I am bemused by the Observer's Cash section. This week they launched their campaign against Inheritance Tax with the headline:
'Wicked tax' that hits the bereaved
I wrote for 'Cash' for some time. I know those who are writing this stuff. I have argued with them about it. And I can find no substance to their reasoning. I conclude it's cynical pandering to the British middle classes at their worst.
Even their own former editor, Will Hutton can find nothing to support their argument. He wrote this weekend about (quoting his headline):
The case for keeping inheritance tax
Unlike the Cash team, whose only line is that the tax is unfair on co-habiting siblings, which requires a minor change in the law, not a description of it as 'wicked', Hutton is in possession of facts and arguments. Take this:
Only about 6 per cent of the value of inherited property in Britain is paid in tax; less than in most other countries, much less than we paid even 25 years ago, and much less than in feudal England. This should be a cause for concern, not for lowering it still further.
And this:
Rather, the take should be raised and the loopholes closed that let much property to be held offshore.
The economic benefits are clear. More property would have to be sold on death to pay the tax, easing house-price inflation and giving people the chance to buy property that otherwise would not come on the market. Farmers in my grandfather's generation won the chance to buy farms after the war when estate duty was high and land came on the market. No more.
Neither has any economic study managed to associate light inheritance tax with innovation, entrepreneurship or high business start-ups. Rather, the story is the opposite. Easy access to unearned wealth destroys the incentive to work and to experiment.
Put simply, if you believe in an enterprise economy, Inheritance Tax is a good thing. I agree.
The trouble is the British believe in privilege.
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I tend to agree with your comment “it’s cynical pandering to the British middle classes at their worst”. Excellent post.
I was appalled by last week’s QuestionTime when not one person on the panel, nor in the audience, argued for Inheritance Tax – one of very few taxes which meet most of the recognised criteria for a good tax. I posted something on the Response webpage but it was not broadcast, of course.
It’s bad enough that the general tabloid-exposed public believe myths about fair taxation, but no one in govt appears to know what they’re talking about either.
Even Will Hutton, following his Observer article supporting IHT, went all wishy-washy on Radio4 this morning, suggesting that the threshold needed raising and the rate bringing down!
Still, Richard, it looks as if more and more influential bodies are reading your blog – perhaps you have an opportunity to get some of these tax issues properly debated.
All the best for Tax Justice.
I’ve posted on my own blog why I agree with Richard and think IHT should stay.
But I do think it should be made more flexible and less draconian. IHT is necessarily collected at a time of bereavement. Its administration should respect that.
M
Emily’s comment, in case it’s not clear, is at http://www.askm.co.uk/blog.asp
I think the case for reform is clear. But I agree, it does not need the tax to be abolished, or limits to be raised.
Richard
Whilst I can see the arguments for and against Inheritance Tax, the fact is that it is an avoidable tax at this point in time. Therefore, it seems odd that those in the know can avoid the tax and those without advice cannot. This, in my mind, makes it a doubly wrong tax.