Inheritance Tax

[vimothy]

I'm not even involved in this thread, BTW - if anyone's keeping score. Inheritance tax just seems like another unnecessary and unfair tax. I've said that already and other people who are more interested are having a debate without me. I only replied (and misread) to Slothrop's post because it was a harmless joke and even if we're serious about our politics (I am), we don't have to be humourless £$%!ers. I readlly don't understand why you're even bringing it up. An increase in a tax on death (inheritance tax) would make death less appealing - like increasing a tax on cigarettes makes buying them less appealing. Simple.

Surely you can find more important and / or fundamental disagreements between us to get worked up about.

 

[vimothy]

But as we know, taxation of any kind - in Vim's Randian world - is an Absolute Evil, and so must be opposed even when it lol increases the incentive to die.

Er - no, not quite Absolute Evil - merely generally excessive.

 

[IdleRich]

"I'm not even involved in this thread, BTW - if anyone's keeping score. Inheritance tax just seems like another unnecessary and unfair tax."

But why is it unfair? The people who are taxed haven't done anything at all to earn the money, I can't think of a fairer thing to tax.

 

[vimothy]

But why is it unfair? The people who are taxed haven't done anything at all to earn the money, I can't think of a fairer thing to tax.

Let's say I want to give you a gift of £500,000. Is that fair? Should that be taxed?

 

[IdleRich]

"Let's say I want to give you a gift of £500,000. Is that fair? Should that be taxed?"

If you give me half a bar I don't mind donating eighty grand to charity.
But in general, it seems fair to me. People get taxed on income, right? A cash gift is effectively income isn't it?

 

[Mr. Tea]

And let's not forget that it's not as if every penny of the value of the house has been worked for by the deceased parents - the housing market being what it is means the majority of the value, of any house possessed for more than a few years, will have come from inflation of the market.

 

[crackerjack]

And so much cash swimming untaxed from one generation to the next is bound to have yet more growth impact on the housing market, making it ever harder for those without well-off parents to buy (and even more expensive to rent).

Quick question for you Vim: does the decreasing social mobility that seems to go hand in hand with liberal economics trouble you at all?

 

[vimothy]

If you give me half a bar I don't mind donating eighty grand to charity.
But in general, it seems fair to me. People get taxed on income, right? A cash gift is effectively income isn't it?

Even if you can't pick the charity? Even if you don't like the charity? Even if you already donated to charity when you earnt that money in the first place, and are having to donate again simply because that cash is changing bank accounts?

[And personally I favour a flat tax on income.]

 

[vimothy]

Quick question for you Vim: does the decreasing social mobility that seems to go hand in hand with liberal economics trouble you at all?

Can you unpack that question, please, and explain what you mean in a little more deatil?

 

[IdleRich]

"Even if you can't pick the charity? Even if you already donated to charity when you earnt that money in the first place, and are having to donate again simply because that cash is changing bank accounts?"

Well, I'm not a massive fan of charities in general. What I'm saying is, if, out of the blue, you give me five hundred thousand pounds, I wouldn't mind burning eighty-thousand of it or throwing it down the drain, I've still got four-hundred and twenty-thousand pounds more than I had yesterday and it seems churlish to complain.
Anyway, I don't understand what you mean about "when you (ie me) earned that money in the first place" because I didn't earn the money, that's the whole point. Also, it's not simply changing bank accounts is it, it's changing ownership. I don't think people are saying that you should have to pay a tax to change money from one of your own accounts to another.

"[And personally I favour a flat tax on income.]"

Really? I thought that you would be against income tax at all.

But can I ask you a question... if you have two societies, one with no tax on inheritance and one with a hundred percent tax on inheritance (but the same in all other respects), in which one do you think your claim that wealth reflects productivity (and thus merit) would hold the most water?

 

[crackerjack]

Can you unpack that question, please, and explain what you mean in a little more deatil?

What's to unpack? The UK and US have grown steadily more liberal economically over the last 25+ years and social mobility has declined. Does that trouble you?

Put it another way: your plan to abolish inheritance tax will mean lots more money in the hands of people who already come from relatively wealthy backgrounds and therefore (because every study backs this up) are already more wealthy themselves. The extra money in their hands creates upward pressure on prices, pusing the necessities of life (housing being the most obvious) further out of reach of those without. What you're proposing to create is a notional meritocracy which stacks the odds even higher against those not born into the upper-middle class.

 

[vimothy]

Well, I'm not a massive fan of charities in general. What I'm saying is, if, out of the blue, you give me five hundred thousand pounds, I wouldn't mind burning eighty-thousand of it or throwing it down the drain, I've still got four-hundred and twenty-thousand pounds more than I had yesterday and it seems churlish to complain.

Perhaps - yes. But it's not a question of whether you wouldn't mind giving some of your winnings to charity, but whether you should have to regardless as to whether you mind or not. No one "deserves" a gift in any objective sense, just like no one deserves anything in any objective sense, because there's no one objective enough to decide that.

Anyway, I don't understand what you mean about "when you (ie me) earned that money in the first place" because I didn't earn the money, that's the whole point. Also, it's not simply changing bank accounts is it, it's changing ownership. I don't think people are saying that you should have to pay a tax to change money from one of your own accounts to another.

I was running with my analogy. say I spent thirty years working and saving money to donate to my favourite charity - my no-good, spendthrift son. During that time I paid income tax when I earnt the money. And then again when I give it to my son. You don't think my son deserves it. I don't think that's any of your business.

Really? I thought that you would be against income tax at all.

No - I favour a flat tax on income. I think that's pretty standard fare, really.

I'm not an anarchist (i.e. a deluded socialist), or an anarcho-capitalist (i.e. a deluded libertarian). I believe that good government is necessary for a good society, and one of the checks on good governance is tax. In oil rich states, for e.g., the government is not answerable to the people in part because of the resource rents accrued without them. Also there is the supply of public and merit goods.

But can I ask you a question... if you have two societies, one with no tax on inheritance and one with a hundred percent tax on inheritance (but the same in all other respects), in which one do you think your claim that wealth reflects productivity (and thus merit) would hold the most water?

Surely the important thing is how much you have grown your wealth. Simply inheriting a million and dying with the same amount doen't necessarily mean you were producitve in any way.

 

[vimothy]

What's to unpack? The UK and US have grown steadily more liberal economically over the last 25+ years and social mobility has declined. Does that trouble you?

That's what's to unpack. You have to demonstrate that the US and the UK have become less socially mobile because they have become more liberal economically. Correlation is not enough. (And personally, I have a different (equally unsupported, probably) explanation). In any case, are you simply saying that "the UK and US have grown steadily more liberal economically", as in it has been a straight line all the way, and we are more liberal economically than we were under Thatcher and Reagan?

Put it another way: your plan to abolish inheritance tax will mean lots more money in the hands of people who already come from relatively wealthy backgrounds and therefore (because every study backs this up) are already more wealthy themselves. The extra money in their hands creates upward pressure on prices, pusing the necessities of life (housing being the most obvious) further out of reach of those without. What you're proposing to create is a notional meritocracy which stacks the odds even higher against those not born into the upper-middle class.

Look - this is just my instinctive dislike of tax and government spending. I'm not trying to back it up with studies. I'm not even trying to get engaged with the argument. I will sit down at some point and try to work it all out in my head, then we can have a proper libertarian vs. social democrat debate about it.

Can I just ask - how much per year does the government make from inheritance tax, and what proportion of government spending does this account for?

 

[crackerjack]

Can I just ask - how much per year does the government make from inheritance tax, and what proportion of government spending does this account for?

I think the Tories were saying they'd have to raise £3-4b to compensate for their plans to reduce it. I don't think anyone's claiming you can fund the entire education system off the back of it - the argument in favour rests prinicpally on the belief that its abolition further enshrines the advantage of the already rich.

 

[vimothy]

I think the Tories were saying they'd have to raise £3-4b to compensate for their plans to reduce it. I don't think anyone's claiming you can fund the entire education system off the back of it - the argument in favour rests prinicpally on the belief that its abolition further enshrines the advantage of the already rich.

That rings a bell, actually. It would be good to try to set this tax in some sort of context, I think. Coffee and fag break first!

 

[Mr. Tea]

That rings a bell, actually. It would be good to try to set this tax in some sort of context, I think. Coffee and fag break first!

*taxes your coffee and fags*

 

[IdleRich]

"Perhaps - yes. But it's not a question of whether you wouldn't mind giving some of your winnings to charity, but whether you should have to regardless as to whether you mind or not. No one "deserves" a gift in any objective sense, just like no one deserves anything in any objective sense, because there's no one objective enough to decide that."

Maybe no-one deserves anything in the objective sense but you are the one who said that earned wealth represents a meritocracy which seems to imply that wealth has been gathered on merit and is, in one sense at least, deserved. I don't see why you are now moving away from that idea. I don't think that you would disagree that if you have two people, one who lives on benefits his whole life is suddenly gifted a million pounds vs one who works hard to earn a million pounds that the second character has in some sense deserved that money more. Earlier in this thread you described money taken in tax being given to people who hadn't earned it and didn't deserve it, now you are saying "deserve" doesn't mean anything.
Basically, now you're just going for complete moral relativism by saying "no-one is objective enough to decide that". As a society we agree to allow government to make moral decisions, this is merely another one.

"I was running with my analogy. say I spent thirty years working and saving money to donate to my favourite charity - my no-good, spendthrift son. During that time I paid income tax when I earnt the money. And then again when I give it to my son. You don't think my son deserves it. I don't think that's any of your business."

OK, you said it wrong, that's why I was confused. Above you implied that the son had already paid tax on it, not the father.
Anyway, back to the question in hand. Your argument basically comes back to "it's none of your business" - or "it's not fair" in other words - but you still haven't said why.

"Surely the important thing is how much you have grown your wealth. Simply inheriting a million and dying with the same amount doen't necessarily mean you were producitve in any way."

Well consider two sons. One, the son of a poor man inherits nothing, gets a job and earns £25k a year which he lives on, dying finally with nothing. The second, the son of a rich man, inherits a million which he banks at 5% per year, he lives on £25k a year and grows his wealth by £25k in the first year and more in the next year as the sum he is earning interest on grows. The gap between him and the poor man has grown each year even though he hasn't lifted a finger - do you really think that this is something that exemplifies a meritocracy?

 

[Mr. Tea]

Well DUH - the son of the poor man should have just started a business or invented something or become a premiership footballer or a pop star and made HIS OWN million pounds, shouldn't he? I mean, there's nothing to stop him.*

*this post not intened to be taken seriously

 

[vimothy]

Maybe no-one deserves anything in the objective sense but you are the one who said that earned wealth represents a meritocracy which seems to imply that wealth has been gathered on merit and is, in one sense at least, deserved. I don't see why you are now moving away from that idea. I don't think that you would disagree that if you have two people, one who lives on benefits his whole life is suddenly gifted a million pounds vs one who works hard to earn a million pounds that the second character has in some sense deserved that money more. Earlier in this thread you described money taken in tax being given to people who hadn't earned it and didn't deserve it, now you are saying "deserve" doesn't mean anything.
Basically, now you're just going for complete moral relativism by saying "no-one is objective enough to decide that". As a society we agree to allow government to make moral decisions, this is merely another one

But no one has "decided" that you deserve to earn a lot of money in your lifetime. You simply have.

OK, you said it wrong, that's why I was confused. Above you implied that the son had already paid tax on it, not the father.

I said it wrong or you misinterpreted it - either way, not important ...

Anyway, back to the question in hand. Your argument basically comes back to "it's none of your business" - or "it's not fair" in other words - but you still haven't said why.

It's none of your business because money that I have earnt (and paid tax on) is my money. If I want to piss it up the wall, donate it to charity or give it to my un-deserving off-spring, that's my choice.

Well consider two sons. One, the son of a poor man inherits nothing, gets a job and earns £25k a year which he lives on, dying finally with nothing. The second, the son of a rich man, inherits a million which he banks at 5% per year, he lives on £25k a year and grows his wealth by £25k in the first year and more in the next year as the sum he is earning interest on grows. The gap between him and the poor man has grown each year even though he hasn't lifted a finger - do you really think that this is something that exemplifies a meritocracy?

Interest is nothing more than the opportunity cost of saving money, as you surely know. The poor man is no less deserving than the rich man, but nevertheless, the rich man's contribution to society is greater, because his money is used by banks to generate more money than the poor man generates.

Shouldn't we also talk about other un-deserved inherited advantages? What about the fact that we are more technologically advanced than other societies?

 

[IdleRich]

But no one has "decided" that you deserve to earn a lot of money in your lifetime. You simply have.

Yes, but before you said that someone who earned a lot of money had "merited" it - now you are saying that that is meaningless. I'm just trying to find some consistency in what you say.

"It's none of your business because money that I have earnt (and paid tax on) is my money. If I want to piss it up the wall, donate it to charity or give it to my un-deserving off-spring, that's my choice."

It's not your money once you've given it to your son is it? How about if you see it this way? It is indeed your choice to give the money to your son, once you have done so it's out of your hands, when he receives it HE pays tax on it, that's none of YOUR business.

"Interest is nothing more than the opportunity cost of saving money, as you surely know. The poor man is no less deserving than the rich man, but nevertheless, the rich man's contribution to society is greater, because his money is used by banks to generate more money than the poor man generates."

Yes, but the point is it's much easier for him to make a greater contribution to (the wealth of) society because he started with more. Surely if you wanted a true meritocracy you would oppose that.