Inheritance Tax

[borderpolice]

Since redistribution of wealth by tax is entirely arbitrary (or should be, at least), why is this the case?

I don't understand. (1) the point is to force people to educated themselves and generate wealth by themselves, rather than being parasites. (2) Redistribution of wealth by tax isnt entirely arbitrary.

IdleRich just did. But anyway, it sounds better than saying "there's a difference between giving 40% (!) of an asset to the state and giving that 40% to your children". And you clearly know what I mean, or you wouldn't have mentioned it.

Maybe i misunderstood your point then. But if you argue for a partial inheritance tax, some of your arguments don't apply.

 

[borderpolice]

It's a fairly common desire, wanting to pass something on to your children. Of course, I don't have any figures to prove it, just as I doubt you have any to disprove it.

It is very common und completely understandable to pass on wealth to your children. But almost all of a humans most productive period, is between maybe 35 and 60, about 20 years before one's own death. It seems clearly the case that humans aggregate wealth to support their children while they are children, to enable them to stand on their own feet, and to provide for one's retierement.

One fairly obvious place to look at is to compare the economic behaviour of parents and that of childless adults. I doubt that you see that much of a difference.

 

[vimothy]

I don't understand. (1) the point is to force people to educated themselves and generate wealth by themselves, rather than being parasites.

And you are going to do this by taxing the wealth people have generated by themselves and give it to people who haven't. How does this encourage people to generate their own wealth and not be "parasites". (Slightly Reaganite argument you're advancing here, borderpolice).

(2) Redistribution of wealth by tax isnt entirely arbitrary.

But it shouldn't take into account the character of people it redistributes wealth to, just like as inherited wealth doesn't represent "earned" wealth but the arbitrary (in a cosmic sense) favour of someone who happens to be rich (or rich-ish).

 

[gek-opel]

Vim surely you can imagine other targets that inherited wealth could be redirected to other than arbitrarily towards the "undeserving poor". For example capital investment projects for the benefit of the whole society perhaps?

 

[borderpolice]

And you are going to do this by taxing the wealth people have generated by themselves and give it to people who haven't.

I don't understand. The people who have (or are belived to have) generated that wealth are dead! So they certainly don't worry about being taxed any more.

Ideally the money goes into infrastructural work that enables society to be more efficient as a whole. A special case of this is in benefits, that allows people to escape market mechanisms for a while to educate themselves, and be more productive. If the money obtained by inheritance tax is widely distributed, nobody gets enough to sit back and do nothing for the rest of their lives.

 

[IdleRich]

"IdleRich just did."

I don't think so, I just said I thought that you would be in favour of one-hundred percent death duty because that's genuinely what I did think.

"When I reply to you I actually spend time looking for spelling mistakes that you are going to bring up after I post, you know. I had gone through that post already, but am sorry to say I missed that one."

Try harder.

"And you are going to do this by taxing the wealth people have generated by themselves and give it to people who haven't."

Well, only in the sense that improving, I don't know, say, hospitals, public transport etc is "giving it to people who haven't".

I said at the start that just anecdotally it appears to be the people dying who fret about where their money goes rather than the people inheriting it and that seems borne out by the way you were arguing. What I mean is, you are taking the stance "when I die I want my money to go where I want it" as opposed to "when my rich uncle dies I want to get his money". To me this is strange though, when you're dead you won't know and it won't affect you, but when you're inheriting it could be of direct relevance. Something in me suspects that a lot of people (not necessarily you - do you have wealthy relatives?) use the former argument because they don't want to admit that the real reason they care is the latter.

 

[IdleRich]

OK, lots of people talked about whether or not inheritance tax is a good or bad thing and what the level should be etc but no-one discussed how important it is. What I mean is, it's perfectly possible to disagree with a party's policy on inheritance tax but still vote for them because you agree with them on other things. I'm intrigued as to how the Tories have been able to tap in to some massive resentment against a tax that will probably only affect people once in their life at the most. Why is it such a vote winner? Is it really the most important issue?

 

[borderpolice]

I'm intrigued as to how the Tories have been able to tap in to some massive resentment against a tax that will probably only affect people once in their life at the most. Why is it such a vote winner? Is it really the most important issue?

Because while it affects them only a few times (one may also inherit from one's grandparents), it usually pertains to a big chunk of wealth, especially in the UK where most people are homeowners. I reckon that many people with homeowning parents will secretly already have factored eventual transfers of homes into their medium term financial planning. This is especially so with the kind of people who can make decisions as to what is being written/said in the mass media.

 

[IdleRich]

"Because while it affects them only a few times (one may also inherit from one's grandparents), it usually pertains to a big chunk of wealth, especially in the UK where most people are homeowners. I reckon that many people with homeowning parents will secretly already have factored eventual transfers of homes into their medium term financial planning. This is especially so with the kind of people who can make decisions as to what is being written/said in the mass media."

OK, so it is a selfish (receiving) reason rather than the oft-quoted, more principled (giving) reason? That's what I reckon too.

 

[Grievous Angel]

It's cgt that's pissing me off.

brown has fucked himself with IHT, though I'm glad he's done it, he's knackered his brand.

 

[borderpolice]

I in fact think that a reasonable case can be made for low inheritance taxes, and that is that it may incourage saving. If a 100% inheritance tax would be enforced, then it makes perfect sense to blow one's money in old age on luxury goods the production and distribution of which may not be as advantageous to society as the production of other goods. Of course the argument depends on the saving being used for more productive investment in the first place. if it just goes into fast cars for fund managers, as it probably does quite often these days, it really makes no sense to encourage saving.

 

[Lichen]

Seems to me that most people who I've heard moan about inheritance tax are old rich people concerned about their legacy rather than the young who might one day inherit. .

LOL.


It's much easier to moan about what you can't give than it is to gripe about what you won't receive. Especially when a loved-one's death is death is the catalyst for the receiving.


Also, people tend to keep schtum about their inheritance; not a great pub conversation is it - unless you're prepared to stand an expensive round.

 

[gek-opel]

OK, so it is a selfish (receiving) reason rather than the oft-quoted, more principled (giving) reason? That's what I reckon too.

Yup. This is exactly so from my very limited experience of who the people are who are moaning about this (ie- the children of those who are near death/recently deceased). Its not quite as selfish when you consider that what they are complaining about often means not a lump sum of money but the family home they grew up in. As they inevitably have to sell the property, whilst they get the money value left over after death duties have been paid, they lose the property they actually wanted to receive and as such it is almost worth having 100% duty- the sentimental value being entirely lost under the current system given that many people are unable to stump up the 30% value or whatever.

 

[crackerjack]

OK, so it is a selfish (receiving) reason rather than the oft-quoted, more principled (giving) reason? That's what I reckon too.

Reports on the reaction to the Tories pledge said it was particularly popular among the young.

 

[borderpolice]

And then there is the obvious psychological point that one cannot really think about inheritance without at the same time imagining one's parents' death, which is truely a terrible thought.

 

[vimothy]

Hasn't New Labour already tried to scrap inheritance tax? It has investigated it at least - think that there have been a few Treasury reports on the feasibility of it, which give nominal support in theory but note that given the need for the money lost here to be regained somewhere else (to meet spending targets), actually carryng it out would not be possible.

It was funny to hear the wonks discuss this on Question Time. All three parties were solidly statist, the Tories no less than anyone else. There was no suggestion that the government could do without the money lost from inheritance tax; all discussion centred around how the money could be recuperated from somewhere else.

 

[IdleRich]

"As they inevitably have to sell the property, whilst they get the money value left over after death duties have been paid, they lose the property they actually wanted to receive and as such it is almost worth having 100% duty- the sentimental value being entirely lost under the current system given that many people are unable to stump up the 30% value or whatever."

Not like you to care so much about sentiment Gek.

"Reports on the reaction to the Tories pledge said it was particularly popular among the young."

Ah, is that right? Interesting. So it might not be unreasonable to assume that a large number of people who are swayed by this measure are selfish young people who disguise their greed by arguing that as a matter of principle they ought to have the right to dispose of their hard-earned money how they choose when they die?

 

[Mr. Tea]

This might be a really stupid question but what's to stop Gramps and Grandma from legally transferring ownership of their house/fortune/collection of Ming vases to their offspring (or even grandchildren) while they're alive? I mean, is it against the law to make very valuable gifts down the generations like that, at least without paying some kind of tax on it?

 

[vimothy]

Ah, is that right? Interesting. So it might not be unreasonable to assume that a large number of people who are swayed by this measure are selfish young people who disguise their greed by arguing that as a matter of principle they ought to have the right to dispose of their hard-earned money how they choose when they die?

Surely you're overstating the importance of this, IdleRich. I have never, ever heard any of my friends discussing inheritance tax.

 

[borderpolice]

This might be a really stupid question but what's to stop Gramps and Grandma from legally transferring ownership of their house/fortune/collection of Ming vases to their offspring (or even grandchildren) while they're alive? I mean, is it against the law to make very valuable gifts down the generations like that, at least without paying some kind of tax on it?

This happens where the gift tax is lower than inheritance tax. But there is a risk: that the children spend the money frivolously, and the parents live longer than expected. Recipe for unhappy families. Which is why gifts should be taxed no less than inheritance.

In fact, some legistatures have a form of property where one person (e.g. the child) is the legal owner, but some other person (e.g. parent) holds all the rights to do whatever they like with the property. At the point of death of the latter, no change of property takes place, hence no inheritance tax. This is a complicated construction, but often very lucrative. I reckon, the only reason why this form of property exists in some places is to enable the local lawyers to get round inheritance taxes without having to witness their spoiled kids blowing it all on coke and hookers.