Thursday, October 19, 2006

If your country could afford to cut taxes would you cut inheritance tax?

What a sad lot the Tories are! After the fiasco of their early release of their dramatic new tax plan which looks extraordinarily similar to their old one, they’re now rushing about assuring interviewers that they’ll only cut tax when the nation can afford it.

So that’s ok isn’t it?

Except that one of the headline grabbing taxes they’d cut is one paid by only about the richest tenth of the population and even they pay it only once and then only when they no longer need the cash...

10 Comments:

At 08:31, Blogger cassilis said...

Around one in five homes now breach the inheritance tax threshold - I'm not sure how that squares with 'richest tenth' assertion?

I'm not your typical frothing-at-the-mouth 'tax cuts now' Tory but even I have to say inheritance tax is surely fundamentally immoral. The most invidious aspect of it is that it's levied on assets which have already been subject to taxation. I'm no expert on political philosophy but this seems to me to breach a fairly fundamental tenet of fair taxation - namely that it's goods or income earned that is subject to taxation, not individuals. Should someone benefit from a grand inheritance through the thrift and hard work of their parents then that money has already been subject to taxation - to tax it again purely because it's passing to another person can be little else but the politics of envy.

 
At 09:36, Blogger Bob Piper said...

Cassilis says "The most invidious aspect of it is that it's levied on assets which have already been subject to taxation."

So, presumably the Tories would abolish VAT, as it is spending out of income that has already been taxed at source. Oh, yes, and the road fund license, tax on savings and investments.... in fact, all tax apart from income tax.

Perhaps he could then tell us whether there would be any public spending left when he has finished funding the military.

 
At 09:44, Blogger cassilis said...

VAT is a tax levied on goods purchased and road fund license is levied in lieu of a service provided (use of the public roads) - neither is a tax on the source funds used for their purchase so both are entirely consistent with the principles of fair taxation I alluded to.

In the case of inheritance tax the state provides no service to the payer and no goods change hands - hence this tax is inconsistent with those principles.

 
At 11:31, Anonymous Anonymous said...

Inheritance is unearned income, and any fair system would tax it more stringently than it taxes earned income. Whilst the car tax can arguably be seen as a fair tax on the basis of charging for use, VAT cannot - indeed, both are specifically described by economists as an unfair taxes, because they take an inverse proportion of income. Any fair tax proposal would certainly prioritise the cutting of VAT, likely in favour of increasing taxes on wealth, such as inheritance tax. Similarly, things like the car tax or the TV license fee should be charged on a proportionate basis to take account of income.

 
At 11:32, Anonymous Gregg said...

Inheritance is unearned income, and any fair system would tax it more stringently than it taxes earned income. Whilst the car tax can arguably be seen as a fair tax on the basis of charging for use, VAT cannot - indeed, both are specifically described by economists as an unfair taxes, because they take an inverse proportion of income. Any fair tax proposal would certainly prioritise the cutting of VAT, likely in favour of increasing taxes on wealth, such as inheritance tax. Similarly, things like the car tax or the TV license fee should be charged on a proportionate basis to take account of income.

 
At 11:46, Blogger Bob Piper said...

I'm afraid I still cannot see the difference, Cassilis. If you have paid tax once on your earnings, why should you pay tax again on your purchase if you use the same warped logic. You are having the same money taxed twice. Gregg is absolutely right. Unearned income, given to someone without any effort on behalf of those that inherit, should be liable to tax. All the Tories are proposing. (just read Iain Dale's comments column) is something which makes the greedy Tories' eyes light up. No such thing as society....

 
At 12:36, Blogger cassilis said...

We won't do battle over the semantics Bob because I suspect we'll never see eye-to-eye. The idea that the state should consider a family home 'unearned income' is shameful..

I've said before that I'm not a tax-obsessed Tory and I've argued over on Conservative Home that as a party we need to grow up and recognise that times have changed. Whatever niggles we have about tax burdens as %'s of GDP or whatever the broad thrust of public opinion is that tax levels are neither to high nor too low. Labour learned the lesson on the later point and we need to learn the lesson on the former.

There's another issue here though that I've addressed on my blog...

 
At 13:32, Blogger Hughes Views said...

I'm with Bob and gregg on this one cassilis. You say "in the case of inheritance tax the state provides no service to the payer" - you mean apart from having let them live a peaceful and comfortable life in a land full of money-making opportunities and with decent public services?

As gregg points out an inheritance is unearned income as far as the recipients are concerned. And the rise in value of a house is equally unearned. So another Tory get rich quick / something for nothing policy.

Your notion that money once taxed shouldn't be taxed again reminds me of those old Tory buffers who tell their cooks not to declare what little they pay them because they've already paid tax on it. Are you perhaps suggesting that ten pound notes should have a perforated four pound tax portion and that once it has been removed the remaining six quid should be tax free for all eternity?!

 
At 14:05, Blogger cassilis said...

I think perhaps we should draw this one to a close gents and notch it up to a gentlemanly disagreement - we're unlikely to convince each other...a last word though (I can't resist!)

"having let them live a peaceful and comfortable life"!! Please tell me you're not serious Hughes? Have we reached the point in the UK where I'm supposed to be grateful, indeed financially indebted to the state for having 'let me live'?! Sounds like something you'd here from Pyongyang..

 
At 14:21, Blogger Hughes Views said...

cassilis 'for having let you live' no. But for 'having let you live a peaceful and comfortable life in a land full of money-making opportunities and with decent public services' - yes.

The problem is that most people in the UK today don't seem to know they're alive because life is so easy(see also my most recent post)...

 

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