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

[Robert Charleston <rc3673@student.open.ac.uk>]

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Hi All,

Just grabbing a quick couple of minutes break from work and thought I'd 
point out that actually inheritance tax isn't particularly left or right 
wing at the moment.

The mainstream parties hold pretty much the same policies, and the think 
tanks of both wings have mooted the idea of 100% inheritance tax coupled 
with a much higher child trust fund, held until the age of 18. The idea 
being, for reasons of stakeholding on the left, and mobility of capital on 
the right, that starting all adults on a 'level playing field' (hate that 
phrase) would give them the tools and resources to invest in the country / 
provide a sense of pride and ownership / and make them responsible for 
their financial status (no more undeserving poor).

So if, in today's prices, every adult received 50 grand on turning 18 they 
could choose to invest in a house, pay for an education, buy stocks and 
shares, or drink, snort and eat the cash. No more second generation poor, 
no more idle rich scions, no more inherited poverty or wealth. No more 
money sat still and not doing anything (the 18 years would see it being 
used in government bonds etc), no more chance to say 'I never had a 
chance'. Whatever you make you keep until you die, when your estate is 
liquidated and returned to the state to set up the next load of trust 
funds.

You can see why it appeals to both left and right - but what do you think?

I intuitively see it as mixed: giving waaaay too much power to the state 
(making it the ultimate arbiter for not just protecting the financial 
system but also the start and end transactions of every citizen's life) 
[boo]; but also bringing capitalism down to a game in which talent and 
good decisions would be rewarded over parental wealth [yay]. But then I 
have a higher IQ and a lower parental bank balance than the average Tim 
nice-but-dim, so I'm bound to say that really. The system does - it has to 
be said - put the dim, overconfident, feckless and spendthrift at extreme 
risk of lifelong poverty. Which they may be at risk of anyway, but this is 
supposed to be a system that is more fair than the current one.

I also am extremely worried that it removes children (and grandchildren 
and so on) from the financial side of the social contract. By making none 
of your financial details depend upon your forbears, and denying any link 
from your actions to the adult financial wellbeing of your children, it 
separates you into different societies with drastically reduced financial 
duties between child and parent. It therefore further encourages ethical 
egoism (a.k.a. Thatcherism, Reaganomics) which I take it has been 
extremely damaging to the social wellbeing of our country already.

A problem for radical adjustments of inheritance tax is that to build 
large companies, railways, art galleries, colleges, support new political 
parties or rapidly construct new weapons or amass soldiers etc. we have 
often looked to families with huge personal wealth. More than can be 
accumulated in one lifetime (pace Industrial Revolution and Imperial 
adventuring). To replace this often-used facility in the event of high 
inheritance tax making it untenable to be a rich hereditary family, the 
State would have to 1. take on these roles, just as the National Trust had 
to take on dozens of stately homes when inheritance tax was first 
introduced; and 2. constantly maintain a large reserve of capital to draw 
on in the event of something unexpected cropping up (war, plague, natural 
disaster...)

On a merely pragmatic level, since there are events that call for the 
expenditure of more money than a nation actually has, the state needs to 
make sure its credit rating on the international markets remains 
excellent, since it no longer has the kind of 'pool' of credit-worthy 
families to arrange loans on its behalf, offering their personal guarantee 
against its debts (this is how the government financed many modern wars of 
defence).

There are, of course, philosophers on this list who favour extensive state 
coordination of the arts, college-building, political funding, science 
grants etc. - but since governments in an indirect democracy often fall 
into the hands of a few powerful individuals, you can end up handing all 
these priorities and tasks to just a few well-connected friends if you're 
not careful. You can create a smaller oligarchy than would ever be 
possible under a distributed pluralism of powerful families with 
hereditary wealth left mainly intact by low inheritance tax. I guess 
that's what I'm interested in. I like a few rebel houses to exist against 
the government of the day, as a decent guarantee of pluralism. I think 
inheritance tax should probably, on reflection, therefore be abolished. 
Tax the living, let the dead pass on what they can to those they have 
elected to use it. Enough will turn out to be feckless or wasteful or 
unlucky to lose the lot; and enough of the rest of us will turn out to be 
astute or wily or attractive or lucky enough to build houses of our own. 
Stability, pluralism, distributed power and wealth, social mobility, 
duties to children. What else could you want?

Rab.


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