Friday, August 17, 2007

Inheritance Tax - We Should Keep It

Redwood ... spent four lines in his report Freeing Britain to Compete, arguing the case for abolitionof "Inheritance tax "
...(IHT) is not a popular tax. This has become even more true as the swift rise of house prices in much of the country has resulted in many people, who could not in any sense be described as rich, suddenly finding that their family will be liable to pay quite substantial amounts upon their estate. We recommend the abolition of inheritance tax." Some time ago Nick Drew forecast that Brown would do it as it is a small revenue tax but a high profile injustice


FACTS
1)600,000 people die each year and of those
2)370,000 could be liable for IHT because they don't have a spouse
3)The IHT threshold is £300,000, then an estate pays 40%
4)In the last year 37,000 people paid £3.5bn into the exchequer.
5)3% paying ten years ago has become 10%


The IHT bottleneck like so much , is a symptom of house prices . Still , so have taxes and working hours per couple and only house prices have reconciled the independent to the socialist state that has settled around them. People work in the hope their children will have a better chance and this basic prudence is hated by the levellers who want all the middling to re-start at zero at each generation. Personally I can see the argument from both sides but in the context of all the other attacks on low level aspiration and Liberty it has to go . The rich can sign away fourteen of their fifteen million . It’s harder for someone to give up the security of their house of £300,000. I do not think it should be abandoned entirely though there are many taxes that are less justifiable and better hidden and the case for opportunities being open to all is a Conservative one especially the opportunity to own property. With proper linking it was a good thing and I would like to see it retained

22 comments:

Anonymous said...

The only people to pay inheritance tax are those that inherit (i.e. sudden gift money for doing nothing) from a windfall that is over £280,000 caused by the death of a benefactor. So what's the problem?

The actual wealth has been made by the person who is dead and they won't be affected.

Newmania said...

The person who is dead created that wealth for spending on their children not going on a world cruise. Why shouldn`t they , these are good ambitions

Travis Bickle said...

Anonymous, the problem is that the average house price in London is roughly £40,000 above the threshold.

I tend to agree that there is a case for IHT but personally I would exempt first homes, or at least raise the threshold so that it doesn't drag relatively low income middle classes into what was intended to be a tax on very rich landowners.

Newmania said...

TB - You and I seem to see eye to eye a fair bit thats exactly what I think!

Jenny! said...

Is this the same thing as the death tax in the US?

Croydonian said...

Oh dear. We are not singing off the same hymn sheet at the moment. I regard IHT (even if it is viewed by the forward thinking as an almost voluntary tax) as grossly iniquitous. Bear in mind that one's estate is what one has managed to build up net after any number of other taxes have been inflicted.

Furthermore, the amount it rakes in for the state is comparatively limited, but can have a devastating impact on a family if two generations die in quick succession, as was the case in the first half of this century. Why do you suppose so many large houses are in the hands of the National Trust or have been turned into conference venues and so forth?

Death duties have also been used as a very deliberate class war tool by the parties of the left.

Stan! said...

Fuck it, inheritance tax is out of date and unnecessary.There are no death taxes at all in Italy, Australia, Canada and Argentina, China, India, Indonesia and Mexico.
Its yield - about £2.5 billion currently, compared to £1.6 billion in 1997 – is merely a tiny fraction of the £500-plus billion that the Chancellor is raising overall.
It's time to bury this tax once and for all....

Travis Bickle said...

Ironically if the Conservatives made the abolition of IHT official policy then they would get roundly attacked, gleefully by BBC and other media, as the party of the rich, and bugger everybody else.

The reality of course being that, like 50% top tax rate and no access to completely legal tax sheltering schemes, it is only the lower middle classes that ever pay the higher rates.

But I agree with other posters, the current inplementation of IHT is motivated by class spite and social engineering, rather than revenue generation. But what else do you expect from a chancellor who considers taking the lowest paid workers from a 10p band into 20p starting point as a "tax cut"?

Newmania said...

C and IT it can only have a devastating effect if you have loads to start with. At the current rate of increase about 15% of us will be in for it by 2010 and the yield is rapidly escalating hence the worry.

However it is also wrong that money that comes from property , largely , should be put back into property sending the price further up and leaving an underclass stranded and aopart from those with propertied parents. A degree of equalising is acceptable I think.

Not a problem in many other countries as it is here IT. We have to have a chance for everyone and this unearned wealth could go into schools an`ospitals for all. I think it is reasonable to hit the wealthy with it which was the previous compromise.

C THose who owned huge houses they could not maintain and did not have any income are not a group I can shed too many tears about when others have nothing. In fact this classs have been doing very nicely out of the EU for a good while now and I LIKE THE NATIONAL TRUST


However I do not feel too strongly about it especially since those paying it now are , for the most part lower middleclass who have been caned right left and centre . the rich get out of it

Newmania said...

Jenny , yes it is

Nick Drew said...

Note that Badger Darling's response has been the same as it was last summer (when Byers was kite-flying) - simply that if you are going to cut a tax you have to say how the corresponding reduction in revenue will be handled.

He also carefully lumped the relatively small (£4 bn) putative IHT effect with £ 17 bn of other stuff, & said £ 21 bn of tax cuts seemed likely to impact on the NHS etc.

None of this is inconsistent with McBroon keeping his options open in this regard.

Newmania said...

Yes funny that Brown has announced ( or pretended to announce)£39billion of spending ..should he not say which taxes are going to rise ?

Jenny! said...

Well then I think it's shitty, you shouldnt tax people who have a family memebert that died!

Anonymous said...

The crux of the problem with IHT is, as has already been said, that it hits middle earners disproportionately. Rich fat cats like Blair, Reed and Gordon Brown don't pay it.

For that discrimintory effect alone it should go. Like newmania, I would like to see the rich pay more IHT, but they will always find ways to avoid it.

As for nulabs 'Conservatives will compensate for this revenue loss by taxing the poorest more' argument, Conservatives must give a categorical undertaking that this will not be the case.

We should also be asking Brown, if in nulab's considered opnion every tax reduction necessitates a tax increase somewhere else, what extra taxes does he intend to levy to cover the cost of nulab ministers and MP's tax dodges - Reeds offshoring and Brown's £700,000 house gift to Sarah, for example.

Auntie Flo'

Anonymous said...

Here's George OSborne's response to a BBC HYS question:

Q: Why abolish inheritance tax? Fifteen to 20 years ago, it was only paid on houses well above average prices so only paid by the genuinely rich. Surely the best idea would be to raise the threshold back to an equivalent value - say over £500,000 by 2010, rather than £350,000.
L, Staffordshire


George Osborne: Alongside the recommendations on inheritance tax made by our economic competitiveness policy group, we are also looking at other options like reducing the rate of inheritance tax or, as you propose, reducing the threshold. The broader question of whether we are able to make a firm commitment on reducing inheritance tax - by whatever method - we will make closer to the next general election.


Auntie Flo'

Anonymous said...

And here's another:


Q: I too disagree with inheritance tax, but I can see much opposition to its abolition. Could you not merely make the first home exempt when it came to calculation? This would better ensure that the "average" family did not suffer than the current system.
A, Lancashire


George Osborne: The effect of the recommendation on inheritance tax in the Economic Competitiveness Group Report, which is the same as the recommendation from the independent Tax Reform Commission, is to exempt the first home from any death tax. We are considering this recommendation carefully

That 'carefully' sounds interesting.

Auntie Flo'

Anonymous said...

I wonder if Brown was carefully considering exempting first homes from IHT before he switched ownership of his spare house to Sarah?

Auntie Flo'

Anonymous said...

Most recomended posts on IHT topic on BBC HYS, in order or popularity:

1. I cannot think of many people who would oppose scrapping it... except the Guardian reading vocal minority who somehow think its a justified tax on success...oh and the BBC who managed to raise an eyebrow to it tonight on the news and declare it to be 'controversial'. Since when has scrapping a tax proved to be controversial??

2. Go to work : Pay tax on the money you earn

Save your money : pay income tax on the interest you get

Spend your money : pay VAT on what you buy

Die : Pay tax on what you owned

So, you might as well just send all your money to Mr Brown ‘cus he’s going to get it all in the end anyway.

3. The cash rich can afford to avoid IHT. (The Queen Mother didn't pay any.) It's just a punitive tax on what average folk have carefully saved from their taxed income for their latter years and for their children. It is utterly unfair. Abolishing it would be a massive vote winner.

At least the family home should be exempt from inheritance tax. We all pay for our homes from taxed income. Every time we move home we pay stamp duty. Whichever party promises to abolish this pernicious tax will get my vote.

At least the family home should be exempt from inheritance tax. We all pay for our homes from taxed income. Every time we move home we pay stamp duty. Whichever party promises to abolish this pernicious tax will get my vote.

At least the family home should be exempt from inheritance tax. We all pay for our homes from taxed income. Every time we move home we pay stamp duty. Whichever party promises to abolish this pernicious tax will get my vote.

At least the family home should be exempt from inheritance tax. We all pay for our homes from taxed income. Every time we move home we pay stamp duty. Whichever party promises to abolish this pernicious tax will get my vote.

At least the family home should be exempt from inheritance tax. We all pay for our homes from taxed income. Every time we move home we pay stamp duty. Whichever party promises to abolish this pernicious tax will get my vote.

At least the family home should be exempt from inheritance tax. We all pay for our homes from taxed income. Every time we move home we pay stamp duty. Whichever party promises to abolish this pernicious tax will get my vote.

4. At least the family home should be exempt from inheritance tax. We all pay for our homes from taxed income. Every time we move home we pay stamp duty. Whichever party promises to abolish this pernicious tax will get my vote.
At least the family home should be exempt from inheritance tax. We all pay for our homes from taxed income. Every time we move home we pay stamp duty. Whichever party promises to abolish this pernicious tax will get my vote.


5. Inheritance tax should be scapped as it's a tax on tax on tax. Every penny we earn is taxed (PAYE) and every penny left that we spend is taxed (VAT) and any we save is taxed (Capital Gains) and then when we die it's all taxed again.

6. How to pay for it ? Get rid of some of the nearly one million civil servants taken on since 1997, close the door to further mass immigration, deport foreign criminals, get the millions of "economically inactive" off their rear ends for a start !

7. Inheritance tax is double taxation,full stop,and should be scrapped as soon as possible

8. This is an awful tax

9. More to the point do something about the obscenity of 'stamp duty'.

10. HM Treasury raked in £524 billion last year & will be raking in £610 billion this year - KER-CHING indeed !!!. IHT "only" brings in £4 billion. Until & unless we know where the £524/£610 billion is going, we should never let the government rob us further.

11. Inheritance tax should stay. Public services have to be paid for somehow. If not through this tax, it would be by increasing income tax or VAT

12 Inheritance tax basically is tantamount to taxing you when you are dead,not withstanding the thousands whilst alive.

13. I keep seeing comments such as IHT helps spread the wealth? How? Since when did any extra tax go back into society to spread the wealth?

14. Inheritance tax is blatantly unfair. Your children get the benefit of far more of each pound if you merely squander the money on a lifetime of fripperies for them. Hardly an encouragement to live responsibly.

15. when Mrs Thatcher was Prime Minister and Mr Redwood had already spent years as head of her Policy Unit, and the Conservatives did nothing whatsoever to abolish it during their long time in power. Why should we believe they would do so if they gained power again?

16. Increase the inheritance tax threshold to £1m. It's not a bad tax, but is now catching out people who it was never intended to affect.

17. It's about time we had some real initiatives like this from the opposition so we will have real choice when the election comes



Abolition wins on balance?

Auntie Flo?

flashgordonnz said...

I think it's shitty as well. Even NZ has gotten rid of it. Although we do have gift duty that kicks in if total gifts in a year reach $27k. Thats about GBP9,000. Not a high threshold and so it interfers with transfers of assets into trusts.

Anonymous said...

At least the family home...

WOOPS! apologies, the attempted brain washing wasn't my intention. Don't how I managed to do that...by not looking I imagine :)

Auntie Flo'

Newmania said...

At least the family home .....

I was starting to wonder if I had losy my wits Flo...At the least the family home ...ahhhhhh can`t stop saying it

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