The creation of a large rentier class was disastrous for Europe on a number of occasions before. I don't think it would be a good idea to repeat the error.

Warren Buffet on inheritance tax:

"Warren Buffett, the world’s second-richest man, announced this week that he plans to give away 85 percent of his $44 billion fortune to charity. Buffett explained his motivation in today’s New York Times:

“I love it when I’m around the country club, and I hear people talking about the debilitating effects of a welfare society,” he said. “At the same time, they leave their kids a lifetime and beyond of food stamps. Instead of having a welfare officer, they have a trust officer. And instead of food stamps, they have stocks and bonds.”

It’s hardly a suprise, then, that Buffett also opposes repealing the Estate Tax (aka the Paris Hilton Tax), a “graduated inheritance tax on big fortunes“:

Mr. Buffett said repealing the estate tax “would be a terrible mistake,” the equivalent of “choosing the 2020 Olympic team by picking the eldest sons of the gold-medal winners in the 2000 Olympics.” …

“We have come closer to a true meritocracy than anywhere else around the world,” he said. “You have mobility so people with talents can be put to the best use. Without the estate tax, you in effect will have an aristocracy of wealth, which means you pass down the ability to command the resources of the nation based on heredity rather than merit.” [NYT, 2/14/01]

Buffett was also opposed to President Bush’s dividend and income tax cuts for the wealthy. “If class warfare is being waged in America,” he wrote, “my class is clearly winning.” Congress ought to listen."

http://thinkprogress.org/2006/06/26/buffett-estate-tax/

Then there are Andrew Carnegie's views. As one website puts it "Carnegie argued that inheritance is a burden on children because "it deadens the talents" and "tempts" the heir to "lead a less useful and less worthy life." "

Andrew Carnegie on inheritance tax:

"While more suspicious of government intervention than Paine, Andrew Carnegie heartily endorsed estate taxes. The greater part of this steel magnate’s little magnum opus, The Gospel of Wealth, is devoted to a discussion of the three possible ways to dispose of wealth: (1) leave it to the families of decedents, (2) bequeath it for public purposes, and (3) administer it during one’s life. Carnegie abhorred the first, tolerated the second, and encouraged the third.

He asks his reader: “Why should men leave great fortunes to their children?” If it is from affection, then it is a misguided affection because “great sums bequeathed often work more for the injury than the good of the recipients.” The instances of public servants that live off their wealth in order to devote themselves to community service are rare. “It is not the welfare of the children, but family pride, which inspires these legacies.”

Carnegie sharply distinguishes between the intended consequence of the inheritance tax (to create funds for public purposes) and its unintended consequence (private philanthropy). The unintended effect of the tax is “to induce the rich man to attend to the administration of wealth during his life.” Wealth is a trust fund for the community that helps the rich “dignify their own lives.”

According to Carnegie, philanthropy in a capitalist economy solves the problem of rich and poor alike. “The laws of accumulation will be left free, the laws of distribution free. Individualism will continue, but the millionaire will be but a trustee for the poor.” Carnegie concludes his famous tract with the words: “The man who dies rich dies disgraced.”

Carnegie practiced what he preached and gave away more than 90 percent of his estate before his death, leaving a modest trust fund for his family. He included a trust fund for Theodore Roosevelt’s widow because the government at the time made no provision for the wives of former presidents."

The link for that piece on Carnegie:

http://www.pgtoday.com/pgt/articles/mt_rushmore_and_a_history.htm

Stephen

Please could you outline in a little more detail what you mean when you say that "a properly working [inheritance] tax would:-

a) ensure a level playinf (sic) field for capitalism to operate in, giving meritocracy the chance to flourish

b) promote a proper work ethic amongst the young

What is a level playing field, how does inheritance tax help this and how does any tax help to promote proper work ethic?

JT - Meritocracy requires that people start are allowed to succeed or fail on their own, rather than their parents' merits. Giving a random selection of young people large financial hand-ouits is highly unlikely to promote a proper work ethic. Just look at the English upper classes.

A specific example of the damaging effect of inherited wealth on Britain is the inflationary housing market. The children of wealthy people are left large sums which they use to buy houses, pushing the price of property beyond the means of many who have to rely purely on the income they have earned. Obviously this cycle tends to perpetuate itself.

Promoting work ethic in the young should be left to the families and other organizations around them. It is no business of the state to interfere there through taxation. And while the rentier class may not be such a great idea, so many people in this country now own property that the amount left to the children would not, on average, be enough to live on. On the other hand, knowing that you are saving and improving property to hand on to your children is a huge incentive. Knowing that the government will hack off a large percentage of it for its own uses is not.

Inheritance tax for the median to lower earners is iniquitous. There are no justifiable reasons for it.

James - few low to median earners will be paying much inheritance tax as the first £285,000 is exempt in the UK (as are estates left to spouses).

Anyone who thinks that, squid, does not know much about prices on very median property, indeed.

If, despite heavy taxation upon my efforts, I manage to accumulate some capital which I seek to pass onto to my heirs and successors, in the hope that they may be sheltered from the harshness of life, that option is my liberty.

To rob me on my death of 40% of my estate on no stronger grounds that it risks making some people happier than you are is banditry in the service of envy.

That those grateful heirs may spend it on their housing, their education, their health, or God forbid on foreign holidays, in order that they might improve the quality of their lives may affront those who aspire to make themselves the arbiters of how people ought to live, but I would rather give every kopeck of the money I earn from toiling in the workplace to my family and friends, or indeed the charity of my choice, rather than feed the greedy maw of a hypocritical, lazy, and spiteful Nomenclature of Leftist blood suckers who justify themselves by claiming to be working in the public interest.

I'm rather taken with Hayek's notion that inheritied wealth allows people to explore a wider variety of lifestyles than would otherwise be the case.

Helen

It is simply a fact that the overwhelming majority of people do not pay inheritance tax - In 2001 (the last figures I could find) 96 per cent of estates avoided it altogether. http://www.moneyobserver.net/facts_inht01.htm

Even allowing for some growth in this figure (though the exemption limit has risen too), it is clear that inheritance tax is a tax on the wealthy minority. It simply isn't an issue for low or even median earners.

Bear in mind that the average price of a UK property is £200k and nearly 30 per cent of adults don't own property at all.

“meritocracy requires”

Natural justice requires that you leave well alone

“allowed to succeed or fail on their own”

Actually what you mean is that State employees can decide to help people in ways in which they approve, but the freedom of parents to help their children in ways they feel is best is forbidden

“giving young people large financial handouts is unlikely to promote a proper work ethic”

I think your jealousy blinds you to the fact that the ‘hand outs’ are more likely to go to the middle aged in order to cushion them in their old age. Even if they were only to help ‘young people’ you forget that an inheritance helps such ‘young people’ make choices for themselves (such as setting up businesses) which enable them to improve their lives.

No doubt some are fools and after spending it unwisely will return to the State for ‘hand outs’. But as we have already established you approve of State ‘hand outs’ because they are taken from people by force and given to State employee who then give a proportion of it back to [amongst others] those who have spent any money they inherited or who cannot be bothered to earn any money for themselves. Clearly much more deserving cases.

‘just look at the English upper classes’

If you knew anything about English history you would know that the ‘English upper classes’ [for example the Russell and Cavendish family] generally invested their money in their estates and property, and in commercial and industrial interests, a great deal more wisely then the Modern State. Those that failed to do so rapidly became ex members of the upper class. The class envy just drips off the page of your comments.

Recent figures from HM Revenue & Customs (HMRC) reveal that inheritance tax (IHT) receipts have leapt by 42% over the last three years.

For year 2006-07 IHT receipts are forecast to total £3.56 billion, up from £2.5 billion in 2003-04. This 42% increase is well ahead of inflation over the same period which was just under 10%.

Research from Grant Thornton and Lombard Street Research last year calculated that 3.6 million people will be liable to pay IHT by 2009 which represented a 70% increase from 2002.

Looking to the future, based on the long-term average asset price, the research points to the number of estates above the threshold rising from 2.1 million in 2002 to 3.3 million in 2009.

Chris

It's a bit of an stretch to suggest from what I wrote that I think the State should decide who succeeds or fails. Or that I "approve of State ‘hand outs’ because they are taken from people by force and given to State employee who then give a proportion of it back to [amongst others] those who have spent any money they inherited or who cannot be bothered to earn any money for themselves", as you pithily put it.

I could equally extrapolate from your comments that you are implacably opposed to taxation of all types, in all circumstances. Perhaps you are...

As far as the Grant Thornton figures go, the fact that 3.6 million people will be liable to pay IHT in 2009 suggests a figure of around 12 per cent of the adult population - an increase on the 4 per cent who paid in 2001 but still a small minority of the population as a whole. It's also worth considering that Grant Thornton are interested in selling tax planning/avoidance schemes so have an interest in ensuring that their predictions are as alarming as possible.

If you're interested and live in London, Peter Oborne has a piece in tonight's Evening Standard in which he makes the case far more persuasively than I could that abolishing IHT would indeed be an undeserved subsidy for a bunch of "narcissistic, self-indulgent" (Peter's words) young trustafarians.

The Squid!

You asserted that in a meritocracy ‘people should succeed or fail on their own’.

I merely drew out the implication that if you endorse the notion that the State ought to take our money and spend it helping others, you are violating your principle that ‘people should succeed or fail on their own’. All you are doing is shifting the benefactor from those who have created and/or invested the money, to those who feel that they know best how to spend it! Justifying this confiscation by appealing to the principle that ‘people should succeed or fail on their own’ is therefore sheer hypocrisy.

What is required is some principle that justifies money being taken from us and given to the State. If you accept that the State does have a role to play, the issue therefore becomes one of levels of taxation.

A socialist by definition believes in re-distributing resources to the State. The rest of us however expect the State to give the same sort of value for money that we expect in every other area of life, and are sceptical that simply because the State is largely run by Guardian/Independent readers that they will spend our money more wisely than we would ourselves.

If you live in London it is painful no doubt for you to see people with more money than yourself, especially if you believe yourself to be more worthy. If you are keen on having more money I suggest going out and making more of it. I cannot help you I am afraid I haven’t got a bean.

That's all right, Chris, I've got enough for the time being (all earned, I should probably point out) though that will doubtless change when I try to scrabble up another rung of the London property ladder...