Last week I stated my hope that the UK Conservative Party was showing possible signs of courage, as well as smart political opportunism in voicing support for slashing, if not completely abolishing, inheritance tax. The posting triggered a lot of comments, most of them nice and supportive of my view, and only a few in support of the tax.
One commenter claimed that inheritance taxes were a good thing because they broke up rich dynasties which the commenter thought acted as a brake on economic dynamism.
Is this actually true? In the 19th Century, for instance, Britain was indeed a class-bound society in many ways and the richest families enjoyed a standard of living beyond the wildest dreams of the humblest farm labourer. But Britain was in many respects an astonishingly vibrant and upwardly-mobile society too, often in certain respects even more so than today. Sir Robert Peel, the great Tory Prime Minister of the 1840s, was the grandson of a humble cotton weaver. Richard Cobden, one of the great advocates of free trade, a Member of Parliament and hero of classical liberalism, rose from conditions of great poverty. The list of rags to riches folk in Victorian history is long and makes for wonderful reading (it also puts my generation to shame, frankly.) Rich families, either deriving their wealth from the land or from elsewhere, were simply incapable of hogging the whole economic pie and denying any entry points to others.
As the writer Jenny Uglow pointed out in her marvellous book, The Lunar Men, the brightest and best entrepreneurs circumvented the old ‘Anglican establishment’ entirely on their way to creating the world’s first true industrial nation.
All this is a long-winded way of saying that those who inherit wealth may gain a temporary advantage which appears ‘unfair’, but in an expanding economy with new ideas, opportunities and ventures springing up all the time, it is hard to see how a person who has not inherited such wealth can say he has been denied a chance to make a good life for himself. (This, by the way, is not the same as privileges created by the State to favour select groups over others. That is a different argument).
And of course in reality rich businessmen over the centuries have realised that it was in their own interests to encourage and widen opportunities for the less well off, which is precisely why they endowed so many schools, libraries, musical orchestras, art galleries and the like, as well as political and cultural causes of all kinds. The ‘rich dynasties’ of Britain certainly did not, as far as I can see, act as a serious drag on the country’s economy. If there was a drag factor, it was more to do with the slow rise of collectivist economic doctrine towards the latter stages of the 19th Century, and the rise of State power and influence, which did much of the damage.
A final thought: some folk may imagine that inheritance taxes are okay because the persons affected are dead, so they would not care. Well, quite apart from the contempt this shows for the wealth a person has sought to acquire during a lifetime, it also rather ignores a simple point, which is that many people view their life goals as not simply to make themselves rich and happy, but also to build a better and fuller life for their children and grandchildren. That desire is itself a powerful incentive to work hard and create wealth, and is a spur to growth and the transmission of socially beneficial values.