# Low income tax – High inheritance tax



## Purple

Many people have a problem with inequality in society. One of the major reasons that they cite it an uneven distribution of wealth.
It does seem unfair that some people can live in comfort and riches because their parents, grandparents or great grandparents (etc) were clever/industrious/lucky/hardworking.
It also seems unfair that people who work hard now have so much of the fruits of their labour taken away and given to others.

One solution is lower income taxes and higher inheritance taxes.
I know this poses a problem for people with family farms and family businesses so how about a 60% inheritance tax with a 1.5% reduction for each year that the beneficiary has worked in the business/ on the farm with a maximum reduction of 40% (a minimum payment of 20%)?
There should be no exemption levels for family homes etc. In effect the state takes less from you when you are alive but in effect it is just deferring the balance ‘till you die.

That way we get a much more even playing field for society without dis-incentivising hard work in fact it is encouraged because people know that they will be retain the fruits of their labour while they are alive and their children know that they won’t get a free ride in life.

Would this work?


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## T McGibney

With all respect, it is a crazy suggestion. 

It would bring us back to the days when you had to work for 30 years in daddy's business or farm before you got to own it, and you had 60 year olds  working in family firms with their lives on hold until their 85-90 year old parents passed away. You could call this the Prince Charles Syndrome.

It would also make it virtually impossible for any family business to ever afford to transfer its ownership within the family to the next generation, as most firms have their equity tied up in working capital or generally illiquid assets.

And that's before we even start thinking about how a 60% inheritance tax rate would work for homes and other inherited property, which would be in effect confiscated by the State on death. How many people have got the equivalent of 60% of the value of their parents' home in ready cash?


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## Purple

T McGibney said:


> With all respect, it is a crazy suggestion.
> 
> It would bring us back to the days when you had to work for 30 years in daddy's business or farm before you got to own it, and you had 60 year olds  working in family firms with their lives on hold until their 85-90 year old parents passed away. You could call this the Prince Charles Syndrome.
> 
> It would also make it virtually impossible for any family business to ever afford to transfer its ownership within the family to the next generation, as most firms have their equity tied up in working capital or generally illiquid assets.
> 
> And that's before we even start thinking about how a 60% inheritance tax rate would work for homes and other inherited property, which would be in effect confiscated by the State on death. How many people have got the equivalent of 60% of the value of their parents' home in ready cash?



I’m not sold on the idea myself, I’m just putting it out there for discussion.
OK, so 60% mightn’t work but what would?
In principle is it better to have lower income taxes and higher inheritance taxes?

Why should 60 year olds put their lives on hold waiting for their elderly parents to die? They get an income from the business/farm as an employee and will continue to do so. If it has to be sold then they will get the cash benefit of the balance of the sale. 

Why should anyone feel entitled to inherit their parents wealth (including the family home)? Do remember that their parents will have more wealth because income taxes were lower. 



> that's before we even start thinking about how a 60% inheritance tax rate would work for homes and other inherited property, which would be in effect confiscated by the State on death.


 Yes, instead of confiscating it when they are alive through taxation.


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## T McGibney

Sorry, if you're not sold on the idea yourself, its only a waste of time asking the rest of us to debate it


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## Purple

T McGibney said:


> Sorry, if you're not sold on the idea yourself, its only a waste of time asking the rest of us to debate it



Why?
It sounds like a good idea to me but I haven't thought it through enough to say it's sound.


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## Slim

Purple said:


> Why?
> It sounds like a good idea to me but I haven't thought it through enough to say it's sound.


 
It occurs to me that the last government had started rolling back the inheritance exemption. So, an inheritor can only inherit about €350k from parents before paying CAT, that's a lifetime limit. What about the large wealth that is transferred by other means, e.g. trusts etc? If the taxation scenario changes dramatically, people will motivated to find other ways to avoid tax and, indeed, nursing home charges. Shouldn't people to able to leave a house to their children?


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## Ceist Beag

Purple said:


> It does seem unfair that some people can live in comfort and riches because their parents, grandparents or great grandparents (etc) were clever/industrious/lucky/hardworking.



Why? I hate inheritance tax, absolutely hate it. If I choose to work hard all my life and want to then leave the fruits of my labour to my children why should the government of the day get a chunk of that? I earned it, I paid my tax along the way, it's mine now to pass on as I see fit as far as I'm concerned.


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## Purple

Ceist Beag said:


> Why? I hate inheritance tax, absolutely hate it. If I choose to work hard all my life and want to then leave the fruits of my labour to my children why should the government of the day get a chunk of that? I earned it, I paid my tax along the way, it's mine now to pass on as I see fit as far as I'm concerned.



The proposal is to lower income tax by the same amount so there's no net loss of revenue to the state.
Why should your grandchildren start life well off because you worked hard?


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## ontour

Purple said:


> Why should your grandchildren start life well off because you worked hard?



Because the person decided to work hard so that you could leave them 'comfortable'.  That is the spending choice of the person who earned the money and should not be treated more severely in tax terms than if they bought a car, a holiday or a wine cellar.


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## Ceist Beag

Purple said:


> Why should your grandchildren start life well off because you worked hard?


I find that bizarre logic Purple. If I choose to give my grandchildren a headstart in life that is my choice. I would be paying tax as I earn so the money I save for my grandchildren is already nett of tax. Why should it be taxed a second time?


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## Brendan Burgess

Hi Purple

I fully agree with you on both counts!

Tommy said:


> Sorry, if you're not sold on the idea yourself, its only a waste of time asking the rest of us to debate it


Absolutely not. We need new ideas. No one has a monopoly of ideas. When people put forward ideas, they should be open to discussion. The pros and the cons.  I have come up with many ideas. After analysis, some of them have turned out not to be workable. Others have been good ideas and have worked. Often an idea which turns out to be impractical sparks a variation which turns out to be practical.

On the main proposal...

I am a single person with no children.  I would gladly accept a 100% CAT in exchange for a significant reduction in income tax.  That is speaking as a tax payer. I would have more money to spend now. 


> Many people have a problem with inequality in society. One of the major  reasons that they cite it an uneven distribution of wealth.


Society is very unfair. It is not right that  someone born in Foxrock should get a gift of a new car when they are 18 and a nice apartment when they are 21 while someone born in inner city Dublin will probably be in a low paid job all their life.  Someone born in Foxrock is probably going to have a huge advantage in terms of education and job contacts anyway. Why should this advantage be furthered by them getting huge gifts and legacies? 

There are practical problems with tax. 


> It would also make it virtually impossible for any family business to  ever afford to transfer its ownership within the family to the next  generation, as most firms have their equity tied up in working capital  or generally illiquid assets.


These administrative difficulties should not prevent a good idea from being implemented. 

I would guess that few people have all their wealth in the family business. Most would have other assets such as the family home which could be sold off. Parts of the business could be sold off in some cases. 

If the business is very valuable, they could borrow on the basis of it to pay the inheritance tax. Or the tax could be paid on a phased basis over 10 years.

If I was offered a business worth €10m but I had to borrow €6m to pay the CAT, then I would do so. I would probably look for some other investors to reduce my borrowings.  Maybe I could be allowed to use the profits of the business to repay the loans in a tax efficient way?

*The big disadvantage of a 60% inheritance tax would be its impact on behaviour
*If someone can't pass on money to their children, would they tend to squander it? Would they tend to work less hard?  I suspect that this would be marginal. And maybe it would be a good thing. I have seen elderly people living in poverty so that they can leave a legacy to their children. They would be much better off spending their money on themselves.


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## Purple

Ceist Beag said:


> I find that bizarre logic Purple. If I choose to give my grandchildren a headstart in life that is my choice. I would be paying tax as I earn so the money I save for my grandchildren is already nett of tax. *Why should it be taxed a second time?*



I'm not proposing that it be taxed a second time. Read my first post again.


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## Bronte

It is being taxed twice.  If you earn money as a PAYE worker and save 100K that is after tax income.  If you leave the 100K to your child you are proposing it be taxed so that's a second tax. 

What would be the incentive for people to save and do their best for their children or grandchildren's future?


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## Purple

Bronte said:


> It is being taxed twice.  If you earn money as a PAYE worker and save 100K that is after tax income.  If you leave the 100K to your child you are proposing it be taxed so that's a second tax.


 
The suggestion is that you pay less tax on income but more is charged on inheritance. In effect the income tax is deferred 'till death. 
Since money now is worth more than money later it wouldn't quite balance out but it should be close to it.
The net result is that you keep more of your money when you are alive and your kids get less (as a proportion) when you die.



Bronte said:


> What would be the incentive for people to save and do their best for their children or grandchildren's future?


The idea is to remove the incentive to leave lots of money to your children or grandchildren. Instead the big benefit you could give them is a good education and skills. They would start off on a more even playing field and would retain a greater proportion of their own efforts during their lives. The net result would be a more productive and egalitarian society due to more equality of opportunity.


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## Ceist Beag

Purple said:


> I'm not proposing that it be taxed a second time. Read my first post again.



Yes you are Purple - unless you can suggest how current assets/savings (that have already been earned nett of current income tax rates) can be made exempt from an increase in inheritance tax!


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## Purple

Ceist Beag said:


> Yes you are Purple - unless you can suggest how current assets/savings (that have already been earned nett of current income tax rates) can be made exempt from an increase in inheritance tax!



I agree that it would have to be implemented over time and there would be a lot of details to be sorted out.


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## Ceist Beag

Wouldn't a much fairer tax (I know that is a contradiction in terms!) than inheritance tax be a wealth tax? Tax savings/assets over a certain (reasonably high) threshold to encourage more current spending and less stock piling? Again there would be difficulties in how to implement this but I would see this as a much better way of encouraging current spending (which seems to be the aim yourself and Brendan are striving for here) than a blanket tax grab on inheritance.


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## askalot

I think it is a very interesting idea but you'd need to address the issue of older people who currently have stopped working. They may have no taxable income therefore they won't benefit from the lower income tax rate but would be liable for the increased inheritance tax or at least their beneficiaries would be.

As for taxing money twice, what's the problem? We are subject to double taxation all the time, VAT, duty, dirt etc.


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## Brendan Burgess

What is the hang up about being taxed a second time? 

I earn €100 - I pay €50 income tax. 

I spend that money and pay VAT and Excise Duty, so the €50 is taxed again. 

I save some of it and it grows, so I pay tax on the capital gains. 

We probably should have a wealth tax as well.

I leave it behind me and the recipient pays CAT. 

Purple is simply proposing that the existing tax be increased, which I agree with, especially if income tax rates could be reduced as a result.


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## Bronte

If this tax existed I for one would be handing my kids the inheritence in cash over time.  And so would everybody else.


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## mandelbrot

Bronte said:


> If this tax existed I for one would be handing my kids the inheritence in cash over time. And so would everybody else.


 
And I suppose that's the point - would it be better to have money in circulation in the economy, being spent by the younger generation, than being kept out of the productive part of the economy by the stockpiling of the older generations? 

I'm not expressing my own view here, just asking a question.


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## T McGibney

I'm amazed that this topic is still being discussed 

Maybe I'm imagining things but did we not all learn around 2007 that it is folly for a government to attempt to replace revenues from income-based taxes with those from event-based and transaction-based taxes, due to the more volatile nature of the latter?

In the present and immediate future climate, I suggest that it is fanciful to expect that income taxes will ever fall significantly, even if 'compensating' revenues are sourced elsewhere.

And I don't think that anyone has properly addressed the points I made in my earlier post about the destructive impact that a 60% CAT rate would have on owner-managed and family businesses. Put simply, if an owner-manager business person dies (unexpectedly or otherwise), their estate would face an immediate 60% tax charge on their business assets. This would, in many cases necessitate an immediate liquidation of the business, as there is simply not enough investment capital out there to finance third-party business investments and buyouts.

This would entail serious implications for the job security of all employees working in small private businesses or industries.


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## Purple

Hi Tommy,

I'm not suggesting that this is a fix for our current problems, rather a fairer way of taxing people in the long term.
I agree that a mechanism would have to be found to keep family businesses in operation.


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## T McGibney

In that vein, its certainly worth looking at. I know though that there has been a lot of disillusionment in the UK with the perceived unfairness of the Inheritance Tax (IHT) system, where the rates are/were higher and the exempt thresholds a lot lower than in Ireland. Mind you, there is zero Gift Tax in the UK, once the donor survives 7 years after the date of the gift.


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## Bronte

mandelbrot said:


> And I suppose that's the point - would it be better to have money in circulation in the economy, being spent by the younger generation, than being kept out of the productive part of the economy by the stockpiling of the older generations?
> 
> .


 
Well the younger generation certainly spent the money in the last 10 years and look where that got us.

Purple isn't being thrifty and careful with money a good thing, something that should be encouraged?

Perhaps if people were encouraged to invest in entreprenurship/business that would be more fruitful that what you are proposing.


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## Purple

Bronte said:


> Well the younger generation certainly spent the money in the last 10 years and look where that got us.


 They spent much of it buying property from older people. We saw a massive credit funded transfer of wealth from young to old throughout the boom. 



Bronte said:


> Purple isn't being thrifty and careful with money a good thing, something that should be encouraged?


Yes, and knowing that when your parents die you won't get a big lump sum will only help this.



Bronte said:


> Perhaps if people were encouraged to invest in entreprenurship/business that would be more fruitful that what you are proposing.


 Why not do both? Property taxes are a good way of keeping money out of non-productive assets.


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## csirl

Purple said:


> Hi Tommy,
> 
> I'm not suggesting that this is a fix for our current problems, rather a fairer way of taxing people in the long term.
> I agree that a mechanism would have to be found to keep family businesses in operation.


 
Purple, why do you think family businesses should be exempt? Shouldnt they be subject to the same rules as other wealth? Why is it ok for someone to get the benefit of e.g. inheriting a business worth €1m, but not allowed to get the benefit of inheriting property worth €1m or cash?

Also, I dont agree that inheritance tax means that family businesses will get liquidated on the owners death. If the business is sucessful, then someone will be willing to buy it as a going concern.

On the subject of people working years in family businesses - dont they get a salary like everyone else?

Incidently, I dont agree with large inheritance taxes. Looking at it from a purely scientific basis - while an individual dies, their genes live on in their children. Its logical that these genes should get the benefit of their hard work in a previous life.


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## T McGibney

csirl said:


> Also, I dont agree that inheritance tax means that family businesses will get liquidated on the owners death. If the business is sucessful, then someone will be willing to buy it as a going concern.



Wishful thinking in the vast majority of cases. I couldn't imagine too many people buying a farm, for example, as a going concern.


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## mandelbrot

csirl said:


> Purple, why do you think family businesses should be exempt? Shouldnt they be subject to the same rules as other wealth? Why is it ok for someone to get the benefit of e.g. inheriting a business worth €1m, but not allowed to get the benefit of inheriting property worth €1m or cash?


 
Trading businesses / farms, to which CAT reliefs apply, contribute to the active economy, they add to economic output and generate and maintain employment. The same can't be said of property, or cash, which in and of themselves are merely passive assets.

In order to obtain the CAT reliefs, the recipient will generally have been actively involved in generating the value in the business that is being passed on (and must continue to trade, or at least hold the business assets, for 6 years after receipt). The same can't necessarily be said where someone wishes to pass on property, or cash.


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## Joe_90

I see the merit in CAT relief for business assets.
I wonder in the current climate if the 90% relief can be justified ie if you qualify then 2.5m can be inherited without CAT.  There is no CGT on death or in retirement relief cases, . No stamp duty in the case of death either.
Surely if a business is worth say 1m CAT of €100,000 payable over say 5 years would not be too much.  So reduce the relief to 33% instead of 90%.


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## T McGibney

Joe_90 said:


> Surely if a business is worth say 1m CAT of €100,000 payable over say 5 years would not be too much.



At normal Revenue interest rates, this would cost almost €25,000 per year. How many businesses have that sort of money lying around?

Anyway, businesses are paying enough tax as it is especially after the recent VAT hikes. I can't understand the fetish with taxing them until the pips squeak.


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## Firefly

Good topic and one I've often wondered about. 

I am broadly in favour of Purple's idea AS LONG AS INCOME TAXES ARE ALSO REDUCED. 

Lower taxes mean that someone who works hard can have a decent chance of providing for their retirement. The kids who inherit will certainly do better than those kids from poorer parents, however, they will have to give something back. If this means that family homes need to be sold, then so be it..the kids will still be getting a lot of money for "free".  I think this move would be a good way of levelling the playing field where essentially, hard work is rewarded more so that the lottery of birth.


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## Codogly

*Tax Inheridance*

I agree nobody should get a free ride ... everyone should live by the fruits of their own labour and not inherited benefits.  I wouldnt tax heavely on inherited businesses or farms just assets like cash and houses... afterall we have CGT to deal with realised earnings from the sale of an inherited business or farm...ie i dont mind a child inheriting a Job from his parents business , if he works hard in that Job he'll benefit for his efforts ... if he decided to sell the business then he should be taxed heavely.


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## Joe_90

T McGibney said:


> At normal Revenue interest rates, this would cost almost €25,000 per year. How many businesses have that sort of money lying around?



Did not realise that the CAT interest was 25%pa.  What I would propose is that people claiming Ag Relief or Bus. Asset Rel would get a 5 year installment agreement interest free as a compromise.



T McGibney said:


> Anyway, businesses are paying enough tax as it is especially after the recent VAT hikes. I can't understand the fetish with taxing them until the pips squeak.



Anyone earning over 32800 paying 52%,  CT at 12.5% don't think thats taxing them until the pips squeak as you put it.


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## Joe_90

Codogly said:


> I agree nobody should get a free ride ... everyone should live by the fruits of their own labour and not inherited benefits.  I wouldnt tax heavely on inherited businesses or farms just assets like cash and houses... *afterall we have CGT to deal with realised earnings from the sale of an inherited business or farm.*..ie i dont mind a child inheriting a Job from his parents business , if he works hard in that Job he'll benefit for his efforts ... if he decided to sell the business then he should be taxed heavely.



If you inherit assets worth €2m and qualify for relief no CAT.

If you hold the assets for 6 years then there is no clawback.  If the assets do not increase in value no CGT.  So no tax on assets of 2m.


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## T McGibney

Joe_90 said:


> Did not realise that the CAT interest was 25%pa.  What I would propose is that people claiming Ag Relief or Bus. Asset Rel would get a 5 year installment agreement interest free as a compromise.
> 
> 
> 
> Anyone earning over 32800 paying 52%,  CT at 12.5% don't think thats taxing them until the pips squeak as you put it.



The interest rate isn't 25%, but €100,000 repaid over 5 years at current Revenue interest rate is almost €25,000 p.a.

CT and high rate income tax mightn't be a heavy burden, but when you add in employer PESI, rates and VAT, the story changes.


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## Chris

T McGibney said:


> It would also make it virtually impossible for any family business to ever afford to transfer its ownership within the family to the next generation, as most firms have their equity tied up in working capital or generally illiquid assets.



I agree, and personally oppose any kind of inheritance tax, and not because I anticipate any large sum. Here is an example of a friend of my parent’s in Germany. After WWII he was 15, his brother 19 and both his parents had died during the war. The older brother got work and started rebuilding a badly damaged house where the two brothers eventually lived. The older brother never married but lived with the younger brother and his family in the house they rebuilt. Turns out that the area they lived in would become a very popular area of Cologne. When the older brother died he left the house to the younger brother who had to then sell the house because on a teachers salary he was not able to get a mortgage to pay the inheritance tax. 



Purple said:


> In principle is it better to have lower income taxes and higher inheritance taxes?


I think taxes overall should be lower, rather than raising one to lower another and then a couple of years later another politician decides to raise the latter again so the overall tax take is higher than originally.



Purple said:


> Why should anyone feel entitled to inherit their parents wealth (including the family home)?


I don’t think anybody should feel entitled to anything, but if a parent decides to leave something to their children then that parent should have the right to do so without the state taking a share. I think it is totally immoral to simply take private property because you think someone has “too much”. That is mob mentality and severely infringes on private property rights. What I do with my private wealth should be of no concern to anybody.



Slim said:


> If the taxation scenario changes dramatically, people will motivated to find other ways to avoid tax and, indeed, nursing home charges. Shouldn't people to able to leave a house to their children?


I agree. I think in general this sort of idea gains popularity because people think of taking something away from “the rich” or “the super rich”. If I was due a large inheritance I would move to a country that has no inheritance tax to completely legally avoid inheritance taxation and return a few years later. The lower the inheritance tax would be the less likely I would choose this approach.



Ceist Beag said:


> Why? I hate inheritance tax, absolutely hate it. If I choose to work hard all my life and want to then leave the fruits of my labour to my children why should the government of the day get a chunk of that? I earned it, I paid my tax along the way, it's mine now to pass on as I see fit as far as I'm concerned.


Absolutely, it should be nobody’s business what you do with your wealth before or after you die. It is your property and in a free society you should be able to dispose of it as you like.



Ceist Beag said:


> Wouldn't a much fairer tax (I know that is a contradiction in terms!) than inheritance tax be a wealth tax? Tax savings/assets over a certain (reasonably high) threshold to encourage more current spending and less stock piling? Again there would be difficulties in how to implement this but I would see this as a much better way of encouraging current spending (which seems to be the aim yourself and Brendan are striving for here) than a blanket tax grab on inheritance.


No, spending is wealth destroying. When money is “stockpiled” as you say then it doesn’t leave the economy. Saved money is absolutely crucial, as it provides the basis investment in the productive economy. The last thing especially Ireland needs is more spending. What is lacking here is investment, whether directly or indirectly through saving. A wealth tax discourages this.



Bronte said:


> If this tax existed I for one would be handing my kids the inheritence in cash over time.  And so would everybody else.


Indeed, it has been shown time and time again that increased taxes lead to a higher rate of avoidance and evasion while lowering taxes has the opposite effect.



mandelbrot said:


> And I suppose that's the point - would it be better to have money in circulation in the economy, being spent by the younger generation, than being kept out of the productive part of the economy by the stockpiling of the older generations?


No, spending does not benefit an economy per se, and definitely not an economy that is in trouble. When money is spent there is less money for investment which means there is less money for business expansion, which means there are less jobs. You have to produce before you can consume.


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## Ceist Beag

Good post Chris.


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## Joe_90

Thats a very comprehensive summary



Chris said:


> I agree, and personally oppose any kind of inheritance tax, and not because I anticipate any large sum. Here is an example of a friend of my parent’s in Germany. After WWII he was 15, his brother 19 and both his parents had died during the war. The older brother got work and started rebuilding a badly damaged house where the two brothers eventually lived. The older brother never married but lived with the younger brother and his family in the house they rebuilt. Turns out that the area they lived in would become a very popular area of Cologne. When the older brother died he left the house to the younger brother who had to then sell the house because on a teachers salary he was not able to get a mortgage to pay the inheritance tax.





I think that perhaps a provision in the Tax is better that getting rid of it altogether.  We had such a provision but for some reason it was amended in 2007 to exclude inheritances from people under 65.
http://www.revenue.ie/en/tax/cat/leaflets/cat10.html

On the basis that there is no Capital Gains Tax on death there has to be some form of taxation on inheritances to capture the tax these gains.


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## Firefly

Chris said:


> I don’t think anybody should feel entitled to anything, but if a parent decides to leave something to their children then that parent should have the right to do so without the state taking a share.


 
Hi Chris, I'm not sure the state will be taking a share as such. Basically, the next of kin would pay a tax as they in effect have received an income in the form of a asset gift.



Chris said:


> I think it is totally immoral to simply take private property because you think someone has “too much”. That is mob mentality and severely infringes on private property rights. What I do with my private wealth should be of no concern to anybody.


 
I totally agree, but the issue is when your wealth is passed to another person ie your kids, then perhaps they should have to pay a tax on this gift? 



Chris said:


> No, spending is wealth destroying. When money is “stockpiled” as you say then it doesn’t leave the economy. Saved money is absolutely crucial, as it provides the basis investment in the productive economy.


 
I agree with this, however (to play Devil's advocate) , too much saving on the otherhand would not be a good idea either...even though there would be ample funds for the productive economy to invest, they wouldn't do so if no-one was going to buy their products! .. The Paradox of Thrift from your beloved Keynes!!


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## Purple

Chris said:


> I agree, and personally oppose any kind of inheritance tax, and not because I anticipate any large sum. Here is an example of a friend of my parent’s in Germany. After WWII he was 15, his brother 19 and both his parents had died during the war. The older brother got work and started rebuilding a badly damaged house where the two brothers eventually lived. The older brother never married but lived with the younger brother and his family in the house they rebuilt. Turns out that the area they lived in would become a very popular area of Cologne. When the older brother died he left the house to the younger brother who had to then sell the house because on a teachers salary he was not able to get a mortgage to pay the inheritance tax.


 The moral of that story is the bad financial planning between the two brothers; joint ownership or a transfer over time would have avoided what happened (as would a life insurance policy naming the younger brother as the beneficiary).




Chris said:


> I think taxes overall should be lower, rather than raising one to lower another and then a couple of years later another politician decides to raise the latter again so the overall tax take is higher than originally.


 I agree that taxation overall should be lower. This idea doesn’t mean that can’t happen as well. 




Chris said:


> I don’t think anybody should feel entitled to anything, but if a parent decides to leave something to their children then that parent should have the right to do so without the state taking a share. I think it is totally immoral to simply take private property because you think someone has “too much”. That is mob mentality and severely infringes on private property rights. What I do with my private wealth should be of no concern to anybody.


 The state would take less of your income when you are alive, taking it instead when you die. Same net result.




Chris said:


> I agree. I think in general this sort of idea gains popularity because people think of taking something away from “the rich” or “the super rich”. If I was due a large inheritance I would move to a country that has no inheritance tax to completely legally avoid inheritance taxation and return a few years later. The lower the inheritance tax would be the less likely I would choose this approach.


 Yep, that’s a big problem; buggering off to a low tax country when rich Uncle Fred’s angina gets worse. 




Chris said:


> Absolutely, it should be nobody’s business what you do with your wealth before or after you die. It is your property and in a free society you should be able to dispose of it as you like.


 Every society/country taxes your wealth, most when you earn it and when you spend it, some only when you spend it. 




Chris said:


> No, spending is wealth destroying. When money is “stockpiled” as you say then it doesn’t leave the economy. Saved money is absolutely crucial, as it provides the basis investment in the productive economy. The last thing especially Ireland needs is more spending. What is lacking here is investment, whether directly or indirectly through saving. A wealth tax discourages this.


 I’m not proposing a wealth tax (I’m not proposing anything; I’m putting an idea out for discussion.




Chris said:


> Indeed, it has been shown time and time again that increased taxes lead to a higher rate of avoidance and evasion while lowering taxes has the opposite effect.


 Yes but the state wants to raise “X” amount of tax. Lowering taxation to a level where everybody is happy to pay won’t raise “X”. I think we are both of the opinion that “X” should be much smaller than it is now but that’s a different discussion.




Chris said:


> No, spending does not benefit an economy per se, and definitely not an economy that is in trouble. When money is spent there is less money for investment which means there is less money for business expansion, which means there are less jobs. You have to produce before you can consume.


 Businesses need people to buy their goods so spending is needed as well. Where the sweet-spot is is the big question.


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## dam099

T McGibney said:


> Maybe I'm imagining things but did we not all learn around 2007 that it is folly for a government to attempt to replace revenues from income-based taxes with those from event-based and transaction-based taxes, due to the more volatile nature of the latter?


 
Agree totally on the over-reliance on stamp duty/CGT/property related VAT but the event that most often triggers CAT respects no boundaries not even ecomomic cycles so I would anticpate they are less volatile (although estate valuations may fall in bad times).


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## T McGibney

dam099 said:


> Agree totally on the over-reliance on stamp duty/CGT/property related VAT but the event that most often triggers CAT respects no boundaries not even ecomomic cycles so I would anticpate they are less volatile (although estate valuations may fall in bad times).



I think you're ignoring the reality that a substantial proportion of CAT revenue comes from lifetime gifts. These by their nature are voluntary, and  as such are highly sensitive to CAT rate rises. If lifetime gifts are discouraged, the effect is that they are postponed until death, and unless the person dies within a short timeframe, the State has to wait years to collect the CAT revenue.

Your point about estate valuations being depressed in bad times merely adds to the case that it's risky for the State to rely too heavily on CAT revenues.


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## Chris

Firefly said:


> Hi Chris, I'm not sure the state will be taking a share as such. Basically, the next of kin would pay a tax as they in effect have received an income in the form of a asset gift.


Yes, that is of course how the state "justifies" such a move. For me, however, this is outright confiscation of private property which is totally immoral in my books.



Firefly said:


> I totally agree, but the issue is when your wealth is passed to another person ie your kids, then perhaps they should have to pay a tax on this gift?


Yes, perhaps you should pay tax, but I cannot find a single moral reason why someone else should benefit from other people's good fortune. Just because it is the state doing the taking doesn't make it any more morally correct than if a modern day Robin Hood decided to rob one of my computers to give it to someone who doesn't have one. 



Firefly said:


> I agree with this, however (to play Devil's advocate) , too much saving on the otherhand would not be a good idea either...even though there would be ample funds for the productive economy to invest, they wouldn't do so if no-one was going to buy their products! .. The Paradox of Thrift from your beloved Keynes!!


It's actually not such a paradox at all, but that is a totally different discussion. The problem is indeed where is the right balance between saving/investing and spending. But there is a very simple solution to this and that is to let people decide for themselves. No one person or group of people are able to make an accurate assessment of what that level should be.
In Ireland's case, people here probably did about 25 years worth of spending in a 10 year period. That means that there will have to be a long rebalancing period to reduce levels of debt and increase savings. That means that Ireland has to export more, spend less on everything and save more, i.e. have other people elsewhere do the spending.



Purple said:


> The moral of that story is the bad financial planning between the two brothers; joint ownership or a transfer over time would have avoided what happened (as would a life insurance policy naming the younger brother as the beneficiary).


Yes, there certainly was bad planning there, but at the end of the day, the lives of ordinary people should not be made more difficult than it already is. 



Purple said:


> I agree that taxation overall should be lower. This idea doesn’t mean that can’t happen as well.
> 
> The state would take less of your income when you are alive, taking it instead when you die. Same net result.


This is where I am a bit cynical. Raise one tax to lower another, and very soon after it is argued that the other needs raising again because it is too low. You simply cannot trust politicians.



Purple said:


> Every society/country taxes your wealth, most when you earn it and when you spend it, some only when you spend it.


Maybe I should be clearer as to how I would define wealth. In my books it is your assets owned, rather than assets earned. Once you pay taxes on assets earned you add it to your wealth.
Anyway, collecting taxes on spending is a much better way than on earnings, as this (a) encourages earning, (b) encourages investment rather than spending, and (c) gives the public a very powerful tool to reduce government spending, as they can control the amount of money flowing to government through their spending habits.



Purple said:


> Yes but the state wants to raise “X” amount of tax. Lowering taxation to a level where everybody is happy to pay won’t raise “X”. I think we are both of the opinion that “X” should be much smaller than it is now but that’s a different discussion.


Yes indeed that is the problem. Everyone wants the services but when it comes to paying for them the general attitude is let's take it from someone else. Back to Bastiat's good old quote: "Government is the great fiction, through which everybody endeavors to live at the expense of everybody else."


Purple said:


> Businesses need people to buy their goods so spending is needed as well. Where the sweet-spot is is the big question.


Indeed, but nobody can manually figure out where that level should be. Everybody has to figure it out for themselves how much savings and debt they want, and this results in an overall average level. Politicians should be the last people to say things like "people need to spend more and save less to get the economy going". 
As I already mentioned Irish people went on an almighty spending binge over a ten year period, now is the time to pay that bill, and pay it as quickly as possible, because an economy straddled with huge debt will never significantly improve.


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## ajapale

Issue raised again today.


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## Purple

ajapale said:


> Issue raised again today.



By who?


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## oldnick

Noonan was evidently looking over old posts on AAM , saw your idea and called a special meeting of cabinet this morning to discuss it. Someone leaked the news to ajapale.


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## ajapale

Purple said:


> By whom?


By Firefly and others here : Good analysis "Site-value tax" V "full-value tax"  by Ronan Lyons  I.T. April 26 2012


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## Purple

oldnick said:


> Noonan was evidently looking over old posts on AAM , saw your idea and called a special meeting of cabinet this morning to discuss it. Someone leaked the news to ajapale.



Lol


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