This really isn’t one of those difficult questions: yes, of course we shoud abolish inheritance tax. Or at the very least this is an easy one: we should abolish the inheritance tax that we actually have.
The Conservative party would be better off scrapping inheritance tax altogether rather than increasing the threshold to £1m, the Institute for Fiscal Studies has suggested.
Yes, quite. It’s doesn’t raise very much, it’s wildly unpopular and distinctly distorting (as people pile into those assets that are not subject to it like farmland).
Let’s think back to what the original point of this tax was (and this pops up in that new book of Piketty’s as well). It was to prevent the great dynastic fortunes from being perpetuated on down through the centuries. There is, after all, something that might be considered not entirely fair if one person today is born with the whole silver cutlery cupboard in their mouths just because ggg to the nth power grandad was a murderous Norman bastard. Or perhaps we should revise that to a successfully murderous Norman etc.
But our current inheirtance tax doesn’t actually do that: the great landholdings aren’t actually subject to it and anyone with that sort of money can get around it entirely with trusts and so on. It doesn’t actually do what it was set up to do.
What it does do is hit the bourgeois. Yes, I know, half a million, a million, that doesn’t sound all that bourgeois but these days it is. 30 years of socking money away into ISAs will get you there (plus some compounding), not even including what has been happening to house prices. The tax hits those estates of those who have worked, saved and been successful, and doesn’t hit the estates of those dynastically rich. It simply doesn’t do what it says on the tin.
Now some might argue that we should be taxing those bourgeois pots: for there are those who don’t have one for micturation let alone a pot to spend. But that’s rather to miss what a nest egg does for people: it provides freedom in this life. Not total and absolute of course, not while we are still in this vale of tears that humanity is condemned to. But a bit of capital does indeed provide freedom. And the sort of amounts that those bourgeois inheritances provide seem to be just about the right amount too. Enough to aid, enough perhaps to be able to do anything, but not enough to do nothing with one’s life.
And the concept that we should tax away such freedom just seems most terribly odd. We should rather be hoping that all can gain such freedom from the immediate trials of having no assets.
Personally I’m not actually worried about inequalities of wealth. But I can see that some might worry about the position of the Duke of Westminster while there are those without a £10 note to their name at the age of 21. But the current system takes from those bourgeois, leaving the Duke alone, and still does nothing for those without the tenner.
The inheritance tax system as it is just doesn’t do anything of any value for us as a society. We should therefore abolish it. You know, like Sweden has just in case Polly wants to scream at us about the Nordics.