Thursday, 11 November 2010

Inheritance Tax Is Unjust

Today I came across a brilliant article from 2002 by Robert C. B. Miller:
When the Queen Mother died, there was a muted criticism by republican commentators that Inheritance Tax would not be paid on her estate. It was a scandal, so the argument ran, that the Royals should not have to pay a tax that everyone else had to pay.

Criticism resurfaced when it was announced that the Queen would exercise her privilege and that details of her mother’s will would not be published in accordance with longestablished practice. The Queen may have been relieved that the criticism did not develop into another round of the nonpayment of income tax imbroglio that emerged in the early 1990s and caused so much excitement amongst anti-royalists.

But while some of the mainstream press complained at the royal privilege, few pointed to the obvious conclusion, which was that no one should have to pay Inheritance Tax. The arguments that led John Major’s government to agree to the Queen’s exemption from Inheritance Tax in 1993, apply with equal force to other people. The tax is relatively expensive to collect, requires ferocious anti-avoidance rules, and affects most severely those least able to pay it. It raises little revenue — around 1.5% of Inland Revenue receipts — and in the long run may stifle, if not prevent, much altruistic and generous behaviour.
Indeed, one of the ill consequences of Inheritance Tax is that it has subsidised institutional bureaucratic and increasingly politicised charities at the expense of sympathy and generosity closer to home. Help given from one individual to another is likely to be far better directed than anything provided by the welfare system, or politically correct charities. And it is just this generosity at the margin that is likely to be stymied by the 40% charge on the bequests of the middle classes.

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