Should we be more open to a wealth tax?

Aveline I'm not what you might call "wealthy* and much of our money is tied up in the value of our house. I think this is true of many older people but the increase in house prices can't be ignored.
1980-2000 280% with the volatile 80's showing increases of 164% as well as dips and high interest rates
2000- to date 250%- 257% nominal increases depending on where in the country you live. Renters get none of theses benefits but pay a heavy price when property prices increase which as time has gone by, with stagnant wages and inflation it has got harder and harder to get on the housing ladder.

I'm not sure if all this applies to us Grans here. I sincerely doubt we are what others might think of as wealthy. Look at Russian oligarchs etc not to mention grossly overpaid footballers and those cashing in on eg the World Cup. I've been reading about who really profited from it.

I absolutely agree and I'm someone who would potentially be hit hard by such a tax as I am very fortunate to live in a lovely house. If I were a young person today with OH and my salaries adjusted for inflation, there is absolutely no way that we could afford to live where we do. We have benefited in so many ways from inflationary house prices and we're happy to pay our share to help those who have not been as fortunate. Yes, we've worked, saved and we've had good health but I don't kid myself that what we have has been "earned", some of it just fell into to our lap whilst others were left to struggle!

A Care Supplement on IHT set at say 10% on all estates would raise a massive amount, on a modest estate £250k a modest £25k. On £1m a hefty £100k it's free money applied before IHT at the present rate, the existing rates are far to generous to the wealthy home owners, everyone should pay something.

Which also affected those in privately rented properties as landlords had to increase rents. Also, those high interest rates were preceded by and followed by huge increases in the value of properties. A house we bought in 1986 of £98K was sold in 2023 for £1.7million, earning over £33K a year whilst providing a very nice home (not for us as we moved to a different house in 1999)

But also colossal profits, depending on area. A lot of people who will attract IHT will do so because of that, not so much because they have worked harder or saved more than others - it was more that their postcode meant their house earned more than they did.

None of this is ‘fair’, but if we need to get more money in to pay for NHS, defence and so on it has to come from somewhere, and IHT is free money for the recipients, so IMO is a better target than PAYE.

Colossally high interest rates on mortgages though. 15% in our case

fwiw For those who bought our houses before 2000, we benefitted from the interest on our mortgages attracting MIRAS (phased during the 90's) So unlike people who paid tax on all the money used to rent their home, we, homeowners, got some tax relief on the overall cost.

Aveline

But it's not free money. In my case it will be what's left of carefully saved and looked after proceeds of a life's work. It's already been taxed over and over over the years.

It's free to the heirs, which is what I meant.

I do understand the wish to leave something behind - in fact I think it's wrong that people are expected to sell up to pay for the social care that many get free, and many disagree with that point of view, I know.

The problem is that we have to get money from somewhere. We had a society which provides so much free at point of use (roads, police, defence, education, health and more) yet not everyone contributes to paying for it, so we need to find ways of raising more than we currently do. We could tax workers even more, but so many are suffering in the COL crisis as it is.

IHT is a way of allowing people to keep the money they've earned while they are alive (and we can't take it with us) and taxing the heirs, who haven't earned or paid tax on it. It seems fair to me, but if anyone has any better ideas I'd be happy to change my mind.

Well, I would like to point out that Mrs Thatcher's policies might just have contributed to the significant problem in a shortage of social housing, and her enthusiasm for privatisation could, perhaps have led to some changes that were unlooked for:
I live by the sea, and in the past, we didn't need an organisation called Surfers Against Sewage.

Burnham certainly has a huge task on his hands.

Aveline

Thatcher had to do what had to be done. The country was at risk of being brought to a standstill by the unions. There would have been nothing for anybody if she hadn't. The country would have been ruined. Equally awful though so maybe that's what you want?

That her find what needed to be done but went too far, the entire steel, coal, shipbuilding, motor industries didnt have to be abolished. They needed investment, what we didn't need was give aways, gerrymandering votes and short term plans. It wast just Thatcher Blair did nothing to change the damage then crashed the economy to boot.

Thatcher cause huge and permanent damage to this country and its' people.

The cult of the individual.

Thatcher had to do what had to be done. The country was at risk of being brought to a standstill by the unions. There would have been nothing for anybody if she hadn't. The country would have been ruined. Equally awful though so maybe that's what you want?

I like your post, Apple3pie.

I understand your feelings about IHT but I still feel that the ability to leave £325k (or more) plus 60% of the remainder of your estate to your heirs is reasonable.

I do despair at the grasp that neoliberalism has on our governments. Especially as the feelings of poverty and helplessness it engenders is driving significant numbers of the population to support right wing populists who can garner support by virtue of the fact that they are an unknown quantity when it comes to governing a country.

Aveline

So how to have a balanced society? It's impossible.

It was on its way to becoming possible after WW2. A period that now looks more like a blip in the 'normal' state of affairs. However, looking at how it was achieved can give us some idea of how it might be achieved in the future. The main mechanisms seem to have been far higher levels of taxation for the wealthy and greater union strength for negotiating improvements to wages and salaries.

This was put a stop to by Thatcher who both reduced taxes paid by the wealthy and reduced the perceived power of the unions, both by legislation and deindustrialisation. This might appear to be a very simplistic analysis but the correlation is undeniable. Inequality has grown, wages have stagnated and the wealthy have prospered.

The only thing stopping us learning from the post war period is political will and a determination to reduce the power of the wealthy to influence policy. IMO...

I am taking no issue with the IHT threshold for single people.
I reiterate my claim that the 4% figure of legacies attracting this tax is likely to rise very sharply in the next decade.
In many parts of the country, a modest house already is worth £500k and may well be lived in by a single person.

foxie48 so it’s our fault for being homeowners- really 🤦‍♀️

So how to have a balanced society? It's impossible.

For many of us who have bought a house, the house has earned more money than we have. Yes, we've paid mortgages but if we hadn't bought our home we would have paid rent. If we don't require expensive care before we die, our home will constitute the largest part of our estate for IHT purposes, with careful planning and no unexpected death, we could probably avoid paying much in IHT and eventually pass on £1million to our children, most of that will have come from inflationary house prices. This is fueling the division between those who have and those who don't have parents who own their homes. It is completely unfair and IMO is not a recipe for a happy balanced society.

I think inheritance tax feels different from other taxes because we save and go without to provide for our children. When we buy a Cadbury bar, we don't think of the 20% VAT that goes to the treasury. With inheritance tax, there's this visceral feeling that, despite my best efforts, my child will suffer while the money goes into this black hole and disappears. We try to pass on as much money as possible because without it, our kids and grandkids have no hope to own a home or have a decent standard of living.

Inequality has grown immensely since the '80s. Neoliberal capitalism created a system where a few "winners" in society take most of the wealth, leaving ordinary people and governments in poverty. We allow privatised water companies to pay out profit shares while they are pumping literal sh*t into our rivers. We allow billionaires to bribe politicians. This needs to stop. Our taxes, no matter the rate, should go towards public services, not making the rich even richer. Affordable housing, sustainable energy, a working NHS... Not giving hundreds of millions to Michelle Mone for defective PPE. If we don't act now, our children and grandchildren will be nothing but serfs to the rich.

Yes, yes - brilliant video should be seen by all!

Aveline

But it's not free money. In my case it will be what's left of carefully saved and looked after proceeds of a life's work. It's already been taxed over and over over the years.

And it will be taxed again if it exceeds the £325,000 or £500,000 threshold (whichever is applicable) for IHT. And it will continue to be taxed as your legatees spend it.

There is nothing magical about inherited unearned income which qualifies it for special treatment.

I don’t suppose it matters, but our discussion about inherited wealth at our level of wealth - very little compared to the level of wealth the wealth tax is proposing to capture.

Aveline

But it's not free money. In my case it will be what's left of carefully saved and looked after proceeds of a life's work. It's already been taxed over and over over the years.

Exactly 👏👏👏