We're not generally known for praising Polly Toynbee around here but when she gets something right it's worth mentioning it. Actually, it's especially worth mentioning when Polly gets something right given its rarity. So, we agree, this is half a good idea:
Take a deep breath – now is the time for Labour to declare it will abolish inheritance tax altogether. The argument is lost, the public’s ears are blocked. Although people overwhelmingly say the country is too unequal, Ipsos Mori finds 70% hate IHT, calling it “unfair”. They like high income taxes for the rich – the 50p rate was popular – but not IHT. Sad, but true.
Jean-Baptiste Colbert, Louis XIV’s finance minister, famously warned that the art of taxation is to “pluck the goose to obtain the largest amount of feathers with the least possible amount of hissing”. IHT gets one big hiss. So the Fabian Society has come up with a far better solution. Instead of taxing an estate, tax whatever gifts and bequests people receive as part of their ordinary taxed income.
This is not an idea new nor unique to the Fabian Society. And we would indeed generally support it. In fact, we've proposed it in passing more than once ourselves. Tax not the estate but recipients of incomes and or capital.
We also agree with the reasoning: inheritance tax might well be, as many insist, logical, possibly even righteous. But people hate it, hate, hate, hate it. And it's really not the point of public policy to insist upon things which the populace in general despise.
But it is only half a good idea. Because we would insist that the general principle extends much further than inheritance tax. In this case we are stating that incomes and or capital should be taxed when they hit the wallets of some live human being. Very well, that's a good principle. We should thus abolish corporate taxation (of profits that is, not resource extraction excises) in its entirety. Simply tax incomes and or capital when they hit the wallets of some live human being, the dividends or the capital gains. Thus making our tax system simpler, more just and righteous and even more efficient.