Inheritance tax: of course we should abolish it

17
08
07

Inheritance tax: of course we should abolish it

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Much discussion on the TV and in the press overnight about will-he won't-he George Osborne endorsing John Redwood's idea of abolishing inheritance tax. There has been a protracted discussion about this in Lib Dem circles over the last year or so as well.

The irony is though that many of those that want it abolished do so because it is usually the "family home" that pushes an estate into IHT liability. Ironic because of all the possible assets one might have accumulated in one's life, the value of one's property is the most likely to have been "unearned". Many proponents of abolition reckon that because they paid tax on the earnings they used to purchase their house, so any rise in the value of that property ought to be untaxed - that anything else is "double taxation".

The trouble is, you don't earn the rise in your property value. It happens because other people need what you have - a site in an increasingly popular location. A popularity most often created by expenditure on things like infrastructure that make that location better connected. It is monopoly profit.

Most of the other assets you might leave to your descendants - shares and so on - are productive assets that themselves help create wealth. Land values move wealth from those who don't own land, or own low value locations, to those who own better land, more popular sites, in a zero sum market.

So yes, abolish inheritance tax, but replace it with Land Value Tax, paid throughout the time you own that location, reflecting the value that others create at your location. Read about it: "Ricardo's Law: House Prices and the Great Tax Clawback Scam" (Fred Harrison)

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Comments

Submitted by a radical writes (not verified) on August 17, 2007 - 08:41.

OOO the daily mail wouldn't like that idea one little bit. It'll be interesting to see what Cameron does her, he's in rather a kerfuffle at the moment when it comes to dealing with the Thatcherites. strange how all the proposed tax cuts from the tories seem to go to the rich and well off though when it is the bottom 10 % of the country pays the highest proportion of their income in tax (about 50% I believe).

Submitted by Andy (not verified) on August 17, 2007 - 11:15.

Who'd have thought it, another problem solved by LVT! ;-)

Submitted by Jock on August 17, 2007 - 14:49.

John, you can get quite a good listing of what each income decile pays in tax from the Lib Dem Tax Commission Paper on the party website "Fairer, Simpler, Greener" or whatever is was.

But yes, any withdrawal of tax on domestic property, unless matched by another tax on domestic property will effectively result in transfer of wealth from those who do not own their home to those who do.