Inheritance tax

Chris Dillow has compared attitudes to slavery apologies/reparations and inheritance. It's an interesting point:

If we shouldn't impose costs upon people because of something they are not responsible for, why should we tolerate them getting benefits?

I think that's an unfortunate way to phrase it, though. It's trying to balance state intervention in one matter (imposing costs) against state non-intervention in another (untrammeled inheritance). In fact, the natural situation in both cases is state non-intervention, which gives neither apology nor reparation for slavery, and does not interfere in inheritance. You have to make a case for state action, not for state inactivity.

The argument is really that if good things must, morally, pass down the generations, then so must bad things. If assets can be transferred from one generation to the next then so can liabilities. Therefore if there is a liability for slavery then that liability falls on the present generation.

None of this makes the slavery apology/reparation campaigners any less fatuous. Their case would fail even if assets and liabilities properly passed down the generations. But they do not.

We have no moral claim to the products of our ancestors' labour. While people are alive they have absolute moral claim to the products of their own labour and can dispose of them as they see fit, including disposals that benefit their children. But when you're dead, you're dead. No dispositions of your assets will, ultimately, be honoured (just ask the Pharoahs) and there's no reason why they should be. The dead have no claim at all over the world of the living.

This means that while income tax is a form of theft, inheritance tax is more like the disposal of unclaimed bank accounts or lottery tickets.

Dillow argues the case on principle: it's wrong to benefit from past injustices, and these can't be disentangled from any inheritance. He's right. Claiming inheritance without liability for past wrongs is as flaky as claiming rights without responsibilities. But there's also a practical point.

Inheritance is a dead weight on us all, it's a blanket laid across the country, suffocating us all. It's a dreadful, dreadful thing, in practice. The most vital and active countries in the world are relatively unburdened by inheritance - Australia and the USA, for one reason or another, are places where it is within living memory that assets were still freely available for the most enterprising, who naturally put them to the best use.

People talk about economics not being a zero sum game, and that's patently true. But it is a massive brake on society and the economy when most - more than 50% and as much as 80% depending on who you believe - of all currently available assets are held by those whose sole purpose is to keep hold of them and pass them on to the next generation as unchanged as possible, and not to exercise them in any economically useful way whatsoever.

And since there's no moral reason why the dead should be able to dictate what happens to what were once their assets, and since nobody has any moral claim over the fruits of other people's labour, not even relatives, the auctioning off of 100% of the assets of all estates above, say, £500,000 would have no obstacles in principle, would place assets in the hands of the most productive members of the current generation, and would provide voluntary tax revenues to allow cuts in compulsory ones.

UPDATE: Tim Worstall argues persuasively that leaving assets to your children is just a form of delayed consumption. At a stretch, he argues:

While growing up the consumption of the family has been limited by the savings being accumulated. It seems a little odd to insist that delayed consumption must be taxed, while current consumption is not.

This is fair enough, although I think it is still worth repeating that when you're dead you're dead and you can't expect to control any assets beyond your own lifetime.

But this is why I think there should be a highish threshold beneath which no inheritance tax at all is paid, and above which the tax rate is effectively 100%. In the post above, I suggested £500,000 but I'd have no problem with a figure twice that. The point being that you can still trace faint outlines of the Norman Conquest in the landholdings of the English aristocracy, and by now you should not be able to. That's one hell of a period of stagnation: coming up to the millennium mark.