My media day continued. I did Radio Wales tonight with Matthew Elliott from what is called the Taxpayer’s Alliance.
He spoke complete nonsense. Like the speaker earlier in the day he thought inheritance tax was paid on small businesses. Where do these people come from?
Then we had the argument:
People don’t like this tax
Which is quite absurd. No one loves taxes. I don’t. But I do like what they do. So it’s an absurd question to ask if people like any tax, or not. Of course the answer will be that they don’t.
But worst of all is the usual twaddle he peddled that Inheritance Tax is triple taxation (apparently it’s income tax, stamp duty and Inheritance Tax). There are two answers to this:
1) There is lots of triple tax in this country. Take earnings form employment spent on alcohol: that’s income tax, national insurance, VAT and alcohol duty for starters. So we have quadruple taxation. So what? This spreads the tax base. That’s the basis of good tax design.
2) It so happens there isn’t triple tax on a house included in an estate charged to inheritance tax. First of all it’s the estate that is charged, not the house. So that’s only one tax. But even if the whole estate were a tax then a) the house will almost certainly represent an inflated value probably hundreds of times the total paid for the property if the deceased is of actuarial life expectancy. I recall , for example, my parent’s first house cost under £2,000. It must be worth more than a hundred times that now. If included in their estate now the increase in value would never have been taxed, the amount subject to income tax to pay for it would have been less than £2,000 and the stamp duty under £100. That’s not triple taxation. Given the generous allowances for Inheritance Taxation that’s much less than single taxation.
So let’s stop the misrepresentation and get down to the facts. The reality is that the argument about Inheritance Tax is about greed: people saying “I want to keep all the cash and want none of it to go to the State to create greater social justice and opportunity for those who might never be in the top 7%” (and that’s 93% of people, by definition). And greed is always ugly, which means it’s hidden behind lies and false arguments. .
Second, let’s be thankful that at least one tax might be slightly deflating the housing market. After all something has to do so because anyone under 35 now relies on having wealthy parents to buy a house. Nothing could crush the enterprise spirit more than this. What the Tories need to realise is that if every penny you have has to go into paying for a house, there is no chance of taking the risk of starting a business. You’re in the drip of death of a debt for life (and mortgage by the way means ‘grip of death’).
But despite this the Tories want to abolish the only tax that is doing anything to stop this economic and social madness. I despair.
And I’ll be candid: I distrust their motives. Because I don’t think they’re fools. And if that’s the case then they know all I’m saying is right. Which makes their presentation of their tax policy far removed from the substance of the policy they’re really pursuing, which is one of tax cuts for the rich of the sort Bush pushed through in the States at the start of this century, and which has created so much harm and not one jot of benefit there.
6 Comments
“people saying “I want to keep all the cash and want none of it to go to the State to create greater social justice and opportunity for those who might never be in the top 7%””
Do you really not accept that some people *don’t believe* that the state is a good vehicle for creating “social justice” and “opportunity”?
It is not “greedy” to resent one’s property being forcibly confiscated to pay for programmes you believe are, at best, misjudged and, at worst, counterproductive.
Inheritance tax was designed to tax the wealthy, not the majority of those people who are now liable.
Your example of your parent’s house is simply farcical, I don’t know how old you are or when your parents bought their first house but as an example my parents bought their current house in 1975 and paid £5000, it’s now worth around £250,000 so surely that’s a 5000% increase……rubbish, at that time my father was earning under £2000/year so for a start you have to factor in the equivalent inflationary rises before you make any comparison.
Secondly, my father’s basic salary is not a great deal above the national average, only with overtime (and lots of it) has he been able to afford the luxuries of a comfortable life. He has been very shrewd with his investments and not frittered away every penny of his earnings as is the case with many other people earning similar amounts. How can you possibly argue for a tax that would take a six figure sum out of any inheritance he chooses to leave? He is by no means “wealthy”, simply sensible.
The argument that the idea of the abolition of inheritance tax is simply based on greed just doesn’t add up, I’m not greedy I just don’t see why the money my father earns throughout his lifetime, for the benefit of his family, should be subject to yet another tax when it is passed on to them.
And if you want inheritance tax as a measure of subduing the housing market then your knowledge of the problem needs some refreshing. Perhaps you should look at the mortgage lenders who over the past 10 years have been more than happy to look the other way (and even endorse) when people artificially inflate their salaries by massive amounts and therefore the housing market as a whole. Or perhaps the overriding issue of supply and demand!
Oh, and by the way, the literal meaning of the word mortgage is not “grip of death”, it is “dead pledge”, mort=dead, gage(prev. guage)=pledge.
Richard
An even greater worry re the effect on the housing market is the proposal to exempt the value of private residences when calculating IHT. This would have the same effect on the housing market as have the tax breaks on farms and forestry. The wealthy would just put all their wealth into their homes.
Peter
Dear Richard
I accept some people believe what you say. They are wholly misguided.
Just as you are. Anyone who can call taxation confiscation is clearly out of touch with reality. It is a payment due by law: the same law that, incidentally, provides the mechamism in the which the market works.
If you believe in the end of law that is your right, but please don’t argue for the market and for taxes being confiscation at the same time: it is an impossible case to make. The market cannot exist without a government to impose regulation. Government cannot exist without revenue. And in this case the existence of government is a pre-condition.
Further comments so poorly reasoned as those you are seeking to post here at present will be blocked. I will not waste the time of the readers of this site by allowing them.
Richard
Dear Richard Roberts
Farcical? Not at all. £245,000 of the value in your aprents house has not been taxed. So it was not taxed during your father’s lifetime. Nor did he earn it.
Your argument is wrong.
But your greed is apparent. You want the money for yourself.
I rest my case.
Richard
One of the reasons that people are so ignorant of the exemptions from the so-called ‘Inheritance’ Tax (Cumulative Lifetime Capital Gifts and Estates Tax) is the existence of the separate Capital Taxes Office. If you go into a local Income Tax office, in Oxford for example, there is nothing about all the vast exemptions from ‘Inheritance’ Tax for business, farming and shareholding assets. If there were, there would be a public uproar from those who have to pay 40% on anything above £300,000 and an instant demand for ‘Inheritance’ Tax reform.
The rate of ‘Inheritance’ Tax should be reduced from 40% to 10% and all asset linked exemptions abolished. Giving is a luxury expenditure. There is no reason not to tax it at such a rate. Then there should be a negative (£10,000 at the age of 25 for every UK-born citizen) and progressive (10% upwards)Cumulative Lifetime Capital Receipts Tax on capital, including the £10,000, that beneficiaries have done nothing to create, earn , make or save. No one would pay any net tax until they had received £100,000 - the £10,000 plus £90,000 from other donors. Given that the average wealth of every adult and child in the country is approx £90,000, this British Universal Inheritance proposal could be self financing at a flat rate of 10% - but for collection costs, which would be paid for by progressive rates above 10%. Political debate - currently impossible - would determine the balance between progressive rates above 10%, increasing the £10,000 amount or replacing the current annual tax take from ‘Inheritance’ Tax (£3 billion or so).
Capital would thereby be transferred from the heirs of all assets, regardless of type (but with intra-generational exemptions for partners, spouses and cohabiting siblings) to the children of those with no parents or those whose parents who, for whatever reason, have little or nothing to give. The higher the progressivity in rates, the fewer people in each new generation would own more than one house. More people would own their own houses.
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[...] Richard Murphy is on something of a media kick at the moment with appearances on Radio 4 and Radio 5 Live. As someone who likes to deal in hard facts, Richard gets mightily ticked off when faced with people who have little or no idea what they’re talking about. [...]
[...] But, more particularly, the comment I made which Richard Brown referred to was appropriate. It is wholly untrue to say that I had not logically argued my case from first principles before referring to greed. I had. And I was responding to this statement which was made by a commentator: I’m not greedy I just don’t see why the money my father earns throughout his lifetime, for the benefit of his family, should be subject to yet another tax when it is passed on to them. [...]
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