Millennials are likely to enjoy the biggest "inheritance boom"

[Dolph]

It is a property tax, which by definition taxes property. Boats can be quite high value so taxing them is effective. In theory property tax could apply to anything such as your TV but the values are too low for the overhead so having a short list of high value items such as houses, cars and boats makes sense. This is what most counties do.

The tax is random, it is on property which makes much more sense than on income for example.

Why does property tax make more sense, it doesn't relate to ability to pay, or the value of the asset at acquisition.

It is entirely possible for property taxes to be massively regressive, or to have massive unintended consequences that significantly damage the revenue generation.

 

[Irish_Tom]

I guess it depends on how the tax is managed, what thresholds are set etc.

I don’t think a property tax alone is the answer and I don’t think it could work as a replacement for income tax.

Also, bear in mind tax can be used as a tool to control certain types of behaviour, it’s not necessarily all about revenue generation — again, it depends on how it’s implemented.

 

[Amp34]

So you want more of people’s eatates taxed? I don’t see why you couldn’t achieve that just by reducing the nil rate band.

I’m not advocation more or less, rather advocating a system that taxes the receiver of the “income” rather than the wealth of the person who dies.

Whether the end result is a net benefit or deficit to the inheritees is something that will depend on specific circumstances and the way it’s implemented. A single child would undoubtedly be worse off, but if the wealth is distributed amongst more people then everyone may be better off because of the way the tax is calculated.

 

[Amp34]

I think if you believe we should live in a meritocracy in any sense, then you should be in favour of some form of inheritance tax. Otherwise why should one child have such a tremendous start ahead of another.

Some children get a tremendous start ahead anyway, it doesn’t matter about money.

How your parents treat you and nurture you probably has a bigger affect on your life than any money you may receive in future from them.

Unfortunately a true meritocracy would have to involve some form of state orphanages where children are treated completely equally, with no input from parents.

 

[The_Abyss]

I’m not advocation more or less, rather advocating a system that taxes the receiver of the “income” rather than the wealth of the person who dies.

Whether the end result is a net benefit or deficit to the inheritees is something that will depend on specific circumstances and the way it’s implemented. A single child would undoubtedly be worse off, but if the wealth is distributed amongst more people then everyone may be better off because of the way the tax is calculated.

This will not distribute wealth amongst more people.

 

[Amp34]

This will not distribute wealth amongst more people.

I haven’t suggested it will. I’m pointing out the taxed amount will change depending on how the money is distributed. One person recieving everything would be taxed higher than 2 children, four grandchildren and couple of charitable causes (for example) each receiving part.

With the current death tax system the amount distributed is the same no matter how many people/organizations get the money, because the tax is calculated on the wealth of the person that died, not how much each individual/organization actually receives.

 

[The_Abyss]

Challenging for those parents who want to bequeath equal amounts to their different children. They'd need to constantly update their wills right up until the point of death to ensure equal net distribution. And, let's not forget, it is their money to decide how it is distributed upon their death.

 

[balky12]

It is a property tax, which by definition taxes property. Boats can be quite high value so taxing them is effective. In theory property tax could apply to anything such as your TV but the values are too low for the overhead so having a short list of high value items such as houses, cars and boats makes sense. This is what most counties do.

The tax is random, it is on property which makes much more sense than on income for example.

How would you tax property? Annually? And what would the rate be? If 1.5% then would that be of the current value?

My parents would be paying over £15k a year tax in that case.. up from £4.5k when they bought it in 1999 due to market forces beyond their control. Now it's not all doom and gloom because they have made over 700k on a house in 18 years however as they fast approach retirement a £15k annual tax bill that would continue to grow would eat into their pension quite substantially.

Yes they could downsize but why should they have to? Wouldn't this then increase demand for smaller houses driving the price up?

 

[LabR@t]

Some children get a tremendous start ahead anyway, it doesn’t matter about money.

How your parents treat you and nurture you probably has a bigger affect on your life than any money you may receive in future from them.

Unfortunately a true meritocracy would have to involve some form of state orphanages where children are treated completely equally, with no input from parents.

Alphas, Betas, Gammas,Deltas, and Epsilons?

 

[dl8860]

Some children get a tremendous start ahead anyway, it doesn’t matter about money.

How your parents treat you and nurture you probably has a bigger affect on your life than any money you may receive in future from them.

Unfortunately a true meritocracy would have to involve some form of state orphanages where children are treated completely equally, with no input from parents.

OK but that's sort of like saying that a progressive society would seek to tax every individual such that we all end up with the same net worth at the end of each year.

I do take your point about parental nurturing being extremely important for giving kids a head start, but I'm talking more about the fact that the system is set up so massively to benefit those who receive intergenerational wealth e.g. someone who has a house bought outright for them vs. someone who can only afford to rent because they can't afford a deposit. Which perpetuates the cycle.

 

[D.P.]

How would you tax property? Annually? And what would the rate be? If 1.5% then would that be of the current value?

My parents would be paying over £15k a year tax in that case.. up from £4.5k when they bought it in 1999 due to market forces beyond their control. Now it's not all doom and gloom because they have made over 700k on a house in 18 years however as they fast approach retirement a £15k annual tax bill that would continue to grow would eat into their pension quite substantially.

Yes they could downsize but why should they have to? Wouldn't this then increase demand for smaller houses driving the price up?

In countries where property tax is used the property is assessed in much the same way council tax is assessed. 1.5% is just an example rate, in the US it will vary between counties from around 0.5% to 2.5% etc. Your example of the change of market value doesn't take into account inflation either, but is to be expected because property tax is a tax on the value of an asset. Beyond their parents control is irrelevant, VAt for example changes without your parents control as goods increase in value.

The fact that your parent's house has increased by 700k is exactly why this is not a problem. Your parents can downsize into a smaller house if they can't afford the property tax, otherwise they would need toi make provision for that in their retirement. I don't believe there is any evidence that property tax increases house values.




Edit: for reference the UK is almost entirely unique in OCED countries for not having a property tax. Instead, the UK has an antiquated and highly regressive Council tax system where even if you are too poor to afford your own house house you have to pay the council tax levied on the property, instead of the property owner.

 

[dowie]

How would you tax property? Annually? And what would the rate be? If 1.5% then would that be of the current value?

My parents would be paying over £15k a year tax in that case.. up from £4.5k when they bought it in 1999 due to market forces beyond their control. Now it's not all doom and gloom because they have made over 700k on a house in 18 years however as they fast approach retirement a £15k annual tax bill that would continue to grow would eat into their pension quite substantially.

Yes they could downsize but why should they have to? Wouldn't this then increase demand for smaller houses driving the price up?

AFAIK in US states/counties there are often provisions in place to deal with retired people on low incomes such as freezing the tax at a certain rate or having a discount or cap... I think there are also differences based on whether it is your primary home or an additional home etc..

I guess having a strong incentive to downsize from a big house or simply free up a flat in prime central London when you're economically inactive is probably a good thing... then again I also think we should sell off most council housing in zones 1 and 2 as most council tenants are economically inactive too and there is plenty of demand to live there from people who work in central London whereas people can go retire or live on benefits elsewhere

 

[Irish_Tom]

Piketty suggests an annual wealth tax of 0.1 or 0.5% on fortunes below 1 million euros, 1% between 1 and 5 million euros, and 2% between 5 and 10 million euros, with rates as high as 5 or 10% for fortunes of several hundred million or several billion euros.

This would be net of debt, so if your house was still mortgaged it would be the difference between the market value (recalculated annually) and what you still owe. It also includes all other capital, including property, financial assets (stocks and shares) as well as cash savings.

As dowie says, discounts or caps could apply if you were pushed over the threshold due to appreciation on your primary home, especially if you were "cash poor".

As I said before though; the "middle class", even those with a £1m house, aren't really the problem.

 

[Scam]

The fact that your parent's house has increased by 700k is exactly why this is not a problem. Your parents can downsize into a smaller house if they can't afford the property tax, otherwise they would need to make provision for that in their retirement. I don't believe there is any evidence that property tax increases house values

If anything a property tax or a Land Value Tax would be another tool to help prevent our housing bubble. If owner/occupiers have to pay say 1% of their property value in tax instead of a council tax -- there's no incentive for property prices to bubble out of control. In fact Labour's 2017 manifesto appeared to have proposals for LVT in it; https://www.theguardian.com/politic...backs-labour-land-tax-solve-uk-housing-crisis

Council tax is utterly redundant. How a tenant in a 2-bed flat in a "nice" area should pay the same as an owner/occupier of a £2m or even £20m house somewhere is laughable. The value of the land or property should be taxed.

 

[LeeUK]

People who give their wealth away to their kids to actively avoid IHT are up there with benefit cheats and "Channel5 documentary style" benefit scroungers. Hope you get found out when they peg it and made to pay it back or whatever it is they do.

 

[cheesyboy]

Between my wife and I (I'm just about a millennial, born '82, she isn't quite, born '81) we might be looking at 3-4 hundred thousand in inheritance, albeit none anticipated for another 15+ years (going on life expectancy).

But I, personally, think that IHT should be miles higher, say 75% of everything beyond <£10k individual chattels. Makes no sense to tax productive endeavour (working) whilst not taxing unearned (by the recipient) wealth transfer.

I really don't see the downside to taxing the estates of the dead.

 

[cheesyboy]

How do you deal with gifts? Do you have the same kind of seven year rule as we have now on transfers of money?

Seems sensible to me. By gifting something away you no longer have the benefit of it. But the IHT tapering on gifts puts a, IMO reasonable and fair, obstacle in the way of those just trying to work around the tax.

 

[cheesyboy]

Right, so your plan wouldn’t achieve much because well off people would just gift everything to their kids early enough. Eg. My father would gift me and my brothers everything he has, then we’d rent his house back to him at a market rate rent and he’d still be able to afford everything he currently does.

I'm ok with that.

(if this were that popular a loophole, people already wouldn't ever pay IHT. And they do. And they moan loads about its existence)

 

[dowie]

People who give their wealth away to their kids to actively avoid IHT are up there with benefit cheats and "Channel5 documentary style" benefit scroungers. Hope you get found out when they peg it and made to pay it back or whatever it is they do.

eh - what exactly gets "found out"? If the gifts happened 7 years in the past then there is nothing to find out and nothing owed as far as IHT is concerned.

It has to be a legit gift too - you can't just sign over your home in on paper and then just carry on living in it rent free.... you need to move out or pay rent at full market rates and if you end up living for another 25 years then that could cost you rather a lot- like cash equivalent to the value of the home!

Obviously it would go to your beneficiaries too but you might well not have sufficient savings/pension to make it too feasible -paying market rents to avoid IHT could take up such a big portion of your pension that you then live a much poorer retirement for those 25 years.

 

[cheesyboy]

Oh, it’s just because you said, “Makes no sense to tax productive endeavour (working) whilst not taxing unearned (by the recipient) wealth transfer.” Now you’re okay with it? Alright. So it’s bad when they’re dead but okay when they’re alive?

Why go broad on that interpretation when the topic is Inheritance?

But to humour your pedantry: If you hold your wealth until you die, then you've had full value from it. If you gift it before death, you're giving up some of that value. I think, morally, people should generally be able to do what they wish with their cash whilst alive, but once dead I don't feel they should be owed anything much by the state: there are living people to take care of.