Inheritance tax should be raised to 100% for everyone born in the UK
Ultimately one of the greatest sources of economic and social inequality in modern society is money passed from parents to children. I would therefore suggest that the state confiscates (or taxes if you prefer the term) all the money passed on by anybody born in the UK when they die.
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Meritocracy is good
Hopefully most people would agree that a society where you have to work hard to earn money is better than one where you can inherit it from mummy and daddy. The first reason for this is a simple question of rights to wealth, how can someone hold the right to wealth that they did not create. Many people criticise the idea that members of the royal family gain social status and wealth without any personal merit, surely this is the same thing?
Secondly this creates an incentive to earn. Relying on inherited income from parents is impossible, which incentivises even the richest in society to work hard and be a productive member of society. It's objectionable to see well-educated, well-brought-up people who can't be bothered to work, because they don't need to.
Many parents earn money just for their children. continuing a happy, healthy family is nature. Once the money is made by whichever member/s of the family if becomes the money of the family as a whole.
Let's says for example a wife and a husband have a family. The husband, in this case, makes 100% of the money while the wife looks after home affairs. Does the fact the the wife has not earned the money mean she does not have a right to have and use it?
This can be applied to parents and children. The family earns money as a whole. If certain parents think that this is not how their family works or should work then they can write their children out of their wills.
It's better than income tax
Ultimately income tax can only achieve a certain level of equality. If you tax people too much you disincentivise working hard and the economy collapses. Taxing people after they are dead is somewhat less of a disincentive to them working hard whilst they are living.
Gradually increasing inheritance tax (ultimately to 100% if successful) would reduce the amount of money available to buy real estate and so make housing more affordable on average. It would also make it possible to reduce income tax (or at least avoid any need to raise income tax). If people wish to pass their home to anyone (e.g. an adult child carer), they could make that person joint owner.
This is plainly not true. If you were taxed all of your wealth after death then what would be the point in saving? People would no longer invest money into bank accounts in order for their children to benefit. A lot of people say they are just a stepping stone for their children, and if nothing could be left for them financially, they would not work as hard. They would only want to earn what they could reasonably spend.
In the current recession that we are in, we need people to invest ion banks. If everyone withdrew their savings to spend whilst they were alive, our credit crunch would be a lot more dramatic and disastrous.
Inheritance tax, like income tax, reduces the incentive for people to work and save. It increases their incentive to spend as they approach old age.
More tax money would be nice
OK, some people don't like big government, but everyone likes not getting MRSA when they visit an NHS hospital.
Likewise better schooling, transport, cuts in existing taxes even more nukes to fend off the commies if that's what floats your boat.
Please note that the title of this debate is 'inheritance tax' not income tax. I agree that 100% income tax would be insane, since there would be no incentive for anyone to earn money. Money earned from a 100% inheritance tax would always be less year on year than that earned from current taxes, that means a 100% inheritance tax does not require raising the overall level of tax.
Yes if we lived in a perfect world that's how things would work. Probably without the nukes. But we don't and every single government that has ever existed proves this point. 100% income tax, 100% government corruption.
You'd have to be sure that the government will spend the money well. This is highly debatable. Governments (particularly the current one) have a tragic record of blowing cash on job-creation schemes.
Hard to get round
Admittedly there are lots of other ways to pass on inequality to children, pay for them to go to Eton, drip feed them cash while you're still alive or simply set them up with contacts in your chosen field. But the most effective remains to leave them a lump sum of cash when you die, this simply prevents that. Furthermore we already have plenty of clever ways to stop people evading the current 40% tax, we simply need to extend them.
You also can't emmigrate to avoid the tax, everyone born in the UK gets hit. That's perfectly possible, US emmigrants still have to pay income tax to the US government, this would work in the same way. Admittedly leaving the country before you have children prevents them getting hit, but does anyone honestly have the foresight to emmigrate in order to decrease their deceased future children's tax liabilities. I thought not.
Only the moderately well-off pay inheritance tax. The very rich employ expert accountants and lawyers to avoid the tax. It's therefore not the tax on the mega-wealthy that you might like - it's a tax on the moderately successful, thrifty professional classes.
And yes, plenty of them do emigrate. I know of at least a dozen who have emigrated to Switzerland precisely for that reason.
Better to Collect from the Dead than from the Living
Government needs income. Question becomes where to get the money. Better to get it from dead people than from the living.
Since you have to collect tax anyway, it makes sense to collect first from the dead, then from the rich, then from the poor. That's the most progressive.
It is better to collect from the dead yes. But its not just the dead. What about the families left behind. The kid who wants the family home. Its hard enough for young people today to buy property. Its almost impossible. And then suddenly they can't inherit?
Also the above point. Why should the stay at home partner, the one who raised the kids and supported the working partner be cut out the loop? If it was just collecting from the dead then I would understand, but its not and it only would be in the rare cases.
Would promote getting money into the economh
If people knew that their savings were not going to go to their children and would instead go to tax then they would be less inclined to save it in the first place. Instead they would be out enjoying it and spending it which would help the economy. Rather than passing it on to their children, who leave it in the bank to pass on to their children and so forth...
This would then mean that there be more money moving around the economy which in turn would mean more jobs for everyone's children.
So greater enjoyment for parents, and a better economy.
Not everyone who passes on cash in their will is a millionaire
For many individuals the cash they get from , say, their parents' house is very useful. This tax would penalise those who pass on quite small amounts even more than those who are rich (and could probably get round the law).
Current income tax allows you to pass on a certain amount tax free. There's no reason that needs to change.
On the other hand I don't see why people who are are fortunate enough to have parents who 1) owned their own home and 2) died, are any more deserving than those whose parents live in rented accomodation and are still perfectly healthy.
People have a right to pass on the money they earned through hard work
If people have earned money through working hard they have a right to spend it in whatever way they choose. Surely that includes passing it on to their children.
If that were true we'd have no justification for tax of any kind. The fact is that the state already pilfers people's hard earned pennies for its nefarious ends including via the current inheritance tax system. How is a 100% tax any less morally justified than a 40% tax?
Your argument seems to protect hard-earned money but not easy-earned money. In the case of inheritance, hard-earned money transforms into easy-earned money, which your argument does not claim to protect. So, nabbing the dough at the transition point or just slightly after (but before it reaches the pocket of the child) is allowable by your own argument.
Further, this argument requires judgment about how hard someone worked to gain money that he legally owns.
Who says the government will spend the money well?
To the comment that "more tax money is nice" - this is only true if you assume that the government will employ this money well, or at least, better then beneficiaries.
Beneficiaries may leave the money invested wisely in the stock market, or they may choose to spank it on luxuries. Either way, private sector economic activity is the result.
The current government's track record of delivering value to society from every extra pound spent is less than impressive.
All public expenditure ultimately ends up in the private sector anyway, and private sector expenditure can be even more value destructive than public sector expenditure, as recent economic developments have shown.
However this is not a question of private sector expenditure good, public expenditure bad. Rather it is a question of whether some, by virtue of birth to the right parents, rather than having worked for it, have an entitlement to greater wealth than others. If we accept that they should not, then any superfluous parental wealth must be confiscated at time of death (or before if in the case of gifting). The State, through taxation, already has a role in wealth re-distribution, and while it is a trusism to suggest that governements should be prudent in expenditure of public funds, the State would seem to be the best actor in this redistribution.
Inheritance tax is too high and should be lowered.
Inheritance tax should be lowered, it is already too high. Why shouldn't parents improve the lives of their children by leaving money for them?
The money earnt has already been charged income tax and various other taxes so why should it be re-taxed again?
No explanation here of why it is too high, so we may as well assert it is too low and leave a rhetorical question along the lines of 'what right do their children have to their money, given that they didn't earn it?'
This point about the right to that money has been analysed up there.
It would have unintended consequences
Think about it. If you know that when you die, 100% of your estate will pass to the state in taxes, and none will be left over to give to your family, friends or chosen charities, that is very likely to change your behaviour in one of 2 ways:
You might try your hardest to spend all your money while you're alive - leading to irresponsible / unnecessary spending behaviour to the very limit of one's resources, and an increase in destitution among older people who get the calculations wrong and live longer than they expected.
Alternatively you might feel a strong sense of duty to gift your life savings to your children before you die, so that your children receive something rather than nothing. This could backfire on older people who are disappointed in their expectation that the children to whom they've just donated their life savings will be responsible enough to repay the favour and look after them. It could also cause great feelings of guilt in those elderly people who don't want to donate to their children during their life. At best, it just shifts the problem of 'unearned wealth' being inherited during the life of the giver rather than after their death.
You may think inheritance tax should be higher but it shouldn't be too high or it will change behaviour in the period before death in unwanted ways.
There is no empirical evidence as to what, if any, the unintended consequences might be. As older people empirically tend to be more risk averse than the population, it may be more likely that they do not in fact change their savings behaviour.
For this reason, a gradual increase in order to have time to empirically test for and devise policies to counter any unintended consequences would be adviseable.
Equally the implementation of any sharp increase in inheritance tax to future generations should go hand in hand with an equivilent increase in gift tax.
However, if there were unwanted consequences, these should serve as a deterrent to those who would otherwise cheat the process by gifting their family with their wealth while they live.
Destroys incentive to work
Once you have enough money to live comfortably for the rest of your life, there would no incentive to earn any more. If you can pass some on to your children, you can justify working until you are too old to do it. A lot of middle class workers are docters, entreprenuers, plumbers and other important parts of the economy. Prevent them passing on their money will prevent important work being done.
99% of parents who work in older life do not do it to produce money for the heirs and any parent or millionare who does work in there old age to give it to spoilt children is surely a bad thing. This destroys there childrens incentive to work and become a part of a healthy active society by understanding the value of money. Most doctors work as doctors because they like helping people and entrepenures because they like making money, if you did an economic regression, i think you would find most millionaires and billionaires make money because they enjoy it, not for there children, especialy self-made ones.
Secondly if people did retire early its because they have earnt the right to do so and therefore have contributed to society so why is it a negative thing?
To add to the above argument, there is plenty of unemployment at the moment, and jobs are sought for. If those who already have enough to survive quit their jobs, they make a place for somebody in greater need of work. Losing incentive to work, if you already have enough, needn't necessarily be a bad thing.
What do you think?