The rate of Asset Tax for individuals will be harmonized with the rate of tax on earned income, and all allowances for each will be pooled, in order to ensure that work is rewarded and incentivised to the same extent as investment.
Investigate possible reforms to the way VAT is applied to goods and services with a view to making it less regressive and, ultimately, to remove the poorest from having to pay entirely. This may require renegotiating our obligations to the EU, which makes VAT compulsory for all member states.
Increase inheritance tax as much as possible, and use the revenue to reduce income tax (as described above). This is on the principle that inheritance, even for those lucky enough to get it, is capricious and as the population ages increasingly likely to arrive too late to be of any use. Instead, we prefer to have more money while working.
We will support research into a universal basic income and its effects on society and the economy, with the aim of eradicating poverty and providing a basic standard of living for all.
Are you also suggesting decreasing (perhaps to zero) the threshold for triggering inheritance tax, or do you think there's value in having estates of a certain size untaxed?
Have you any pointers to deeper reading on this one? Most of the research I've seen has been in the opposite direction (i.e. for eliminating it entirely).
I've also read some fairly convincing elaborations on how lots of unexpected things in British society (including the number of hedges!) are a direct result of primogeniture rather the more European system of partible inheritance, so I suspect the implications of something like this would be quite far-reaching. (That's not an argument for not doing it, of course — I'd just like to at least a little bit more understanding of what they're likely to be!)
FWIW, I'm a big fan of the Estonian system, where there is no inheritance tax, per se — it just falls, with everything else, into their all-encompassing income tax system (which treats all income, from any source: salary, dividends, payments-in-kind, inheritance, etc etc etc as identical for the purpose of taxation).
This is largely orthogonal to what tax rates apply to that income etc: this is a more profound approach, where tax is deliberately kept as simple as possible. This helps significantly reduce the ability for people to set up complex legal structures for moving money around in ways that minimise taxes[1], in that they can do that all they like, but the instant they gain a personal, tangible benefit from it, it's treated as income and taxed accordingly.
Specifically wrt inheritance, it also removes what has always been, to me, one of the most puzzling aspects: if I receive money from someone's estate in the UK, the amount of tax I pay on it is related to someone else's circumstances, not mine.
[1] and completely eliminates the arms race between the tax officials and big accounting firms to create/tax such structures.
The principle laid out is generally sensible I think, though I'd definitely want to see more research on this, and how it related to other ideas like a Wealth Tax or Land Value Tax. Worth noting for anyone that is reading the PR that the title is stronger than the actual proposal, which suggests relying more on inheritance taxes instead of income taxes, rather than proposing outright replacement.
@PaulJRobinson - over 9 years ago
Inheritance tax is essentially a tax on accumulated wealth. I much prefer to tax lazy greedy Smaug than ambitious and hard working Bilbo. Can we be broader on this (ie not just inheritance tax?)
— Sent from Mailbox
There are various different alternative Wealth Taxes already in place in various countries that could be copied/learned from; however the trend across Europe recently is to move away from those. Interestingly, Iceland and Spain both removed them, and then brought them back again in recent years. I'd like to know more about what's behind those trends (in both directions), and what the results of them have been.
(Standard disclaimer applies: I'm always highly suspicious of taxes introduced on largely ideological groups, as they seem particularly sensitive to unintended consequences, not least because the people who should be most hit by them are best placed to be able to find ways around them)
@tmtmtmtm - (Regarding your standard disclaimer: My purpose here isn't ideological, but practical. I personally would much rather have lower income tax, and higher inheritance tax.)
Basing this on evidence sounds great. However, I don't think inheritance tax is a wealth tax. On the contrary, the "wealth tax" Wikipedia article cites it as a tax which wealth taxes could decrease!
Are the Iceland and Spain examples specifically about inheritance tax, or about wealth taxes?
Hunting about for anyone else writing on this, I've found the Green Party inheritance tax policy: http://policy.greenparty.org.uk/ec.html
It does do a shift to taxing on "recipient basis" as @tmtmtmtm has suggested - albeit one with its own bands, and other complex rules. It is also explicitly an ideological tax "to reverse and prevent the accumulation of wealth and power by a privileged class".
Not that helpful I know, but it is something!
Stephen Byers (!) in 2006 on inheritance tax claims it doesn't redistribute wealth (no citation though): http://www.theguardian.com/commentisfree/2006/sep/01/comment.economy
Oh this is good - report by the Confederation of Swedish Enterprise from five years into Sweden abolishing inheritance tax. The introduction states preserving family business as motivation:
The challenges faced by Swedish family businesses were one reason for repealing the
inheritance and gift taxes. About half of all family-owned businesses were then facing a
generational change within the next ten years. Hundreds of thousands of employees, customers
and suppliers would be affected, right alongside the business owners.
http://www.svensktnaringsliv.se/migrationcatalog/Rapporterochopinionsmaterial/Rapporters/five-years-with-no-inheritance-and-gift-taxes532900.html/binary/Five%20years%20with%20no%20inheritance%20and%20gift%20taxes
@frabcus — that response was to the suggestion by @PaulJRobinson to widen this. Sorry for not making that clearer.
@philipjohn - over 9 years ago
Inheritance tax is essentially a tax on accumulated wealth. I much prefer to tax lazy greedy Smaug than ambitious and hard working Bilbo.
I really think we should avoid this kind of rhetoric. It disturbs me - I find it demonising, inferring that anyway with any sort of wealth must be an evil greedy oligarch who doesn't do a "proper job".
Why, if I manage my finances well, spend little and save well to leave my offspring a reasonably modest estate am I automatically greedy? And why should my descendants then be punished for my responsible fiscal behaviour by getting whacked with a massive tax on the security I wanted to leave to them? I worry about the message it sends - should I have been talking lessons from the irresponsible bankers that caused the crash instead?
Anyway, the proposal..... a couple of questions... 1. Could you clarify why you think income tax should be reduced? I'm asking because I'm thinking of our policy of having the income tax threshold at the level of the living wage. 2. Do you think that lowering income tax could encourage people to spend more, and save less, and therefore reduce the revenue from inheritance tax given that the general population may have accumulated less assets as a result? 3. Perhaps any inheritance could be treated as income, and taxed according to those rates so that folks on low earnings don't get taxed as much on inherited assets as those on higher incomes? (I'm thinking of what the Estonian model sounds like)
@digitalWestie - over 9 years ago
I can imagine this is quite easy to avoid. Has this been tested somewhere?
The OpenPolitics Manifesto
@frabcus - over 9 years ago