Tuesday, October 02, 2007

Polly on Taxation, again

Polly, evidently miffed that her call for a Conservative Party indistinguishable in every way from the Labour Party appears not to have been heeded, has written to denounce in clarion tones the Conservative plan to raise the threshold of Inheritance Tax to £1 million. Once again, however, she's missing the point. Look at this, for example:
This is a very Tory version of Robin Hood. George Osborne yesterday promised to steal from the outrageously, stratospherically rich and redistribute it to the already very, very rich. That's what taxing non-doms to relieve inheritance tax does.
So, only the 'very very rich' pay Inheritance Tax?
To raise the threshold to £1m reduces the number of estates that will ever pay a penny from 6%, the pretty rich - to 1%, the very rich.
I see, so only 6% of estates actually pay IHT in its current form?
As house prices rise, more people fear that their estate will creep into the £350,000 level most recently set by Gordon Brown; 37% of estates are now worth over £350,000 (homes, pensions, cash), so if everyone died today then 37% of estates would be liable.
Ah, so in fact some 37% of estates are potentially liable today, should death actually happen. Now, the great problem with IHT is essentially this: few estates actually pay it; but a very large proportion are potentially liable for it. Given that a good revenue-raising tax raises money without altering behaviour, it's clear that IHT, by impacting the planning and behaviour of over a third of people while only collecting revenue on 6% of estates is an ineffecient tax. What's absolutely clear is that it affects far more than the 'very very rich' - most of whom won't be paying it anyway.
Labour has an opportunity here. Who inherits £1m? Let's look at photos of the homes of David Cameron and his wife's parents, or George Osborne's parents
Oooh yes, lets have some lovely personal attacks on the families of politicians, that'll go down a treat. If Polly Toynbee is really suggesting that the Conservative's are making economic policy in order to save David Cameron's wife's parents from having to pay IHT on their estate then she's crossed the line from being merely disingenuous to being downright nasty.

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