Inheritance tax is the least popular tax in the UK - yet we have one of the most punishing death tax regimes of all developed nations.
Picture the scene; the UK’s tax burden is at its highest in 30 years time. The government really hasn’t had a major policy victory in quite some time – in fact, Theresa May is constantly on the back foot. Her government needs a win – and one that provides a return to the free-market, low tax Conservative Party that has been so instrumental in shaping Britain.
Time to abolish Inheritance Tax.
Hear me out, the ‘100% inheritance tax when’ and the ‘redistribution of wealth’ brigade. Hear me out, the ‘we need to tax the rich more,’ brigade. Even your progressive utopias – Canada, Norway, Denmark and Sweden have long-since abolished the death tax. So, too, have Australia, New Zealand, Israel, India, Luxembourg, and more. Those countries realise that the basic principle of tax during life, tax after death is a massive overstep of government. They realise that an inheritance tax goes against the basic human instinct to provide for their families. They realise that inheritance tax is just yet another squeeze on the already over-burdened middle classes, because the intended recipients – the mega-rich – are the ones who can afford to skirt around the edges.
Besides, not only is IHT by its very conception highly regressive, it also isn’t really working in practice. Inheritance Tax raises 0.25% of government revenues, but accounts for more than 10% of our ridiculously over-complex tax code. Is the amount of trouble the policy causes both Labour and the Conservatives really worth it – given the measly funds it generates for the Treasury? Cutting Inheritance Tax to 0 could even help (slightly) ease the housing crisis – according to the TaxPayers’ Alliance, Inheritance Tax ‘encourages investment in housing, ‘adding inflationary pressure to house prices while reducing the capital available for other uses, such as business investment.’
Theresa May’s premiership has been plagued with losses. Even her staunchest supporters can’t argue against the fact that the Windrush scandal showed incompetence right at the heart of government. May has struggled to keep her cabinet in check – and is losing on housing, social care, and immigration. She needs a decisive, popular victory – one that appeases the grassroots with a return to free-market, small state conservatism and is also popular with the wider public.
Where better to start than by abolishing a distortionary, unpopular tax which produces such a minimal percentage of government revenue? Doing so would give May and her cabinet a rare chance to set the agenda rather than slowly reacting – a phenomenon which has been seriously lacking in recent months.