Richdog said:
Seq what's your full, unbridled opinion on IHT? I know that theoretically you (or your dear sprogs should I say) could get mutilated by it with the amount you're likely to be worth when you die.
I'm split about it. But as for me getting mutilated by it, 'fraid not. I'm not a UK taxpayer .... or at least, not in that regard.
As for my feelings, I'm split about it.
On the one hand, part of me says "I worked for it, achieved it all myself and paid tax in the process. Why should I give a large chunk to the government instead of my kids?"
But you have to temper that with two fundamental, incontrovertable facts.
- Government has to get taxes from somewhere
- There are far more pernicious, unfair and regressive taxes out there to hate. Start with Council Tax.
For anyone bothering to read this that isn't sure what "regressive" means, let me explain. If you do know, skip this bit. The distinction between progressive and regressive taxes relates to the proportion of income that a tax takes from the taxpayer.
Suppose you have a fixed tax (like council tax sort-of is, within bands) of £1000. Then suppose you have two individuals, one earning £10,000 per year and the other £1,000,000 per year. That £1000 represents 10% of income to the first person, and 0.1% to the second. If you have a million pound a year income, just how much does £1000 fixed tax affect your lifestyle? Not much. But if you have a £10k income?
A progressive tax is one that means you pay proportionately more the more you earn, while a regressive one means you pay
proportionately more the less you earn. And
that definition applies to council tax. This is one reason why I despise the hypocrisy of New Labour. They purport to represent the people, but look at what they do, not what they say. They've maintained Tory tax philiosophies in relation to Income tax, with very marginal twiddling,
because of an election promise not to raise income tax
rates, but at the same time have used more regressive forms of taxation, like council tax and increased national insurance (which is mildly regressive due to capping levels), and by failure to let IHT exemption levels keep anything like in pace with property prices.
I guess what I'm trying to say is that if the Tories are a pickpocket, New Labour are violent muggers. In both cases, you lose your wallet, but with the pickpocket, you'll end up just wondering where and when you lost it. With the mugger, you're likely to lose you shoes and shirt as well, and wake up in hospital with stitches in your head. Rather be pick-pocketed or mugged?
So, Rich, to get back to your question of what I think of IHT, here goes :-
- In principle, I see NOTHING wrong with those most able to pay tax doing so.
- I have considerable problems with the system as currently implemented in the UK, the biggest one being the level of exemption. When IHT gets to the point where it clobbers the inheritance of vast numbers of ordinary working class people because it applies to large numbers of standard, urban homes, and in fact isn't actually much abouve the average national property price, the implication is that almost ANY property owner has to fear this tax
- Depending on what jurisdiction you live in, IHT has implications FAR beyond how much tax is gained from it.
If you abolish IHT, what you will do is establish a new aristocracy of the wealthy. Anyone that thinks we don't already have that, to one extent of another, is naive or ill-informed, but totally removing IHT will embed that aristocracy for future generations.
If you don't agree, or understand what I mean by 'new aristocracy', I invite you to consider the effects of money. Could Bill Gates get an audience with the President of the US (or British Prime Minister) if he wanted it? Anyone think the President's office are going to deny a request from Gate's office?
Then there's the law. Suppose you're a teacher and someone libels you. It's going to cost you £100,000 (or more) to pursue a thorough defamation case against the multi-million pound multi-national publishing company that libelled you. They can afford the best lawyers, and teams of them. You can't. How "impartial" is the law?
And then there's tax. Can the man in the street afford to pay thousands (or hundreds of thousands) for world-class tax advice? Can he afford to set up the financial vehicles that that advice may require to be implemented? Can he hell. But the rich can. And, often, do.
And, on the subject of tax, something is only illegal if you can be proven to have done it. Otherwise, whatever the authorities may suspect, you can do it. Innocent until proven guilty. And if you can afford to fight, tooth and nail, it is MUCH harder to prove you guilty. So if legal tax avoidance isn't enough, illegal tax evasion will often work. Again, anyone that thinks it doesn't happen is naive or ill-informed.
- Following on from the last point, a common vehicle in many countries (including the US) is certain forms of trust vehicle. Suppose you have a large, valuable asset that will get clobbered by Estate tax. You can transfer the asset to a trust, where the asset goes to a designated charity on your death, but the life income does not. You then use that income to pay premiums on a substantial life policy that, when it pays off, pays to your beneficiaries. The asset, on death, goes to the charity, that being the capilal that was invested in the trust. If you do this right, most or all of the value of the asset will be covered by the life policy. It's a pretty effective tax vehicle. And if you act in the tax system to prevent it, the result will be a massive cut in charitable donation.
Similar vehicles exist in the UK, but while I know the rules on IHT and trusts have just been massively changed, I don't follow it closely enough to interpret the effect.
- I will do everything in my power to legally avoid paying it. I want my kids to get a decent inheritance, but I have a number of other beneficiaries in mind too .... including a few specific charities.
In the light of most of my comments, is that last point a bit hypocritical? Yeah, probably. What can I say. I admire the principle of paying tax according to 'ability to pay' intellectually, but when it comes to depriving
my kids of what I want them to have, the tax man can **** right off.
