Re: Alice's inheritnace tax proposals (a problem)

["HArish Natarajan" <harishisnot@hotmail.com>]

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dear all,

Haven't posted before, but I think, perhaps, its worth grounding this 
discussion and providing a different point of view. I think there are 
several practical issues with the tax that need to be raised, as well as a 
consideration of the prinicple arguments for an inherentance tax.

Firstly in the UK inheretance tax (IHT) is 40% on everything valued above 
£263,000. In Germany a 30% top rate is not applied until after £2m, and in 
France the 40% top rate is applied at incomes above £1m (approx), while no 
such tax exists in Austraila, New Zeland and Canada. Thus the IHT catches 
more people than  other industrialised countries - and I think is horribly 
misapplied. It is not aimed at the top 1%, but instead impacts on the top 
50% (bare in mind the rapid rise in property prices places many more in that 
bracket)

Secondly I think that there are substanial transparency issues. The 
inheretance tax masks who pays what - which I think is unfair of a 
government, and creates confusion. Bare in mind that income has alrady been 
taxed; if in the top income groups already at 40%. So we are talking about 
an estate taxed at 64%, leaving the inheretor with only 36%; but further 
with liabilities to pay if the inheretance is in property - ie if they don't 
sell their home, then they have to find another way of funding.

Thirdly, i think that there is an effect on savings. A comparison (albeit 
crude) with British, German and Canadian savings rates show that the great 
British middle class virtue of thrift has all but been forgotten. Assuming I 
care for my children (say) I would be happy to work to leave something for 
them and for my old age. Why though would i save if i knew that if something 
happened to me that a large proportion of my money would end up with the 
government not my children? I think it is fair to say that despite persons 
emphesis on the short term, the rational person would be more likely to save 
in a system which does not tax the dead. With social security problems, 
chronic under savings, and net debt at over £1trillion (2004) a policy that 
discourages this is an anathema to fiscal prudence. Suggesting that all 
inheretance is confiscated jsut incentives people to splurge in their own 
working life.

The idea of the continued survival of a de facto aristrocracy (IHT breaking 
pockets of wealth) , i would question whether that is a problem currently or 
even if it is, doesnt splitting inheretance between children (and them 
splitting it) deals with it?

But what I'm more interested in is that principle. The IHT is a tax on love.
In saving money to give to children, the parent is performing a laudable and 
natural parental function - providing for their future generations. The 
parent has the right to do so, but its a derived right. Say you don't object 
to one being allowed to spend their money as they wish- its something most 
accept as following from principles of liberty - doesnt this extend to a 
parent being allowed to give their money to whoever they wish? I'm claiming 
then, that even if the children havent earned it, but their parents have, it 
does not follow that children should not be allowed access to it.

the argument that you do not have full right over your money because there 
were other inputs is something that i find somewhat awarkward. I don't think 
you can substantiate an argument that you have no input into what you earn - 
if you werent there then you wouldnt make the money. So at least some is 
you. The money i make is what that market believes my work is worth. If 
there are social factors, which i think is a reasonable assertion to make, 
perhaps they cancel out. The work I do contributes to others ('society'), 
working as a teacher say, or producing anything that someone else is willing 
to purchase (if someone is willing to buy my services, clearly they value 
what i produce at more then the price i sell it).

I do think that taxation is legalized theft, and I'm not alone. Perhaps i'm 
wrong, but i see no reason to suggest that if we have any rights at all why 
a right to property (right to take actions to obtain) should not be included 
in them, while, say, a right to a stable source of food is? Or am i just 
charactaring an argument (I'm really not sure)?

Sorry if i come off sounding too right wing, or have bored people with by 
Randian dogmatic views; just thought i would add my opinion for what its 
worth ;-)

harish




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