stamp duty<\/a>, which a large number of economists think limits people\u2019s mobility, meaning they are less likely to move to take on a new job.<\/p>\nIt also happens with the 60 per cent tax trap \u2013 a tax quirk affecting earners with incomes between \u00a3100,000 and \u00a3125,140 \u2013 that means many cut their hours to avoid getting stung.<\/p>\n
There are really clear economic arguments for cutting all the above taxes, whether you agree with them or not.<\/p>\n
Then we come to IHT. Multiple right-leaning policy papers, including from the Institute of Economic Affairs think-tank and political party Restore Britain, have recently argued that the tax should be ditched entirely.<\/p>\n
Sometimes dubbed the death duty, it is charged at a rate of 40 per cent on the money, property and possessions of someone who has died.<\/p>\n
You get \u00a3325,000 that you can pass on tax-free, as well as numerous other exemptions and allowances.<\/p>\n
Spouses can pool their allowances and if you own property, you get an extra \u00a3175,000 worth of tax-free allowance, so married couples can often pass on \u00a31m to their children without paying any money.<\/p>\n
I can see why people don\u2019t like it, but if I was drawing up a list of taxes to cut or abolish, IHT would be low down the list \u2013 very low down.<\/p>\n
I know the public disagree with me on the whole \u2013 55 per cent support cutting or abolishing it according to polling from Public First.<\/p>\n
But let\u2019s consider the facts. Good tax policy should raise revenue while avoiding suppressing economic growth.<\/p>\n
Compared to other taxes, IHT does this.<\/p>\n
The likes of income tax and NI charge you money for the work you\u2019ve done \u2013 productivity that benefits the economy.<\/p>\n
As blunt as it sounds, those who are hit with IHT are getting money for nothing.<\/p>\n
As the money is paid by beneficiaries, rather that the person passing, it isn\u2019t money that has been earned, and on the whole, the person getting it is likely to be from the more privileged end of society, given the vast majority of estates don\u2019t attract a tax charge because of the thresholds involved.<\/p>\n
You could even argue that IHT benefits the economy. In trying to cut their bills, more families gift wealth and assets to their children during their lifetime, knowing that if they hoard wealth they could have to pass some to HMRC.<\/p>\n
Stopping the need for this could mean the flow of money from parents and grandparents to their children ends, meaning a lot of house purchases or other spending would reduce, as people kept their wealth to themselves instead.<\/p>\n
Some of the other arguments against IHT also fall apart. It is often a charge levelled that it amounts to double taxation, as it is a tax on money that has already been taxed.<\/p>\n
While this is true, it is in no way unique.<\/p>\n
When you pay VAT on some clothes, or fuel duty topping up your car, you are also being taxed on money you have already paid tax on.<\/p>\n
The biggest argument in favour of cutting IHT in my view is its complexity \u2013 which will no doubt be added to when pensions come into its scope next year.<\/p>\n
But my honest response to this is pragmatic. There are other complexities in the tax system that should be prioritised before \u2013 the 60 per cent tax and the loss of free childcare to name two \u2013 that would warrant sorting first because of their distortive effect on the economy.<\/p>\n
Scrapping IHT would ultimately mean that \u00a38bn of taxes would have to be collected in other ways, or public spending cut accordingly.<\/p>\n
Doing so to benefit people who have been lucky to be born into relative wealth seems wrong, and our fiscal priorities should head elsewhere.<\/p>\n","protected":false},"excerpt":{"rendered":"Most people would probably like it if their taxes were lower. This is not a controversial thing to…\n","protected":false},"author":2,"featured_media":556606,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[14],"tags":[64,63,99,186,36756,184,185,4961],"class_list":["post-556605","post","type-post","status-publish","format-standard","has-post-thumbnail","category-personal-finance","tag-au","tag-australia","tag-business","tag-finance","tag-inheritance-tax","tag-personal-finance","tag-personalfinance","tag-tax"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/556605","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/comments?post=556605"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/556605\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media\/556606"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media?parent=556605"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/categories?post=556605"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/tags?post=556605"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}