Tuesday, July 25, 2006

Aaargh! Missing the point again

Ross Clark spectacularly misses the point on inheritance tax here. I think I've mentioned this before, but I think IHT is one of the more unpleasant taxes. Reasonable people can differ as to whether the state should remove more taxation from a bequest made out of taxed savings, but the method, the rate and the execution of British IHT is iniquitous.

It is iniquitous not simply because it is a tax on taxed income, but because it is paid almost exclusively by the middle-incomed. The allowance of some 245,000 hardly covers a house these days, so any house-owner will almost certainly be liable. The seriously rich, at whom this tax is routinely described as targeting, do not pay IHT. There are enough ways around it, through trusts and other tax mechanisms, that anyone who can afford proper tax advice should never have to pay more IHT than he wants to.

The result is that it is those whose property have made them wealthy, but whose income is insufficient to make tax advice possible who end up paying. There are better methods of taxation, that raise more money and fall more equitably.

Clark's other suggestion, that we should pay Capital Gains Tax on property is a bit of an eye-opener as well. Given that the largest asset in the UK is property, and that our entire economy is kept out of recession (barely at times) by consumer spending based on that property, why on earth does Clark think it would be a "huge boost to the economy" to place a major disincentive in the way of anyone wishing to sell their house?

I think we need one of our resident economists to deconstruct this further.


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