[petejh]

Yep there are good arguments against increasing pension pots precisely because of the fact that they’re used as shelters from IHT. Which I entirely agree with - my approach is make good money and don’t be too heavily penalised for it (by Sean’s wished-for even higher taxes) while you’re alive, but expect most of it to be taken when you die - I’d vote for 90% IHT with super tight laws on loopholes and dodges, but lowish income taxes.

However we don’t live in that world. Labour are free to adjust the IHT laws if/when they come to power, if they have the guts/honesty/political naïvety to face the fallout from a public who want good services, low taxes and the biological hardwiring to want to look after their offspring. With this policy they’ll potentially have more of a wealth pot to tax via IHT should they want to.


The fact that the policy changed to a 25%tax-free break up to a cap of £268k, while the total pot was allowed to become unlimited, makes it a progressive tax if as I’ve tried to show to Wellsey, you look at the difference in tax/free allowance between the doctor or airline pilot with a £1m pot - getting a 25% tax break, and the super-rich hedge fund manager with a £10m pot -getting a approx 2.86% tax break. Also bearing in mind the marginal tax rates paid are higher. It might only be progressive once you’re above a certain level, but it is progressive above that level.

[abarro81]

I'm very confused about how
"My point remains, why is people having more flexibility to contribute more into their pensions because they have more spare money than you, even if you personally can't, necessarily a bad thing in principle? Especially when as pointed out it's a tax deferral scheme not an absolute tax break"
fits with
"there are good arguments against increasing pension pots precisely because of the fact that they’re used as shelters from IHT. Which I entirely agree with"
in a self-consistent way, but hey ho! I'm sure plenty of my stuff in internally inconsistent too.

I’d vote for 90% IHT with super tight laws on loopholes and dodges, but lowish income taxes.

Definitely agree with this

[petejh]

Because I believe in both ideas - freedom to create, earn, save and invest tax-efficiently in life, and high death duties when you’re gone so as not to perpetuate inequality. Most people only believe in the first but not the second, or neither and just high taxes during life to really crush the spirit (only semi joking).
And whilst we don’t yet have the IHT system I’d prefer, you have to start somewhere if you’re going to change a deeply rooted complex system that’s resistant to change.
And this is a step in the correct direction in my opinion.

[seankenny]

I’d vote for 90% IHT with super tight laws on loopholes and dodges, but lowish income taxes.

As it stands, IHT currently accounts for 0.25% of GDP. Income tax, capital gains and NI together are 16.8% of GDP. Given the deep inequality in household wealth I simply can’t see how even extensive changes to IHT would make any meaningful difference to income tax.

In terms of how estates get passed down, for most people the issue of care and how it’s paid for is a bigger determinant of how much you get from parents than IHT.

[Nemo]

Haven't really got time to engage too much in this debate as need to be on a flight in the morning.  But briefly:

"As it stands, IHT currently accounts for 0.25% of GDP. Income tax, capital gains and NI together are 16.8% of GDP" - SeanKenny

As it stands that sounds about right.  Let's face it, IHT is currently a bit of a joke. 

Doesn't mean it couldn't fundamentally change.
As was previously discussed, there's an awful lot of details about the implmentation that would be needed to get it right.
But it's doable, and a realistic (and IMO sensible) way of fundamentally changing the inequality in the country.

Rather than Labour party policy, which seems to amount to slightly raising income tax and slightly increasing spending.
Or in other words, not really changing much of anything.
(To be clear, I've never voted Tory in my life and I'm not about to start.  Doesn't mean I'm going to parrot every silly thing the Labour party come out with).

If the Labour party actually want to do something, rather than just get into power, they need to:

- Rejoin the Single Market and Customs Union.  That should be entirely doable without any referendums.  They could and should have always have made the case that that was exactly what was voted for.  ie: the 52% to 48% was a vote for the softest possible Brexit imaginable.  Not gone along with the wet dreams of the lunatics on the right of the Tory party.
- Decide what they actually want to spend / cut money on.
- If that requires more taxation, then getting it via some form of IHT (and I don't really care if it's taxed from the estate, or the recipient) is a very good way of doing it.  But yes, the scale of change that it requires to really make a difference is huge, and would completely change the UK housing market.  But that's a good thing.  The fact that young people today, if their parents don't currently own property, are basically consigned to a shite life regardless of how hard they work, is completely appalling.  Whilst a lot of the older generation, basically got to Covid and realised they could retire on the income from the housing wealth they've acquired by virtue of doing not very much of anything other than being lucky enough to own a house prior to the mid 90s (and smart enough to jump on the remortgaging / buy to let bandwagon early on).  Changing that requires fundamental changes.  And it's what the Labour party should be advocating for if they actually care about changing stuff, rather than just getting into power.  Not letting that wealth just get passed down to the lucky subset of the kids in the country with the right parents.

[ali k]

Because I believe in both ideas - freedom to create, earn, save and invest tax-efficiently in life, and high death duties when you’re gone so as not to perpetuate inequality.

You say you want to reduce inequality, but would prefer to do that by increasing death duties. Fair enough - I don’t necessarily disagree. But to make a fundamental difference this would have to be close to a 100% wealth tax with no loopholes whatsoever. Something which is never realistically going to happen in this country short of a revolution. And you must know that.

But in the absence of that you think pushing more wealth into the hands of the top few % is a step in the right direction?! This is bonkers.

[Wellsy]

I can definitely agree on IHT being good for society

[Nemo]

Not getting involved in the discussion about pensions as I've not had chance yet to read what they're actually proposing. 

On IHT,

But to make a fundamental difference this would have to be close to a 100% wealth tax with no loopholes whatsoever. Something which is never realistically going to happen in this country short of a revolution.

I know I somewhat tongue in cheek said 100% when I first mentioned this in a late night rant, and yes that's clearly not going to happen any time soon.  I do think it could be done in stages, and as was previously pointed out on here, IHT used to be way way higher in the 70s and didn't cause a revolution (was essentially scrapped by the Tories in the 80s). 

Admittedly it wasn't terribly effective then, so that's not anything to try and replicate.  But if done sensibly in a staged way, even the indication that that was the direction of travel, would stop some of the investment strategies around property which would be a step in the right direction.  The details of how it might actually work, would require an essay I ain't got time to write, but as a general direction of travel politicians making noises around taxing wealth, particularly inherited wealth, rather than income would be what I want to hear.

[petejh]

You say you want to reduce inequality, but would prefer to do that by increasing death duties. Fair enough - I don’t necessarily disagree. But to make a fundamental difference this would have to be close to a 100% wealth tax with no loopholes whatsoever. Something which is never realistically going to happen in this country short of a revolution. And you must know that.

But in the absence of that you think pushing more wealth into the hands of the top few % is a step in the right direction?! This is bonkers.

It isn't a zero-sum game, I don't understand why you appear to think it is? For someone to be doing well it doesn't depend on you doing badly.
If you don't want a high earner to be able to save more of their income into their pension - which is what you seem to be implying - where do you propose it should go instead? Yet more tax? How do you propose convincing the high earner to continue earning in that case? Forced labour?

The issue of low-earners not getting an advantageous tax treatment for savings purposes is something I think should be dealt with. But it's an independent issue, not a result of a doctor, pilot etc. earning a high wage. If you think the high-earner is going to allow being made to fund it through their wage, then that's probably as realistic as 100% IHT.

[ali k]

It isn't a zero-sum game, I don't understand why you appear to think it is? For someone to be doing well it doesn't depend on you doing badly.

I didn’t say it was a zero sum game. But I do believe in redistribution of wealth, and so do you by the sound of it. But you seem to think the only ‘fair’ way to do this is through massively increased unavoidable IHT on death. And as I said, I’d probably agree if that was vaguely realistic. But as it is, the current method of redistributing wealth is overwhelmingly through taxation in life, via various methods. Pensions being one. It’s not a zero sum game to say that if you can afford to put £40-60k/yr into your pension and accumulate millions in the pot then that money should be taxed. You’d still be doing pretty fucking well in life. And you’ve still got the freedom to put as much as you want into your pension - no one’s stopping you. Those people just shouldn’t expect pity if they get taxed on it.

[petejh]

I understand that view, of course I do. But it isn't realistic just as 100% IHT isn't - which isn't what I think it should be btw.. 80-90% of any wealth above a relatively high cap - say £400k, inflation linked,  would do a great deal of good for society imo. It would leave the less wealthy to pass on their stash and level the field back against all the rich entitled kids every few generations. 
Redistribution from wages beyond a certain point, which we're virtually at imo, is also unrealistic. Who'd vote for it, who'd bother working beyond a certain wage, there's no incentives. So you'd need to go full communist and force people. It'd be completely shit way to live, and the services would still be crap!

I think we found the limits of communism, it's horrific. And are currently - as in this weekend and next week possibly - finding out the limits of the current debt based capitalism model based on ultra cheap money. Something new is required - we haven't tried the 'earn good money while you're alive pay it nearly all back once you're dead' model. It gets my vote for the next thing.

[ali k]

Redistribution from wages beyond a certain point, which we're virtually at imo, is also unrealistic. Who'd vote for it, who'd bother working beyond a certain wage, there's no incentives. So you'd need to go full communist and force people. It'd be completely shit way to live, and the services would still be crap!

I disagree that it’s unrealistic. [Hypothetically speaking for a minute] If you took away the strong influence of the likes of the Daily Mail, Telegraph, right-wing think tanks/lobby groups churning out its anti-redistribution agenda. Plus you removed all culture war distraction bollocks from the debate. And had a more representative voting system, possibly coupled with mandatory voting. Then I think you could have a proper debate about this stuff, and I’m confident you’d find most voters would support a fairer system of redistribution in life through taxation.

As for people not being incentivised to work beyond a certain wage. You don’t need to jump to communism to force people to work. Even taking out of the equation the top few % of earners there’s still a pretty fucking enormous difference in living standards between, say, a headteacher earning £100k/yr vs a classroom assistant earning £14k/yr. So there absolutely is an incentive for people to work their way up. And the reason very high earners in their 50s have left the job market is because they can afford to retire very comfortably at that age, and the only incentive to carry on would be if they want to leave even more money to their offspring. That’s at the same time as huge numbers of workers have to carry on until 67 and either retire with fuck all or just keep trudging on until they die. So if the highest earners were taxed more they might have to work on a bit longer before retirement (good thing for keeping skills in the labour force?) and low earners would get a few extra pounds in their pension pot.

We’ve seemingly never been that concerned about very high earners retiring early in the past, or given them tax breaks to tempt them back. It’s only when it includes people who turn out to be quite useful that the chancellor springs into action! But there’s been chronic shortages in critical NHS staff for a while. These pension changes simply look like classic pork barrel politics using GP and consultant shortages as cover.

[Wellsy]

Taxing people who have pensions worth well over a million pounds is the slippery slope to Stalinism now, guess I must have missed that lesson.

[petejh]

Redistribution from wages beyond a certain point, which we're virtually at imo, is also unrealistic. Who'd vote for it, who'd bother working beyond a certain wage, there's no incentives. So you'd need to go full communist and force people. It'd be completely shit way to live, and the services would still be crap!

I disagree that it’s unrealistic. [Hypothetically speaking for a minute] If you took away the strong influence of the likes of the Daily Mail, Telegraph, right-wing think tanks/lobby groups churning out its anti-redistribution agenda. Plus you removed all culture war distraction bollocks from the debate. And had a more representative voting system, possibly coupled with mandatory voting. Then I think you could have a proper debate about this stuff, and I’m confident you’d find most voters would support a fairer system of redistribution in life through taxation.

So you don't think it's unrealistic. But then go on to describe how it could work if only we removed the free representation of the views of all the people who don't agree with it.

Consider for a moment what you just suggested, and what it says about how you view people who disagree with your worldview.

At best, it's quite a naïve position because there'll always be fringe nut-jobs with extreme views at both ends. It's also potentially quite an arrogant position. At worst it's an incredibly sinister position - to want to shut down opposing views from people who don't believe the same things as you, using claims of righteousness as the justification - joining a long and nasty list of religions, worldviews and cults. It's a disease of many socialists at heart who appear to believe in their own unquestionable righteousness but not that of others who disagree.

I say that being a reader of both the telegraph, guardian, economist, FT etc. It doesn't mean I agree with every word I read in any of them, obviously.

I believe in socialist redistribution - because I believe humans are inherently predisposed to tribalism, bullying and exploiting any perceived strength/weakness disparity. This trend grows over generations and needs controlling. Perhaps that's 10 years in the military and seeing some examples of what underlies civilisation when the veneer is removed.

But ideally redistribute not during your lifetime but after you've gone, after having lived a good life - because you know now is the time you're alive and not any other time. This is a win-win - it encourages creation, enterprise and freedom in life while encouraging socialism after life. The good life imo involves freedom to create, freedom to live how you want without too much economic interference, and various other freedoms in life that the heavier socialist ideologies just can't abide because it destroys their idea.

[seankenny]

There’s just not enough money to raised via inheritance tax for it to have a central role in funding the state - so that last paragraph is just a fantasy.

[ali k]

Read my post again. I said if you removed undue third-party influence on voters opinions together with distraction from or conflation with other completely separate issues like culture war bollocks and had a debate purely on the merits of redistribution of wealth and nothing else then I’m confident most voters would agree with the principle of more progressive redistribution. You can then start to argue whether that’s better done during life or after death.

It’s nothing to do with shutting down opposing views or any of the other bollocks you wrote.

I just think it’s more likely given where we are that fairer taxation on the wealthiest will happen during life than after death.

And remember - to get to your preferred position of everyone passing virtually all of their wealth over to the state on death then you’d face the same opposition from vested interests, only much stronger.

[warmonke]

the free representation of the views of all the people who don't agree with it.

Pretty poor take; 'all the people who don't agree with it' being the ultra-rich media barons who own the press?

I think it'd be pretty hard to argue against the role that the right-wing media and associated sketchy think tanks and their insidious rhetoric has on influencing public opinion. It's hardly totalitarian to suggest that if media discourses weren't straight-up abhorrent and actually promoted compassion, understanding and critical thinking - and god forbid trying to 'hold power to account' - rather than directing hate and vitriol to the most vulnerable in society then maybe we wouldn't be in such a horrible mess.

Obviously people are always going to have different opinions but maybe wealth redistribution wouldn't seem so bad if people weren't encouraged to believe that poor people are inherently lazy and undeserving of compassion.

[petejh]

There’s just not enough money to raised via inheritance tax for it to have a central role in funding the state - so that last paragraph is just a fantasy.

There's something not mathematically logical in what you wrote - if you think about the money/wealth gained over a person's lifetime.

Money can either be taxed in a person's lifetime via various mechanisms - purchase taxes, income taxes, fuel taxes, alcohol duty, capital gains tax, NI, dividend tax etc.; or after life via a death wealth tax. But it's the same money (or wealth accrued), just tax deferred to after death, or tax taken during a life. Isn't it?

So it would be incorrect to just blanket state that there isn't enough money, because it's the same money.

But it's even more incorrect then that (you stating there can't be a central role). Because a tax after death 'could' be at a much higher rate than a tax during life - because there's that thing of you not being here anymore to care about paying it. Versus the tax rate during life will always hit lower boundaries by virtue of us wanting to enjoy the fruits of our labour in the here and now and not be taxed to the hilt.

So for the same amount of money you could pay more tax in death than you would accept paying in life. Alternatively, for less money you could pay the same amount of tax as the 'taxed during life' system. 

Of course you have to get over that slight issue of the large driving motivation for our existence being to want to propagate our genes and protect our offspring...

[Will Hunt]

the free representation of the views of all the people who don't agree with it.

Pretty poor take; 'all the people who don't agree with it' being the ultra-rich media barons who own the press?

I think it'd be pretty hard to argue against the role that the right-wing media and associated sketchy think tanks and their insidious rhetoric has on influencing public opinion.

I agree with Pete on this. As much as you may not like it, the right wing press is a representation of people's views as much as it is an influence on them. The Daily Mail doesn't sell newspapers to people who don't agree with what they say.

The vast majority of people are compassionate and kind to those they know and care about. A lot of people, enough to significantly influence national politics (most or nearly most?), don't care very much at all about people who they don't know or who they feel are "other" to them. I think you have to understand and accept that if you want to understand people's political views without leaning on conspiracy theories about how a few individuals mind-control millions of people via the free press.

[seankenny]

Income tax is a tax on earning. IHT is a tax on savings. Earnings and savings are two different things.

[petejh]

Of course.. that doesn’t tell you a lot about the potential for different ways of going about taxation in a society though, and isn’t very imaginative. It also doesn’t look at money in terms of it being one thing.

For example, savings come from earnings. Other sources being windfalls, gifts, investment gains, property sales, (and inheritance…).

IHT can be whatever you set it up to be. Call it XYZ if you want, it could tax based on whatever we chose it to tax - number of windows in your house extension on date of death, number of pigs owned, weight of second vehicle in a two/car household. The point is the major difference between IHT and income tax is it taxes you once you’ve departed this world not during life. Meaning theoretically it can tax more and/or could tax at a higher rate than an earnings tax can.

It doesn’t do away with the need for earnings taxes. It just theoretically makes it possible to encourage both individual enterprise and redistribution.

[warmonke]

the free representation of the views of all the people who don't agree with it.

Pretty poor take; 'all the people who don't agree with it' being the ultra-rich media barons who own the press?

I think it'd be pretty hard to argue against the role that the right-wing media and associated sketchy think tanks and their insidious rhetoric has on influencing public opinion.

I agree with Pete on this. As much as you may not like it, the right wing press is a representation of people's views as much as it is an influence on them. The Daily Mail doesn't sell newspapers to people who don't agree with what they say.

The vast majority of people are compassionate and kind to those they know and care about. A lot of people, enough to significantly influence national politics (most or nearly most?), don't care very much at all about people who they don't know or who they feel are "other" to them. I think you have to understand and accept that if you want to understand people's political views without leaning on conspiracy theories about how a few individuals mind-control millions of people via the free press.

It's a very valid point however the 'leaning on conspiracy theories about how a few individuals mind-control millions of people via the free press' comment is a bit reductive, surely recent events would indicate that the 'free press' isn't as free as you'd like to think - and it's not really got anything to do with 'conspiracy theories' or 'mind-control' but very real structural limitations.

Regardless, Ali put it best: 'if you removed undue third-party influence on voters opinions together with distraction from or conflation with other completely separate issues like culture war bollocks and had a debate purely on the merits of redistribution of wealth and nothing else then I’m confident most voters would agree with the principle of more progressive redistribution.'

[seankenny]

Pete, the amounts that could possibly be raised by IHT are small compared to income tax, so small that much of what you write about being (partially) freed from the indignity of paying taxes whilst you are alive is just a fantasy. Of course IHT could be higher, but it will never play a huge role in taxation; for scale, alcohol duty brings the state about twice as much revenue.

[petejh]

I think in abstract theory you’re definitely not correct - because £1 owned is worth the same £1 whatever its source, whether a pound in savings or a pound in earnings, or a pound in valuation of illiquid assets. It’s the ‘mutability of money’ as you know.

And the effects of lowering tax take at one point in the cycle (income) would have the effect of raising the money available to be taxed at another point (savings, illiquid assets and all other wealth owned at time of death).

Whether it’s realistic to raise a lot from IHT is more doubtful. In part because of attitudes. Attitudes can always change though.

[Offwidth]

It doesn’t do away with the need for earnings taxes. It just theoretically makes it possible to encourage both individual enterprise and redistribution.

A good sounding idea in theory but in practice how do you stop the less economically beneficial mechanisms the very rich use to keep money in the family and away from tax (trusts, offshored, or worst case just leave the UK for tax purposes); mechanisms that mean money often isn't doing much useful work for the UK? I know some very rich folk and get to hear their views: leaving wealth for their family is often incredibly important.