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Monday
Apr132015

Dad is So Mean!

I’ve had an interesting couple of discussions recently, one via Twitter with a miner’s son from Yorkshire and one with an actual, bona fide hedge fund manager at my kitchen table in Gloucestershire.

Two people, you would imagine, from very opposite ends of a socio-economic spectrum, and yet on one topic they were in total agreement.

I posted a rather immature tweet in response to one of the latest Tory party tax-break-please-vote-for-us-for-God’s-sake proposals.

It said:

So happy Cameron has saved my massive family legacy from tax… oh wait, I haven’t got one. Oh right, it’s for really rich people. Get it.

Silly and reactionary, but some people found it amusing.

Not the miner’s son and hedge fund manager, they argued that their main aim was to make sure their children were as wealthy as possible after their passing.

As lovely Dave Cameron said, That wish to pass something on is about the most basic, human and natural instinct there is.”

Indeed, it seems almost churlish to disagree, what finer and higher motive could there be, it’s human and natural.

Well yes, if you just look at the world from the point of view of your immediate family and you own a house that’s worth a million quid or more and you utterly ignore the rest of the society you live in.

If you live in the South East and have a well-paid job it’s quite likely you do own a house worth a million or more quid. Okay, not the majority of the country, but certainly a lot of voters who live in the South East.

But away from party politics, the result of this change in tax law would also mean there is less income for the government and to be fair, they are not going to stop tax breaks to their mates in the extraction industry or big pharmaceutical companies or the banks, or Trident. There, I’ve said it. £100 billion over the next 30 years. Great investment, go team Trident.

No, they are going to get it by cutting benefits and services to poor and disabled people, people who live up north, out west or deep south who’s houses are worth nowhere near a million quid.

So, they are adjusting things to make the minority of rich people even richer. That’s their job.

Okay, you can swear at me for being a ridiculous old lefty, head in the clouds, not dealing with the real world, but strangely I do have a bit of support from a mad bunch of lefties called the Institute for Fiscal Studies, (the IFS was founded by a conservative MP, Will Hopper back in the 1960’s.)

On hearing this proposal they said; “It is rather odd to give this special treatment to housing given that owner-occupied housing is already extremely tax privileged. This will only increase the bias we have towards putting your money in a house, to inflating potentially the value of housing, without dealing with the lack of housing, which is driving up the value of private residences.”

Even more unfortunately for the government, a leaked Treasury memo stated the changes would “most likely benefit high income and wealthier households”.

It is a profound moral and ethical problem, as members of a society that is much larger than our immediate family, do we just build our own castle and let everything outside those stout walls go to rack and ruin, or do we work together, collectively, to hopefully build a better and fairer society.

That’s where the fault line is. It’s all about me and mine, or it’s all about all of us.

My attitude could be seen as equally selfish. I don’t give a tuppeny fart what happens to my money after I’m dead, I can’t do anything with it.

I have two children who I love very dearly but having grown up with people who were set to inherit substantial amounts from their parents I’m in a quandary.

If I die and they get very little I don’t think that’s going to worry me. I would be very anxious to leave them with debts to clear up but hopefully that won’t happen.

But I know from long-term observation that it’s not always a great help for people to inherit large sums. If anything it often hindered and hobbled their ambition, their drive and focus. It didn’t really matter what they did because ‘when dad dies, I’ll get a shit ton of money.’

I am hoping my children will find a way to support themselves and anything they inherit is just an added benefit. I don’t want them to rely on it and wait around for me to cark it so they can go on a spending binge.

Anyway, as I have often told them, I intend to spend every last penny before I shuffle off.

‘You are so mean dad, I hate you, I’m adopted.’ Was the response from both of them.

Oh, the joy they bring.

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Reader Comments (10)

This is primarily the fault of our being an evolutionary species. Evolution demands that we favour our own offspring, that we strive to conquer and control. So much so, that when we run out of countries to rule, we have to invent new, microscopically different religions, creeds, political parties - the list goes on.
Not everybody is so driven, but there are enough who are...........

cj

April 13, 2015 | Unregistered Commentercj

In principle I agree. But there's always grey areas. What if your and your parents finances are inextricably linked? What if you and your parents have gone into business together, or your parents own the house you rent off them, or you've given up your job and home to be a live-in carer for an ageing parent? Taxing free money is one thing, pulling the rug from under someone with a big tax bill they may not be able to afford just after they've lost a parent is quite another.

April 13, 2015 | Unregistered CommenterMPW

personally, i think anything you leave behind should be free of tax.
as far as i'm concerned, it's already been taxed while you were alive. it'll be taxed again when it's spent. the interest will be taxed if it sits in a bank. inheritance tax is 'we'll take it because we can'.
on top of that, you're sending a bill to someone who just lost their mother or their father. having been through that myself that's a bit much.
yes, i understand the whole selfish interest vs society thing, but ultimately you're arguing between two different interpretations of fairness. society fairness is taking from one to give to another who hasn't earned it. selfish is hoarding and keeping so no-one else can benefit.
i'm going to leave nothing behind. i have no vested interest in that sense. but, to me, it feels like a very unfair tax.

April 13, 2015 | Unregistered Commenterblades

Well said Mr L. I was going to write a great screed affirming your viewpoint but realise you've said it all rather well already! :-)

April 13, 2015 | Unregistered CommenterNigel

Blades, I agree entirely. I know people here in the States that have had to sell the family home to satisfy inheritance tax. The money that paid for the house was taxed as it was earned, the utilities have tax built in and upkeep has been accomplished with materials that had tax added. Enough is enough.

We can bash the well-to-do and concoct stories about lazy heirs just waiting for the folks to kick off, but there are far more of us way down the financial ladder that can make good use of some inheritance. We'll make better spending decisions than the government on average.

April 14, 2015 | Unregistered CommenterKen Brown

Oh dear, here come the straw men. MPW, a business should be set up such that NO IH is incurred, only personal wealth is targeted. Blades, how much do you personally think you need to survive in this society? That is where disagreement begins, on the amount that can be left "tax free". If there were no IH then the wealth of society is further locked into fewer hands. If you knew the stratagems used to "avoid" IH you may be less averse to having such an "unfair" tax. I can honestly say that after paying for long term care for my parent I had no need to worry about IH as there was little left, or wanted, after their passing. I cannot say much about the US, Mr. Brown, but have always found on this side of the pond that the "workers" always pay more, a lot more, relative to earnings than any wealthy individual whose main income is usually unearned. And to rub salt into the wound, this unearned income has been passed down to them. So how do we make a fair society? Certainly not by asset stripping those with wealth, but certainly by making sure everyone contributes to society as evenly as possible, no nondoms, and ensuring all who can work do work, there is plenty that needs to be done. And they are working for a fair living wage and living in decent secure accommodation with no threat of eviction for having an "extra" bedroom.

April 15, 2015 | Unregistered CommenterJRreally

Um....difficult one this. True, you have already paid tax when you earned the dosh in the first place ...but we (as a country) do need to bring in more tax (unpopular but necessary) to provide essential services. Personally, I'd favour the scandi model of good incomes, higher taxes and in return good public services.

Only thing I would add to that is, remember many people living in the south and south east don't live in million pound houses...there are plently of folk here struggling to rent (usually privately) and buying is only really for the middle class. I consider my family relatively comfortable but we had to pay find/mortgage £370,000 odd for a small 3 bed house - one of the bedrooms is like a cupboard - we live here because of work and family commitments not necessarily by choice (after all, who really wants to live in 'Daily Mail' Cameroon lala land............)

April 15, 2015 | Unregistered CommenterMike Lee

@jreally to be honest, i think you're setting up a different set of straw men yourself ;)
we're starting from a currently position of wealth inequality - i think we can both agree with that much, at least? the question is in *how* to address that inequality.
that, however, is a *totally* different question to fairness and inheritance tax.
let's say i earned 50k a year. i would lose around 40% of that to various taxes before it comes to me, so i'd see around 30k of that. if i spent 20k of that (food, clothes, mortgages/rents/student loans/car loans etc), *at least* 20% of that amount is taken in taxes; far more on things like petrol (which i need to burn to get to my job as i can't afford a nice electric vehicle). let's be nice and make it a round 5k figure for that, too.
the government has therefore had half of what i earn, one way or another, when i earn it and spend it.
of that last 10k, i'm supposed to store in pensions, isas, and so on.
if, after all of that, i have anything left? i really don't think it should be taxed again. i really don't think that's fair at all.
i die. guess what happens next? funerals, and inheritance tax if what's left is over a certain value (£325k in the uk, iirc?)
usually, that's tied up in property - to pay it means realising that value by selling it, for the vast majority of people. so mum and dead are dead - now sell the family home they left you to pay the inheritance tax, which will take 40%. that means, for the most part, the average family home in the uk is probably going to incur that inheritance tax bill. and what if mum and dad helped you buy a house or a car in the last seven years before they died? well, they'll tax that gift, too.
it's like the sliding tax scale on earnings - that isn't fair, either, if by fair you mean treating everyone equally. for me, everyone should pay a flat rate of tax on anything they earn above a certain level, and that amount should be the same across the board for *everyone*. no evasions, no loopholes, no exemptions.
if of course, by fair, you mean taking from the rich to give to the poor, then that's a different kettle of fish. the poor loved robin hood, after all, while the nobles hated him. but by treating them differently, you're actually doing more to segregate the two camps into 'us' and 'them' than you would be if you treated them equally. and, ultimately, you're still asking disproportionately more of one than another.
you ask how much you need to live on - that's a question that no-one can answer, because you don't know their circumstances. i've seen a single person on 20k a year live more comfortably than a couple with two kids with both on 40k a year just because of their financial circumstances.
don't get me wrong - there's something obscene about hoarded wealth passed down through generations. i detest the fact that some people have estates worth millions that they can hand down. but i don't think it's fair to tax what's been earned in accordance with the law after death.

April 15, 2015 | Unregistered Commenterblades

All are good, but you should at least stable the paragraph a little.

heading is too root and bad. but the article is being understandable and truthful... i support you

April 20, 2015 | Unregistered CommenterHexder New Collection

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