It is certainly a relic so it is silly we still have it but there once was a very real need for it.
UK - Pensioner incomes 'outstrip those of working families'
- Thread starter The Don
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It is certainly a relic so it is silly we still have it but there once was a very real need for it.
- highly tax efficient
One of the many things that annoy me about myself is that I'm drawn to analogies like a moth to a flame and as I'm constructing them they fall to pieces in my hands. 
Nevertheless....
It seems to me that Inherited wealth (and the associated privilege) is like getting a hefty head start in a 100m race. It means that unless you are particularly slow, or another competitor is particularly fast, that you're likely to finish first - again. The way that inheritance seems so be working at the moment (and explained in the article I linked) is that winning the race not only gives you the victory, but also an enhanced head start for the next race (the next generation).
Back when I was in favour of inheritance, I'd have viewed attempts to remove the headstart as being unfair to the parents (or grandparents or whatever) who wanted to give their descendants the best chance to win. The trouble is that under this system, the best athletes aren't winning, just those with the biggest head start. Removing that head start I guess would be characterised by some as pulling those athletes down and engaging in the athletics of envy
. IMO it's making the race less unfair and increasing the chance that the best athlete wins.
In the case of a fictional athletics race, who wins and why really isn't important at all but in the context of society and the economy then IMO it starts to matter. A society in which there are high levels of social and economic mobility would tend to encourage the kinds of behaviour which results in that mobility, education, innovation entrepreneurship and so on. I can see how that would be a benefit for the economy and society as a whole. OTOH a society where preserving inherited wealth and privilege is the fastest route to the top would seem to encourage the kind of behaviour which would stifle innovation.
Back to my bad analogy, the path to winning the 100m race would no longer be to be born with the best potential and then train really hard, but instead to work at all costs to ensure that your head start is preserved, and indeed enhanced - for example by increasing the head start bonus you get for winning, eliminating the loss of head start should you lose or even a change to the rules so you're only entitled to a head start bonus if you already enjoy a significant head start.
...must stop with the analogies and go out for a run now
Nevertheless....
It seems to me that Inherited wealth (and the associated privilege) is like getting a hefty head start in a 100m race. It means that unless you are particularly slow, or another competitor is particularly fast, that you're likely to finish first - again. The way that inheritance seems so be working at the moment (and explained in the article I linked) is that winning the race not only gives you the victory, but also an enhanced head start for the next race (the next generation).
Back when I was in favour of inheritance, I'd have viewed attempts to remove the headstart as being unfair to the parents (or grandparents or whatever) who wanted to give their descendants the best chance to win. The trouble is that under this system, the best athletes aren't winning, just those with the biggest head start. Removing that head start I guess would be characterised by some as pulling those athletes down and engaging in the athletics of envy
. IMO it's making the race less unfair and increasing the chance that the best athlete wins.In the case of a fictional athletics race, who wins and why really isn't important at all but in the context of society and the economy then IMO it starts to matter. A society in which there are high levels of social and economic mobility would tend to encourage the kinds of behaviour which results in that mobility, education, innovation entrepreneurship and so on. I can see how that would be a benefit for the economy and society as a whole. OTOH a society where preserving inherited wealth and privilege is the fastest route to the top would seem to encourage the kind of behaviour which would stifle innovation.
Back to my bad analogy, the path to winning the 100m race would no longer be to be born with the best potential and then train really hard, but instead to work at all costs to ensure that your head start is preserved, and indeed enhanced - for example by increasing the head start bonus you get for winning, eliminating the loss of head start should you lose or even a change to the rules so you're only entitled to a head start bonus if you already enjoy a significant head start.
...must stop with the analogies and go out for a run now
Lothian
should be banned
I disagree. With the age profile of the UK and the longer life expectancy we need a lot more money to fund the care of the elderly. That means we need more taxpayers. Given the public don't want Europeans funding our retirement we need to incentivise the young to breed like rabbits.
And the wealthy can provide much more support for their child simply because they are wealthy. For example the kid falls behind in maths - get a private tutor for a term or two. Or spend an afternoon at the weekend tutoring the kid themselves. The poor parent can't do that because they have a job in retail and that means they work the weekends and don't have the money to pay a private tutor. There are studies after studies that show why wealth and poverty perpetuates across generations.
Are you really arguing that social mobility in the UK isn't low?
To speak for MikeG (because, being a man of his word, it's unlikely that he'll return to the thread) and to be fair to him, he has consistently said that social mobility in the UK is low, he just thinks that inheritance tax is not the way to address it because the sums of money raised are comparatively small* and therefore won't help those in need and that inheritance taxes are a symptom of the politics of envy and "dragging down" those who have privilege doesn't actually help those those in need.
I disagree with that argument but wouldn't want to see MikeG's position grossly misrepresented.
* - of course one of the reasons why inheritance tax receipts are so low is that successive governments, in order to keep the comfortably well off happy, have raised inheritance tax thresholds far ahead of inflation. £325k (£650k for a couple) is a colossal sum of money for almost anyone. I can perhaps see a case for being able to keep some nick-knacks and/or personal effects of a nominal value tax free. I can even see a case being made for items requiring care being kept in families for the national interest. I don't understand the case for being able to inherit a 4-bed semi in Penge free of tax
Archie Gemmill Goal
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To speak for MikeG (because, being a man of his word, it's unlikely that he'll return to the thread) and to be fair to him, he has consistently said that social mobility in the UK is low, he just thinks that inheritance tax is not the way to address it because the sums of money raised are comparatively small* and therefore won't help those in need and that inheritance taxes are a symptom of the politics of envy and "dragging down" those who have privilege doesn't actually help those those in need.
I disagree with that argument but wouldn't want to see MikeG's position grossly misrepresented.
* - of course one of the reasons why inheritance tax receipts are so low is that successive governments, in order to keep the comfortably well off happy, have raised inheritance tax thresholds far ahead of inflation. £325k (£650k for a couple) is a colossal sum of money for almost anyone. I can perhaps see a case for being able to keep some nick-knacks and/or personal effects of a nominal value tax free. I can even see a case being made for items requiring care being kept in families for the national interest. I don't understand the case for being able to inherit a 4-bed semi in Penge free of tax
One thing about inheritance tax if it was applied to everyone at 100 percent then it is going to also bring those who struggle out of poverty back down to zero. And given all the other advantages of the wealthy and privileged classes that wealth is much more likely to end up back in their hands.
Therefore I think it's important that the system allows a reasonable level of accumulation but there probably is a good case for ramping it more aggressively for larger inheritances.
The Swedish study I linked earlier shows exactly what you describe:
http://voxeu.org/article/how-inheritances-influence-wealth-inequality
But it depends on how the taxes raised are used:
Many taxes are either progressive and/or have a substantial zero-rated band. There's no reason to think that inheritance tax shouldn't/couldn't be the same.
With your analogy Don I think it is a good one but it needs one tweak, don't think of the wealthy being given a headstart think of it being more that they start at the starting line, but the poor start 99m *behind* the start line. So even if everything else was equal the poor have to run 199m to get to the same place the wealthy do. I think that reflects the reality of social mobility in the UK. As I said it shouldn't be about pulling people down/back but getting everyone up to something like a fair playing field.
It's a huge issue and there is no simple solution.
It isn't just about grabbing money from "them" to give to the "other them" it would require huge changes throughout society - requires changing people's and society's attitudes and perceptions. For example the internships I mentioned should really be open to all, create a system of applicants being "blind" interviewed or allocated randomly from all interested? Perhaps ensure that there is a means tested bursary available for those whose family wealth can't support them? And lets be honest it would still take generations to get to anything like a meritocracy.
Of course such things would and do attract huge opposition and "outrage" and it fights against what I think are pretty basic human behaviours.
But something being hard and "unnatural" shouldn't be a reason not to aspire to it.
The way I see it is the society (in the form of government, presumably) should give everyone a chance of becoming well off through his or her own means. Irrespective of who your parents were, irrespective of how poor you are, each person should be able to become well off through being productive, either through hard work or whatever else one can offer to the society.
This includes many things Europeans take for granted but are novelty in the US, like universal health care and tax-funded education system. It also includes things most countries have to some extent, some sufficient some not, like an adequate safety net, meaningful pension system and so on. Beyond that the role of the society/government ends though.
I see income equality as a welcome byproduct of achieving more useful goals and not a particularly meaningful goal in itself. I realize this opinion is not universally shared, but my opinion is such.
McHrozni
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Archie Gemmill Goal
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It's not completely dissimilar to the situation of ethnic minorities. Even if you address the obvious stuff there is still a hell of a lot of invisible bias and privilege that would need to be overcome.
When you have colleges at Oxford and Cambridge where less than half the students come from state schools it's beyond a joke.
When you consider that those two universities alone make up half or more of our cabinet, our diplomats, our newspaper writers and a quarter of our MPs it's not even funny.
The entire country is one big old boy's network.
https://www.theguardian.com/news/datablog/2014/aug/28/elitism-in-britain-breakdown-by-profession
This is one of the reasons I am so strongly in favour of Scottish independence.
Yes, not least because the attitudes that underpin it seem to be deeply ingrained in UK (and US) society. You mentioned the difference in working for a Danish company - a country with comparatively high levels of social mobility. I cannot decide whether Denmark has high levels of social mobility because of their different attitude to wealth or whether it has a different attitude to wealth because of their relatively high levels of social mobility or whether they are both symptoms of other underlying factors (such as an greater sense of a wider society rather than individualism).
The UK has a lot of "challenges" such as:
- The deeply ingrained class system which even if the "breeding" based class system erodes (though IMO there is little evidence) will likely be replaced with a US-like money based class system
- The high levels of individualism in society, established by Thatcher and promoted ever since
- A corporate and government vision mired in short-termism. On a corporate basis anything over 6 months in the future is impossibly distant, for goverments the threshold may IMO be 2-3 years
Where they will just have gone to Edinburgh , Glasgow or St Andrews instead. Though I appreciate that the social elitism the Oxbridge perpetuates is not so rampant - though St Andrews has something of that reputation (IMO)
Public school is a real driver for this, the proportion of public school attendees in senior positions is totally out of line with the general populace. In both the UK generally and Scotland specifically.
Public school is a real driver for this, the proportion of public school attendees in senior positions is totally out of line with the general populace. In both the UK generally and Scotland specifically.
Archie Gemmill Goal
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Last figures I can find Glasgow was one of a handful of 'top' universities that met their state school targets. Can't find the info for St Andrews but yes expect it's worse.
A lot more chance of breaking up those situations in an Indy Scotland than in the UK and it's far more likely for a state school kid to get into Glasgow than it is Oxford or Cambridge.
* - of course one of the reasons why inheritance tax receipts are so low is that successive governments, in order to keep the comfortably well off happy, have raised inheritance tax thresholds far ahead of inflation. £325k (£650k for a couple) is a colossal sum of money for almost anyone. I can perhaps see a case for being able to keep some nick-knacks and/or personal effects of a nominal value tax free. I can even see a case being made for items requiring care being kept in families for the national interest. I don't understand the case for being able to inherit a 4-bed semi in Penge free of tax
Wow, that is strikingly low as compared to the US where the exclusion amount is $5.45M ($10.9M per couple). And even with that high exclusion amount most people with over a few million dollars in assets have already moved some of their assets into a trust.
One of the many things that annoy me about myself is that I'm drawn to analogies like a moth to a flame and as I'm constructing them they fall to pieces in my hands.
Nevertheless....
It seems to me that Inherited wealth (and the associated privilege) is like getting a hefty head start in a 100m race. It means that unless you are particularly slow, or another competitor is particularly fast, that you're likely to finish first - again. The way that inheritance seems so be working at the moment (and explained in the article I linked) is that winning the race not only gives you the victory, but also an enhanced head start for the next race (the next generation).
Back when I was in favour of inheritance, I'd have viewed attempts to remove the headstart as being unfair to the parents (or grandparents or whatever) who wanted to give their descendants the best chance to win. The trouble is that under this system, the best athletes aren't winning, just those with the biggest head start. Removing that head start I guess would be characterised by some as pulling those athletes down and engaging in the athletics of envy
In the case of a fictional athletics race, who wins and why really isn't important at all but in the context of society and the economy then IMO it starts to matter. A society in which there are high levels of social and economic mobility would tend to encourage the kinds of behaviour which results in that mobility, education, innovation entrepreneurship and so on. I can see how that would be a benefit for the economy and society as a whole. OTOH a society where preserving inherited wealth and privilege is the fastest route to the top would seem to encourage the kind of behaviour which would stifle innovation.
Back to my bad analogy, the path to winning the 100m race would no longer be to be born with the best potential and then train really hard, but instead to work at all costs to ensure that your head start is preserved, and indeed enhanced - for example by increasing the head start bonus you get for winning, eliminating the loss of head start should you lose or even a change to the rules so you're only entitled to a head start bonus if you already enjoy a significant head start.
...must stop with the analogies and go out for a run now
The mistake you're making is that life is not a race. In a 100 m sprint you want to come first, because any other place is a lesser achievement, with fewer goodies down the line. It does matter a lot whether you finish first, second or last as to what happens after.
In life, it doesn't matter. After it ends you're dead by definition. Unless you're a practice of ancient Egyptian religion (or something similar to that) you can't take your wealth to the afterlife. After you die it doesn't matter if you were rich or poor when you were about to die.
Life is not about finishing, it's about how well you run in the race.
The next mistake you're making is to look at money as the only criteria for success. This is manifestly untrue, lots of other things matter as well, and they vary from person to person, from having time to enjoy to having a family to being respected in society and so on. Having plenty of money makes achieving those things easier, but looking at the big picture money is a means, not an end.
Society shouldn't seek for everyone to end the race at the same time, it should enable everyone to run well regardless of their starting position. The only way inheritance tax can assist in that is by pumping additional money in the society (through government) to be redistributed to those whose parents weren't as well off. Making children of the rich start the run from the same line doesn't do anything meaningful. You say if the society shows you that the quickest way to wealth is by inheriting it doesn't stifle innovation and entrepreneurship in most people, except perhaps in those who stand to inherit substantial wealth, who are few and far between anyway.
McHrozni
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Sounds like you have fundamentally misunderstood the analogy, which is of course one of the problems with analogies.
Life isn't about "how well you run the race", otherwise we really would have a meritocracy, it's about "winning" or achieving the goal. Those with inherited privilege manage to "win" far easier which in turn enhances the ability for their descendants to win. There are (at least) two negative outcomes from this:
- The opportunity for those outside the elite to win is reduced - which is unfair (but then again so is life)
- Because "winners" tend to be in charge and set the rules for the future, we don't end up with the most capable people in charge, just the "winners" and they contine to "fix" the race in their favour
Looking at UK society, who is in charge and what their background and capabilities are, it's clear to me that something's broken. I know you and I disagree about whether Boris Johnson is smart but one think I think we can agree on is that he is singularly unsuited for his role - which he wouldn't have been in a position to be in were it not for him attending Slough Grammer and Thames Poly.
3point14
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It may not be the only criteria but it's the most important one, especially if you have children or elderly relatives to look after. For many, many things that are necessary in life (food, shelter, warmth, healthcare, access to the internet etc.) money is the only means to any end.
I find, and I may be mistaken in this, that those that posit that money isn't that important have never suffered a serious lack of it.
The importance of money to a person is a function of how much the person needs and how much the person has. Once you have enough money for your needs the benefits of having more drop off a cliff.
The same goes for any other thing a person could want of course, but money is the one thing people spend most time obtaining - about 2000 hours a year or so, give or take a few hundred. Money is by design the most versatile of all things a person could wish for, that's why we spend so much obtaining it.
I'm not saying money isn't important, that's not the case at all. However all a very steep inheritance tax can accomplish is to remove the ability of individuals from wealthy families to accomplish their objectives in life, whatever they might be. If it managed to improve the chances of those less fortunate to accomplish something in their lives, I would support it.
McHrozni