Sigh

The argument against the idea is contained within the very piece recommending it.

In the UK, official statistics suggest around £77bn is passed on in inheritance each year (tax avoidance means the real amount could be even higher). That’s money that no living being has a moral claim to, according to standard justifications of wealth inequality and private property. Were that money redistributed by the state, it would cover the cost of adult social care several times over. It could plug gaps in NHS, education and police funding. It could provide the kind of comprehensive welfare state that meant nobody had to worry about their family after they passed away – because there would always be a safety net.

OK, 100% inheritance tax. Why not?

The idea that we should be able to pass on our life’s accumulated wealth to descendants is deeply embedded. It appeals to the fundamental biological urge to protect your offspring and propagate your genes.

Because human beings don’t work that way.

Which is a pretty shit hot reason why not. To the extent that we’re doing any designing at all we’re trying to aid humans in being human, not anything else.

111 comments on “Sigh

  1. I wonder if dear Abi will feel the same when she realises just how much she has to lose when dear Mummy and Daddy shuffle off this mortal coil and can no longer make up the sh**y income she gets from the Grauniad….

    No trips to the family chateau in the Cotswolds, no ‘don’t worry dear we’ll pay for your flight down to St. Tropez so you can join us for a holiday’ etc…

    No effing inheritance!

    or am I being mean?

  2. Yes, BBB, anyone who writes for the G has to have the trust funds properly squared away, unless they’re eating roadkill and living in a squat.

    And dear Abi just doesn’t look the type.

  3. The problem with a 100% inheritance tax is that it fails some simple equality tests.

    Imagine that two equally rich couples are bringing up two children called Peter and Paul. Peter’s parents live until age 80 and fund their child’s education and support him in buying his first house. Paul’s parents die when he is 10 and the state seizes all the “unearned” wealth, thus ensuring that Paul is left destitute.

  4. That’s money that no living being has a moral claim to, according to standard justifications of wealth inequality and private property.

    Define those ‘standard’ justifications, please. Are these ‘standard’ in the sense that you and your fellow travellers have redefined the word ‘ethical’?

  5. That’s money that no living being has a moral claim to, according to standard justifications of wealth inequality and private property.

    How soon before a statement like that will be written about your private pension? Your savings? Murphy is already well down that road.

  6. if we accept the “unearned wealth” argument logically we would end up with the state redistributing everything as the problem caused by my Peter and Paul example makes it clear that a 100% inheritance tax creates inequality and the solution to this would be to prevent Peter benefiting from his parents’ wealth.

    Alternatively we end up with the compromise we have today.

  7. “Yes, the desire to pass on property to your descendants may be natural”

    It is. We want our offspring to thrive.

    ” – but why should we be slaves to our biology?”

    The desire to ensure our offspring is oppressive, is it? We are enslaved by it?

    “Social progress has frequently depended on our ability to transcend individualistic urges and work together for the common good.”

    Rational self-interest and genuine altruism often reconcile those “individualistic urges” with “working together for tbe common good”. We don’t need expropriatory socialism to achieve it.

  8. I could see the merit in a high (but not 100% tax) and distributing it equally at, say, age 21 as some kind of “national inheritance”. Use it to pay for university, start a business, buy a house, or just blow it on coke and hookers if you like. Of course, even starting out with such intentions the state will just blow it anyway as it does with every other tax.

    That could be more effective simply on the basis that most people nowadays don’t inherit until they are retired, or close to, anyway. At which point, it’s rather pointless.

  9. I’d also, as a sprogless selfish bastard, be much happier if I could choose the manner of taxation. Being taxed when you are dead in return for being taxed less when alive has a lot of appeal.

  10. Because human beings don’t work that way.

    History shows the Guardian is unmoved by that statement.

  11. Yep. 100% inheritance tax. Once.

    Why would anyone bother about accumulating wealth if it’s all going to be taken by the State? Live high. Live wild. Die a pauper. Way to go!*

    *Although it’s not easy. I’m fortunate enough not to have produced any descendants. A couple of medium distant relations who are comfortable in their own right. An ex living off the considerable inherited wealth of her parents. A marginal responsibility for someone else’s kid half a world away. And a lifetimes wealth accumulation plus some inheritances to squander. Bloody hell it’s hard! Trouble is, I keep getting involved in things show a profit. There ain’t no justice!

  12. Basically this is an attack on the concept of private property and is one of the most offensive articles as well as transcendentally stupid even by Grauniad standards.

    IMO the correct way to manage inheritance tax is simply to require that anything you receive is taxed as normal income, possibly at a special rate say 10% to reflect the fact that this is wealth accumulated despite paying tax on it once when it was acquired by the deceased.

    There should be no estate tax at all. It is an obscene squalid concept.

  13. “I could see the merit in a high (but not 100% tax) and distributing it equally at, say, age 21 as some kind of “national inheritance”. Use it to pay for university, start a business, buy a house, or just blow it on coke and hookers if you like.”

    Given you have ideas like that, I’m relieved you aren’t passing on your genes.

  14. Ken,
    Obviously the state provides both Peter and Paul with education and accommodation. Problem solved!

  15. ” Were that money redistributed by the state, it would cover the cost of adult social care several times over. It could plug gaps in NHS, education and police funding.”

    Naturally, the State and it’s employees would have to be suitably remunerated for their labour in redistributing all those ill-gotten gains as well as making sure that the cash got to the ‘right’ people – not those awful Sun or Mail-reading Tory scum.

  16. “Obviously the state provides both Peter and Paul with education and accommodation. Problem solved!”

    And a house and a job and…, seduce my antique footwear, we’ve arrived in a socialist paradis!

  17. So the natural behavioural responses to a 100% Inheritance Tax would be either “Not Die” or “Spunk it all away before you go”.

    While both have their advantages, the second is considerably easier than the first, but even with this the possibility that you accidentally undershoot (i.e. die before you’ve splurged the lot) or overshoot (i.e. spunk it all away and then live to 113) are too high, so to prevent inequality in dying as well as a 100% Inheritance Tax you must also introduce mandatory age limit.

    Those not surviving to the mandatory age limit must be resurrected to live out their days, those who exceed the mandatory age limit must be put to death.

    It is unclear what interest and penalties HMRC would charge on top of “Termination with extreme equality”.

  18. The idea would be delightful in its innocence if it wasn’t also evil.

    Even Murphy could see that with 100% IHT wealth would largely vanish from the hands of the elderly. He would argue to introduce measures prohibiting people over, say, 60 or in poor health selling their homes and moving into rented accommodation. He would reintroduce exchange controls to prevent foreign blokes from moving wealth abroad with a view to doing a better job of frittering it away than BiS.

    Does it require huge powers of imagination to envisage the possibility that wealth can move if not curajously nailed down prior to seizure by the state and that wealth would tend to congeal and ossify as people get older and that enforced illiquidity would be deleterious to the economy as a whole?

  19. Does it require huge powers of imagination to envisage the possibility that wealth can move if not curajously nailed down prior to seizure by the state and that wealth would tend to congeal and ossify as people get older and that enforced illiquidity would be deleterious to the economy as a whole?

    Perhaps some kind of solid structure to prevent the movement of inequality, possibly built from lots of smaller clay and shale blocks fired in a kiln.

    It could be called the “Anti-Fascist Protection Rampart”, since clearly it is to prevent the nasty Fascist types from undermining the state’s ability to feed and clothe its citizens.

  20. But remember citizens to save diligently to provide for your old age, as we are all living longer. If you die, we’ll steal the lot, but fuck it, social justice and all that.

    Quite how we cannot comfortably manage the welfare of our poorer citizens despite a 40%+ tax take is a mystery.

  21. ‘The idea that we should be able to pass on our life’s accumulated wealth is deeply embedded. But imagine if we could use that money for the greater good ‘

    I do love this section of the Guardian – the odious phrase ‘The Greater Good’ is a dead giveaway (makes me think the author has been watching the film ‘Hot Fuzz’) – a previous column is shown below:

    https://www.theguardian.com/commentisfree/2017/apr/10/free-housing-universal-right-free-market

    No doubt the author is confident here ‘right on’ credentials would find her housed in Park Lane or Mayfair rather than a Skelmersdale Council Estate but I digress.

    As the admirable ‘allthegoddnamesaretaken’ points out’ – there might be a pattern emerging here:

    ‘Poppy Noor is a London-based freelance journalist. She writes about class, politics, inequality and education, and has provided social commentary for Channel 4 News and Newsnight’

    In fairness (I am in a charitable mood this morning because I found a tenner in an old coat) the idea of this series of articles is called ‘Utopian thinking’ (i.e it puts crazy ideas out there) and Christ we don’t want to ape the likes of Murphy and his acolytes who would close down the Window of debate completely. (albeit Wilkinson and her ilk would be subject to the planned ‘Socialist tax’ which would raise revenue from those who most deserve to have their income confiscated)

    Nevertheless I wonder if she has considered the impact on charities who receive bequests from wills of this policy?

    Also, I doubt she was meaning to increase the prospects of the offshore Finance industry either but I can only imagine the champagne corks that would be popped in every single offshore financial center if this proposal came to fruition – a bonanza of epic proportions…

  22. BinG/BinS…
    In the same childfree position. Am doing my best to party my way through the pile but it’s tough going. If I depart first Mrs G. cleans up…and visa versa. When we’ve both turned up our toes whatever’s left is split between the state and the dogs’ home. I’ll be dead so I don’t really give a shit.

    Rob…
    Presumably because half the country isn’t paying tax, still less 40%.

  23. Frederick Forsyth wrote a very good short story on the subject of inheritance tax and “taking it with you”.

  24. How many jobs/businesses does that inherited £77 Billion support/create?

    How many people would lose their jobs/businesses if that £77 billion were not spent by the ‘invisible hand’ in the economy and instead given to Government to squander?

  25. The fact that it is a human urge to pass on goods to offspring makes it a big goose to pluck and argument thatt the offspring have done nothing to deserve it reduces the volume of hissing when it is plucked.

    However raising the rate, particularly raising it above the marginal rate of income tax, would simply lead to more wealth transfers during lifetime. Tax free gifts might be clawed back as 100% inheritance taxable, but transfers made as taxable income probably would not.

  26. BiG

    Your suggestion does not solve the inequality problem that afflicts Peter and Paul in my little example above. Once we start down this route, you end up with full redistribution of all income, which ends badly.

  27. @David S L

    I find Quora generally to be an absolute dung heap. There’s the odd shaft of gold in there, but mostly it’s a sh1t pit of the one-eyed leading the blind. And dumb questions that might just be trolling…..

  28. “That’s money that no living being has a moral claim to” – I’d like to see her explain the moral case why surviving wives should be treated differently to surviving children.

  29. There would be a strong incentive to give your wealth away before death to avoid the 100% tax.
    What about wealth given away five minutes before death? Or five months? Or five years? She doesn’t cover that issue.

  30. One of the problems on both the left and the right, but more so on the left, is the idea that you have to rob Peter to pay Paul.

    You saw this in the Labour “fully costed” manifesto. Raise tax one one cohort to pay for extra police etc…

    The problem with this approach is that it doesn’t take into account the actual macroeconomic consequences (and trade-offs) of those changes.

    For example if 10 000 extra police are recruited, what happens when their salaries are paid? Well 30% comes straight back as tax and NI, so the initial cost of £300 000 000 (or whatever) is already reduced by a third. And when those extra police spend their salaries a portion will come back as VAT. Then their spending will generate sales for businesses who will in turn employ people and pay tax.

    So inevitably, a large portion of that spending will eventually come back as tax – not all of it (because there will be leakages, and people along the way will set money aside for saving, which breaks the spending cycle), but the fundamental point is that you don’t necessarily need to increase (for example) capital gains tax by an exact figure to fund extra police – it’s much more complicated and nuanced than that.

    Because the economy is not household, and because the state has the power of taxation over many transactions, a large chunk of its spending comes back as tax – completely unlike a household.

    So the left does itself no favours by misunderstanding how macroeconomics works. It threatens to raise taxes, such as inheritance tax, which are likely to be deeply unpopular, when in fact there isn’t really the need to (or at least not to the extent that you have to fully fund one change with another).

    And of course if the state spends more into the economy by employing more police, that will raise overall demand, creating more sales for businesses, more jobs, and more taxes. Regulating demand would arguably a much more constructive use of the state than trying to run the Budget like a household.

  31. @Bart

    If you accept the logic of the 100% inheritance tax, it eventually leads to full redistribution of all income – in a fashion similar to the Peter and Paul problem. Since it is unfair that someone should be able to give away their wealth while alive…

  32. “That’s money that no living being has a moral claim to” – I’d like to see her explain the moral case why surviving wives should be treated differently to surviving children.

    I don’t think dear Abi has thought that far. Abi just doesn’t like other people having money, so confiscate it.

  33. Sigh.

    You’ve just taken the money off other people wh would also have paid income tax, who would pend and pay VAT. So you’ve just lost those tax revenues.

  34. @ken – agreed. But your example ignores Pauline, who, not being a member of the lucky sperm club, has parents who aren’t in a position to leave anything to her, whether they die when she is 10 or 60.

    Oh, wait, it’s her tough shit that she’s poor is it? I see.

  35. @Tim,

    Does it make a difference if government uses it to buy millennium domes, or if it’s redistributed to different people?

    I’m sure rich people spend (and cause VAT revenues) of proportionally a lower part of their income than everyone else. They also are clearly quite adept at minimising income and other taxes.

    Even I’m not advocating a 100% inheritance tax – BiI’s idea of taxing inheritances as income has some merit but would make it difficult to ring fence for a redistribution program.

  36. “You’ve just taken the money off other people wh would also have paid income tax, who would pend and pay VAT. So you’ve just lost those tax revenues.”

    It depends though, doesn’t it? You’re assuming the economy is a zero-sum game. If extra government spending results in overall GDP growth because of a rise in aggregate demand caused by the extra spending then you haven’t lost tax revenues, but gained them. And in the process the country overall is richer. That’s why fiscal stimulus can work, the tradeoff is inflation, not a loss in tax revenues.

  37. @BiG

    “I’m sure rich people spend (and cause VAT revenues) of proportionally a lower part of their income than everyone else. ”

    I’m not so sure- a lot of poor people would spend a vast chunk of their income on zero rated/low rated goods- food, fuel, kids clothes etc.

  38. Super, now you’re appealing to the multiplier. Fine. But that’s a different case from the one you presented before, which is that you don’t need quite so much tax revenue to fund spending because the people you’e spending it upon pay tax.

  39. @Mr Yot

    But if you are looking at an economy growing at 1.7%, and not all of that is concerning government spend, and then talking about the percentage of that growth that generates tax revenue, you are very much operating at the margins.

    For the purposes here- especially as we are looking at the return within the same year-, I think you can say that Tim’s comment stands

  40. “Super, now you’re appealing to the multiplier. Fine. But that’s a different case from the one you presented before, which is that you don’t need quite so much tax revenue to fund spending because the people you’e spending it upon pay tax.”

    Well the first case is the simple truth, a significant proportion of government spending *does* come back as tax. That doesn’t happen with a household.

  41. “I’m sure rich people spend (and cause VAT revenues) of proportionally a lower part of their income than everyone else. They also are clearly quite adept at minimising income and other taxes.”

    Source?

    ” But your example ignores Pauline, who, not being a member of the lucky sperm club, has parents who aren’t in a position to leave anything to her”

    Oh, you mean apart from the free education, free healthcare, benefits, provided courtesy of those “rich” people? None of whom ever had to work obviously.

  42. “a significant proportion of government spending *does* come back as tax”

    Makes you wonder why government doesn’t pay net of tax, which would reduce the amount taken from taxpayers in the 1st place?

  43. Another useless Graun “journalist” who appears not to know her arse from her elbow.
    Imagine what all those so-called “millenials”, the kids currently bleating about baby boomers having it all blah blah, will say, when they find they’re entitled to sweet Fanny Adams because the oldies have squandered it all rather than leave it for the greater good.

  44. Did I just see an argument that the fact that government spends money that is then taxed is a factor in favour of government spending because it means the government spends less?

    Presumably it is possible to be unaware of the costs involved in employing people, collecting tax and employing people to collect tax… Never mind the slightly obvious point that government spending seems to be less effective than individual spending or investment in generating wealth.

  45. And on the ridiculous front, I have just seen an argument that rich people spend less on VAT-able things than poor people. As a progressive society, maybe BiG needs reminding that the UK doesn’t charge VAT on essentials (interestingly something that really upset the EU). So if you are basically just buying essentials (basic food, children’s clothing (apparently naked adults are fine…), books, feminine hygiene products recently etc) then you aren’t paying VAT (and government is not artificially inflating the price of being alive – something our government can actually be praised for in this one narrow instance). Whereas if you are richer (and are not the stereotypical miser) then most of what you spend will be VAT-able (or otherwise taxed in the case of property and business purchases).

    I think we can discount this one – even without addressing the issue of savings being the driver of investment.

  46. “Did I just see an argument that the fact that government spends money that is then taxed is a factor in favour of government spending because it means the government spends less?”

    Nope, I never said the government would spend less. The point I made was that you don’t need to rob Peter to pay Paul and that government spending will have an effect on aggregate demand.

    “Never mind the slightly obvious point that government spending seems to be less effective than individual spending or investment in generating wealth.”

    Debatable. Since we have had larger government as a percentage of GDP, and especially since WW2 and the creation of the welfare state, recessions on the whole have been shallower and shorter than when the state was smaller (the 18th and 19th centuries had prolonged economic crises and depressions). A mixed economy is much less volatile than a laissez-faire one. Precisely because the state regulates demand via the automatic stabilisers.

  47. “You’ve just taken the money off other people wh would also have paid income tax, who would pend and pay VAT. So you’ve just lost those tax revenues.”

    Not if you pluck some fresh fruit from the magic money tree.

  48. I’m always intrigued by liberals aruging that you shouldn’t make change X to some tax because it reduces tax revenues.

    I thought us liberals all wanted reduced tax revenues?

  49. Whooosh!!!!

    That was the sound of every wealthy person leaving the country with as much of their wealth as they could get out, to go and live in a country that has no IHT (or a relatively sensible one. I expect the Irish would open their doors pretty sharpish)

    And as usual with the Left the people who would suffer would be the ordinary ones, who couldn’t up sticks and fuck off.

    Please please let someone in the Labour Party think this is a brilliant idea and start agitating for it to become party policy. I think they probably are stupid enough to think it would be popular……..

  50. “Not if you pluck some fresh fruit from the magic money tree.”

    Society gets richer over time. We’re undeniably richer now than we were 100 years ago. The Magic Money Tree is human ingenuity which drives growth. (We probably agree on that bit).

    The debate is how the Magic Money is distributed, and how big a role we give to the state.

  51. if you are basically just buying essentials (basic food, children’s clothing (apparently naked adults are fine…), books, feminine hygiene products recently etc) then you aren’t paying VAT

    You could have added another essential, domestic energy, if the EU hadn’t insisted we all pay VAT on it. Another Progressive triumph.

  52. Is she proposing making loving one’s children and grandchildren illegal? Even then people would try their hardest to find a way. The family undermines the state, you know loving the individual rather than society. I suspect in another place and era she would be dobbing kulaks because social justice.

  53. I think they probably are stupid enough to think it would be popular……..

    It would be popular. Most people wouldn’t be affected directly, or if they are would see as happening in the far future. Never underestimate the appeal of taking money from other people.

  54. On a technical note:

    Tim, if the manufacturer of a zero-rated final product buys in, presumaby he is buying in raw materials/subproducts plus VAT.

    In that case the VAT paid down the chain as far as that final manufacturer has incorporated VAT all the way but the final manufacturer can’t offset it against VAT ‘cos he ain’t collecting it.

    Surely the VAT paid to companies further down the chain will merely be incorporated (or lower profit margin yeah, yeah) into the final price making whatever it is more expensive than the preVAT price of the same product.

    Simplifying:
    Product £100 plus VAT @ 20% = £120
    Product with VAT lower down the chain but no final VAT added
    £108 (or whatever) cos the prior VAT is treated as an expense

    My point being that not charging 20% on a product does not mean it can necessarily be 20% cheaper.

    Usually the final price will be less than the VAT price but not by the amount of the VAT?

  55. Another mistake made by the left is to not apply the concept of fairness universally.

    100% inheritance tax is a dumb idea because it will make some people feel as if they are being punished. And humans are particularly susceptible to loss aversion.

    Any tax regime that feels punitive will cause resentment, and will create division and loosen the social cohesion that a welfare state requires to function effectively.

    Taxing the rich until the pips squeak is not effective because it’s unfair (and certainly perceived that way by those being taxed). Even the Beatles resented being taxed at 90%.

    It’s probably better to tackle inequality from the bottom up, rather than the other way around.

  56. ‘Were that money redistributed by the state, it would cover the cost of adult social care several times over. It could plug gaps in NHS, education and police funding.’

    Sure, it could. But it won’t. It will spend it on Severn Barrages, or other flights of fantasy.

  57. “The point I made was that you don’t need to rob Peter to pay Paul and that government spending will have an effect on aggregate demand.”

    Robbing Peter to pay Paul is politics 101. You just have to make sure that there are more Paul than Peter.

    As for aggregate demand, the money was already there in the hands of Paul, having it go through the state does not increase demand, aggregate or not.

    The state, as a borrower, further robs Peter and Paul through inflation.

    Again, read Bastiat, he said it much better 170 years ago.

  58. “It would be popular. Most people wouldn’t be affected directly, or if they are would see as happening in the far future. Never underestimate the appeal of taking money from other people.”

    It would affect ordinary people, tens of millions of them. Most people have something, a house, a car, a few savings, something, even though they would come no-where near the IHT threshold. The idea that your last surviving parent dies and the State basically moves in and takes everything, down to the last penny would be anathema to pretty much everyone, regardless of wealth levels.

    Look at how unpopular the ‘dementia tax’ was, and that was only the possibility of one’s wealth being used up by ones own social care. If that was unpopular, you can times that by 1000 if the State was going to turn up at the funeral and say ‘Hand over the keys and the bank books please’.

  59. “As for aggregate demand, the money was already there in the hands of Paul, having it go through the state does not increase demand, aggregate or not.”

    Well maybe it’s one of those “opinions differ on the shape of the earth” situations, but history quite clearly shows that the state has a very profound effect on aggregate demand. How could it not when 40p in every pound spent is spent via the state?

    Again, the era of laissez-faire in the 18th and 19th centuries was far more volatile than the post WW2 era. A mixed economy is proven to be more stable than a laissez-faire one. A small state leads to instability and prolonged crises.

  60. The logical consequence of her argument is (i) the abolition of life insurance and (ii) that in divorce cases, the state should confiscate half the husband’s wealth instead of giving it to the ex-wife (iii) she would abolish widows’ pensions.
    One of the (more) despicable acts of the Attlee government was to freeze the War Widow’s Pension in a period of high inflation.
    The dependants of the deceased have a moral right to enough money from the estate to keep them from penury.
    My former employers used to be a leading provider of “Family Protection” policies that guaranteed an income to widows and under-age children until they reached 21 or started work. I thought that was “a good thing” but Ms Guardianista thinks that, by providing a safety net attuned to individual needs, it is depriving the state of the funds to provide a safety net.

  61. Having spent over a quarter century advising American Golden Geese clients, let me offer you a different perspective. One of the major reasons they retain someone like me is to legally deal with tax and succession planning. While not homogeneous as a group, they tend to have a fair amount of consistency of opinions in this particular area. Therefore I will try and channel some of their “Golden Geese” thoughts:

    The underlying premise of those who support an estate tax is that estate assets belong to the state and that the state currently “allows” some of it to be passed onto the Golden Geese offspring. They assume this privilege should be stopped and ask for justification as to why it should be retained. The Golden Geese would argue that the assets that we are discussing are theirs and that the state would need to justify to them why some of those assets should go to the state in the form of estate/inheritance tax;

    As a result of globalization, Golden Geese do not need to remain in the tax regime of their birth in order to reproduce their current business or personal lifestyle or to maintain or increase their wealth. In business terms, they are no longer “ sticky”. The practical result is that the state needs to convince the Golden Geese (who pay 100% of the US estate tax) that any estate tax is justifiable. Failure to make a convincing argument means that even if politicians pass a law, inheritance will not be “banned” – the Golden Geese will simply legally leave any taxing jurisdiction which applies such a rule.

    Let’s go through some of the common justifications put forth for estate tax:

    Argument: This is simply part of the “fair share” the Golden Geese owe.

    GG Response: I have already paid income or capital gains tax on this wealth and therefore have paid my “fair share”;

    Argument: Your children are not entitled to it and as part of the “lucky sperm club” shouldn’t have the benefit of their forbearers hard work.

    GG Response: What my children are or are not entitled to is my business not the state’s. I know and have a connection with my family which is much stronger than the connection I have with millions of people, I will never know, who by chance of birth happen to populate a particular geopolitical area (i.e. my fellow citizens);

    Argument: If you leave it to your children, then you are creating a perpetual division of wealth in our country and increased inequality.

    GG Response: Leaving it to my children or not, is my choice. If I do leave them all or some, I hope that they are smart with this money. However, I have no guarantee that they will break the “shirtsleeves to shirtsleeves in 3 generations” truism.

    Global inequality is dropping precipitously as multitudes of people around the world are raised out of abject poverty. The domestic and international economy is growing in size and is not a “zero sum game”. My fellow citizens were also born in the same geopolitical unit as me. Simply by us all having been part of the lucky sperm club, we were born into what would, for most of the world, be an unimaginably privileged life (i.e. no war, schools, infrastructure). So some of my fellow citizens have not increased their already (from a global perspective) high living standards and wealth at the same rate as me. And you think this is a problem significant enough for me to forego leaving money to my children or engaging in strategic philanthropy?

    Argument: Your fellow citizens really need this money to deal with their domestic societal ills.

    GG Response: Through strategic philanthropy, I can have a much more effective and efficient use of this money to deal with a societal ill than by using the government as a charitable vehicle. In addition, I can decide whether it is best to deal locally, regionally, nationally or internationally;

    Argument: In a democracy, it should be the majority, through their elected officials, who decide where your estate assets should go. You cannot be trusted to make the “right” strategic philanthropic decisions.

    GG Response: Thank you for your patronizing arrogance but I was careful and smart in the accumulation of my wealth, I trust myself to be the same in its distribution (A Billionaire Defends Modern Philanthropy);

    The only reason that the estate tax has been able to still be applied at all, is because of ignorance or life inertia. The result is that not all Golden Geese have yet arranged their affairs to avoid its application. This can currently be done by the creation of a foundation (Buffett and Gates) or expatriation (Eduardo Saverin and an exponentially increasing number of former Americans). If you managed to convince enough of your domestic politicians to actually pass a 100% estate tax, not only would you fail to gain additional tax revenue, you would also see a significant loss in the amount you currently collect.

    As a final point, I enjoyed when some estate tax proponents premise their arguments with, “if we assume that any change in inheritance policy is to be made by all countries at the same time”. As a result of The Prisoner’s Dilemma, there will never be universal application of 100% estate tax or any “level tax playing field”. Politicians in one country do not get and stay elected by implementing policies which are good for other countries to the detriment of their own. That is why there has always been economic competition (including Tax Competition) between taxing jurisdictions. There is absolutely no incentive to do away with this now and no method of enforcement if it was attempted to be forced upon certain intransigent jurisdictions.

    This type of statement reminded me of the old story about the Engineer and the Economist who are stranded on a deserted island. They have a single tin of beans and after an hour of watching the Engineer try to figure out the angle to hit the can on a rock to pop the tin, the Economist haughtily tells the Engineer to stand aside. Raising the tin, the Economist states, “now assume we have a can opener …”

  62. @bilbao,

    You can be in a “repayment situation” with VAT, buying in VATable and selling VAT exempt/zero-rated etc.

    HMRC take considerable interest in you when it happens, but it is legitimate.

  63. “history quite clearly shows that the state has a very profound effect on aggregate demand. How could it not when 40p in every pound spent is spent via the state?”

    40p is TAKEN by the state to be spent. Unless its printing money, the state has none. Those 40p are spent by someone different than the original owners. So an entity that redirects 40% of the country’s wealth has an effect. No shit Sherlock.

    “Again, the era of laissez-faire in the 18th and 19th centuries was far more volatile than the post WW2 era. A mixed economy is proven to be more stable than a laissez-faire one. A small state leads to instability and prolonged crises”

    Certainly, the various world wars waged by states never had an effect? I’m willing to bet that most crisis are/were created by a combination of incentives created by the state, and you can hardly complain that the players act according to the rules. So your statement about mixed economies is just wishful thinking and plain wrong.

    There is what is seen and what is unseen. You need to figure that out.

  64. “That’s money that no living being has a moral claim to, according to standard justifications of wealth inequality and private property”

    Makes you wonder how this will writing business started, doesn’t it?

  65. “Honestly, if people did decide to retire earlier and enjoy their later years, instead of slaving away for as long as possible, would that be such a bad thing? And given that youth unemployment is such an issue, it may well be socially beneficial to free up those jobs.”
    Since a half-educated Guardianista couldn’t do my job …
    [Actually, my wife wants me to retire by the time I am 75 so my major client has transferred the bits of my job that he can do a self-employed middle-aged guy with 20+ years experience but I still have to do one bit on my own and help him out on another].
    She is an arrogant *person* (decades ago, a friend pointed out to me that lady dogs did not deserve to be insulted by comparing them with certain human females), who does not understand what she is talking about. You cannot replace a STEM graduate with forty years’ experience with a twenty-odd graduate in media studies or sociology.

  66. So it turns out everybody wanna more money for less effort?

    Is that obvious, or trivial, or both?

  67. Didn’t the tories get a massive boost when Osborne spoke of increasing the threshold to £1m?

  68. “40p is TAKEN by the state to be spent. Unless its printing money, the state has none. Those 40p are spent by someone different than the original owners. So an entity that redirects 40% of the country’s wealth has an effect. No shit Sherlock.”

    Yes exactly. The state has a profound impact on the economy. And levels of taxation are decided via the ballot box, so if you want less taxation you have to make your case to the electorate.

    “Certainly, the various world wars waged by states never had an effect? I’m willing to bet that most crisis are/were created by a combination of incentives created by the state, and you can hardly complain that the players act according to the rules. So your statement about mixed economies is just wishful thinking and plain wrong.”

    Except that the state was smaller then, as a proportion of GDP. Whereas the introduction of the welfare state after WW2 has stabilised the business cycle – the automatic stabilisers soften the blow of recessions and speed up recoveries. So not wishful thinking, and clearly right.

  69. BiG

    Happened to me one quarter back in the crisis. Summer (always quiet) that year was a business free zone and we had contracted a whole load of extra stuff. All with VAT at 21%.

    Didn’t get it back, cos in the annual return things were back to normal. We pay every quarter, they pay once a year.

  70. BiG

    There is indeed the problem of “luck”, which means that some people suffer from inequalities caused by the luck of the draw. The luck egalitarians such as Ronald Dworkin are from the same philosophical strand as John Rawls and his veil of ignorance would indeed favour some form of redistribution. Note though that they would not favour a 100% inheritance tax that would leave Paul at a disadvantage to Peter since the deaths of the parents is again a form of luck.

    Most philosophical approaches to this problem acknowledge the problem of incentives and thus do not require full scale redistribution for this reason. Indeed if we assume that the wealth of the parents in our example is a result of effort and not luck, while some form of redistribution is called for – free education, basic support, wholesale seizure of all income is not supported.

  71. “And levels of taxation are decided via the ballot box, so if you want less taxation you have to make your case to the electorate.”

    Didn’t we just have one of those things, an election?

  72. Yes exactly. The state has a profound impact on the economy. And levels of taxation are decided via the ballot box, so if you want less taxation you have to make your case to the electorate.

    Which is exactly why our Poundland Maggie Thatcher aka Theresa May lost her party’s majority in the House of Commons on June 8th this year.

    Between the “Dementia Tax” and the disemboweling of the commitment not to raise income tax she turned an almost certain win into an almost lost.

    But generally governments do not announce their intentions on tax at the ballot box, but rather wait until they get into power before squeezing the stone for more blood.

    While George Bush did win in 1988 with his claim “Read my lips: no new taxes”, then did exactly what he said he wouldn’t and supported the creation of new taxes.

    This came back to bite him with a vengeance in 1992 and he became that most useless of broken things a one-term President.

  73. @monoi is right, a cheap copy policy was implemented by Brown.

    The wealth tax, a variant of this caused the well off in France to abandon it.

  74. “Didn’t we just have one of those things, an election?”

    We did. Tax and spending were at the heart of the campaign. The side that wants less of both narrowly won 🙂

    The next election, whenever it comes, will certainly be interesting. Tax and spend, size of the state, public investment, public spending, will all be front and centre. The electorate can decide.

  75. “Except that the state was smaller then, as a proportion of GDP. Whereas the introduction of the welfare state after WW2 has stabilised the business cycle – the automatic stabilisers soften the blow of recessions and speed up recoveries. So not wishful thinking, and clearly right.”

    Are you for real? The state was smaller but nevertheless managed to start 2 world wars. As for your other bollocks about automatic stabilisers (hahaha), we’re still in the aftermath of apparently the largest recession ever 10 years ago and well on our way to the next courtesy of central banks. But yeah, mixed economy.

    By the way, how do you define a mixed economy? And do you have any clue as to what the role of the state is?

  76. @monoi I have to ask myself the same question: are you for real?

    a) you’re conflating starting wars with the welfare state

    b) you don’t seem to know what the automatic stabilisers are

    c) you appear to be blaming the 2008 financial crisis on central banks

    Those arguments are irrational and ideologically blinkered. If the facts are that bothersome to you you’re welcome to live in your libertarian fantasy world, but you won’t be persuading many of the rest of us to join you.

  77. @ken,

    I rather specifically did not favour a 100% tax.

    What’s the “best” rate is rather depends on your view of what you think is best, or rather what should be best (and for whom). And there isn’t a single liberal answer to that because two liberal axioms (taxation is theft vs. equality of opportunity) are in conflict. And, as our golden goose consultant has pointed out, there are practical limits.

    And it probably doesn’t matter that much as most stupidly rich families squander the lot within at most 3 generations.

  78. 1/ Your point was that small states = chaos. I respond that states, even small, start wars, as well as creating the wrong incentives, and hence create more chaos than any free market will ever do. That is, if you understood what a free market is.

    2/ Automatic stabilisers: I sort of know what they should be but experience tells me they’re nothing of the sort and just a politician’s mantra. Furthermore, only a moron would have automatic stabilisers after the fact. I mean, your mixed economy is so well managed, why are there recessions at all?

    3/ You’re not very bright, are you? I wrote that we are well on our way to the next recession courtesy of central banks having created bubbles everywhere you look, on the back of the last recession (Are they applying automatic stabilisers?). Try understanding what you read. Difficult I know.

    That leads me to conclude that convincing the “rest of you” is an impossible task. I have better things to do anyway.

  79. Predictably resorted to the ad hominem after the irrational arguments get nowhere. You’re right, your persuasion skills suck 🙂

  80. Personally, I think that these “Automatic Stabilisers” are just storing up trouble and going to make the next recession into a depression, if not encourage war.
    If I understand correctly, an automatic stabiliser is government spending in times of recession and benefits to keep people afloat.(please correct of I’m wrong)
    All this means is that most Western governments are now up to their eye balls in debt, with anaemic, if any, growth and aging populations. They have lowered interest rates to zero and printed loads of money. Having backed themselves into this corner, the next time there is an economic crisis they have no tools left. Hence war, as a distraction.

  81. Robbing Peter to pay Paul is politics 101. You just have to make sure that there are more Paul than Peter.

    Not necessarily.

    You just need to make sure that more Pauls change their voting preference to you (or are encouraged to turn out if they already prefer you) than Peters move away from you (or are persuaded to turn out for your opponents.)

    If almost all Peters already reject your socialist utopia as wholly unrealistic, then dumping more tax on them isn’t political suicide.

    Unless it gets so bad they hit the streets.

  82. Ken,

    Even socialists would have some compassion for a 10 years old…… on second thoughts if the parents were then probably not.

  83. Richard Yot / Tim (around 12.45pm) – Argument for state employing more people

    If the state is employing that person, that means the private sector isn’t / can’t.

    From personal observation, I’m inclined to suggest that people employed in the private sector generally have to work harder / produce more (£ for £) than those in the public sector. Perhaps add up all the diversity officers and other pointless waste before challenging that?

    Hence, all other things being equal, the answer surely is the opposite.

    Wherever possible, the default should be to sack people from the public sector, reduce the tax that funds that waste, and let the private sector spend that same money employing those same people to do something more useful, productive and value adding with their lives?

    Exceptions being where it really is preferable for the collective to fund something? And I mean fund, not necessarily directly employ.

  84. This sort of garbage could have come from the keyboard of the infinite monkey – where basically all your money belongs to the state and everything should be for the greater good – Murphy with his” all your pension belong to us” and now this bimbo with “all your wealth belong to us” only see people as vassals of the state. I don’t want to sacrifice my savings and prosperity for the greater good where i have no choice . If they want to spend money on transexual solar powered moslem breeding programmes -do it with their money and not mine. I would quite like not to be lectured on the greater good
    etc by people who A) have more money than me to start with and b) make choices i don’t agree with and then tell me i’m in the wrong. Fuck off and stop trying to tell me what to do.

  85. “Wherever possible, the default should be to sack people from the public sector, reduce the tax that funds that waste, and let the private sector spend that same money employing those same people to do something more useful, productive and value adding with their lives?”

    Isn’t that making the assumption that doctors, teachers, policemen, firemen, nurse, binmen, park keepers, town planners, etc etc etc don’t do something useful?

    For most of us, the services provided by the state are essential. We rely on schools, hospitals, roads, town planning and all those other myriad things to live a decent life.

    Could the private sector provide all this better? I would need compelling evidence to believe that. I’m open-minded enough to change my mind, but so far every experience I’ve had has been that state provision of infrastructure is generally better than the privatised alternative. And some things simply can’t effectively be privately run, roads and public spaces for example.

  86. Richard Yot: And some things simply can’t effectively be privately run, roads and public spaces for example.

    That’s palpably untrue – toll roads and motorways can be, have been and are privately run.

  87. Richard

    Sigh..

    Deliberately or otherwise, you ignored “Exceptions being where it really is preferable for the collective to fund something?”

    And (fwiw, continuing in the same vein), doctors, teachers, etc – not necessarily? Medicine, education – or, more accurately, redistribution from those with to those without – sure, I would very much argue yes.

  88. Logic says kill someone and so be looked after in prison.
    You could even warm the palms of the warders beforehand.

  89. Doesn’t the Guardian only exist because of an inheritance??

    What is the Scott Trust other than both a tax avoidance vehicle and a means by which a Rich Person showered his favored children with a massive inheritance?

  90. Doesn’t the Guardian only exist because of an inheritance??

    What was the Scott Trust is now a limited company and despite cost saving measures it is gradually running out of the money in its reserves.

    Unless a Labour government comes to power and makes it whole once again it only has about 10-years worth of life left before it goes bust.

    I know, I’ve been marking the days off on my living room wall like a prisoner in his cell.

  91. David S Lesperance – on behalf of all, thank you 100 times for your excellent and informative post which I appreciate must have taken ages to compose.

  92. “That’s palpably untrue – toll roads and motorways can be, have been and are privately run.”

    Show me one country *only* operates toll roads, and no publicly funded ones 🙂

    Toll roads are only viable if they are busy, but a national road infrastructure requires both busy and quiet roads to be built – something the market cannot deliver.

  93. Show me one country *only* operates toll roads, and no publicly funded ones

    Push off and take your goalposts with you.

  94. “Ah dammit, we do need the state after all!”

    Yes, probably to redistribute some money so that all have access to roads, education, healthcare etc.

    But that in no way states that we need the State to run those things. After all the State doesn’t actually build roads does it? It doesn’t have a State Road Building Service. It decides where it wants a road, and gets a private company to build it. It even sometimes gets a private company to build it and maintain it on a long term contract. And the same could go for virtually every other State service, especially education and health. As long as the State pays the fees for a basic level of service for those unable to pay, then there’s no reason why they shouldn’t all be privately provided. There’s no problem of free riding with either – when a teacher teaches a child its able to exclude other children from that teaching, ditto a doctor treating a patient. The State would need to run Defence, and the police and fire service due to the problem of non-exclusivity. But beyond that, no need. Just collect taxes, redistribute them let people get on with it after that.

  95. Jim,

    Mostly completely agree.

    A lot of costs are predictable – food, a roof – and simple redistribution without the state waste will often work. But health is one area that isn’t (predictable). I can be well for decades, the next person have very serious problems, or vice versa. Insurance vultures will ideally try to get themselves off the hook wherever they can.

    Hence, for health specifically, I could see a universal voucher system of some description having some merit compared say to redistribution of an amount deemed to cover (based on insurance)? Or something? Supply side can change, obviously.

    Education – anything that destroys the marxist control of the sector / indoctrination of youth.

  96. @PF: you can still have universal health ‘insurance’provided by the State, but the services are provided privately. I can see it makes sense to spread the risk across as large a population as possible, although yes that does mean cross subsidisation of unhealthy by the healthy (and indeed the feckless by the careful, although that could be addressed by exclusions etc). But the role of the State is still merely one of collecting money and paying it out again, not actual provision of hip replacements, or whatever. It certainly true that the State is not the universal healthcare provider in any country other than the UK. The private sector has a significant role in other healthcare systems, with the State playing more of an umpire role than one of active participant.

    To be honest I can see some role for the State provision of healthcare services, mainly in the emergency ‘scrape this person up off the floor’ type situations, where a universal provider is most cost effective, and probably most practically effective too. And the NHS is quite good at this, mainly because you can’t fuck it up very much, because the bodies start piling up if you do, and people notice. Beyond that, once you’ve been scraped up off the floor and stabilised you should be shifted to the private sector provider of your choice and you get on with it, and the State’s role reduced to merely one of payment.

  97. “You can be in a “repayment situation” with VAT, buying in VATable and selling VAT exempt/zero-rated etc.

    HMRC take considerable interest in you when it happens, but it is legitimate.”

    Not really, all farmers are in this situation, buying inputs with VAT on and selling outputs that are zero rated (ie food), HMRC is aware of this and I have no knowledge that farmers are inspected any more than anyone else. I personally have had one VAT inspection in about 30 years of farming business, and I’ve not heard from any other farming acquaintances that they have suffered any great interest from HMRC. I suspect they are far more interested in businesses that both buy and sell vatable items, but where its a lot easier to ‘lose’ some of the sales – shops and restaurants for example. Farming is largely done business to business – If I were to ‘lose’ some of my sales there would be easily available records with the purchasers, large multinationals mainly. With a business that deals with the public such records do not exist.

  98. Jim

    “you can still have universal health ‘insurance’provided by the State, but the services are provided privately.”

    Agreed, that was what I was trying to articulate (ie compared to individual health insurance)..

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