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End the envy tax

The British Conservative Party is contemplating making a pledge to sharply cut inheritance tax as part of their election manifesto commitment, as reported here. That is fine as far as it goes and does at least hold out a glimmer of hope that the Tories are willing to name the sort of taxes they want to cut, if not scrap entirely.

But of course, inheritance tax needs to be abolished in toto. All taxes are bad -some libertarians regard them as forms of licensed theft – but this is a particulary bad one. It taxes a person twice on the income already earned or the profits made, and hits the laudable desire of parents to bequeath wealth to their offspring to help in later life. If the Tories have the conjones to get rid of this tax, they should make it part of a broader policy of cutting, and drastically simplifying taxes on savings in particular.

Inheritance tax is borne out of a mindset that holds that wealth and opportunity is essentially fixed, so that if person X inherits a million pounds, that person in some way gets an ‘undeserved’ headstart in life against person Y. But in a world when opportunities are changing and expanding, no such ‘headstart’ exists. As the late libertarian philosopher Robert Nozick pointed out, to hold this view is to regard human life like an athletics race around a fixed circuit towards a pre-determined finish line. Clearly, if life were like that, then an athlete given a headstart or has an unfair advantage (this explains why drug use is such a heated issue in the Olympics). But real life is not at all like that. It is, as Nozick pointed out, about different people pursuing different ends.

Also, consider this – if I do not ‘deserve’ to inherit any money from my father, then neither do you deserve my father’s wealth, either. So socialists who insist on seizing that wealth are in fact seizing something they do not ‘deserve’ in any meaningful sense. The logical thing for such egalitarians to do would be to destroy the wealth.

Finally, there are many incidental, utilitarian reasons for opposing inheritance tax, including the fact that if the law was scrapped, it would force thousands of people to do something more productive with their time and brains than negotiate the shoals and reefs of the tax code. It also encourage a long-term point of view in that it opens up the goal of not just getting rich, but enjoying the idea of making one’s children and descendants rich as well.

23 comments to End the envy tax

  • Ted Schuerzinger

    Also, consider this – if I do not ‘deserve’ to inherit any money from my father, then neither do you deserve my father’s wealth, either. So socialists who insist on seizing that wealth are in fact seizing something they do not ‘deserve’ in any meaningful sense. The logical thing for such egalitarians to do would be to destroy the wealth.

    But the egalitarians are being logical: after all the purpose of a tax is to destroy wealth. 🙂

  • toolkien

    1) As far as ‘deserving’ most socialist come at reallocation two ways, one is using the selfish/selfless angle, the other is that allocations from collective efforts were inherently unfair. Under the second option, it is felt that fabulous wealth could not have been created if it weren’t for systematic unfair ‘force’ used in the allocation. They, of course, are just the ones to fix it. They may assert they may not be perfectly entitled either, but that they are the next best option to rectify ‘injustice’.

    2) The best way I can think of to defend inheritance is that (assuming allocations ARE fair) that the person who gathered wealth through their value systems are entitled to dispose of it through the same set of values. It doesn’t necessarily have to be family members either. The proof in the pudding is that if the capital value is maintained; if wealth is maintained, the inheritor has shown the ability to be a good caretaker of the capital, if it is pissed down a hole, it is likely through transcations via the market, and someone gains from their inability to maintain ‘centralization’. The market controls either way.

    But we know that it’s not about fairness, it is about the power inherent in large sums of money, and who controls it.

  • Guy Herbert

    Rates and existence of the tax notwithstanding, I can’t see why no Chancellor has ever seen fit to fix the insane way Inheritance Tax is levied on the legatee before he may receive the relevant inheritance. To alter this would have “revenue neutral”, i.e. it would cost the state nothing, and surely must be popular.

    Some plausible explanations are that (1) the Treasury wants the marginal tax on the bank profits made from large bridging loans, or (2) the Inland Revenue actually enjoys causing additional distress to taxpayers and seeks to maintain the highest possible tax burden relative to the tax take. (The latter has broad explanatory power for the nature of the British tax system, so ought not to be dismissed as an illogical motivation for an entirely unfeeling bureaucracy.) Any other suggestions?

  • R C Dean

    Another reason often heard for repealing the estate tax here in the US: it often forces the closure and liquidation of businesses, as heirs try to raise the cash necessary to pay the tax.

  • John Harrison

    Inheritance tax should be abolished. End of story.
    Arguably though, other taxes are even more damaging to the wealth creation process.
    Income tax, for example, or in the K, Employer’s national insurance. That is a particularly nasty tax on giving people jobs and stops the poor getting off welfare so it has a trebly bad effect – it hits employers, cutting the profits of businesses and it stops less skilled employees getting jobs and it means the rest of us have to pay extra taxes to fund the handouts to people that should be working. The Conservative Party is making a good move towards scrapping a bad tax and it is likely to appeal to more people who might consider voting Conservative, so it is welcome. I would just like to see more thought and moral righteousness being put behind the case for tax cuts. Cutting taxes is about the most compassionate thing a Conservative administration can do.

  • J

    “But in a world when opportunities are changing and expanding, no such ‘headstart’ exists.”

    So, having half a million quid when you’re 20 isn’t a headstart of the guy who doesn’t have it? Riiiight. So _that’s_ why parents leave their money to their kids – to avoid giving them a headstart in life!

    Inheritance tax is NOT a tax on money you’ve already been taxed on. It’s a tax on earnings that your parents have already been taxed on. That’s completely different.

    The tax has two benefits:

    1. Less importantly, it’s a way of raising revenue that people object to less – the dead are dead and don’t miss it, and the survivors didn’t earn it to begin with so mind paying it (a bit) less.

    2. Far more importantly, it tends to prevent the build up of unevenly distributed capital, which itself is a bad thing. It prevents dynasties forming. It encourages innovation and enterprise.

    The tax’s main problem is the situation where an asset has to be sold or destroyed in whole because it’s too valuable to pay the tax in part.

    If you are going to start cutting taxes, start with VAT, then other arbitrary taxes on property like stamp duty, then income tax.

    Inheritance tax is the one worth keeping.

  • Bernie

    This smacks as nothing more than political opportunism to me. There isn’t a sound philosophy behind it. It is merely about votes from an ageing population where most of what is left of Conservative support is probably with the mid to upper end of the age range. The tories are every bit as statist as the other main parties and this tiny token remnant of their beliefs is a very poor strategy. It falls right into the “party of the rich” slot and even if accepted wouldn’t make the slightest dent in the Treasury coffers.

    Now if they had the guts to abolish Income Tax ….

  • Angela

    “J” writes; “So, having half a million quid when you’re 20 isn’t a headstart…”

    Apart from the fact that half a million quid won’t buy a decent house in this damn country any more.

    If I as a parent, want to give my children a ‘head start’ what fucking buisness of yours is it if I do?

    And if you don’t like the build up of dynasties have a word with the beneficiaries of Donald Dewar’s estate, That socialist stalwart who fought tooth and nail to frustrate the Thatcher privatisations. But dies a millionaire on the basis of British Telecom, TSB and Railtrack.

    That is an example of inequitable build up of wealth that is a bad thing(tm).

    On the other hand, if a man has honestly come by his wealth through his own hard graft (physical or intellectual) and has paid his taxes then there is no justification for double taxing him simply because he has died.

  • Julian Morrison

    Bernie says “This smacks as nothing more than political opportunism to me.”

    I reply: happy the libertarian whose views become politically expedient! If the Tories do the right thing for the wrong reasons, at least they’re still doing the right thing.

  • limberwulf

    while I agree that most other forms of tax should ideally be done away with first, I cant say that inheritance tax is worth keeping.

    1) Money is a head start in some ways, however, many born-rich people I have known start life seriously disadvantaged because of being essentially spoiled. Giving someone too much without them earning it is not always a good thing for the receiver, that’s why welfare is such a lousy system.

    2) Parents who teach their children the value of what they have and the process of earning, and then give them a headstart with tools, i.e. extra money after they have learned their lessons do not do damage to society. Life is not a race, nor an equality struggle. People who wisely utilize their resources and seek true success are a benefit to society as a whole. Success breeds success, wealth is not a limited resource. So in the cases where the receiver of inheritance is not a spoiled brat, society is benefitted far more than giving the money to random people who may or may not have had such training. In cases where the receiver is not well raised, the wealth fails anyway, and others still receive its benefit, as Toolkein pointed out.

    3) There is no entity which justifiably has the right or qualification to redistribute wealth. The question of right to property may end upon death, but a will exists so that the holder of wealth may “spend” his resources in a manner of his choosing, thus his property rights must be honored. As for qualification I defy anyone to give me a rational argument for the state being wise enough to distribute wealth in a manner that benfits society, or to even find an equitable means to do so wherein the wealth is not destroyed through inneficiency. I even defy anyone to show me reasonable evidence that the state can do so without showing some form of corruption and favoritism.

    4) The build up of capital is not a bad thing in and of itself. Misuse of capital as a pursuit of power, a limited resource, is a bad thing. Use of capital to pursue wealth, and unlimited resource, is a good thing. Proper restrictions on the size and scope of the state would make the first option far more difficult.

    5) A tax is by no means more acceptable simply because it is not as disliked. The fact that only the successful would dislike it shows me that it is even less justifiable. I do not want the most productive members of my society to be the most oppressed and angerred group, that is suicidal folly.

  • Ken

    I’ll have to join the ranks of those who object less to the inheritance tax than other taxes. The inheritance tax is not a tax on the successful, nor is it a tax on those who have already been taxed in the process of making the money.

    That person is dead.

    This is a tax on people who receive inheritances. Such people have not, as a rule, demonstrated any particular fitness to properly use the inheritance to generate wealth – the person who did that is the one who created the inheritance to begin with and, sadly, that person is no longer available to continue creating wealth.

  • Ken, I would deny that the all-powerful State has the right to pass judgement about the ‘fitness’ of heirs to inheret their ancestor’s property.

    This tax is about envy pure and simple. It also goes against the nearly universal urge among parents to do the best that they can for their children. I have never been convinced by the merits of it, and I’m very glad that it does not apply in Australia.

  • Verity

    Wot Scott Wickenstein said.

    Why should you be taxed on something of which you were not the author (in most instances) – have your parents die?

    It’s rabid hatred and envy. Except, as all the people who bought their council houses and fixed them up are now in the dying generation, all those hundreds of thousands of natural Lab voters and inheritors will be noting this incursion into their step up the ladder.

  • Jahs

    There is one aspect of the inheritance tax that I find makes it uniquely awful. Aside from the usual wealth destroying, time consuming etc. effects of taxation there is also the emotional cost.

    At a time when a family is just coming to terms with the loss of a loved one, state interference is particularly unwelcome. Indeed, it takes a special kind of malice to put (usually elderly) relatives through the bureaucratic nightmare that is unavoidable with such an intrusive tax.

  • Verity

    Jahs – yes. Yesterday, I would have said it’s all part of the mean-spirited socialist manifesto of envy.

    But now I think it’s deeper. There’s an intent to destroy Western society that has been underway for around 30 years.

  • Pete_London

    Verity – absolutely. I often think I’m alone in realising that the aim of the left is to utterly destroy Western without the slightest care for what would take its place. Without changing the subject, I’m convinced the left would welcome even Islamic, dhimmi Western world over what we have.

    How anyone can defend or ‘understand’ inheritence tax is beyond belief. Amongst all taxes and state restrictions, this one is plainly wicked, vicious and completely indefensible.

  • The Wobbly Guy

    Such people have not, as a rule, demonstrated any particular fitness to properly use the inheritance to generate wealth

    So what? It still doesn’t give anybody the coercive power to remove that wealth from them.


  • John Harrison

    Inheritance is good! It keeps wealth within families. It can give the beneficiary a headstart which gives them a private cushion against misfortune and reduces their likelihood to be dependent on the State.
    No wonder the socialists hate inheritance. It takes away their potential clients.

  • Johnathan

    One commenter objects to inherited wealth because it encourages the creation of rich dynasties. So what? In an expanding economy, such a “dynasty” cannot claim the whole economic pie for itself. In an upwardly mobile society such as Britain during the 19th century or America now, the existence of rich families is not a bar to riches.

    Of course some “trust fund” offspring are feckless brats who ruin their good fortune. Again, people with high IQs inherited from the genetic lottery of life fail to live up to their potential. That is part of life.

    Agreed that many other taxes like income tax and national insurance do a lot of damage.

    As for the political expediency argument, again, so what? The Tories are pitching for the middle class vote. Good. Shows they want to win power. This is supposed to be a bad thing in politics?

  • Verity

    Re Jonathan’s post above and his conclusion that the Tories want to win back power – most of us would judge this good. Or at least preferable to being ruled with a fist of iron by a one-party state. Peter Hain, however, in a textbook example of socialist viciousness, has warned the electorate that if they do not vote Labour at the next election, “the Tories could get in through the back door”.

  • limberwulf

    I agree Johnathan, politicians bending to the desire of the people to eliminate or reduce a tax. That is always a step in the right direction. The question of what taxes are the most damaging is comparatively irrelevant, the bottom line is that any tax reduced or eliminated is a good thing, hands down.

  • Errr..
    I think you mean cojones, not conjones

    Anyway, Australia abolished its inheritance taxes long ago so you could always emigrate


  • legolas

    I believe that some of the people on this board are missing the basic issues sourrounding the inheritance tax. I do not feel that it is a question of whether or not the tax should exist. Inherited wealth, like inherited political power, is a fundamental threat to a truly democratic society, and this is why the estate tax was intially conceived – to prevent dynastic tendencies that can assume a financial, and therfore, political stronghold in a government that is meant to be “for the people”, not “for the top 1% of the people”.

    I believe the questions are twofold,

    1. What is the established “exemption” amount, to be revisited and modified over time?

    2. How is the money invested into a society to have the least negative impact (loss of jobs, etc…) and as high a positive impact as possible? (again revisited over time)

    What is considered wealth and what is considered “exorbitant wealth”? The notion of working hard and achieving financial stability for your own life and for your children is certainly a noble endeavor and should certainly be encouraged at all costs in a capitalistic and democratic society. The pursuit of happiness often includes, although unfortunately, the pursuit of wealth. However, when does financial stability reach a level of “exorbitance” that really has nothing to do with providing for security of a family and its descendants, but rather establishing a dynasty that could eventually lead to a powerful entity, strong enough to buy the government and its “people”.

    The inheritance tax should be exempted at a high enough level that it does not effect the lives of any of the people taking the time to write down their viewpoints on this most esteemed website and allow for complete assention into their highest financial “dreams”. I doubt most of us in our lifetime will rise to the top 1% level of financial wealth (although I wish you all luck). However, when the inheritance of any single beneficiary reaches a value that is well beyond an established “security” for their own lifetime (by the current society’s definition), only then should the estate be appropriately taxed and invested.

    I will not waste any more of your time trying to establish the exemption levels ($50,000,000 US dollars could be a start), nor how to appropriately invest those funds in the nation’s best interest (education), for I only offer my own narrow viewpoint, not a sound solution that would have been the best use of my time. 🙂