Saturday, 5 December 2009

Taxing People is Wrong

To die in England leaving a reasonable house and some savings and investments is a fate not to be wished on your worst enemy. Not a grand house, not even a detached house in a decent-sized garden - an ordinary suburban house with front and back garden, three or four bedrooms and a couple of bathrooms would do it. A well-maintained house in one of the older roads in Hatfield Garden Village plus rainy-day savings in whatever form they are invested - and your children will be paying 40% tax on some of what you leave them.

Of course if you have chosen to end your days in a lovely house, this being your preferred consumption mode rather than motors, trans-continental summer-holidays, and Prada, they'll be taken for so much tax they'll lose your life-style - and what may well be theirs.

When the Italian centre right coalition announced it would abolish inheritance tax, the centre left lost power at the first opportunity the people got to vote. Despite a social democratic interlude under Romano Prodi (by the skin of his teeth) inheritance tax has never been restored. Prodi tried it, brought it back at a nominal 3%, and promptly lost the next election.

Brown's class hate policies and his repellent class hate rhetoric have proved already sufficiently destructive to cause back-pedalling on child care allowances and means-testing the few, very few universal welfare benefits. When we are told by a Downing Street official that Labour will focus on the Conservative policy of lifting the estates of quite ordinary people out of inheritance tax, “morning, noon and night until the general election”, Kenneth Clarke's observation (reported in the Times) that people are “only keen on tough measures so long as they don’t affect them and their families” takes on a new salience.


Caronte said...

"A well-maintained house in one of the older roads in Hatfield Garden Village plus rainy-day savings in whatever form they are invested". You imply that there is no residual mortgage on the house, or savings are higher than mortgage debt. You are not talking of the representative UK citizen, but of a very privileged person indeed.

Of course without taxing people you could not have roads, police, defense, justice, and reasonable access to health and education. But you are right: taxing inheritance is wrong, a small annual tax on wealth would be much better than a random, vulture-like depredation of the dead. And taxing labour income is also wrong, because that income is only the replacement value of the leisure forsaken by workers - most unfair, unless you specifically taxed also the leisure of the rich.

hatfield girl said...

Might older people not reasonably be expected to have paid off their mortgages, C? For inheritance to kick in they'd have been in their 70s and 80s.

Weekend Yachtsman said...

Caronte: Police, Defence, and Justice, I will agree without quibble. Roads, I suppose grudgingly. Reasonable access to Health and Education would certainly be better provided by the market, but I accept that in the UK that's an argument against the grain, despite evidence.

But even if we grant all that, and cost it, I would bet that it represents but a small portion of the tax we are actually expected to pay.

Inheritance tax raises - in national terms - a derisory amount of money, but that is not its aim. It is a spite tax, an envy tax, pure and simple. They would still want it even it raised nothing. It is nothing to do with those public goods you have enumerated.

Hats is right.

roym said...

"To die in England leaving a reasonable house and some savings and investments "

i would have thought that north of 350K is a bit more than some savings? but of course, the very rich shouldnt have to contribute anything to the rest of the country should they?

hatfield girl said...

R, a perfectly normal house plus savings - bought and set aside through a lifetime of work - on which tax has already been paid should not be subject to inheritance tax. It should pass to the children of the family for whom it is intended and for whom, undoubtedly, both foregone consumption and careful planning of family arrangements have been shouldered.

Brown's policies have dragged working families into inappropriate tax categories.

It is surprising to hear his vicious attacks on Toffs and his prosecution of class war targetting people of my parents class and, indeed, me.