Bbc : This Week With Andrew Neil

[yaakov]

I'm sorry but this is absolute boll*cks. It is not a tax against savings, etc. It doesn't affect your savings when you are alive. And when you are dead, you don't care. For a fairer society those assets need to come back into the general pot so they can help everyone get the best out of their talents. Then, when you've left school/college and are on your own, if you can succeed in life good on you. But everyone needs the same chance to start off. You can then work hard, save hard, and enjoy the fruits of your labour. When you die they then bung you in a box and shove you out of the way; and give the next generation the same opportunities.

Many of the middle classes simply want to pull up the ladder now they are doing ok. It's wrong!

Then what is the point of leaving any savings at all?

This just encourages everyone to spend freely when alive and live hedonistically without any care for future generations.

[Gurgle]

And when you are dead, you don't care.

Don't tell me what I care about. I do care. I care about my childrens future. You however clearly don't care about yours.

Don't expect me to fund your, or your childrens' future because you don't want to, or aren't capable of doing so.

if you can succeed in life good on you. But everyone needs the same chance to start off.

Sounds like a bizarre form of communism to me.

[JustYield]

BUT the tax is, effectively, NOT a tax on your parents -- it is effectively a tax on YOU, for receiving unearned income -- just as if you'd made a capital gain on shares.

YES!

One argument Portillo made was that someone whose £7000 house from the 50's has not been taxed on the houses meteoric rise in value is missing an important point. The person is no better off than they were when they bought it. They still have a house (like they did before) and to buy another house of the same size would cost them the same money as the one they have is worth. Their position is no better than it was 50 years ago.

It's not the nominal price that is important, it is the fact that someone who did nothing to pay for the house is being gifted it. It is right that there is some redistribution at this point or you will end up with an even more stratified society within 3 or 4 generations. Careful what you wish for - I presume you don't want there to be an annual wealth tax, as exists in France?

But everyone needs the same chance to start off. You can then work hard, save hard, and enjoy the fruits of your labour. When you die they then bung you in a box and shove you out of the way; and give the next generation the same opportunities.

Many of the middle classes simply want to pull up the ladder now they are doing ok. It's wrong!

Great post.

[cynic]

Then what is the point of leaving any savings at all?

This just encourages everyone to spend freely when alive and live hedonistically without any care for future generations.

I don't get this.

We're talking about a tax, not an outright seizure of wealth.

[yaakov]

YES!

It's not the nominal price that is important, it is the fact that someone who did nothing to pay for the house is being gifted it. It is right that there is some redistribution at this point or you will end up with an even more stratified society within 3 or 4 generations. Careful what you wish for - I presume you don't want there to be an annual wealth tax, as exists in France?

Great post.

Unfortunately, we have become ever more stratified under this government. Redistribution doesn't destratify society, it reinforces it as people have even less motivation to change their current circumstances. Society is becoming ever more stratified because they hardly mix socially and as a result social attitudes are becoming ever more divergent. This government has done nothing to remedy this situation.

[yaakov]

I don't get this.

We're talking about a tax, not an outright seizure of wealth.

its a sliding scale. The higher the tax, the less incentive there is to save for future generations. 100% is one extreme of this scale obviously.

[cynic]

its a sliding scale. The higher the tax, the less incentive there is to save for future generations. 100% is one extreme of this scale obviously.

Sure, but the richer will pass on more. It's hardly a leveller.

[Injin]

I don't get this.

We're talking about a tax, not an outright seizure of wealth.

[yaakov]

Sure, but the richer will pass on more. It's hardly a leveller.

well then what is the justification of it? The rich can always escape these measures by various tax dodges.

In addition, what if your assets are illiquid such as a family business. This would have to be broken up and sold as far as I understand, although I admit I am no tax expert. Its difficult for me to see how this benefits anyone.

Edited October 12, 2007 by JimmyMac

[cynic]

Of course, it's a seizure - I meant to say not 100%.

[Ethel]

Interesting definition of not rich £56k extra means £70k at 10% or £700k gain in total

BUT this is shafting genuine small business owners. And what really annoyed me was some tit on Radio 4 this morning from the treasury saying that its ok because weve done other things to help business - lowered CT to 28% - yes but this only affects businesses making £1.5 million profit youve actually increased CT for small businesses and then the absolutely unbelievable statement that weve lowered basic rate of income tax that will benefit everyone - my @rse it will ask all thepensioners who pay more tax now because the 10% bands gone.

oh back on topic - yes I think that defending labours actions even for a labour MP is becoming embarrasing.

Yes that is correct - £700k gain - but over the 22 years he has spent about £500k capital expenditure extending and improving the business premises which is not taken into consideration therefore the actual gain after costs is more like £200k but he will be taxed on £700k.

Also his drawings/salary etc has been so low over the years that he actually qualified for working tax credits a couple of years back (point being all the income he could have taken was reinvested, thinking he would only pay 10% ultimately).

Edited October 12, 2007 by Ethel

[Injin]

Of course, it's a seizure - I meant to say not 100%.

Fair play. /bow

[HPCbeliever]

I think IHT is fair (although I did think they needed to raise the threshold a bit. However I think it would be fairer if you were taxed on what you inherit rather than an estate. Afterall a £310,000 estate for one child is a lot of money. However if there are 5 children they will only get £60,000 each. It seems unfair that IHT at the same rate is levied on both estates.

[Ethel]

I think IHT is fair (although I did think they needed to raise the threshold a bit. However I think it would be fairer if you were taxed on what you inherit rather than an estate. Afterall a £310,000 estate for one child is a lot of money. However if there are 5 children they will only get £60,000 each. It seems unfair that IHT at the same rate is levied on both estates.

Ah and this is a very good point indeed.

One beneficiary receiving £250k will pay no inh. tax, but each of the 5 children described above, receiving only £60k, would.

[Wlad]

I think IHT is fair (although I did think they needed to raise the threshold a bit. However I think it would be fairer if you were taxed on what you inherit rather than an estate. Afterall a £310,000 estate for one child is a lot of money. However if there are 5 children they will only get £60,000 each. It seems unfair that IHT at the same rate is levied on both estates.

Yes, it would make it an actual inheritance tax rather than an estate duty as at present.

[IP Newcomer]

1 ) Homeless-champion for 20 years, John Bird cited Thatcher as an enabler of social mobility. He criticied labour for effectively pandering to the rich middle classes and shutting the poor out;

John Bird has always been a Tory supporter, he founded the Big Issue as a way of helping the homeless help themselves. He had to keep it quiet while he was there as most of his backers and staff were strong Labour people.

[Nickolarge]

Wow! Thought you would have been mauled for saying that. Give it time maybe?

I am finding it amazing that surely and slowly more and more people are starting to "say" (dunno if they "thought" it previously) that actually the thatcherite view of enabling wealth generators, rewarding effort and causing a fair bit of pain for lost causes for the greater good, was better than just letting everyone help themselves to a free for all binge on tax fraud and cheap money.

*awaits severe flaming...*

Not sure about a flaming but with the benefit of hindsight you can trace a lot of these problems back to the relaxation of credit controls of which Thatcher was at the vanguard.

Edited October 12, 2007 by Nickolarge

[Wlad]

Yes that is correct - £700k gain - but over the 22 years he has spent about £500k capital expenditure extending and improving the business premises which is not taken into consideration

It is if he's kept detailed enough accounts.

[the_skeptic]

If my parents gave me 100k right now while they're alive, I or they should theoretically pay CGT on a proportion of it (I bet almost all people don't though, esp when parents are giving equity to buy into the housing market). The idea that one should be able to gift assets to children free of tax on death is often based on a misunderstanding that these assets can be gifted free of tax when alive and that therefore IHT is somehow unfair -- it isn't! I wish people understood this point more often!

I would guess that the reason people don't often understand your point is because it is factually incorrect.

Anyone can gift anyone else any amount of money that they please - whether it be parent to child, child to parent or you to a complete stranger - and the taxman can not claim a penny of it.

The one exception to this is inheritance tax, whereby any gifts made in the 7 years before death are considered part of a person's estate for inheritance tax purposes (note that there is some tapering such that gifts made 6 years ago are subject to less taxation than ones made 2 years for example).

So provided you aren't planning to die in the next 7 years, or if your estate is worth less than the threshold, then feel free to gift any money you like to me safe in the knowledge that it is tax free.

[Gurgle]

YES!

It is right that there is some redistribution at this point or you will end up with an even more stratified society within 3 or 4 generations.

OK, so is Switzerland a more stratified society than the UK ? No, I didn't think so.

Does Switzerland have inheritance tax ? No

Neither does Canada. Is it a stratified society ? Less so than the UK.

Redistribution of wealth is a communist principle, and we all know how successful communism is.

Many of the most successful businessmen in history have started from absolutely nothing. Just because you start with nothing doesn't mean you've got no chance. Its all a matter of attitude and hard work. Don't sit around expecting to get rich off the back of other peoples hard work. It isn't going to happen.

[JustYield]

Many of the most successful businessmen in history have started from absolutely nothing. Just because you start with nothing doesn't mean you've got no chance. Its all a matter of attitude and hard work. Don't sit around expecting to get rich off the back of other peoples hard work. It isn't going to happen.

That's exactly the point - everyone should make their own way, including rich kids. (Most want to anyway.)

[brainclamp]

IHT is the one tax I fully agree with.

Andrew Carnegie said that huge fortunes that flow in large part from society should in large part be returned to society.

If you give your kids excessive means then they largely turn out bad.

The middle classes will never escape property inflation with thier children anyway assuming they breed more than 2 kids.

Warren Buffett and Bill Gates are giving away thier fortunes for this reason.

[Smell the Fear]

That's exactly the point - everyone should make their own way, including rich kids. (Most want to anyway.)

Sure they do until they realise how tough it is. Then, like my old schoolfriend, they take a £400k house as a wedding gift from daddy.

[Gurgle]

That's exactly the point - everyone should make their own way, including rich kids. (Most want to anyway.)

Right. And the ones who don't want to will probably pi$$ the money away by pumping it into the economy anyway, so whats the problem.

Even if I have enough money to help my kids out financially, I will expect them to make their own way. I'll back them up in times of serious trouble, but I want them to learn to do it the hard way. I won't begrudge leaving them my estate though, and I'll make damn sure no-one else gets their grubby hands on it.

[JustYield]

IHT is the one tax I fully agree with.

Andrew Carnegie said that huge fortunes that flow in large part from society should in large part be returned to society.

If you give your kids excessive means then they largely turn out bad.

The middle classes will never escape property inflation with thier children anyway assuming they breed more than 2 kids.

Warren Buffett and Bill Gates are giving away thier fortunes for this reason.

Yes, the truly rich have legacy on their mind and prefer charity to taxation and have the advisers to prevent the Government getting too much of their pile. I'm all for that, but most of the IHT whingers appear to resent any of their good fortune returning to society at large.

You spurred a thought:

Better to give some away in tax than have it all squandered by the 3rd generation anyway.

(The first generation does the hard work, the second enjoys the spoils and the third squanders it.)