Friday, January 05, 2007

Radical politics

Ever since Tony Blair slid into power, politicians in the UK have been fond of claiming to be 'radical', whilst actually advocating and implementing rather conventional economic policies. So, as an antidote, here's a genuinely radical proposal I heard a few years back:

0% income tax, 0% expenditure tax, and 100% inheritance tax.

Nobody would pay tax during their lifetime, but their assets and capital would be taken by the government when they die. What would an economy such as this look like? Well, with 0% income tax people would have a greater incentive to work harder, so the economy would be larger. 100% inheritance tax would entail that a much greater proportion of the GDP would be taken in the form of taxation, so the government would be able to afford health and education services of an extremely high standard. Some people might try to liquify all their assets and spend all their money before they die, but unless one's time of death can be reliably predicted, this is a difficult game to play. It might also be argued that people would resist 100% inheritance tax, but when the average lifetime enters the 80s, it means that people will generally die when their offspring are in their 50s, and therefore, in most cases, established with a family, house and career.

Just a thought for Mr Cameron!


Andrew said...

Funnily someone only yesterday was telling me how they'd come across stuff where it was proposed that US income tax is not actually a legal obligation, and cases have actually been won in the US Supreme Court based on such proposition. A very quick check this minute on the net threw this up-

Gordon McCabe said...

In a sense, taxation is extortion: the exaction of money with threats. A government exacts money owned by its citizens, using threats of imprisonment.

Tom said...

Live here
Die abroad
Emigrate to the UK
Live here
Die abroad
you get the idea.

Anonymous said...

This is my second attempt.
Andrew has said that imposing Direct Taxation is not legally enforceable. In my opinion, and that of people at the Treasury Tax Policy Unit, that is a fact.
If you alter the construct of your Business or Company, change the Contract of Employment and Payment, Direct Taxation is not an obligation.
There are three Websites saying this

Gordon McCabe said...

Good point Tom: if only one country adopted such a taxation scheme, a proportion of the population might try to emigrate to avoid it. But emigration doesn't necessarily entail a change of citizenship; EU countries, for example, could legislate to seize an individual's assets based upon citizenship rather than country of residence. And, given that governments almost always act to increase their size and power, if the proposed taxation method proved successful in one country, it would probably be adopted elsewhere. Of course, just as some wealthy people currently emigrate to Monaco, and employ lawyers to avoid paying too much tax, some people would still be able to emigrate to avoid the inheritance tax.

Brian Stewart said...

Gordon - Dave Cameron isn't really interested in reducing tax, so may not be happy with the idea of reducing income and expenditure taxes. However, given that his sidekick George Osborne has said that the Conservatives are the party of the public sector, he may raise extra money by hiking up inheritance tax to 100%.

If he does, we'll know where he got the idea from - and who to blame....

Gordon McCabe said...

Welcome to the blog Brian!

Did you see the Peter Hitchens programme on Cameron last night? Very interesting, and quite rightly pointed out that he's a principle-averse opportunist. He'll go far.