The Tories Will Aim To Cut Inheritance Tax
According to this article on the BBC, a future Tory government would end Inheritance Tax on family homes up to a million pounds.
I have form in opinions in this area and had a letter published in the Financial Times in 2006 about this tax, after an article in the paper on March 31st 2006 advocated the killing off of the tax. This is the first two paragraphs of the letter.
I have been against inheritance tax for years, not because I would benefit from its abolition or because I am getting to that age, when I should start to do something about it (“Inheritance tax should be killed off”, March 31). It is just that as a control engineer by training, I think it does untold secondary damage.
Consider: how many bright minds are employed on both sides of the inheritance tax war in avoiding and collecting the tax? Abolish it and they would have to do a proper wealth-creating job.
I still believe that the Inheritance Tax should be abolished, if not totally, but substantially! I don’t have current figures but in 2006, it only raised half as much as Air Passenger Duty in that year. I’m not alone on thinking this way as this article from the Telegraph in 2013 shows. This paragraph is from the article.
Yet the tax raises just £2.9bn a year, a mere 0.18pc of GDP, a tiny sum given all of the collateral damage caused and one which could easily be recouped by accelerating the Government’s savings programme.
David Cameron’s proposals are welcome, but pretty timid and will only have a limited positive effect on the economy compared to what full abolition will have.
The tax revenue would have to be replaced and as a BBC survey showed in 2006, that people would prefer a couple of pence on Income Tax. These days other and better options exist. The problems with abolishing Inheritance Tax are all political rather than economic, as if the Tories went for full abolition, the Labour Party would have a field day, saying they were looking after their friends.
They’ll probably do that with David Cameron’s announcement, even though probably nearly half of the beneficiaries of the tax reduction will be Labour voters.
The Anonymous Widower 
The problem with high taxation is that it tends to destroy ambition (e.g. in Denmark where additional holiday is a preferred bonus to money) and the problem of low taxation when the rich just get richer and by implication the poor get poorer, creating a divided nation. A balance needs to be struck and it is always best to tax windfall gains. My generation has benefited from high gains from housing and good pensions. CGT on houses could provide a large amount to help sort out the deficit and debt, and could be payable only when crystallised (e.g. on death of the occupants and partially when downsizing). The owners never planned for their houses to be worth so much and so it is reasonable to tax the gains. On the pension side, it is a nonsense to give across the board benefits to people just because they have reached a particular age (prescriptions, bus travel, heating allowance, TV licences). This is ageist at best and unfair at worst. I would rather see benefits paid to the truly needy. I am actually proposing something that would cause me to lose out significantly, but would make me feel that society is acting fairly. It is wrong to use such payments to buy votes, and that is what all political parties do.
Comment by John Wright | April 12, 2015 |