Comments on: Reforming inheritance tax http://crookedtimber.org/2007/10/11/reforming-inheritance-tax/ Out of the crooked timber of humanity, no straight thing was ever made Mon, 22 Mar 2010 03:54:46 +0000 http://wordpress.org/?v=2.9.2 hourly 1 By: Katherine http://crookedtimber.org/2007/10/11/reforming-inheritance-tax/comment-page-2/#comment-213839 Katherine Tue, 16 Oct 2007 10:04:46 +0000 http://crookedtimber.org/2007/10/11/reforming-inheritance-tax/#comment-213839 Worth noting on the differences between the US and the UK on this that because the threshold for IHT has not gone up at all in the UK for a considerable period of time (and certainly has not kept pace with rising house prices, especially in the South East) it is no longer perceived as a tax on the rich but a tax on the middle classes. This may well still make it a progressive tax and so on, but it can no longer be argued that it a tax to prevent or ameliorate the effects of major hereditary wealth. The argument for justification in the UK, if it can be made, is why it hasn't kept pace with rising house prices and why it has, in effect, changed its focus and function. No one has yet bothered to try to make that argument. Worth noting on the differences between the US and the UK on this that because the threshold for IHT has not gone up at all in the UK for a considerable period of time (and certainly has not kept pace with rising house prices, especially in the South East) it is no longer perceived as a tax on the rich but a tax on the middle classes.

This may well still make it a progressive tax and so on, but it can no longer be argued that it a tax to prevent or ameliorate the effects of major hereditary wealth. The argument for justification in the UK, if it can be made, is why it hasn’t kept pace with rising house prices and why it has, in effect, changed its focus and function. No one has yet bothered to try to make that argument.

]]> By: Pete http://crookedtimber.org/2007/10/11/reforming-inheritance-tax/comment-page-2/#comment-213837 Pete Tue, 16 Oct 2007 08:46:55 +0000 http://crookedtimber.org/2007/10/11/reforming-inheritance-tax/#comment-213837 "I thought the idea of a family as an economic unit started getting obsolete somewhere around 18th century." Could you tell the people responsible for UK tax and benefits policy then, especially the Child Support Agency? “I thought the idea of a family as an economic unit started getting obsolete somewhere around 18th century.”

Could you tell the people responsible for UK tax and benefits policy then, especially the Child Support Agency?

]]> By: goatchowder http://crookedtimber.org/2007/10/11/reforming-inheritance-tax/comment-page-2/#comment-213751 goatchowder Mon, 15 Oct 2007 02:28:32 +0000 http://crookedtimber.org/2007/10/11/reforming-inheritance-tax/#comment-213751 <blockquote>Labour have reacted concessively to a populist Tory attack on the tax</blockquote> Uh, oh. 20 years of that crap is what reduced Democrats in the USA to a pile of mush. Not a great pattern to repeat.
Labour have reacted concessively to a populist Tory attack on the tax

Uh, oh. 20 years of that crap is what reduced Democrats in the USA to a pile of mush.

Not a great pattern to repeat.

]]> By: mc http://crookedtimber.org/2007/10/11/reforming-inheritance-tax/comment-page-2/#comment-213669 mc Sat, 13 Oct 2007 17:51:33 +0000 http://crookedtimber.org/2007/10/11/reforming-inheritance-tax/#comment-213669 I don’t think it is enough simply to urge the government to ‘make the argument’ in defence of inheritance tax. I could produce plenty of transcripts of ministers deploying the main arguments set out here (i..e, (1) that it is progressive, (2) that for most people it is more in their self-interest than alternative methods of raising revenue, and (3) that it improves equality of opportunity). I think we all have to accept that this has not persuaded people – and that while part of that, no doubt, is down to how well the ministers have done it, part is down to the arguments themselves. I do think there are differences between the UK and America, and that there is no need for progressive types in the UK to be quite as gloomy as US democrats about the prospects of winning the argument overall. But I think that smart progressive types who want to make a contribution to defending inheritance tax should be trying harder to understand why people are opposed to it (or why it is so easy to get them to oppose it at critical times), and trying harder to find arguments that will in fact persuade them, not just arguments that ought in logic to persuade them. I think there are some good contributions in the comments to the first of those tasks: I think it is true that people are just wrong about the extent to which inheritance tax is in their interests; but also true that this is an aspirational issue; and also true that the disproportionately progressive nature of inheritance tax (relative to the rest of the tax system) seems to be outweighed by its disproportionate vulnerability to standard libertarian anti-tax arguments or feelings – maybe because of the association with property (the family home, the family farm), or the association with savings amassed through ‘hard work’ and thrift, or simply because it arrives in a separate one-off bill. These are the facts or arguments or associations which I think supporters of inheritance tax should be trying to work out how to neutralise. There is something sterile in the alternative approach, of deconstructing the ‘death tax’ and ‘double taxation’ attacks as if they are straightforward political-philosophical arguments – when it is pretty obvious that their power is emotional and associative. Similarly, we need to acknowledge the political smartness of the Tories’ move to link the attack on inheritance tax to the proposal on non-doms, in that it neutralised argument (2) (that for most people inheritance tax is more in their self-interest than alternative methods of raising revenue). Politically, this worked, even if in rational terms it is easy to take apart both the non-dom proposal itself, and the legitimacy of linking it so closely to the inheritance tax proposal. And we have to acknowledge that some of the success will stick (both for the Tories, and for the anti-inheritance tax camp) even if the non-dom proposal itself unravels. I don’t think it is enough simply to urge the government to ‘make the argument’ in defence of inheritance tax. I could produce plenty of transcripts of ministers deploying the main arguments set out here (i..e, (1) that it is progressive, (2) that for most people it is more in their self-interest than alternative methods of raising revenue, and (3) that it improves equality of opportunity). I think we all have to accept that this has not persuaded people – and that while part of that, no doubt, is down to how well the ministers have done it, part is down to the arguments themselves.
I do think there are differences between the UK and America, and that there is no need for progressive types in the UK to be quite as gloomy as US democrats about the prospects of winning the argument overall. But I think that smart progressive types who want to make a contribution to defending inheritance tax should be trying harder to understand why people are opposed to it (or why it is so easy to get them to oppose it at critical times), and trying harder to find arguments that will in fact persuade them, not just arguments that ought in logic to persuade them.
I think there are some good contributions in the comments to the first of those tasks: I think it is true that people are just wrong about the extent to which inheritance tax is in their interests; but also true that this is an aspirational issue; and also true that the disproportionately progressive nature of inheritance tax (relative to the rest of the tax system) seems to be outweighed by its disproportionate vulnerability to standard libertarian anti-tax arguments or feelings – maybe because of the association with property (the family home, the family farm), or the association with savings amassed through ‘hard work’ and thrift, or simply because it arrives in a separate one-off bill.
These are the facts or arguments or associations which I think supporters of inheritance tax should be trying to work out how to neutralise. There is something sterile in the alternative approach, of deconstructing the ‘death tax’ and ‘double taxation’ attacks as if they are straightforward political-philosophical arguments – when it is pretty obvious that their power is emotional and associative. Similarly, we need to acknowledge the political smartness of the Tories’ move to link the attack on inheritance tax to the proposal on non-doms, in that it neutralised argument (2) (that for most people inheritance tax is more in their self-interest than alternative methods of raising revenue). Politically, this worked, even if in rational terms it is easy to take apart both the non-dom proposal itself, and the legitimacy of linking it so closely to the inheritance tax proposal. And we have to acknowledge that some of the success will stick (both for the Tories, and for the anti-inheritance tax camp) even if the non-dom proposal itself unravels.

]]> By: Crooked Timber » » One book, another book http://crookedtimber.org/2007/10/11/reforming-inheritance-tax/comment-page-2/#comment-213642 Crooked Timber » » One book, another book Sat, 13 Oct 2007 11:30:25 +0000 http://crookedtimber.org/2007/10/11/reforming-inheritance-tax/#comment-213642 [...] joining. I saw the phantom of the timesink in the close distance, so resisted the temptation. Yet Chris’s post suddenly made me think that perhaps facebook can also be useful, and hey, the economist in me woke [...] [...] joining. I saw the phantom of the timesink in the close distance, so resisted the temptation. Yet Chris’s post suddenly made me think that perhaps facebook can also be useful, and hey, the economist in me woke [...]

]]> By: Uncle Kvetch http://crookedtimber.org/2007/10/11/reforming-inheritance-tax/comment-page-2/#comment-213583 Uncle Kvetch Fri, 12 Oct 2007 16:19:44 +0000 http://crookedtimber.org/2007/10/11/reforming-inheritance-tax/#comment-213583 <i>The reason I thought my anecdotal evidence was likely to scale was that with houses in many areas selling for close to the (old) $600k exemption, a lot of families would have had some member who died and had a house, a car, and enough savings to get to $600k.</i> Makes sense. And I agree that there's a certain ambiguity to the term "affected" in the poll: "I envision my own estate being subject to the tax when I die" vs. "I envision inheriting a portion of an estate that will be subject to the tax." I don't think this fatally undermines my point about the public being generally misinformed (and you seem to agree with me on that), but it would be nice to have polling data that made this clearer. The reason I thought my anecdotal evidence was likely to scale was that with houses in many areas selling for close to the (old) $600k exemption, a lot of families would have had some member who died and had a house, a car, and enough savings to get to $600k.

Makes sense. And I agree that there’s a certain ambiguity to the term “affected” in the poll: “I envision my own estate being subject to the tax when I die” vs. “I envision inheriting a portion of an estate that will be subject to the tax.” I don’t think this fatally undermines my point about the public being generally misinformed (and you seem to agree with me on that), but it would be nice to have polling data that made this clearer.

]]> By: SamChevre http://crookedtimber.org/2007/10/11/reforming-inheritance-tax/comment-page-2/#comment-213580 SamChevre Fri, 12 Oct 2007 15:55:47 +0000 http://crookedtimber.org/2007/10/11/reforming-inheritance-tax/#comment-213580 <i>So, beyond your anecdotal evidence, do you have any data?</i> None whatsoever. I tend to think "people are ignorant" is a robust explanation, but should still be a last resort. The reason I thought my anecdotal evidence was likely to scale was that with houses in many areas selling for close to the (old) $600k exemption, a lot of families would have had some member who died and had a house, a car, and enough savings to get to $600k. So, beyond your anecdotal evidence, do you have any data?

None whatsoever. I tend to think “people are ignorant” is a robust explanation, but should still be a last resort.

The reason I thought my anecdotal evidence was likely to scale was that with houses in many areas selling for close to the (old) $600k exemption, a lot of families would have had some member who died and had a house, a car, and enough savings to get to $600k.

]]> By: abb1 http://crookedtimber.org/2007/10/11/reforming-inheritance-tax/comment-page-2/#comment-213578 abb1 Fri, 12 Oct 2007 15:28:55 +0000 http://crookedtimber.org/2007/10/11/reforming-inheritance-tax/#comment-213578 I thought the idea of a family as an economic unit started getting obsolete somewhere around 18th century. OK, 'conservatism' - sure, I understand - but isn't this a bit too much? I thought the idea of a family as an economic unit started getting obsolete somewhere around 18th century. OK, ‘conservatism’ – sure, I understand – but isn’t this a bit too much?

]]> By: zdenek v http://crookedtimber.org/2007/10/11/reforming-inheritance-tax/comment-page-2/#comment-213574 zdenek v Fri, 12 Oct 2007 15:19:57 +0000 http://crookedtimber.org/2007/10/11/reforming-inheritance-tax/#comment-213574 Chris Bertram : "Zdenek, before you moan about people failing accurately to characterize the views of others, you should, perhaps, take the trouble not to ascribe to them views that there is absolutely no evidence of them holding." My point is not so much that Martin is unfair to his opponents ( this point would be worth making only in passing ) but rather that his argument is weak because it only puts pressure on those 'libertarian intuitions ' which share his view of distributive justice. This is weak because it leaves untouched what is arguably a more plausible ( philosophically speaking because it is defended more comprehensively ) way of resisting IHT viz. libertarianism defended by Nozick in ASU. Chris Bertram : “Zdenek, before you moan about people failing accurately to characterize the views of others, you should, perhaps, take the trouble not to ascribe to them views that there is absolutely no evidence of them holding.”

My point is not so much that Martin is unfair to his opponents ( this point would be worth making only in passing ) but rather that his argument is weak because it only puts pressure on those ‘libertarian intuitions ’ which share his view of distributive justice.

This is weak because it leaves untouched what is arguably a more plausible ( philosophically speaking because it is defended more comprehensively ) way of resisting IHT viz. libertarianism defended by Nozick in ASU.

]]> By: Uncle Kvetch http://crookedtimber.org/2007/10/11/reforming-inheritance-tax/comment-page-2/#comment-213573 Uncle Kvetch Fri, 12 Oct 2007 15:18:01 +0000 http://crookedtimber.org/2007/10/11/reforming-inheritance-tax/#comment-213573 Sam, help me out. I <i>think</i> what you're arguing here is that most households are, at some point in time, and to some degree, however minor, affected by the estate tax. And that therefore the public is not misinformed after all. And you know what? I'm still not buying it. I can provide my own personal anecdotal evidence: The households of my own extended family (and I have a whopping 24 first cousins) have never been affected by the estate tax in any way whatsoever. So, beyond your anecdotal evidence, do you have any data? Sam, help me out. I think what you’re arguing here is that most households are, at some point in time, and to some degree, however minor, affected by the estate tax. And that therefore the public is not misinformed after all.

And you know what? I’m still not buying it. I can provide my own personal anecdotal evidence: The households of my own extended family (and I have a whopping 24 first cousins) have never been affected by the estate tax in any way whatsoever. So, beyond your anecdotal evidence, do you have any data?

]]> By: SamChevre http://crookedtimber.org/2007/10/11/reforming-inheritance-tax/comment-page-2/#comment-213572 SamChevre Fri, 12 Oct 2007 15:12:47 +0000 http://crookedtimber.org/2007/10/11/reforming-inheritance-tax/#comment-213572 Ujncle Kvetch, Once more, slowly, please? I would have thought that my great-grandfather is part of my family, and that thus, "my family was subject to the estate tax when he died" (actually, when his widow died). And that is why all 50 of the households of his descendants are "subject to the estate tax when someone dies," in spite of having very little likelihood of being subject to estate tax when they die. Like pete in #28, I think the idea of a family (an extended, not nuclear, family) as an economic unit drives a considerable portion of the opposition to estate tax. Ujncle Kvetch,

Once more, slowly, please? I would have thought that my great-grandfather is part of my family, and that thus, “my family was subject to the estate tax when he died” (actually, when his widow died). And that is why all 50 of the households of his descendants are “subject to the estate tax when someone dies,” in spite of having very little likelihood of being subject to estate tax when they die.

Like pete in #28, I think the idea of a family (an extended, not nuclear, family) as an economic unit drives a considerable portion of the opposition to estate tax.

]]> By: Uncle Kvetch http://crookedtimber.org/2007/10/11/reforming-inheritance-tax/comment-page-2/#comment-213571 Uncle Kvetch Fri, 12 Oct 2007 14:57:29 +0000 http://crookedtimber.org/2007/10/11/reforming-inheritance-tax/#comment-213571 <i>I was certainly affected by the estate tax, even though on current trends it is not at all likely that my estate will be taxed.</i> I don't see it that way, and the poll question I cited above (#63) certainly doesn't define "affected" in that way. To restate: 49% of respondents believed that <b>most families are subject to estate tax when someone dies</b>. And this is utterly false. So, despite your and Shelby's best efforts, I think my point stands. A very large portion, if not an outright majority, of the American public is woefully ignorant of the basic facts about the estate tax. This is not an accident, but a result of deliberate political action, from semantic flimflammery (renaming the estate tax the "death tax"--you can't even <i>die</i> anymore without the gummint grabbing your stuff!) to flat-out lies (the mythical hundreds [or is it thousands?] of family farms and small businesses liquidated every year because of the tax). I was certainly affected by the estate tax, even though on current trends it is not at all likely that my estate will be taxed.

I don’t see it that way, and the poll question I cited above (#63) certainly doesn’t define “affected” in that way. To restate: 49% of respondents believed that most families are subject to estate tax when someone dies. And this is utterly false.

So, despite your and Shelby’s best efforts, I think my point stands. A very large portion, if not an outright majority, of the American public is woefully ignorant of the basic facts about the estate tax. This is not an accident, but a result of deliberate political action, from semantic flimflammery (renaming the estate tax the “death tax”—you can’t even die anymore without the gummint grabbing your stuff!) to flat-out lies (the mythical hundreds [or is it thousands?] of family farms and small businesses liquidated every year because of the tax).

]]> By: Pete http://crookedtimber.org/2007/10/11/reforming-inheritance-tax/comment-page-2/#comment-213564 Pete Fri, 12 Oct 2007 13:42:16 +0000 http://crookedtimber.org/2007/10/11/reforming-inheritance-tax/#comment-213564 The Guardian is discussing this: http://www.guardian.co.uk/commentisfree/story/0,,2189492,00.html Frank Fisher has got it right, in response to this comment: <blockquote> Arneson October 12, 2007 1:24 PM bostjan said "Inheritance is obviously unfair. You should be blind or deeply biased by your own egoistic interest not to see it. It puts people in completely different position which is not based on based on anything else than right of blood *blue or green, whatever* or family connections. Principle and practice of inheritance is in complete contradiction with principle of equal opportunities. It is basically an feudal and middle age concept and deny everything we so much love to identify as European values." --------------------- Replace 'inheritance' by 'family' in the above and it is just as true. The one institution above all others that creates, perpetuates and increases inequality is.... ...the family. Until we get rid of the family we are just fiddling around the edges. </blockquote> MrPikeBishop October 12, 2007 1:39 PM <blockquote> "Until we get rid of the family we are just fiddling around the edges." well what do you think the main thrust of government policy has been since 1965? You're absolutely right - but the only socialists ever to attempt to rid themselves of this barrier to "progress" openly, were Pol Pot's mob, and they got a very bad press. So our various governments here - including those who pretend to support the individual - have worked via the tax and benefit system, the family courts, the human rights act; all nibbling away, nibbling away, gradually eroding family life, propagandising for their shabby and transitory alternatives and yet still these damn people look tot he families first. It's an outrage isn't it? No wonder Polly gets so cross. </blockquote> (apologies for the incoherent paste; I'm not sure if it's possible to link to individual comments there) The Guardian is discussing this: http://www.guardian.co.uk/commentisfree/story/0,,2189492,00.html

Frank Fisher has got it right, in response to this comment:


Arneson

October 12, 2007 1:24 PM

bostjan said

“Inheritance is obviously unfair. You should be blind or deeply biased by your own egoistic interest not to see it. It puts people in completely different position which is not based on based on anything else than right of blood blue or green, whatever or family connections.
Principle and practice of inheritance is in complete contradiction with principle of equal opportunities.
It is basically an feudal and middle age concept and deny everything we so much love to identify as European values.”
——————————-

Replace ‘inheritance’ by ‘family’ in the above and it is just as true.

The one institution above all others that creates, perpetuates and increases inequality is….

…the family.

Until we get rid of the family we are just fiddling around the edges.

MrPikeBishop

October 12, 2007 1:39 PM


“Until we get rid of the family we are just fiddling around the edges.”

well what do you think the main thrust of government policy has been since 1965?

You’re absolutely right – but the only socialists ever to attempt to rid themselves of this barrier to “progress” openly, were Pol Pot’s mob, and they got a very bad press. So our various governments here – including those who pretend to support the individual – have worked via the tax and benefit system, the family courts, the human rights act; all nibbling away, nibbling away, gradually eroding family life, propagandising for their shabby and transitory alternatives and yet still these damn people look tot he families first. It’s an outrage isn’t it?

No wonder Polly gets so cross.

(apologies for the incoherent paste; I’m not sure if it’s possible to link to individual comments there)

]]> By: abb1 http://crookedtimber.org/2007/10/11/reforming-inheritance-tax/comment-page-2/#comment-213562 abb1 Fri, 12 Oct 2007 13:33:03 +0000 http://crookedtimber.org/2007/10/11/reforming-inheritance-tax/#comment-213562 I'm afraid Zdenek's argument involves fallacies of non sequitur and equivocation, considering that the word "intuition" is defined as <i>direct perception of truth, fact, etc., independent of any reasoning process</i>. I’m afraid Zdenek’s argument involves fallacies of non sequitur and equivocation, considering that the word “intuition” is defined as direct perception of truth, fact, etc., independent of any reasoning process.

]]> By: SamChevre http://crookedtimber.org/2007/10/11/reforming-inheritance-tax/comment-page-2/#comment-213560 SamChevre Fri, 12 Oct 2007 13:20:41 +0000 http://crookedtimber.org/2007/10/11/reforming-inheritance-tax/#comment-213560 Uncle Kvetch, Note that the "are most people affected by estate tax" is a rather different question than "how many estates pay estate tax". For example, my great-grandfather's widow died when I was in my teens; his estate was taxed on her death, and I received a small inheritance (about enough to pay for my college textbooks). I was certainly affected by the estate tax, even though on current trends it is not at all likely that my estate will be taxed. Uncle Kvetch,

Note that the “are most people affected by estate tax” is a rather different question than “how many estates pay estate tax”. For example, my great-grandfather’s widow died when I was in my teens; his estate was taxed on her death, and I received a small inheritance (about enough to pay for my college textbooks). I was certainly affected by the estate tax, even though on current trends it is not at all likely that my estate will be taxed.

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