Wednesday, January 27, 2010

Inheritance tax, it's not about now but maybe later

Whilst talking on the Today programme this morning, Harriet Harman brought up Labour’s old favourite line that a Tory government plans to  “abolish inheritance tax”, something which the interviewer pointed out is not an active policy, which of course made her drop back to the old line that they are cutting inheritance tax just  for the wealthiest families in the country.

Inheritance tax is an ideological outcome of old Labour, inheritance tax was introduced to act as a wealth redistribution method to separate old money from their money. Labour seem determined that the idea of an inheritance tax cut is only a vote winner for the rich, however this is where ideology gets in the way of winning votes.

Inheritance tax is ultimately a tax on aspirations, even if an individual’s estate is not even close to the threshold at present, everyone, regardless of how little they have, wants to think that one day it might be or that their children’s estate will be. Our obsession with house prices continually climbing and our homes being our primary asset is one of the primary causes of this. Ultimately everyone wants to think that one day they’ll reach that threshold. What inheritance tax says is that if you work really hard to provide something for your children when you are gone then it’s a waste, it has the potential to put a cap on the economy by saying no individual should create a level of wealth past the inheritance tax threshold.

Bashing the Conservatives on inheritance tax only appeals to Labour’s ideological base, and actually puts of those individuals who are upwardly mobile and may have been Labour supporters in the past. The danger is that is lumps groups together, and just like we’re seeing in today’s report into inequalities in britain traditionally less well off groups are no longer homogenous.

I’ve just started watching the West Wing again and inheritance tax reminds me of an episode that covered inheritance tax and tax rises for the rich. The Black caucus and NAACP are in the White House to discuss tax rises with Toby and Josh. Their position surprises Josh who expects them to be for a tax rise for the richest. He can’t understand why this traditionally less well off group would be against that is until Toby points out that the first generation of Black millionaires are about to retire and there’s only going to be more of them to come.

This is a message Labour needs to remember when they bash inheritance tax cuts, inheritance tax isn’t about who it affects now, but who it might affect in the future.

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