As the old saying goes there are two certainties in life – death and taxation.
So why not combine the two and raise revenue from inherited wealth?
I have written on this topic before
But, I would like to make another case for why a ‘death’ tax meets the criteria of a ‘good’ tax
Principles of a Good Tax
- Effective in raising revenue
- Non Distortionary (efficient)
- Perceived as Fair – helping to promote greater equality
- Simple and Easy to Understand
Firstly a tax on inheritance doesn’t distort economic behaviour. Increasing income tax to 50% may discourage people from working in UK / working overtime. However, a tax on wealth, should make no difference to incentives to work during your lifetime. In this sense the tax is efficient and non-distortionary.
A tax on wealth, is one of the best ways to redistribute wealth inequality. Wealth inequality is greater than income inequality. A report by, World Institute for Development Economics Research at the UN University, suggests that 2% of population own 50% of global wealth (BBC). An inheritance tax is the best way to redistribute wealth and raise revenue. It is fairer than raising VAT which is paid disproportionally by people on low incomes.
There is popular opposition to inheritance tax, yet, the majority of inheritance tax is paid for by the wealthiest section of society. It is strange that a tax on bank profits would be so popular, but, an inheritance tax so unpopular.
It is easy to criticise taxes, but, we need to find ways of paying for an ageing population, and an expanding health care system.
Personally, I would much rather pay taxes when I’m dead and no longer need it, than pay taxes when I’m alive.