HM Revenue & Customs has published new inheritance tax data today.
This chart shows the proportion of the total of this tax paid in the UK's regions in 2013/14 which is the most recent for which there is data:
Isn't it obvious why we need a policy for redistributing wealth in the UK?
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This data just shows the difference in property prices between north and south?
It’s much more than that
Do we not have to tackle the geographical as well as the class aspects of the problem by using infrastructure investment and education policy to restore the economic initiative to the Midlands , the North and (if it stays in the UK) Scotland. For example why build another airport runway in the South East when there is underused capacity at Manchester ?
I agree with all of that
Jim,
Your suggestion confuses cause and effect in a number of ways. First an foremost, it fails to consider why it is that property values in the south are so much higher.
It could have something to do with demand and the fact that that is where most of the wealth is concentrated.
Marco
With respect you just offered a justification not an explanation
I am in that case not sure what you are criticising others for
Richard
Jim confused symptom with cause. That was my point. If I was to explain why it is that the South is so much richer I may need to go back to the Industrial Revolution or, arguably, the Norman Conquest.
Neo-liberalism and de-industrialisation have made things worse but I am fairly sure that they would not entirely explain this kind of inequity.
I agree that these stats look pretty alarming but they’re also pretty misleading without population numbers attached alongside. Sure, this appears to be a horribly skewed system where government spending flows back to the wealthier South-East and London but Yorkshire, East Midlands, West Midlands despite their size also have much smaller populations.
Accepted
I did think of doing that adjustment
But decided to use the HMRC raw data as they publish for precisely the reason that this is how they publish it
The best wealth tax is LVT.
I agree
But we’re not there yet
And I will keep it on my agenda
And how would that work? I own some land – acquired fair and square by purchase by my father and I have ended up with it – only 30 acres or so of farmland , being used by some local farmer for his cows for not very much rent money. Liability really but nobody wants to buy it. And it costs me to insure it against any idiot falling over on so I have a loss on it. So how much tax should I pay for that. Never mind the Nats will probably just expropriate the land under their new land grab laws. So much for the rule of law. But hey ho , it’s worth not much anyway so the will be doing me a favour. But the principle ?
Anyway , wealth tax is a bad Idea , 50% income / CG tax is fair enough for a sustainable society and is a rate I will happily pay. A wealth tax is fraught with unfairness and inconsistency and would be a nightmare to apply fairly unlike said income and CG tax.
And finally , dim and distant past in the 70’s – was there not a development land tax that was a disaster – I could be wrong on that , mists of tme etc
If this land is of such little value, as you say, I’m not sure that LVT (Land Value Tax) would be much of a problem, if any.
It works well in New South Wales, Australia where it is not very controversial and does not apply to agricultural land. It also exists in parts of Asia and Northern Europe.
Yes a wealth tax is unfair. As currently promoted by our host, it would exclude pension wealth. So a high ranking civil servant on a £100000 pa in his 50’s would not have his entitlement to his generous defined benefit pension scheme included in the wealth tax. But a self employed guy who distrusts pension schemes and who has saved for his retirement by accumulating BTL properties would have the full value of those properties included in his wealth tax
Unjust
Why?
The assets are both fundamentally different and one is an absolute matter of ownership, the other a conditional entitlement
That said, I would also reform pensions in my version of wealth taxation which would be somewhat more comprehensive than an investment income surcharge
Richard. The only fair way of operating a wealth tax is for it to apply to all assets. A personal balance sheet should be constructed for each person and the wealth tax applied to the excess wealth any person has over the starting threshold for the wealth tax.
This personal balance sheet, to be fair, must include the net present value of a persons pension entitlements. This would include both pensions yet to be drawn and those currently being drawn.
I’d be happy to discuss my reservations with you further.
We know that for taxes to be accepted and paid, taxpayers must feel that the tax is fair.
It is grossly unfair for any wealth tax to exclude the value of pension entitlements
I repeat: I would change pension rules
I rather hope that will happen
What Owne Smith is suggesting is clearly not a complete answer to wealth taxation
It is a useful iteration
Thanks Richard
But exactly how would you change pension rules to compensate for the injustice of excluding pension assets from wealth tax calculations?
Sorry if I am being slow or if I’ve missed something
I will publish ideas in my own good time
Combining that HMRC data with the numbers of registered deaths in 2013 (which only vaguely matches the 2013-14 tax year) from https://www.ons.gov.uk/peoplepopulationandcommunity/birthsdeathsandmarriages/deaths/datasets/deathsregisteredbyareaofusualresidenceenglandandwales , I make the IHT per death:
£1,600 North East
£2,200 Northern Ireland
£2,700 North West
£2,700 Yorkshire & Humber
£2,700 Wales
£3,100 East Midlands
£3,400 West Midlands
£3,800 Scotland
£6,300 East of England
£6,900 South West
£10,200 South East
£17,800 London
So even worse than the raw data shows
And anecdotal evidence at least is that the relatively high rate in the south west is significantly influenced by the retirees from London and the south east who push up posh house prices and in so doing inflate ordinary house prices to unaffordable levels for the below average wages in Devon and Cornwall. They pop their clogs in houses the locals could never afford.
If I read the HMRC figures correctly, then no-one dying in Blackpool or East Merseyside left enough to be liable for inheritance tax, compared with (e.g.) 230 in Cheshire CC. So a fair bit of inequality within the regions, as well as between them – accepting the hugely disproportionate figures in London and the South-East.
What do you think about scrapping the entire tax system and replacing it with a single flat rate tax on business combined with a UBI as proposed in the link below?
https://www.reddit.com/r/ukpolitics/comments/4v27bs/what_do_think_of_this_ubi_single_flat_rate/
Absurd
Impossible
Hopelessly unjust
And a macroeconomic disaster
Richard, there you go being dismissive and unreasonable again, I already know that you don’t consider a UBI absurd. I also know that a UBI that replaces as many benefits as possible is not absurd. So you essentially agree with the redistributive methods of this idea.
If a UBI is to be supported then it has to be financed and there are a variety of ideas being touted. Now I don’t think the income/tax side of this idea is as neat or as workable as the author seems to think, but it’s certainly thinking outside the box. Personally I would have the state fund a UBI via direct spending then it’s just a question of appropriate taxation to offset. The point being this can be fluid and responsive rather than any sort of cast in stone formula.
The idea fails to comprehend the nature of tax
And it’s social outpost
Are the fundamental anti-state nature of flat tax
Read The Joy of Tax
If you get some spare time, could you pop in and post a rebuttal to it?
I doubt it
In a way we already have a UBI it’s called personal tax allowance and welfare benefits but the idea you could get business to pay all the tax creates many problems.What if business decides to avoid/evade paying its share,it could hold the democratically elected government to ransom forcing it to rely more on borrowing for example.A UBI and flat rate tax sound good in theory but are in practical.
Derek
Everyone can see the shrinking share of production going to labour and the increasing share going to the owners of capital. But no one seems to see the bigger share which is going to the owners of land.
Agglomeration is a network effect. The bigger the network the more gains from economies of scale.
The trouble with taxing wealth creation rather than land values, is that the centre of our network, London, “metabolises” too many resources at the expense of the network as a whole, weakening it’s overall efficiency, lowering GDP.
If there was a level playing field, instead of London acting like an economic black hole, a functioning market would shift demand and investment would where both capacity and the potential for growth are highest.
It’s no good having all the blood going to the heart, if it starves the rest of the body of oxygen. That’s what our tax system does.
A shift to a 100% LVT would see, at least initially,the liabilities of regions outside London/SE reduce by around £100bn per year.
Wealth and capital taxes can easily be dismissed for reasons of fairness and efficiency, providing the perfect smokescreen for those interested in maintaining the status quo.
As an LVT is merely the way by which we equally share the value nature supplies for free, then it cannot be dismissed on those grounds.
Not directly related but have just watched Dominic Frisby on the latest Keiser Report (https://www.youtube.com/watch?v=kWnXE5Ck-V8). He’s putting tax centre stage, literally, at the Edinburgh Festival with a show called ‘Let’s Talk About Tax’. I’m not too familiar with him as a financial journalist (MoneyWeek’s commentator on gold and commodities) and hadn’t realised he was a co-author of the documentary ‘Four Horsemen’. I wonder if you’ve had any interface with him re. tax.
Four Horseman was absolutely dire – dedicated to the Gold Standard that brought the UK to the Great Recession
I just have, because he promoted LVT;o)
I wasn’t advocating it. I think it was a missed opportunity. Like the curate’s egg, quite good in parts i.e. in highlighting the global problems. Unfortunately, as you say, the underlying monetary argument was economic rubbish. Shows how much work there still is to be done, at all levels.
The populations of the north east, west yorkshire, west and east Midlands add up to around 26 million half of the countries population but have only a quarter of the country’s capital gains tax revenue. This chart does show wealth distribution to be utterly biased to the south east and London.
Owen smiths wealth tax according to the BBC
Setting out plans for a wealth tax, he said it would be a charge of 15% on unearned income, for example from investment, that would only apply to people earning over £150,000.
Not really a wealth tax then
A start
I am familiar with the proposal
More food for thought:
http://paullewismoney.blogspot.co.uk/2015/10/gad-on-triple-lock.html