January 18, 2010
More Nonsense from Tories on Tax
Jonathan Isaby of ConservativeHome has responded to my accusation that his pronouncements at the Fabian Conference on inheritance tax were both ignorant and incoherent.
Isaby doesn’t actually mount any counter-arguments to my original post, but just repeats Tory mantra about being able to pass on enormous amounts of property and wealth tax-free to those who’ve done nothing to earn it.
Yet he does deploy one naughty little manoeuvre at the end. He writes: “The whole point, surely, is that under current Conservative policy it is millionaires who will still pay IHT?”
This is very clever. The message is simple: raising the IHT threshold is good for ordinary people, and that’s why Tories think only millionaires should pay it.
Populist. And deeply misleading.
Let’s recall that the median annual salary for a working individual in the UK is less than £21,ooo (which means 50% of the working population takes home less than that). The current inheritance tax threshold is £325,000, over which a tax of 40% is levied.
It would take somebody earning an annual salary of £21,000 fifteen and a half years just to earn £325,000, let alone save it.
So let’s assume that somebody on median income manages to save £2,000 a year – no mean feat if there are kids to feed and bills to pay. In order to amass a prospective inheritance of £325,000 (all of which would still be tax free, remember), this person would need to work for 162 years, albeit not including interest accumulated.
Of course, Isaby and Co. will reply that what matters is property. And it is true that most IHT is due on inherited property, especially houses. But let’s recall that the average house price today is £222,261. In October 2009 it was predicted that just 12,000 households would pay death duties for the coming financial year. That’s out of c.25 million households in the UK. Admittedly, not all of these are eligible for IHT in any given year – but you get the picture when recalling that around 560,000 people die each year in the UK.
So it’s simply not true that IHT, under current arrangements, affects ordinary people. It affects a tiny proportion of the richest estates. And the Tories want to make it affect even fewer.
Now let’s directly examine Isaby’s contention that the Tories are doing the opposite of giving tax breaks to millionaires, and only want IHT to be paid by millionaires.
Imagine Charles is to inherit £1,000,100.
Under current arrangements, he would be eligible for IHT as follows. Charles enjoys a £325,000 tax-free threshold. £1,000,100 – £325,000 = £675,100. This is total upon which tax is due. There is a 40% rate of tax. 40% of £675,100 is £270,040.
Hence Charles, under existing arrangements, pays £270,040 tax on an initial inheritance of £1,000,100, leaving him with £720,060. A rather tidy sum, I’m sure you’ll agree.
Under Tory proposals to raise the threshold to £1,000,000, however, Charles would of course be liable for a 40% rate on only that last £100. He would thus incur a tax bill of £40, keeping the even tidier sum of £1,000,060.
You will notice that in this case, Tory proposals have in fact made Charles a millionaire, compared to what he would have been under present arrangements.
It’s simply not true that the Tories aren’t about giving tax breaks to millionaires. After all, who will benefit from having the threshold on IHT raised by £675,000? Not just those inheriting less than £1million, but all those inheriting over £1 million who now get the first million totally tax free.
A consequence of Tory proposals means that in some cases they will create millionaires by giving out tax breaks to those who already stand to inherit tremendous amounts of unearned wealth. And they want to do all this whilst promising to slash public spending faster and deeper than any other party, threatening the risk of a double-dip recession.
George Osborne told us that we’re all in this together. But we’re not. There’s a class war going on: the Tories are waging it on behalf of the privileged few, against the hardworking ordinary many.
Shout it from the rooftops.
Mark said,
January 19, 2010 at 1:13 am
Isn`t it a bit naughty to try and associate fiscal policy with the quality of public services? Increases in spending not necessarily improving services and all that (though being rather good for middle class teachers and other professionals).
And, if we are viewing this from the perspective of economic stimulus, do you agree with the need to cut public spending at some point in the future?
Or is it tax raises all the way?
Peter said,
January 19, 2010 at 5:15 pm
Don’t know if you’ve seen this one yet:
http://upload.drarok.com/uploads/3747-posterphp.jpg
hahahaha
Linky Love: 20th January 2010 « Left Outside said,
January 20, 2010 at 8:02 am
[...] Paul Sagar – Continued Tory Tax Nonsense: Jonathan Isaby of ConservativeHome has responded to my accusation that his pronouncements at the Fabian Conference on inheritance tax were both ignorant and incoherent. Isaby doesn’t actually mount any counter-arguments to my original post, but just repeats Tory mantra about being able to pass on enormous amounts of property and wealth tax-free to those who’ve done nothing to earn it. [...]
Policy Watch « Bad Conscience said,
January 25, 2010 at 1:40 am
[...] tax, the Tories’ two big headline-grabbers are mind-bogglingly backwards. As noted (twice) last week, the Tories want to give tax breaks to millionaires by rising the threshold of [...]
F*** Off « Bad Conscience said,
February 10, 2010 at 10:43 am
[...] I’ve laid out my reasons for opposing the Tory tax cut for millionaires on numerous occasions. [...]
The Inconvenience of the Real World? « Bad Conscience said,
May 16, 2010 at 11:56 pm
[...] Although I commend the Fabian Society for reaching out to non-leftists at their events, I do with they’d stick to picking people like Jonty Olliff-Cooper who, although in my opinion confused, is clearly intelligent and thoughtful. But please, no more Jonathan Isaby. Regular readers may recall that last January I recorded Isaby’s incoherent views on inheritance tax. To which he responded with a piece of supreme silliness. [...]
Conservative Home not entirely on message « Left Outside said,
August 20, 2010 at 6:36 pm
[...] a typically asinine post Jonathan Isaby declares “The Green Party now wants to restrict my freedom of choice and [...]
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August 22, 2010 at 3:52 pm
[...] a typically asinine post Jonathan Isaby declares “The Green Party now wants to restrict my freedom of choice and stop [...]
Trent said,
March 19, 2011 at 7:33 pm
The first priority of any Conservative-Led government has been, at least in the past 50 years, to increase top level profiteering by denying the needs of those on welfare benefits. That’s a quantifiable statistic, even if it wasn’t their explicit motive.
That an individual requires £50 (roughly) a week to, effectively, ‘survive’ is labelled “scroungeing”. That an individual, already well endowed, requires £50,000,000 to be politically placated is “good commerce”.
The Liberal Democrats are an integral part of this Coalition – And so their silence on policies thereon is baffling…
Secondary to the above, the (largely) Conservative government has also, pretty much vetoed the enfranchisement of Prisoners, and severely downplayed the right of Registered Sex Offenders to challenge the length of their requirement to register.
Logic and Justice – Lost in the pursuit of acclaim, praise and re-election.
New Labour was destestable because of their obsequious pandering to Tabloid nonsense. David Cameron seems now to be treading the same stupid path.
Beware Mr. Cameron, et al; We (Relatively intelligent lot) were duped by New Labour many a time – It is perhaps unlikely that we’ll let you have such an easy ride…..