Inheritance Tax (IHT) Debate
What if rather than "Tax 'em", we "Make 'em spend it"? - The case for a National Tontine
There’s a debate raging in the media and on social media as the Government (UK one) has floated a pre-election balloon about scrapping “the most hated” inheritance tax. I was going to find actual articles about this from the various politicians and commentators, but I think this version of that debate [mostly] by ChatGPT is probably better:
"A Fairer Tomorrow: The Case for Abolishing Inheritance Tax"
In the quest for a fairer, more prosperous society, the debate around Inheritance Tax (IHT) stands at the forefront of our national conversation. As a centre-right politician committed to the principles of individual liberty, economic efficiency, and fair play, I put forth a compelling case for the abolition of this tax, which, I believe, stands as an obstacle to the values we collectively cherish.
At the heart of the argument against IHT is the principle of fairness. Taxing one's estate upon death represents not only a financial burden but a moral quandary. The wealth accumulated by individuals is often the result of a lifetime of hard work, prudence, and aspiration. It is wealth on which income tax, capital gains tax, and other levies have already been paid. To tax yet again upon death seems not just excessive but inherently unjust.
Moreover, the current IHT regime, despite its intentions, often leads to unintended consequences that distort the economic landscape. While certain assets like agricultural land and family businesses may qualify for exemptions, these are not universal and come laden with complexities. The result is an uneven playing field where investment decisions are skewed not by economic merit but by tax considerations. This distortion is detrimental to the efficient allocation of resources and, ultimately, to economic growth and prosperity.
The impact of IHT extends beyond the individual to the very fabric of our communities. For estates that do fall within the taxable threshold, the implications can be severe. The tax liability can necessitate the sale or breakup of family estates that have been maintained over generations. These are not merely assets in the financial sense but repositories of history, culture, and community life. Their fragmentation can lead to the loss of jobs, the diminishment of local heritage, and the erosion of community bonds.
Furthermore, IHT is often criticized for its complexity and the administrative burden it imposes. Navigating the maze of allowances, exemptions, and reliefs is no small task, requiring significant time and expertise. This complexity not only places a strain on individuals and families but also on the administrative apparatus of the state. Simplifying the tax system by abolishing IHT can lead to increased efficiency and a clearer, more equitable fiscal environment.
In arguing for the abolition of IHT, it is also crucial to consider the international context. In an increasingly globalized world, the UK must remain competitive. High or overly complex taxes on inheritance can act as a deterrent to investment and encourage the migration of wealth and talent. By abolishing IHT, we can position the UK as a more attractive destination for investment and innovation, contributing to our economic vitality and standing on the world stage.
It is, however, important to address the question of revenue and public services. The abolition of IHT must be considered within the broader context of fiscal policy and the need to fund essential services. Here, the emphasis should be on creating a more dynamic economy, broadening the tax base, and fostering growth and prosperity that will, in turn, generate the revenue needed to support public services.
In conclusion, the abolition of IHT is more than a tax policy; it is a commitment to the principles of fairness, efficiency, and respect for individual effort and aspiration. It is about removing barriers to investment, protecting the integrity of family legacies, and ensuring a more equitable and prosperous future. As we contemplate the path ahead, let us choose a direction that reflects our deepest values and aspirations, creating a society where every individual has the opportunity to build and pass on a legacy for generations to come. This is the vision I put forth, and I invite you to join me in making it a reality.
and now the response from the ChatGPT created Centre-Left politician:
"Safeguarding Our Future: The Essential Role of Inheritance Tax"
In the debate surrounding the future of Inheritance Tax (IHT), we must consider not only the economic implications but also the profound societal impact of allowing vast wealth to pass from one generation to another unchecked. As a centre-left politician, I am deeply committed to fostering a fair, equitable society where success is based on merit, not inheritance. IHT stands as a critical tool in this endeavour, ensuring that we do not regress into a society dominated by dynastic wealth.
The accumulation of vast fortunes in the hands of a few is not merely an economic concern; it is a fundamental issue of fairness and justice. When wealth is passed down through generations without significant redistribution, it leads to the entrenchment of privilege and the erosion of equal opportunity. The recipients of large inheritances receive a significant economic advantage that is unearned and often vast in scale. This unearned wealth perpetuates a cycle of inequality, undermining the ideal that individuals should succeed based on their talents and efforts, not the size of the estate they inherit.
The absence of IHT or a weakened IHT regime would only exacerbate the concentration of wealth, leading to a society where a small elite holds a disproportionate share of the nation's capital. This concentration is not only morally questionable but also economically detrimental. It stifles social mobility, entrenches poverty, and creates a class of citizens who are wealthy not due to their contributions to society but merely by the accident of their birth. Such a society is neither fair nor stable.
Moreover, history and international comparisons provide us with ample evidence of the corrosive effects of unchecked inherited wealth. Societies with significant wealth concentration in the hands of a few tend to experience lower levels of innovation, reduced economic dynamism, and greater social unrest. IHT is not just a tax; it is a safeguard against the formation of a stagnant and divided society.
In advocating for the retention and strengthening of IHT, we must also consider its role in supporting essential public services. The revenue generated from IHT contributes to funding healthcare, education, and social security systems that benefit everyone. By redistributing a portion of large estates, we invest in the collective well-being and future of our nation, ensuring that every individual, regardless of their background, has access to the opportunities they need to thrive.
While some argue for the abolition of IHT on the grounds of fairness to the wealth creators, we must remember that true fairness encompasses the entire society. It involves creating an environment where everyone has the opportunity to build a prosperous future. This is not about penalizing success; it is about ensuring that success is available to all, not predetermined by inheritance.
In conclusion, IHT is more than a fiscal instrument; it is a cornerstone of a fair and dynamic society. As we debate its future, let us not lose sight of the broader vision of what we aspire to be as a nation. Let us commit to a society that values merit and hard work over inherited privilege, and let us use the tools at our disposal, including IHT, to build a fairer, more prosperous future for all. This is the moral and economic imperative we must uphold.
But what if there was a different option that addressed both of these viewpoints? Rather than “Tax ‘em”, why not just “Make ‘em spend it”:
"Embracing Change: The National Tontine as a New Inheritance Paradigm"
In the robust debate surrounding the future of Inheritance Tax (IHT), it's time to consider a transformative approach that harmonizes the principles of personal wealth, societal benefit, and economic vitality. I propose a bold and innovative solution: the implementation of a National Tontine. This scheme would require a compulsory purchase by individuals with estates over a certain threshold, effectively converting a proportion of their wealth into a guaranteed lifetime income and simultaneously abolishing the traditional IHT.
For proponents of the centre-right, the National Tontine addresses the critical issue of double taxation and respects the ethos of benefitting from one's hard work. Under this new system, the notion of IHT is abolished, freeing individuals from the concern of their wealth being significantly taxed upon death. Instead, the compulsory tontine purchase ensures that a portion of their wealth is rechanneled into a personal, lifelong income stream. This shift not only acknowledges the importance of rewarding individual effort and savings but also provides a dignified and financially prudent way for individuals to enjoy the fruits of their labour across their lifetime.
From a centre-left perspective, the National Tontine is a mechanism that promotes a fair and functioning society. While it allows individuals to benefit directly from their wealth, the compulsory aspect ensures that a proportion of significant estates is utilized in a way that supports economic circulation and societal well-being. By ensuring that wealth does not simply accumulate but is actively deployed throughout an individual's lifetime, the National Tontine aids in preventing the entrenchment of dynastic fortunes and contributes to a more equitable distribution of resources.
The compulsory purchase of a National Tontine at the point of reaching a wealth threshold is a critical feature of this proposal. It signifies a commitment to both personal prosperity and the collective good. The funds accumulated through these purchases could be strategically invested in national infrastructure, healthcare, or education, mirroring the societal benefits traditionally associated with IHT revenue but without the burden of a post-mortem tax.
Moreover, the introduction of the National Tontine would encourage a more dynamic and responsible approach to wealth management. Knowing that a portion of their wealth will provide for them throughout their life, individuals might be more inclined to invest, spend, or donate the remainder actively, contributing to economic growth and social development. This model fosters a culture of stewardship and thoughtful planning, with profound implications for financial and societal health.
In conclusion, as we navigate the complexities of wealth, inheritance, and societal fairness, the National Tontine stands out as a visionary solution. It offers a way forward that respects the importance of personal accumulation while addressing the need for societal cohesion and economic dynamism. By abolishing the traditional IHT and introducing a compulsory purchase of a lifetime income through the National Tontine, we can create a system that is fair, respectful, and beneficial for all. This is not merely a compromise between differing political ideologies; it's a progressive step towards a future where individual prosperity and societal well-being are inextricably linked. As we contemplate the future of our fiscal policies and societal structures, let us consider the National Tontine as a bold move towards a more equitable and prosperous society.
This blog is a campaign for Modern Tontines as a solution to the retirement crisis and because they make great savings vehicles that can invest for the long term. The idea for a compulsory National Tontine is an intriguing but tangential concept presented here in a mock debate that was fun to do on ChatGPT. If it were to exist, it would hopefully compete with commercial versions that would offer higher returns. Please share, and I would love to hear your comments.