiscating the lot, or so wrecking it that you cant get it together again, you ask yourself why bother!
Inheritence Tax says just that!
How asperational of our Govt!
Johnathan, I still cannot understand your objection to my proposal, especially when I have made it clear that it would only be levied on those who have an estate to pass on and still choose to access welfare in spite of this.
As someone who doesn’t like to forcefully expropriate the assets of others, I object to those who draw on the welfare state without exhausting other options. Thus your argument about people having a right to access the welfare network because of their contributions doesn’t hold much water in my opinion. What if I decided to quit my job tomorrow and plop on the dole? Would you support me as cheerily and defend this action of mine? The same justification can be used; don’t I have a “right”? I’ve paid lots of tax since I’ve started working and seen little benefit from it.
And, as I’ve said earlier, I don’t expect much revenue to be raised from the tax I propose. If targeted correctly, I expect those that could (ie. anyone who owned property and who would otherwise draw on an old age pension) would alter their financial affairs to avoid it.
RAB – Perhaps you might like to take the time to acquaint yourself with my argument. Then you could stop pouring all your effort into stabbing that strawman you’ve created.
James,
People who save up assets and people who spend thriftlessly pay similar amounts of taxes during their lives.
Why do you choose to punish those who saved and reward those who squandered?
Your plan sounds a lot like “… and to each according to his need.”
James, a person who is likely to have enough money to be hit by IHT is also likely to have paid a large lump in taxes over the years. If such a person is NOT allowed, in your view, to draw on state benefits of any kind (what, even defence, law courts, police?) if he or she has some “surplus” cash, unless they are willing to pay a large lump of IHT, then such a person might reply that they are entitled to a partial refund for the taxes they have paid. I would agree with them.
Are you saying that the taxes a person has already paid don’t count for anything?
And you still seem to not address my point that if we let people inherit money from their parents, those inheritors are going to be less of a burden on the state if one assumes that that money gets used for things like education, private savings, and the like.
You seem to be using IHT as a short-term policy weapon to hammer people coming up for retirement, as part of a search for something that might push back the Welfare State. I guess we are all trying for that magic bullet that will bring the edifice down. But this is a daft idea and has dubious value from a libertarian point of view.
We should focus on rolling back the state generally and cutting the overall tax burden, not trying to micro-manage behaviours by fiddling with the tax structure.
Too tipsy at present to respond meaningfully. Answer pending…
James, remember the old Robert A. Heinlein quote: “never use a firearm under the influence of booze. You may shoot at a tax collector and miss”.
Heh.
James, I have looked up this “strawman” in various dictionaries and the definitions, such as they be – do not enlighten me one jot.
Presumably you mean that I am positing a fellacious arguement. Believe me, I am living this one. My mother is 83, fit as a flea, but hey know what I mean!
So If you can come up with an idea where we can hide £100,000 pretty sharpish so Gordon doesn’t get his hands on it, I’d like to know.
Wicca men I understand. Even Corn dollys. Certainly paper tigers, but Strawmen?
Oh, and if I ever get a lock of your hair— well I know about wax dummies too! : )
No, I’m talking about drawing a pension. Those that do not draw a government-provided welfare pension are exempt from IHT.
So? You can use that argument to retain the welfare state right up until the bitter end. If you truly wish to dismantle the welfare state, I’d back away from that argument there pretty bloody sharpish. It’s true, but it’s a recipe for inertia.
See directly above. Anyway, isn’t that the reality I’m going to have to face in a few decades? The welfare state is basically a giant pyramid scheme in structure, and at some point it will collapse. In the event of such a collapse, the biggest losers will be those approaching retirement – who have contributed their whole lives – and have never had the privilege of existing in a low-tax environment (unlike most of those currently nearing retirement). I say we spread the losses – starting with today’s retirees – instead of lumping them all on my generation.
We don’t know that. Such people may be less productive as a result of their inheritance. Subsidising that inheritance by paying the parents a state pension is as much an interference in the economy as my IHT proposal – in fact, I would suggest that the negative externalities of such a subsidy are far more disruptive than those of my far from daft IHT plan.
Incentivizing people to take the responsibility for their livelihoods in retirement back from the state is not “hammering” them. I believe that is a very liberal outcome, regardless of your assertion to the contrary.
RAB: “attacking a strawman” = countering an argument that is not being made.
Read all of my posts on this thread, and then read your last one. Then you should see what I’m getting at.
Quite agreed. The way to deal with that then is to deny retirees benefits if they can support themselves from their own wealth. There is no need to threaten them with IHT. Simply announce that for a whole generation of people, even those who have paid tax for generations, that their previous tax payments count for naught, they are going to have to put their hands in their remaining reserves as part of a move to a libertarian, small-government order.
Yep, I can see that proving a real winner!
This is a problem that libertarians need to deal with. If a whole group of people have paid a bunch of taxes over the years, then regardless of what you think of the economics of this (and I agree that much of this resembles a Ponzi scheme), it is hardly feasible politics to say to such folk, “sorry, all that money you paid counts for naught. You are entitled to no benefits in your old age unless you give whatever you have left.”
I think if we are to roll back welfare, we should focus first on slashing income and other taxes to boost folks’ savings, hence reducing any potential need for them to need welfare in the first place. But to deny an existing ageing population any return on the taxes they have paid is unjust. It cannot be sold politically. I wish I could hit a button and turn the welfare monster off, but no such button exists.
As for my general views on tax cuts, I would focus first on cutting income taxes of all kinds, cutting both rates and raising the thresholds, as well as abolishing all taxes on savings and pensions.
James thanks!
I think you may have just come up with the loophole my family have been looking for.
So just to get this straight, If my mum doesn’t accept the state pension, I, when she dies, am exempt from IHT is that right? or is this just a projected fantasy situation on your part?
She has paid in much more than she is ever likely to get out you know!
RAB, another problem with telling people that they will forgo any state pension if they have “spare” capital is that, at the margins, this creates a disincentive for people to acquire savings in the first place. But I have pretty much burned myself out on this thread.
So it comes down to your contention that the plan I propose isn’t implementable? It wouldn’t be an easy sell, granted, but I think it’s saleable if it’s imposed concurrently with hefty income tax reductions (commensurate with predicted welfare savings), and the two are linked. Also, people should be given a few years to get used to the tax before it’s implemented.
Anyway, I’m done here too. It’s been a fun debate, Johnathan, many thanks.