Exempt Property Profits From Inheritance Tax

[stormymonday_2011]

I actually think we ought to just give up on inheritance tax and capital gains tax. It only affects the 'little people' who are making some headway. Inheritance taxes as currently configured are actually a hindrance towards social mobility and a meritocracy.

The really rich have many ways to avoid. Including Trusts, Offshore vehicles etc. Sweep the lot away and do away with an entire wasteful tax avoiding industry.

Replace with an annual Land/Wealth Taxes instead. On things you can actually capture. At the end of the day, no one wants to live on their own little rock even if they have all the money in the world.

EDIT: Tell me you haven't banned Alexw, Bruce.

I think a lot of people have a poor understanding of how the British tax system works and that this ignorance is reinforced by politicians and the media who like people to concentrate on subjects such as earnings differentials, tax bands, taxable events (death, property purchases, transfer of goods and services etc) rather than on the taxation of wealth itself.

Having worked for the Inland Revenue for most of the 1980s by the time I left I was pretty much convinced that the whole purpose of that organisation and its benefits counterpart the DSS was to ensure that the rich were able to hang on to their assets while at the same time preventing the poor from accumulating any capital (ie it was designed to maintain and reinforce the existing status quo)

IHT really is a prime example of this process since it is largely paid by families who have accumulated a big enough pile of dough to attract the interest of the government but not enough to be able to afford the advanced tax planning that would put that wealth beyond the grasp of the taxman. Thus 90% of IHT cases are settled fairly quickly as a person dies (the event), the estate is valued, inheritance tax is levied on its value and probate is granted. The exception of course are trusts which like corporations never die only get dissolved so the primary taxable event may never occur leaving the assets for ever beyond the governments tax net . The amount of money that may be deposited in trusts tax free is also potentially huge That can add up to a tidy sum over a lifetime. A lot of trusts set up prior to 2006, such as that which George Osborne is a beneficiary, do not even get subject to the 10 year IHT charge on assets

http://www.hmrc.gov.uk/trusts/iht/ten-year-charge.htm

The Vesteys were able to use trusts to avoid paying almost any tax at all in the 20th century.

There are live trust cases dealt with by the Capital Taxes Office at HMRC that date back over a hundred years and some of these files have review dates set running decades into the future.

Most people who grizzle about bankers bonuses, benefit cheats, pay differentials, tax bands etc do not realise that there are vast fortunes out there that barely register on the public radar because they are held in vehicles that are able to avoid most taxes and are essentially hidden from public view.This includes quite a lot of the land in the UK whose ownership is not even recorded by the land registry.

In a way it is a work of genius as it leaves the plebs bickering about whether city workers, footballers, pop singers, IT workers, bus drivers, pensioners, single people, married couples, etc should be paying a greater share of tax on their incomes, savings, pensions or family property while the loot of ages goes completely untouched. Little surprise that the oligarchs and super rich of the world like to hide a lot of their ill gotten gains in the UK. They know that also long as they avoid triggering any taxable 'event' their wealth might lie undisturbed for centuries.

Edited May 31, 2014 by stormymonday_2011

[cybernoid]

Income tax makes it near impossible for most people to ever work their way up to a position where they are well off especially these days. There is therefore little motivation to work for many. If all tax were on wealth and spending then income tax and inheritance tax could be removed and solve all kinds of problems. Even benefits could be drastically cut as it would actually be worth working.

All solved far more sensibly with lower house prices. Remove state interference in the housing market, remove the artificial props and schemes, increase the base rate. Less interference, not more.

[justthisbloke]

IHT is a voluntary tax paid by those who hate paying tax less than they hate their children.

I have no qualms about it being set to 100%.

And I'm a red-blooded capitalist who detests taxation.

If I reluctantly accept that governments will, through their very nature, thieve money from the population then there are far worse methods than IHT.

[alexw]

I think a lot of people have a poor understanding of how the British tax system works and that this ignorance is reinforced by politicians and the media who like people to concentrate on subjects such as earnings differentials, tax bands, taxable events (death, property purchases, transfer of goods and services etc) rather than on the taxation of wealth itself.

Having worked for the Inland Revenue for most of the 1980s by the time I left I was pretty much convinced that the whole purpose of that organisation and its benefits counterpart the DSS was to ensure that the rich were able to hang on to their assets while at the same time preventing the poor from accumulating any capital (ie it was designed to maintain and reinforce the existing status quo)

IHT really is a prime example of this process since it is largely paid by families who have accumulated a big enough pile of dough to attract the interest of the government but not enough to be able to afford the advanced tax planning that would put that wealth beyond the grasp of the taxman. Thus 90% of IHT cases are settled fairly quickly as a person dies (the event), the estate is valued, inheritance tax is levied on its value and probate is granted. The exception of course are trusts which like corporations never die only get dissolved so the primary taxable event may never occur leaving the assets for ever beyond the governments tax net . The amount of money that may be deposited in trusts tax free is also potentially huge That can add up to a tidy sum over a lifetime. A lot of trusts set up prior to 2006, such as that which George Osborne is a beneficiary, do not even get subject to the 10 year IHT charge on assets

http://www.hmrc.gov.uk/trusts/iht/ten-year-charge.htm

The Vesteys were able to use trusts to avoid paying almost any tax at all in the 20th century.

There are live trust cases dealt with by the Capital Taxes Office at HMRC that date back over a hundred years and some of these files have review dates set running decades into the future.

Most people who grizzle about bankers bonuses, benefit cheats, pay differentials, tax bands etc do not realise that there are vast fortunes out there that barely register on the public radar because they are held in vehicles that are able to avoid most taxes and are essentially hidden from public view.This includes quite a lot of the land in the UK whose ownership is not even recorded by the land registry.

In a way it is a work of genius as it leaves the plebs bickering about whether city workers, footballers, pop singers, IT workers, bus drivers, pensioners, single people, married couples, etc should be paying a greater share of tax on their incomes, savings, pensions or family property while the loot of ages goes completely untouched. Little surprise that the oligarchs and super rich of the world like to hide a lot of their ill gotten gains in the UK. They know that also long as they avoid triggering any taxable 'event' their wealth might lie undisturbed for centuries.

Actually very very few families pay inheritance tax. Its about 6% of all estates. So it's not really much of a burden on social mobility even if the poor did pay it. But you are spot on with respect to the get outs for the wealthy. The various forms of trusts have allowed wealth to be passed on from generation to generation with little to no tax ever paid. It's a blight that needs to be reformed. But given that trusts are used by the wealthy not the common man as a tax avoidance strategy, you can see why the wealthy have made sure those systems have stayed unreformed. However, given the rejection of the status quo by the masses in so many nations I am wondering if we are now in the twilight phase of our corrupt "capitalism for the poor socialism for the rich" system.

The story of tax havens is one of greed and inequality, privilege and arrogance. It’s a story that sees wealthy people holding on to more and more wealth, oblivious or uncaring about the impact on those of minimal financial means. An architecture of tax havens has developed alongside the growth in multi-national corporations and our globalised economy.

I’ll start the history bit with two brothers, nice guys William and Edmund Vestey. The Vestey brothers were involved in the meat business. They started in Chicago in 1897, shipping meat trimmings to their native Liverpool. Over the next three decades they built the business up into one of the world’s first really multi-national corporations. They expanded into Russia, China, Europe, South Africa, Argentina, Venezuela, Australia and Brazil. Their business covered farming, shipping, processing, retailing.

They were ruthless monopolists who used their wealth to squeeze out competition at both ends of the supply chain. They bought up rivals and would force small producers out of business. With competitors out the way and lack of choice in employment, wage costs could be driven down. They would lower their prices when necessary to force out other retailers and put them up where there was no competition.

Before the war, England didn’t charge tax on profits made abroad, unless it was brought back home. The country needed to raise finance for the war and in 1914 England started to tax profits worldwide regardless of whether it was brought home. The Vestey brothers were furious with the new tax arrangements and left the country initially to move to Chicago and then on to Argentina where they got away with paying no tax at all but, they still wanted to return to England.

They returned as visitors to plead their case. They argued that they would contribute to local employment, and complained that competitors were taxed lower in America (where have I heard that before). They hit on the central problem of double taxation. If you are going to avoid double taxation in a business spread over many countries, which country gets to tax which bit of the company? Multinational corporations are global, but tax is national. The UK charged a general income tax for anyone resident in the UK. For companies, they were seen to be resident where the main decisions were taken. This emerged differently in other countries. For instance Germany looked at where the seat of management was and the US based its test on citizenship. Sometimes the systems clashed.

The Vesteys worked on the prinicple that it wasn’t what you earned that made you rich, but what you kept. They employed lawyers and accountants to arrange their business in the ways in which least tax would accrue. Profits were redistributed through internal charging away from the production and the sales ends of the supply chain and in to operations that could be conducted anywhere in the world – like the parts that charge the least tax. As their business grew and became more complicated, it became harder for anyone, including the tax man to keep track of what they were up to. The lawyers and accountants helped the Vesteys to use transfer pricing, siphoning profit, often through a chain of intermediaries, to a holding company in a tax haven, instead of sending them back to the parent company. By doing this they could avoid being taxed anywhere. They had turned a system designed to avoid double taxation into one of double non-taxation.

The Vestey’s failed in pleading their case with the British government and moved on to stage two of their plan. They set up a trust. Trusts are secret mechanisms, using three way relationships to manipulate the ownership of an asset. When a trust is set up, the original owner in theory gives away ownership. The trustee becomes the legal owner, though they are not free to spend or consume it; they must obey the instructions set out in the trust deed – i.e. pay £1 million to a wealthy man’s children, when they reach 21. The trustee cannot receive benefits from the trust other than costs. Trusts can be legitimate, they can also be used for less savoury purposes. Trusts can allow people to pretend they have given away their money, and therefore they cannot be taxed on, while in reality they retain control. The trust set up by they Vestey’s did its job and the brothers were able to return to Britain and continue to keep a step ahead of the tax man.

In 1922 William Vestey bought himself a peerage (hmm something else sound familiar).

In 1934 an Argentinian coastguard detains a British owned ship The Norman Star on suspicion of manipulating prices and shipping profits illegally overseas. They found 20 crates labeled corned beef that instead contained documents with the financial details of the Vestey brothers. These showed that not only had the Vesteys been up to fraud and tricks, but members of the Argentinian government had colluded with them. At this time ordinary workers in Argentina were being paid a pittance.

Over the next few years the battle was on to penetrate the Vestey secrecy and gain access to the accounts in London. Ultimately this fails and Senator de la Torres, who had come closer than anyone else, in 1939 takes his own life.

The Vesteys get to continue to operate in much the same way as they always did. In 1980, the Sunday Times revealed that in 1978 the Vestey’s Dewhurst chain of butchers paid just £10 tax on a profit of £2.3 million, a rate of just 0.0004 per cent. ‘Here is an immensely wealthy dynasty which for more than sixty years has paid trivial sums in tax’.

In 1993 the Queen finally started to pay tax. The latest Lord Vestey smiled and said ‘Well that makes me the last one’ – if only he was.

[Unexpected]

Well I'm in favour of lower house prices as well as replacing income tax with wealth and spending taxes. That would be win win for the average person. Just lowering house prices would not be enough.

Why not take some money off the rich that actually reduces their wealth over time if they don't work to maintain it?

[Bruce Banner]

I think a lot of people have a poor understanding of how the British tax system works and that this ignorance is reinforced by politicians and the media who like people to concentrate on subjects such as earnings differentials, tax bands, taxable events (death, property purchases, transfer of goods and services etc) rather than on the taxation of wealth itself.

Having worked for the Inland Revenue for most of the 1980s by the time I left I was pretty much convinced that the whole purpose of that organisation and its benefits counterpart the DSS was to ensure that the rich were able to hang on to their assets while at the same time preventing the poor from accumulating any capital (ie it was designed to maintain and reinforce the existing status quo)

IHT really is a prime example of this process since it is largely paid by families who have accumulated a big enough pile of dough to attract the interest of the government but not enough to be able to afford the advanced tax planning that would put that wealth beyond the grasp of the taxman. Thus 90% of IHT cases are settled fairly quickly as a person dies (the event), the estate is valued, inheritance tax is levied on its value and probate is granted. The exception of course are trusts which like corporations never die only get dissolved so the primary taxable event may never occur leaving the assets for ever beyond the governments tax net . The amount of money that may be deposited in trusts tax free is also potentially huge That can add up to a tidy sum over a lifetime. A lot of trusts set up prior to 2006, such as that which George Osborne is a beneficiary, do not even get subject to the 10 year IHT charge on assets

http://www.hmrc.gov.uk/trusts/iht/ten-year-charge.htm

The Vesteys were able to use trusts to avoid paying almost any tax at all in the 20th century.

There are live trust cases dealt with by the Capital Taxes Office at HMRC that date back over a hundred years and some of these files have review dates set running decades into the future.

Most people who grizzle about bankers bonuses, benefit cheats, pay differentials, tax bands etc do not realise that there are vast fortunes out there that barely register on the public radar because they are held in vehicles that are able to avoid most taxes and are essentially hidden from public view.This includes quite a lot of the land in the UK whose ownership is not even recorded by the land registry.

In a way it is a work of genius as it leaves the plebs bickering about whether city workers, footballers, pop singers, IT workers, bus drivers, pensioners, single people, married couples, etc should be paying a greater share of tax on their incomes, savings, pensions or family property while the loot of ages goes completely untouched. Little surprise that the oligarchs and super rich of the world like to hide a lot of their ill gotten gains in the UK. They know that also long as they avoid triggering any taxable 'event' their wealth might lie undisturbed for centuries.

Which is the point I was trying to make. A simplified tax system, with the loopholes closed (including trust funds), would impose tax on the income from old money.

[credo]

Read thorugh this whole thread. Bruce you come across as a really nasty bitter little man. I hope I never have the displeasure to meet you but I probably never will as, like most people I havent and never will inherite any wealth.

[Bruce Banner]

Read thorugh this whole thread. Bruce you come across as a really nasty bitter little man. I hope I never have the displeasure to meet you but I probably never will as, like most people I havent and never will inherite any wealth.

Actually, I'm not worried about IHT for myself, I can easily take care of that by gifting money to the kids etc. I just think it's intrinsically unfair and counter productive.

[Bruce Banner]

Two lads, early twenties, were walking down the street, when a big shiny Rolls Royce drove by. The driver of the RR had his window down and heard the first lad snarl "Rich *******, how come you've got one of those and not me". Almost immediately he heard the other lad say "Wow,I'm going to work hard and some day I'll be able to afford one of those".

[Maynardgravy]

If owning a Rolls were all down to sheer hard work there'd be hundreds parked outside Indian sweat shops right now.

[cybernoid]

Two lads, early twenties, were walking down the street, when a big shiny Rolls Royce drove by. The driver of the RR had his window down and heard the first lad snarl "Rich *******, how come you've got one of those and not me". Almost immediately he heard the other lad say "Wow,I'm going to work hard and some day I'll be able to afford one of those".

If the more extreme posters on here put half as much effort into their own development as they do in attempting to explain away their own lack of progress by blaming everyone else they might actually get somewhere.

They're their own worst enemies, and would prefer to drag everyone else down to where they are than make any attempt to raise themselves. They'll manage neither. Karma has found a way!

[cybernoid]

If owning a Rolls were all down to sheer hard work there'd be hundreds parked outside Indian sweat shops right now.

Social mobility is a requirement, which requires many things to be in place. One of which is allowing those that make the money to keep it, and do what they want with it. To bring this more on topic, high taxation inhibits social mobility.

[gadget]

Two lads, early twenties, were walking down the street, when a big shiny Rolls Royce drove by. The driver of the RR had his window down and heard the first lad snarl "Rich *******, how come you've got one of those and not me". Almost immediately he heard the other lad say "Wow,I'm going to work hard and some day I'll be able to afford one of those".

The reason Picketty made such a stir was not simply his future of ever rising inequality.

It was showing how wealth begets more wealth in ever increasing amounts (as a %age of GDP). The wealthy will be wealthy because of who they are not what they do. That was the case pre 20th century and he suggests that'll be the case in the future, that the early 20th Century was an aberration.

[stormymonday_2011]

Actually very very few families pay inheritance tax. Its about 6% of all estates. So it's not really much of a burden on social mobility even if the poor did pay it. But you are spot on with respect to the get outs for the wealthy. The various forms of trusts have allowed wealth to be passed on from generation to generation with little to no tax ever paid. It's a blight that needs to be reformed. But given that trusts are used by the wealthy not the common man as a tax avoidance strategy, you can see why the wealthy have made sure those systems have stayed unreformed. However, given the rejection of the status quo by the masses in so many nations I am wondering if we are now in the twilight phase of our corrupt "capitalism for the poor socialism for the rich" system.

Agreed, IHT yield is pretty small. something like 3.5 billion in 2013-14 according to the OCBR far less than the £9,7 billion in duty raised on tobacco for instance. . It is pretty much a token tax on wealth paid mainly by the middle classes. However, given that much of the wealth in the UK is concentrated in the hands of a relatively small percentage of the population then one wonder what yield might be produced it if it was taxed pro rata with no get outs.

http://www.discoversociety.org/2013/12/03/focus-the-distribution-of-wealth-what-we-think-and-how-it-is/

Anyway given the IHT take at present is so small you do wonder why people get worked up about it rather than the price of ciggies and beer on which far more tax is paid

Edited May 31, 2014 by stormymonday_2011

[Liquid Goldfish]

If the more extreme posters on here put half as much effort into their own development as they do in attempting to explain away their own lack of progress by blaming everyone else they might actually get somewhere.

They're their own worst enemies, and would prefer to drag everyone else down to where they are than make any attempt to raise themselves. They'll manage neither. Karma has found a way!

Well, they do say people with left wing views are on average 20 IQ points more intelligent than those with right wing views. I think most of the people you are referring to here are actually doing fine. Maybe what sets them apart is that as well as making a success of their own lives they have the spare intellectual capacity to also be concerned about those who are less fortunate than themselves.

[stormymonday_2011]

Social mobility is a requirement, which requires many things to be in place. One of which is allowing those that make the money to keep it, and do what they want with it. To bring this more on topic, high taxation inhibits social mobility.

Again I do not disagree but you have to keep your earnings to accumulate capital. That is not that easy in the UK where a large slice of the that money is taken before it gets into your pocket. In essence our system is geared to taxing production and commercial transactions rather than asset wealth itself. This is one of the reasons why so many people rush to tie their money up in things such as BTL and engage in property speculation. Capital tied up in rentier activity enjoys far better tax treatment than other commercial activities

[cybernoid]

Well, they do say people with left wing views are on average 20 IQ points more intelligent than those with right wing views. I think most of the people you are referring to here are actually doing fine. Maybe what sets them apart is that as well as making a success of their own lives they have the spare intellectual capacity to also be concerned about those who are less fortunate than themselves.

"they do say". Proof !

My own anecdotal evidence is that I've never met a loonie leftie who was a financial success, Im not sure its possible, the religion prevents it. Ive met plenty of successful people, they've all been intelligent and whenever a political allegiance is revealed it is always right of centre, I don't understand how it couldn't be.

Edited May 31, 2014 by cybernoid

[cybernoid]

Again I do not disagree but you have to keep your earnings to accumulate capital. That is not that easy in the UK where a large slice of the that money is taken before it gets into your pocket. In essence our system is geared to taxing production and commercial transactions rather than asset wealth itself.

I don't know why theres that 'but' in the first sentence, you make the same point as me.

But, since accumulated wealth is taxed less than the income it took to accumulate that wealth you could argue that the money has been taxed already when it was earned.. why should it be taxed again just because you choose to invest it? The income from that investment is of course taxed as well…. so you also invest on behalf of the treasury which probably gives them more than a direct tax on the asset in the first place.

What if we didn't tax income but only wealth? Would the treasury get enough? Would it be accumulated faster than it was reduced via taxation? What happens when its gone? Is there an incentive to accumulate in the first place if its taken by taxation? Where would the investment come from for business if an accumulated pile was eaten away by taxation?

So many of these ideas usually come down to disliking those with some money, with no basis in rational thought at all. "Boo Hiss tax the rich" is as far as most get in their thinking.

Edited May 31, 2014 by cybernoid

[Bruce Banner]

The failing in your thinking is regarding the relative increases of incomes and asset values.

Asset values rise faster than the money supply. Income generated will roughly rise by the money supply. However, because the assets rise faster than the money supply and the debts are devalued whilst their income grows in line with money supply, the rich are able to leverage those assets and secure even more of them.

However, those without the means to avoid cgt and iht will continually be knocked back and have to give up their assets steadily to those who are the richest.

Work doesn't come into it.

Work is one source of income that can be taxed, as are pensions. I'm sure that some clever person could come up with a formula to calculate the "real" income from leveraged assets so that income could be taxed at the standard rate that everyone pays with the formula amended each tax year in the same way that spot currency rates are provided each year by HMRC for use when declaring foreign income on a tax return.

Anyway, what do I know. "They do say people with left wing views are on average 20 IQ points more intelligent than those with right wing views", so perhaps we could get a leftie to come up with a workable formula so that tax is collected on imputed income from old money assets.

Obviously, my suggestion is an oversimplification, but it might be worth some thought.

Edit: Come to think of it, if everyone was taxed on the imputed income from their house, it would make HPI less popular and house prices could return to a sensible level.

Edited May 31, 2014 by Bruce Banner

[Maynardgravy]

"they do say". Proof !

My own anecdotal evidence is that I've never met a loonie leftie who was a financial success, Im not sure its possible, the religion prevents it. Ive met plenty of successful people, they've all been intelligent and whenever a political allegiance is revealed it is always right of centre, I don't understand how it couldn't be.

Depends how you qualify 'successful'. I dare say Richard Feynman was pretty damned smart and I'm pretty sure he leaned to the left.

In your definition I tend to agree. The truly left-leaning would make terrible capitalists for obvious reasons.

Back on topic i happen to believe that inheritance tax should be 100% in a totally fair and healthy society.

Social mobility is a requirement, which requires many things to be in place. One of which is allowing those that make the money to keep it, and do what they want with it. To bring this more on topic, high taxation inhibits social mobility.

Who makes the money and who's allowed to keep it?

[cybernoid]

Depends how you qualify 'successful'. I dare say Richard Feynman was pretty damned smart and I'm pretty sure he leaned to the left.

"What do you care what other people think?"

Successful in wealth terms, plainly, since that is the topic.

Sorry, but

The real question of government versus private enterprise is argued on too philosophical and abstract a basis. Theoretically, planning may be good. But nobody has ever figured out the cause of government stupidity—and until they do (and find the cure), all ideal plans will fall into quicksand.

and

[T]he idea of distributing everything evenly is based on a theory that there’s only X amount of stuff in the world, that somehow we took it away from the poorer countries in the first place, and therefore we should give it back to them. But this theory doesn’t take into account the real reason for the differences between countries—that is, the development of new techniques for growing food, the development of machinery to grow food and do other things, and the fact that all this machinery requires the concentration of capital. It isn’t the stuff, but the power to make the stuff, that is important. But I realize now that these people were not in science; they didn’t understand it. They didn’t understand technology; they didn’t understand their time.

It just took a quick google. More here :

http://mises.org/daily/505

[Neverwhere]

[T]he idea of distributing everything evenly is based on a theory that there’s only X amount of stuff in the world, that somehow we took it away from the poorer countries in the first place, and therefore we should give it back to them. But this theory doesn’t take into account the real reason for the differences between countries—that is, the development of new techniques for growing food, the development of machinery to grow food and do other things, and the fact that all this machinery requires the concentration of capital. It isn’t the stuff, but the power to make the stuff, that is important. But I realize now that these people were not in science; they didn’t understand it. They didn’t understand technology; they didn’t understand their time.

While I agree with Feynman in relation to technology and added value, I think it's important to note that some of the base materials which can be used to to "make stuff" are finite to all intents and purposes i.e. land masses change over time but on a human timescale they essentially remains the same, similarly there is a finite amount of crude oil, metals, etc that exist in the earth's crust. Technological progress and hard work can increase what we can do with these limited supplies, but these resource already exist independent of this human endeavour. What I find to be weird about our current taxation system is that of those two components - added value derived from human effort and natural resources whose existence owe nothing to any human - we choose to tax how much effort people put in instead of the amount of natural resources they use. If we reversed this situation we would be incentivising productivity and technological development, instead of incentivising asset accumulation and rentierism.

Any time any tax is paid out of income that someone has worked for that person is being made to give away part of their labour to the state, which they may or may not see back over their lifetime (maybe I'm overly pissed off about this being young-ish and statistically likely to pay in a lot more than I get back in relation to earlier generations); whereas when tax is taken on the basis of natural resources used then at least the amount of tax paid is optional (people can choose to use less resources) and there is always a direct transfer of value as the individual is essentially paying for the reification of the concepts of land ownership, extraction rights ownership, etc, made possible by the existence of the state.

The wording of the whole income vs. wealth taxes (including inheritance tax) question therefore seems to both miss the point and play into divide and rule politics as it implies a direct tax on money in the bank and the total value of assets (i.e including that value added by human productivity not just that derived from natural resources) regardless of how these were acquired, so it leads one section of the populace to feel that another section is trying to take away what they have worked hard to acquire. People often advocate these taxes because they want to reduce the massive difference in wealth between the 1% and the 99%, but as contemporary taxation most affects the working and middle classes and least affects the rich this intention doesn't hold much comfort when considering wealth taxes in practice, in fact given the ability of the 1% to hide wealth such taxes seem likely to further accentuate the gap between the 1% and the upper end of the 99%. Now I actually think that the 1% almost certainly have more money than is justified by their relative productivity - partly because I don't think it's possible for any one human being to be 100,000 times more productive than any other human being and partly because such success is often derived from gaming other people's labour - but I'm more interested in seeing the system that helped create this situation reformed in a way that would both help to change the distribution of resources and create a productive and moral alternative, instead of just engaging in punitative measures.

Taxing any wealth accumulation without making a distinction between someone who has worked very hard and lived very frugally and someone who has done nothing but extract rent from holding basic resources that they had absolutely no hand in creating does not seem at all right to me. Equally taxing all inheritance to the degree that we would not be able to have genuinely family run businesses passed down and built up throughout the generations seems like something that would make us all poorer as a society. I also think it's natural for parents to want to build something up to pass on to their kids and I don't see that there is a moral problem with people handing things on when they have been acquired fairly and through hard labour in the first place. It seems like the real problem is when people hand on unearned gains that have been unfairly acquired off the back of other people's labour or through restricted access to resources. Clearly that makes inheritance seem like a widespread problem at the moment because of HPI, but it's the HPI making the inheritance the problem not the other way around (this goes equally for the 1%, it's the rentierism involved in the accumulation of wealth which is the real underlying issue). Reducing the capacity for people to make such profits without doing anything productive would be much more helpful than just handing those profits over to the state at the end of their lives, which is why moving from an emphasis on income tax to an emphasis on resources tax would be more helpful than blanket wealth taxes. They would also have the added bonus of being harder to avoid: you can't roll up acreage and hide it in a tax haven.

Edit: this doesn't mean I'm in favour of an inheritance tax exemption for London, or its total abolition without a move over to a resource tax lead system, I think it's a pretty much all or nothing situation.

Edited June 1, 2014 by Lo-fi

[admann]

Two lads, early twenties, were walking down the street, when a big shiny Rolls Royce drove by. The driver of the RR had his window down and heard the first lad snarl "Rich *******, how come you've got one of those and not me". Almost immediately he heard the other lad say "Wow,I'm going to work hard and some day I'll be able to afford one of those".

No one ever got rich through hard work - the only route is rentierism. Some people put a lot of effort into rentierism but that is different!

If you have an above average salary you are harvesting the efforts of those below you, if you have savings you are harvesting the efforts of those in debt..

Edited June 1, 2014 by admann

[admann]

100% IHT with no exploitable loopholes would be a good step to reduce the cumulative effects of rentierism... I think rentierism within your own lifetime is ok, after all that is capitalism, its a game, play hard and get others working for you, but we should all start with a level playing field

Edited June 1, 2014 by admann

[the flying pig]

It's a god-awful idea. It creates a massive tax avoidance opportunity and will incentivize more money being poured into property. "Hitting your late 60's? Want to pass on your wealth free of IHT, buy property now and prepare for the future!"

why wait till late 60s?

why not wait till [say] 80, meaning that you'd only have to live in the too-big place you'd sunk your entire net worth in for a year or so?

or would you even need to live there at all?

Edited June 1, 2014 by the flying pig