Killing The Death Tax In Britain
August 5, 2002
Death duties are now only a minor source of revenue to the British Exchequer (about 1.5 percent of Inland Revenue receipts) and they now have few committed advocates. Nevertheless, they persist, mainly because of inertia.
In "Euthanasia for Death Duties," Barry Bracewell-Milnes analyses the traditional criticism of death duties and adds some novel arguments based on the concept of saving in perpetuity -- saving which is never drawn down during an individual's lifetime, whether or not it was initially planned as perpetual.
According to Bracewell-Milnes:
- A tax on giving or bequests always causes a social loss, and this social loss (or wealth destroyed) always at least equals the revenue yield.
- Because the perpetual saver prefers the shadow of potential use to the substance of actual use, the rest of society enjoys a permanent loan at rates chargeable for loans with maturity dates.
- A tax on saving in perpetuity must be expected to reduce its supply, and the rest of society loses as the saver in perpetuity shifts to spending.
- Inheritance taxes cheapen the spending of the rich taxpayer relatively both to his own saving and to the saving and spending of the poor.
- Inheritance taxes increase inequality in consumption spending and thus inequality in standards of living overall.
According to Bracewell-Milnes, the inheritance tax does immense economic damage, and should be abolished. It is "...perverse and counterproductive for its own ostensible purposes, egalitarian or otherwise."
Source: Bracewell-Milnes, "Euthanasia for Death Duties: Putting Inheritance Tax Out of Its Misery," Research Monograph no. 54, March 4, 2002, Institute of Economic Affairs, 2002.
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