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March 31, 2007
Chris Dillow on Inheritance Tax
Yes, I can see his points but this makes me cringe a little bit. Being quite so gung ho as to insist that there should be no inheritances, or that they should be(almost?) entirely taxed away.
Leave aside the idea of inherited privilege for a moment (for if we did have 100% inheritance taxes, with no loopholes, then everything would simply be spent on the children before death anyway).
Savings, investments, those things that can be inherited in a monetary fashion, are in fact delayed consumption by those who did the saving. It's easy enough to construct a family history in which say, one generation inherited little or no money but went on to save and invest (both directly, through actual savings from income and indirectly, through a choice of career that offered a good pension and also through the serendipity of the housing market) so that there is a pot some multiple of the current inheritance tax allowance. It's not uncommon for people to want to provide a financial leg up to their children (or grandchildren say) and why should the State come inbetween those who have delayed their consumption to do so? It seems, on the face of it, as valid a choice about what to do with their own incomes as taking said children on skiing holidays or not, buying them cars or other trinkets or not, doesn't it?
It's simply showing a different time value I would have thought?
Further, those children who inherit or not might not have done anything to "earn" that money but their parents indeed have, and it was their parents who made the choice to delay consumption, seeing something greater in the bourgeois virtues of saving and possibly sufficient capital for independence than in current consumption.
You could also, although this might be stretching things a bit, say that they have indeed paid for this accumulation of capital. While growing up the consumption of the family has been limited by the savings being accumulated. It seems a little odd to insist that delayed consumption must be taxed, while current consumption is not.
March 31, 2007 in Taxes | Permalink
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Comments
Well said.
Posted by: Rob | Mar 31, 2007 6:06:14 PM
I think your objections might be met by a highish threshold - say £500,000 - below which no inheritance tax at all is paid (yes I know there are loophole problems with death tax).
Posted by: Peter Risdon | Mar 31, 2007 6:22:01 PM
"It seems a little odd to insist that delayed consumption must be taxed, while current consumption is not."
Surely "current consumption" is largely taxed at 17.5%?
Tim adds: That subject to VAT, yes.
Posted by: Judge | Apr 1, 2007 1:28:15 AM
'Preserved consumption', instead of 'delayed' or 'deferred consumption', might be more accurate; and in any event inheritance tax is nothing more than a husbandry tax, levied on people for no reason other than they were not profligate with their resources while they were alive.
So the State allows itself to be profligate with them when they're dead.
Scrap the whole thing.
Posted by: Martin | Apr 1, 2007 9:25:55 AM
I find the idea of taxing the dead distasteful. If the government must tax I would prefer a capital gain tax on those receiving the inheritance.
Posted by: Kit | Apr 1, 2007 10:37:19 AM
Surely the best way to get around this would be to blue the lot on the kids' education and setting them up in stable businesses/investments, thus keeping Gordo's hands off it.
I'd rather put the kids in a position to make their own money, than have them waste the same hard-earned legacy because I hadn't spent it preparing them for the future.
Which seems to be the point, consumption of educational services today AND consumption of whatever tomorrow. Taxable all round.
Posted by: auntymarianne | Apr 1, 2007 3:56:18 PM
