Wrong way round here

Why do we permit this? The transfer of wealth between generations is an injustice: it is a reward for no work, and a form of access to privileges that are otherwise beyond reach. Professor Thomas Piketty, in his new book Capital in the Twenty-First Century, makes the argument that, after a social-democratic blip in the middle of the last century, inheritance is once again becoming the key route to wealth. Piketty argues that if wealth is concentrated and the return on capital is higher than the economy’s growth rate, inherited wealth will grow more rapidly than that stemming from work. This returns us to the terrain of Balzac and Austen, where the road to financial security is to target those who already possess wealth and, where possible, marry them. The data Piketty analyses – a huge and comprehensive set – suggests that the proportion of people receiving a sum in inheritance larger than the lifetime earnings of the bottom 50% is set to return to 19th-century levels in the next couple of decades. Pleasant news for our neo-Victorian government; less pleasant for the rest of us, and a disaster for anyone who cares about inequality.

It is difficult to justify inherited wealth from anything other than a class-partisan position. It is the point where the already threadbare veil of “meritocracy” falls off to reveal a fiscal system designed to reward already concentrated pots of wealth. Far from a Keynesian “euthanasia of the rentier”, we are seeing the triumph of a rentier economy: in such conditions, rather than further accumulation by the sons and daughters of the wealthy, we should instead demand an end to inherited wealth entirely.

Yes, inherited wealth brings freedom to a life. Which is why we should be working towards everyone being able to inherit it, not none. For the desirable outcome is where all have that freedom to do as they wish, not none.

48 comments on “Wrong way round here

  1. Ah, work all your life to build something and the scum will steal it all the minute you are dead. They really don’t believe that there is such a thing as “incentives”, do they?

  2. Wealth, inherited or otherwise gained, doesn’t beget freedom. The claim that it does is a standard leftist abuse of language.
    Wealth facilitates and enables, important things both, for sure. But not the same as freedom.

  3. I justify it simply because its’s my bloody property.

    It’s bad enough that the bastards tax it twice whether you spend it or leave it. If they did intend to confiscate everything one owned in the interest of equality, when I decided that I’d had enough of a good thing, I’d cash everything in, spend it all on a massive party and then top myself.

  4. No-one, not even Piketty, believes in this.

    Name me one prominent lefty who has refused his inheritance.

    They don’t come more lefty than AW-B, but all the Benns are wealthy, yea, unto the fifth generation we may soon see as an MP.

    Name me one prominent lefty who doesn’t have a system of trusts and charities (are you listening Gordon the Moron?) to ensure they pay the minimum of tax and that their estate will largely avoid IHT.

    If Piketty cares to drop me a line showing the estate accounts of his deceased parents, or if they’re still alive, a copy of their will, and this contradicts my view, I’ll humbly apologise.

    But knowing hypocritical lefties, they’d probably be forgeries.

  5. And do the scum of the left NOT leave their accumulation to junior/junioress?. Did Wedgie-Benn ditch the cash so his kids did not suffer under the burden of inherited moolah?. Did any of them–ever?.

    As DocBud says–its our fucking money–that which most people have worked a lifetime for–if they want to leave it to their kids–so said kids can have a better life then that is the deceased business, not the business of political scum and esp not the business of some snot-nosed puke writing in that collection of unprocessed toilet-paper that is the Guardian

  6. Actually I agree with this slightly, being leftist scum. It would at least be interesting to try it out as a thought experiment. You face an effective 100% tax rate at death anyway (you can’t take any of it with you).

    I’d tax it at 50% (so billionaire kids still never have to work) and redistribute the lot as a “national inheritance”. The government doesn’t get a penny beyond administrative expenses. Everyone gets a slice of the pie at 21 (old enough to have done some things wrong). You can use it to pay for your education, downpayment on a house, start a family, start a business, or blow it all on crack and whores if you so choose. Your life, your responsibility. We can also thus drastically reduce welfare payments, since we give every young man and woman such a cracking start in life, rather than making them wait until they are 50 to inherit money they no longer need. And if they spent it all on crack and whores, tough luck.

  7. I never quite grasped the “no way should we be taxed twice” argument – if you tax both income and consumption, then that’s taxing twice. But if anything, it’s better to tax consumption than income.

    Part of me in principle agrees very much with BiG – I have dreamt up an evil plan like that before. But part of me wonders whether inheritance tax is illogical. It is a plain fact of life that if you are born to better-off parents you are statistically likely to have a better start in life. That itself is a valuable (pre-death!) inheritance, and not one that can be prevented or taxed. Similarly, if mummy and daddy give little Jonny a helping hand with the university fees or a deposit for the starter home, I fail to see how that can be blocked. Or why, particularly. Parents surely should have the right to use their wealth in that way.

    So why does it make such a big difference when mummy and daddy are dead, that we should no longer enable or respect their wishes? If anything, that’s the least troublesome time for their wealth to be passed down. The kids are likely approaching retirement themselves. If it adds to the grand sum of human inequality merely by letting some chaps and chappesses who are getting on a bit, to have a longer and more comfortable retirement, what’s the big deal? The wealth transfers that create more social disparity are the earlier ones that give the kids a “head start” – the transfer (or perhaps, creation) of social capital during childhood, or financial support for getting on the property ladder, or study, or training, or launching a small business, or even running off on a thoroughly educational gap year. There are also almost invisible transfers like letting Jonny stay at home rent-free in his twenties while he saves up, whereas his mates are shelling out on London rents. That’s worth a lot of money and not everyone in this land is privileged enough to be able to offer that to their kids, but Is anyone seriously calling for that to be banned?

    If you try to stop post-death transfer of wealth, there’s going to be more of that pre-death transfer of wealth.

  8. I dunno. I think it’s pretty clear that wealth come from some combination of 1) Hard work 2) Big 5 personality traits 3) luck.
    I would have thought a classical liberal/libertarian would have had a preference to reduce the impact of #3 (e.g. rent seeking, inheritance, etc) towards #1.

    I was left nothing, although I expect to hand down £1m+ and I still think its unfair. No I wont spend it all on crack and whores the day before I die, cos I will respond to incentives. I just think the incentives are wrong. Its basic Washington Consensus stuff.

  9. How about just taxing inheritance as income? You could even give the kids the choice of either taking it immediately as taxable income, or adding it to their own pension pot to withdraw later.

  10. I think the lefties see inheritance as something somebody gets in their late teens, early twenties which allows the kids of wealthy folk to live a life of luxury. But that model ended a long time ago, nowadays most “kids” are coming into their parents’ inheritance when they’re in their 30s and 40s, i.e. as as MyBurningEars points out, they’ve already benefitted from their parents’ wealth, or are independently wealthy by then anyway.

  11. Taxed twice?

    The majority of an estate for the majority of people is property, right? And since your parents die, hopefully, once you’ve got your own house (and career and whatnot) then unless they own a wonderful pile somewhere you would like to live, you are going to have to sell it to realise the income. So in effect

    Taxed at point of gain (parents’ income)
    Stamp duty on buying house
    IHT
    CGT on resale

    how many f*****g times do the bastards want to take a slice?

    also, if someone could explain why it’s wrong for your parents to give you their money simply for being born but right for the state to do the same, I’d be happy. Oh yes, amounts, etc, but to echo that neocapitalist running dog GB Shaw, we’ve established the principle, now we’re just haggling over the price.

    It’s shit like this that makes me want to abandon what few liberal principles I have and just cull the left, starting with cretins like this.

  12. “wealth brings freedom to a life. Which is why we should be working towards everyone being able to inherit it”

    Hurrah! Worstall comes out in favour of redistribution. Let’s not just have a tiny minority inheriting wealth, but everyone!

  13. Everyone seems to hate inheritance taxes… but I think they are a pretty ‘good’ tax.

    If tax has to be paid, then I’d rather it was paid when I am dead than when I am alive. Personally, I think IHT should go up (a lot) and income tax/NI should come down.

    If I earn enough when I am alive, my kids will be at a private school – giving them a good education is more than enough of an ‘inheritance’ in my opinion. I plan on spending anything I have left well before I am too old to enjoy it!

    Social mobility is important – people must believe that their own effort can improve their lot. And for mobility to happen upwards, it must also be able to happen downwards.

    (and this can all happen in a rising tide of everyone getting better off – surely, if everyone knows they will not get a penny from inheritance, they will get on with working rather than fighting with their siblings over Mum & Dad’s house)

  14. BiG, you are assuming that wouldn’t be avoided; you would simply get more asset transfer to children before death, and not much tax revenue. I also have a problem with a tax system that encourages the elderly to dispose of their assets and financially penalises people whose parents die unexpectedly early.

  15. sam, CGT on the sale of the house is only on the gain above probate value, so if it’s sold soon after death there won’t be any.

  16. Sickening number on here who can’t understand the concept of private property. Whatever money I earn in my lifetime is MINE–it does not belong to a gang of thieves calling themselves the state–it does not belong to “the nation” , it does not belong to the poor (some of whom are lazy, stupid, shiftless twats) it does not even belong to the poor who might not have deserved to be poor (which will be all of us by the time the scum of the state have finished). It does not belong to the sanctimonious who say “Aw– what about all those poor people”. It belongs to me and is mine to do with as I see fit. If I leave it to the kids then that is it–doesn’t matter if the kids are or become lazy, stupid, worthless trash–it is still where I chose to leave what I have earned by exchange with others.

    I take it that BiG and all the others expressing even mild approval of this guardian shite will be making a point of leaving sod all to their offspring?. Or will the usual terms apply–“this always kicks in at just above whatever level of wealth I happen to have–let the “billionaires” pay”.

  17. Well said Mr Ecks.

    Doesn’t mean it can’t be taxed, since your arguments apply just as much to income, but it does mean that we should view taxing inheritances in the same way we view taxing income or consumption – a possibly necessary evil rather than glorious social engineering.

  18. There is a vast generational transfer going on all the time, from the older to the younger – unless I can somehow opt out of funding the state non-education system and other goodies for the ungrateful percentage.

  19. As Interested points out, inheritance is what is left after we have had to pay for all the shit on top of the basic state’s role.

    There has to be a line somewhere to where the socialist scum can put their hands.

    The debate has really shifted to “How much should you be left with” from “how much does the state need to provide basic stuff”.

    The way it is going, I would not be surprised to see within my lifetime that I am taxed 100%, and then given an allowance.

  20. And after all that arguing above, whats to say that someone who inherits a lot of money doesn’t waste it whilst someone who only inherits a small amount invests it wisely and grows?

    All the lefties think that inheritence equates to rich. Inheritence is for all and in many ways. Looks, intelligence, and money.

    Life’s shit and then you die.

  21. @Mr Ecks you sound very angry so I’ll tread delicately. All of you/my wealth belongs to you/me. But a certain proportion of it must go to the state to allow it to provide the state’s proper functions (let’s leave aside what those are but suffice to say we are probably close on that).
    So – if we have agreed tax needs to be levied, we come to where it should be levied and why. I think you have a bit of an uphill battle to persuade me that it is preferable to tax income, profits, etc than to tax members of the lucky sperm club. Surely liberty and meritocracy requires us to minimise the impact of luck and rent seeking and maximise hard work and personal responsibility?
    All within the boundaries of financing the necessary and sufficient functions of the state of course.

  22. A couple of points about inheritance taxes – firstly there’s the old crack about they mostly affect those who hate their family more than the taxman, because with a bit of thought they are completely avoidable. And secondly that they really only bite on the middlingly wealthy – those who have enough assets for a comfy life, but not enough to give most of it away and still live OK. The truly wealthy can just shift it all down a generation with plenty of time to spare and hang on to enough to live very nicely, with the back up of the kids helping out if needed at some point. So unless you are going to prevent people giving stuff away during their lives as well, death taxes will never have that large an effect on the overall distribution of wealth.

  23. Mr Ecks, bollocks. Your property/earnings are yours solely because the state, by passing laws, says so. Take JK Rowling – self made, but also made by international copyright laws. Contrast Dickens – his books were pirated in the States. All land was stolen at some point, whether from Saxon peasants, monasteries etc, but the state regularised the status quo, and we buy and sell that land.

    Now if you’re saying that a wise state does not capriciously change the rules, that’s fine.

  24. Practically, IHT is a storm in a teacup. Even without emigrating, there are ways to ensure your children benefit as much as possible from your wealth, from giving it to them whilst they’re alive to putting it in trust funds to investing it in education and experiences and even if all this doesn’t appeal you can still blow the lot on coke and hookers so they don’t have to care for you in your declining years.

    So the argument is one of principle, and my principle is: the state has already taken its bite – probably more than once – out of the money you’ve earned and saved, so piss off.

  25. With a few caveats I think they do have a point, it’s just that they have entirely the wrong idea on how to deal with it.

    Inheritance tax is one of those taxes that hits the middle but completely avoids the top – those who’d be seriously affected have enough money for lawyers and trusts, and pay naff all.

    Fact is, as has been said numerous times above, being born to a wealthy family gives you a massive advantage in life. Being born to a little bit well off family gives a big advantage. I’m in my 30s now and still paying nearly half my take home wages in rent, whereas someone whose parents were just well off enough to give them a deposit would be nearly mortgage free by now, and thus have very nearly twice the take home pay that I do.

    If you really want to solve inequality, taxing wages isn’t the way to do it. In fact, wages would be the main way that the less well off have a chance to catch up, if only they weren’t taxed so much. What you really need to do is to tax capital, but for most capital that’s not feasible due to mobility, etc.

    It’s odd. As I get older, I become more and more convinced that land tax is actually a good idea…

    (caveats: there seems to be an assumption that equality is automatically a good thing. It aint necessarily so. If I can get the same quality of life for sitting on my bum as you get for going out and working hard all day, I’ll just sit on my bum, thanks… There has to be some recognition and incentive to work. Also, we have far too much government. They spend 50% of the GDP for gods sake – how is that healthy? Less tax all round would provide more growth and make everyone better off, and if it means we have less interfering busybodies, then that’s even better!)

  26. Lies, lies and more lies.
    “The transfer of wealth between generations is an injustice: it is a reward for no work”
    To give one example: my paternal great-aunt inherited most of her parents’ wealth, while my paternal grandfather, to his fury, inherited £50, because she had looked after her parents in their old age. That was common in the past.
    A second, even more common, example is the small family business (butcher, baker, blacksmith …) where the son(s) has worked for keep/nominal wages all his/their teenage& adult lives until they inherit the business which is a reward for their work.
    In my case I am absolutely determined to transfer some wealth to my younger son (because the current economic environment and the attitude of the HR “profession” who are only interested in round pegs because it is too much like hard work to dig square holes means that he is likely to spend all his adult years after graduating in unpaid work) and that *is* a reward for *my* work.

  27. For those of you who thing it is unfair (cry me a freakin river) that some people are born lucky: what next?

    You’re born good looking/intelligent/tall/fast…etc. Let’s tax you because it is really unfair on the ones who haven’t got these advantages and won’t progress as much in life.

    @rational anarchist, mortgage free in your mid 30s? You are kidding right?

  28. Jim – liked your points. Shows clearly why even a crack down on clever lawyers and trusts etc wouldn’t be very effective at pushing more burden on the very wealthy unless accompanied by more stringent conditions on mid-life transfers. They just have the security that they can arrange stuff earlier.

  29. @monoi. strawman alert. No one here has said it is unfair, what some have said is that it’s a fact of life and deal with it. But that doesn’t mean we should mitigate its impact.
    Or put another way, if you are just to gaddam perfectly correct on this, then why not just revert to a full monarchy?

  30. @ Mr Ecks
    “Whatever money I earn in my lifetime is MINE”

    Yes it is. But IHT is about what happens after your lifetime. It’s not a tax on the money that you have earned (and been taxed on however many times), it’s a tax on what the beneficiaries have gotten by their fortune in being favoured by you.

    @ sam
    “how many f*****g times do the bastards want to take a slice?”

    Are you having a laugh? Wealth gained on private residences is barely taxed at all. If someone inherits a house and doesn’t pay IHT then that’s double unearned and untaxed income, not the opposite.

    And with regards to Tim’s point.. I rather think that if we all inherited a million pounds, then a million pounds would not be worth inheriting… so it’s a bit daft and we may as well just all inherit nothing.

    As much as I sympathise with those who don’t want the state getting it’s mucky hands on the wealth they’d like to give to their kids, I’d rather that than they tax the incomes of those kids to such an extent that they can never build wealth of their own. Personally speaking, I’d like as much of my lifetime tax bill as possible to be paid the day after it ends.

  31. Rational Anarchist

    No doubt Murphy Richards would point out that ideally 100% of your Income should be spent by the Curajus State as it provides you with the means to exist……

  32. Luke: Not just g(uardian) shite–now its Obama shite–I owe it all to the state do I?. Funny –didn’t notice them contributing much sweat when I was doing the grafting.

    I only have it cos’ of their laws?–cos’ the wise hero’s of the state stop all those who would steal it from me?. And who would these warded off thieves be?. Other less successful members of the same violence gang that the state represents the culmination of. The scum of said state have stolen 50% of what I have made and it is their thugs that threaten me not the fucking Mafia (org crime is itself a creation of the states meddling tyranny). The rest of your argument is what?–we need a gang of violent thieves lording it over us because there always have been violent thugs lording it over us?.
    Bollocks yourself.

    Gary: I am very angry (“You talkin’ to me? You talkin’ to me?) and employ profane language in an attempt to soothe my rage. Rage not only against the foul scum at the “top” of society, shovelling shit on the rest of us but against the equally fowl dross that seems to make up the mass of humanity. The stupid, thoughtless ever-willing shit-eaters who seem to dote on the favour of their masters. If Camoron or Blair came round to their house (the pencil-necked political bastards would bring help with them of course), beat the shit out of Mr Average, raped their wife and took their kids for service in a brothel most of the Mr Ordinarys would prob say that they must have done something to deserve it. Their fucking neighbours certainly would. For such is the loveliness of the human race.

    To answer your point, –No I don’t agree with you about the need for taxation. All taxation is robbery under arms.

  33. @mr eks
    Not one penny? The state deserves absolutely nothing? The proper role of the state is zero?

  34. Mr Ecks is one of the reasons people laugh at Worstall.

    It’s like he’s a tolerated dog that shits in your bed every day.

  35. Still alive Arnald?–I heard you fell into a tide-pool down there in Gurn-sea and got eaten alive by crabs. Or was it syphilis.

    The only shite in the bed here is you –and the only thing you are laughing at is all the blood from the 150 million poor bastards murdered by socialist scum. Whom you support wholeheartedly. Still I suppose it puts the states thieving into perspective.

    Gary: Less than zero.

  36. You all seem to thing that tax is not only inevitable but that individual people are very taxable.
    So the big families ie trade unions , charities , companies , religions and the like can not only exist but get bigger by stealth.

  37. Mr Ecks,
    “Luke: Not just g(uardian) shite–now its Obama shite–I owe it all to the state do I?. Funny –didn’t notice them contributing much sweat when I was doing the grafting.”

    You have completely misunderstood my point. You were talking about private property, not effort or merit. Property depends on law. That law can be good, bad, silly or provide bad incentives, but it defines what is your property. (Hint, try being a 19th C slave, and see where your graft gets you.)

  38. Slavery is and always has been a creature of the law ie the state. Slaves may have worked on private plantations but that labour was forced on them under colour of law and by the very institution you are defending. It still is in America’s corporate socialist prison slavery system.
    Property belongs to you if you can keep what you’ve earned. That is the practical truth regardless of right. There are always scum who will look to take what you have earned off you. The largest and most dangerous of the violent preditors end up as the state. Which takes 50+% off us now and is always on the lookout for more. It subscribes only to the notion of private property (except when the state itself wants what is yours of course) because it knows that such concepts provide incentive to build more wealth it can plunder later on–IHT being another example of how. Stephen Molyneux calls it right–the nations of the Earth are tax farms where human livestock are farmed. Some, like North Korea are poorly managed factory farms where even the elite don’t live very well (apart from those up Kim Il Juniors arse-his personal entourage)–while the West have been free-range farms. Mismanagement by the Farmers is causing that to break down now.

  39. Luke – “Property depends on law.”

    No it doesn’t. There are plenty of examples of property in state-less societies. In fact there are people and organisations in most Western societies that have property that do not rely on law enforcement. In prisons for instance. Or outlaw motorcycle gangs.

    Mr Ecks – “Slavery is and always has been a creature of the law ie the state.”

    And likewise there are any number of societies without states that had or have slaves. The state is not needed for people to think that something is theirs.

    “Property belongs to you if you can keep what you’ve earned. That is the practical truth regardless of right.”

    Exactly. You do not need the state to do that.

    You might enjoy James C. Scott Especially Seeing like a State or The Art of Not Being Governed. He is an old Sixties hippy who did not become a yuppy.

  40. For me this isn’t born of jealousy of the wealthy or those who inherit. I’ve got above average coming my way when the time comes, but it will be at a time when I have no pressing needs. I literally won’t need the money. By that point it will do little more than make up the difference between business class and first class when going on holiday (my way of “blowing it on crack and whores” I guess). Whereas, as a newly-responsible adult it would have gone a very long way.

    Also, I’d rather pay my own taxes when I am dead. It’s as much about timing of my own taxation (at a point when I no longer give a shit) and reducing the >50% of my income the government eats while I am alive.

  41. @Mrecks the shouty sweary thing was cool when devils kitchen did it nearly a decade ago. You are adding nothing. I am forced to agree with arnald.”less than zero” ffs. Are you 16 yo by any chance?

  42. @BiG but as nice as it would be for your IHT to save you having to pay so much income tax, it seems unrealistic to expect it to. The numbers aren’t favourable to a noticeable cut in IT because IHT frankly doesn’t raise much in comparison. If a greater burden was placed on to IHT, then even though you know you wouldn’t personally feel the pain of it, you also know that you’d take rational steps to ensure whatever purpose you intended the money for was not hindered by the IHT. And so would other people. It’s really not a hard tax to avoid – if you want to keep it in the family then hand the wealth down earlier, for instance.

    That reduces the effectiveness of the “wouldn’t it be lovely if we didn’t have to pay a whole bunch of tax until death and it doesn’t matter anymore” argument. Not much can be saved (effectively deferred) per year; the “doesn’t matter” bit isn’t really true (because most people do have intentions on how their wealth should be used after they’re gone*); the tax is largely avoidable in the first place. Moreover the incidence will fall disproportionately on those whose financial planning is hindered eg by early death, or not being financially secure enough to pass their wealth down earlier, which seems pretty funny people to target. I don’t think you’d get much joy asking the taxman “please may I defer a chunk of my IT til after I’m dead, and just charge it to my estate. Promise I’ll leave a fat juicy estate, scout’s honour” so don’t expect governments would be very amenable at a societal level either.

    As you say, by the time you inherit it won’t make much odds to you. That just shows the folly of the left-wing argument that it’s all about preventing privilege – the intervention is too late for that. For the ends they’re intending they’d be better to argue for a wealth tax. Or raise income and capital gains taxes so folk don’t get so unequally wealthy in the first place. Not running a property boom would help.

    * Also, since you could have brought consumption forward, even money you have after your death has a present-time value to you. So paying tax on it, even after death, has a present-value cost. In that sense it’s rational to avoid it even though you’d never see its operation. Worth comparing to income streams on intellectual property that can continue after death – just because you won’t be around to cash the cheque doesn’t mean it’s of no present value to you, or that you’d turn such a cheque down if it were offered. IHT is a cheque going the other way.

  43. There’s never going to be enough revenue from taxing only inheritances rather than income – the controls on what one could do with ones money, not to mention the need to stop people leaving the country with their money in later life, would make such a system a virtual prison. Plus you would have to tax gifts between spouses in order to get a slice on every death, and have zero allowances, which would go down like a bucket of cold sick, widows being chucked out of their houses to pay the IHT, people who have sod all losing 50%+ of that etc.

    So IHT is always going to be in addition to income and consumption taxes. If one were not taxed on ones income and consumption during one’s life an IHT would have ‘some’ moral validity. To tax both life and death is immoral IMO.

  44. Gary: “Are you 16 yo by any chance?”

    Far from it–I used to wish I was 16 again–but now, when I look at all the shite going on around me, the approach of death does not seem too bad at all.

    “Mrecks the shouty sweary thing was cool when devils kitchen did it nearly a decade ago. You are adding nothing.”

    That would be the difference between you and me Gary–I couldn’t give a shite about what is cool or otherwise.

  45. @MBE, while life can be damnably unpredictable, I am likely to die intestate with no heirs and (just about) more accumulated wealth than I have paid income tax in a lifetime, which will itself be several average lifetimes worth of income tax. So, yes, I would prefer the opportunity to defer that taxation seeing as the State will get it all in the end anyway – taking it away from me later doesn’t hurt them and it helps me. I agree this option should not be available to those blessed with kiddies as they can keep their money out of the grasping hand on death.

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