Income, capital gains and inheritances should be taxed at the same rates

[Firefly]

I think inheritance taxes should be increased (perhaps to the marginal rate) with very low thresholds and should include the PPR. In tandem with this I would like to see that income taxes be reduced by the same amount making the exercise net-neutral. This would take money from the lucky and pass it to the productive.

 

[T McGibney]

I think inheritance taxes should be increased (perhaps to the marginal rate) with very low thresholds and should include the PPR. In tandem with this I would like to see that income taxes be reduced by the same amount making the exercise net-neutral. This would take money from the lucky and pass it to the productive.

Why bother being productive when the State will strip your family of half your assets (including your home) when you die?

 

[Sarenco]

Why bother being productive when the State will strip your family of half your assets (including your home) when you die?

Presumably to provide for yourself and your dependants while you're alive.

I wouldn't agree that inheritance taxes should be increased dramatically but equally I don't see any good reason to increase the current (rather generous) exemptions and thresholds.

 

[T McGibney]

Presumably to provide for yourself and your dependants while you're alive.

Fat lot of good that is to them if you're unlucky enough to suddenly keel over tonight, and leave them with only half the assets you owned this morning - including half of the roof over their heads.

 

[T McGibney]

I think inheritance taxes should be increased (perhaps to the marginal rate) with very low thresholds and should include the PPR. In tandem with this I would like to see that income taxes be reduced by the same amount making the exercise net-neutral. This would take money from the lucky and pass it to the productive.

Bear in mind that in 2013, the State raised €15,758m from Income Tax and just €279m from Capital Acquisitions Tax on gifts and inheritances.

Even if your suggestion were to double revenue from CAT (which I very much doubt would be the case, as gifts would be disincentivised almost out of existence), this would only finance a tiny 1.7% reduction in the income tax burden.

 

[Setanta12]

One of the arguments for taxing wealth or the existence of more penal rates on higher rates of income in progressive systems of taxation is the synergies/larger investments returns possible with greater wealth. If I have USD10,000 - I get one rate; if I have USD100,000 to invest, I get a better rate. (Can be about redistribution but also taxing more where less effort was expended in the earning of the income)

 

[Sarenco]

Fat lot of good that is to them if you're unlucky enough to suddenly keel over tonight, and leave them with only half the assets you owned this morning - including half of the roof over their heads.

Again, I'm not personally arguing for major changes to our current inheritance tax regime that would give rise to that type of scenario. I think our current regime, broadly speaking, strikes the right balance.

However, I don't think it is unreasonable or irrational to argue in favour of higher inheritance taxes in order to lower income taxes on purely egalitarian grounds. It is pretty self-evident that inheritances are a major cause of inequality within society - even half of a large inheritance is better than no inheritance at all!

 

[T McGibney]

It is pretty self-evident that inheritances are a major cause of inequality within society - even half of a large inheritance is better than no inheritance at all!

Is it really? I'm not sure that it is at all. The levels of inherited wealth in this country are very minor compared say to the UK. Most family businesses don't survive a second generation. And no matter who you are and how much you inherit, if you don't work, or if you're unable to work eg due to illness, you'll eventually end up living a very modest existence.

As for inequality, I'd argue that social structures and family upbringing are much more important indicators of social advantage and disadvantage than inherited wealth. See Robert Putnam's recent excellent book "Our Kids" for how this applies in the US.

 

[Sarenco]

Well, I wasn't trying to make a relative argument. In any event, if you take the US as an example, the exemptions from federal estate tax are now so high that only a minuscule proportion of estates in the US are subject to any inheritance tax at all. Now you can certainly argue that that is entirely fair and reasonable but I don't see how you could possibly argue that it doesn't contribute to the increasingly extreme levels of wealth inequality that are now evident in the US. Do we want to try and emulate the US in this regard?

Whether or not any other factors might be equally or even more important indicators of social advantage is simply not relevant to any debate as to the appropriate level of taxation that should apply to inheritances.

 

[T McGibney]

Whether or not any other factors might be equally or even more important indicators of social advantage is simply not relevant to any debate as to the appropriate level of taxation that should apply to inheritances.

It was you who referred to inheritances as "a major cause of inequality within society". Are we not allowed rebut that?

I wish we could emulate the US in relation to sustainable wealth creation and prospering multi-generational family businesses.

We certainly won't do that if we adopt an even harsher inheritance tax regime than we currently have.

 

[Sarenco]

I really don't know why you keep implying that I'm arguing for increased inheritance taxes - I'm not.

I would have thought that it was self-evident that inherited wealth is a major cause of wealth inequality in society - I never suggested that it was the only cause of wealth inequality or even the primary cause.

We already have substantial reliefs in place to allow for the transfer of trading businesses from one generation to another - I'm not arguing that these reliefs should be materially changed.

I would suggest that the level of income taxes and taxes on capital gains has a far greater impact on productivity than a low level of inheritance tax.

 

[T McGibney]

I really don't know why you keep implying that I'm arguing for increased inheritance taxes - I'm not.

I can only draw inferences from what you've posted here, including what appear to be rebuttals against my own arguments against increased inheritance taxes.

I would have thought that it was self-evident that inherited wealth is a major cause of wealth inequality in society - I never suggested that it was the only cause of wealth inequality or even the primary cause.

Nobody suggested that - my points above in relation to Robert Putnam etc were made to directly counter your contention that it's a major cause.

I would suggest that the level of income taxes and taxes on capital gains has a far greater impact on productivity than a low level of inheritance tax.

And I would suggest that both are equally detrimental in that regard. And if they aren't, even a dramatic increase in capital tax revenue would have negligible impact compared to income tax revenue.

 

[Sarenco]

There's really no need for you to draw any inferences from my posts regarding my position. I thought I had made it absolutely clear, on more than one occasion, where I stood on this debate.

For the avoidance of any doubt, I am essentially in favour of maintaining the status quo regarding our current inheritance tax regime.

I am certainly trying to test the strength of your arguments but that doesn't necessarily mean that I'm in favour of increased inheritance taxes. It seems to me that the logic of your arguments would suggest that we should repeal inheritance taxes completely, which I would consider a regressive step.

As it happens, I have read "Our Kids" but I don't recall any argument being made by Robert Putnam to the effect that inheritances are not a major cause of wealth inequality in the US. If you could point me to the relevant passages or indeed to any other data that supports your position in this regard that would be greatly appreciated.

I certainly don't agree that taxes on income or gains have the same impact on productivity as inheritance taxes. I simply don't believe that an individual's behaviour is very strongly influenced by the possible taxation of their estate whereas it seems obvious to me that high rates of income tax have a significant influence on individual behaviour. I would suggest that Robert Putnam would appear to support the later position as he has advocated increasing income tax credits on earned income.

Income tax certainly accounts for a far higher proportion of the State's revenue than inheritance taxes but I don't see what that has to do with the principle as to whether or not it is appropriate to tax inheritances in the first place and, if so, at what level.

 

[Sophrosyne]

The problem is that as people acquire more wealth they invest in assets. Why would they invest in Ireland?