What a strange attitude

I just happened to see this on our media roundup email this morning, a letter in The Australian about the Green’s policy of seeking reintroduction of Death Duties:

AS the parent of two sons whom I love dearly, I can tell Judith Brown (Letters, 4-5/9) why I voted Green and why I support the reintroduction of death duties. I believe that we all should make our own way in the world and not expect anything for nothing – and that includes an inheritance.

Handouts like this are an insult to those who receive them. It’s much better to spend one’s money whilst alive supporting worthwhile causes and I hope that the government can utilise anything I have left when I die on the environment and meeting social needs.

Trevor Caldwell, Eagle Point, Vic

I don’t know about you, but I find that a very strange attitude. When parents pass on an inheritance to their children, it is not a “handout”. It seems to me to be a very individualistic attitude towards one’s wealth. What belongs to me belongs to my children; while I am alive I manage it, but when I die (or before if I choose), it passes into their hands. This is more literally a “hand down” than a “handout”. Of course I have full freedom while I’m alive to use this wealth in a way that seems best for my family and of course the society as a whole, and if I choose to use it (for instance) to serve “the environment and meeting social needs”, then I am free to do that as well – but not at the expense of my children’s welfare. To suggest that in any way I should trust some nameless bureaucracy to do “what is best” with the wealth that belongs to my household when I die just seems ludicrous.

I can usually see some rationale in the expression of most points of view, even those with which I violently disagree. It is rare that I come across an expression of ideas which are simply beyond my comprehension, but this is certainly such a case. What do you think?

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27 Responses to What a strange attitude

  1. Matthias says:

    Here we have a man who obviously is spending his kid’s inheritance ,or who has no kids and is thus making this statement from a position of arrogance and ignorance.
    I can tell you that my inheritance paid off part of my mortgage and also purchase a new car to replace an ageing old Holden Commodore.
    Judging by this letter I ‘ say we have a traditonal labour voter ,who realises that the greens are really the Left wing of the ALP.

  2. Alexander says:

    If I have five kids and $50,000 when I die, the most my kids can get (assuming equal distribution) is $10,000: Not even a deposit for a house if I understand the pricing correctly. If you have two kids and $5m, then they get $2.5m each.

    So the poor me well might support a death tax: what my kids lose compared to what your kids lose will be negligible. Even in absolute terms, the 10 grand my kids get will barely be enough for a holiday; its hardly going to change their life.

    I don’t agree with this point of view, this is just the logic I see in it. Remember: the left thinks we have to do everything we can to make sure everyone is born equivalent, not just equal before the law. In reality, I think it hurts rich kids much less than this explains, and probably less than it hurts poor kids: If I have $5m I can easily distribute a large chunk of that to my children. Also, I’ve never heard of these death taxes amounting to so much that they really would “equalise” the kids of poor and rich parents, and I think that by the time your parents die, you’ve already got the benefit of their money—a good attitude, a good network and a good education.

    • Schütz says:

      the left thinks we have to do everything we can to make sure everyone is born equivalent, not just equal before the law

      Perhaps you are right. This might indeed be the “rationale” behind the letter-writer’s thinking. Even so, it shows to me an attitude toward one’s own children that would better befit the savagery of the French Revolution than modern Australia.

      • Peregrinus says:

        That seems a little extreme!

        You’re a Christian, David. Surely you agree that material wealth is not a pearl of great price? It’s important to pass on to your children faith, values, truth. It’s important to love them, to spend time with them, to help them as best you can to grow into the people that God is calling them to be. It’s important to show them what love is, and how it is lived. It’s important to teach them, among other things, that material possessions are not going to make them happy, and that they should not attach excessive importance to the acquisition and retention of money.

        It’s not important, when you die, to leave enough money so that your 55-year old children can buy a new car, redecorate the house or invest in that boat they always wanted. And it’s certainly not right to teach them, by word or by deed, that this is important.

        Everything you do that matters for your children you will have done before you die. If you haven’t taught them to love, to hope, to believe and to look after their relationships, they’ll have problems that won’t be solved by inheriting your money when you die without paying tax. And, if you have, they’ll be happy, even if they do have to pay inheritance tax.

        Don’t stress about whether the post-death inheritance of material possessions will be taxed or not. It doesn’t matter.

        • Fr John Fleming says:

          Well it does matter Peregrinus. It might not matter to you, but others of us take the view that the choices we make while still alive are important features of who we are and on which we will be judged along with all our other choices.

        • Schütz says:

          It’s not important, when you die, to leave enough money so that your 55-year old children can buy a new car, redecorate the house or invest in that boat they always wanted. And it’s certainly not right to teach them, by word or by deed, that this is important.

          You are quite right in suggesting that passing on one’s material possessions is “not important” in comparison to passing on all those other virtues you mention.

          However, you make the mistake – perhaps natural for one of your own vintage – of assuming that the average 55 year old is like yourself. Believe me, Perry, by the time that I am 55 years old, my currently 20 year old car will be 30 years old, and I will not be seeking to redecorate my house but to finally be able to afford to put a deposit on one, and that rather than paying for the dream boat, I will be trying to support my own children through their university course.

          The world is changing. Tomorrow’s 55-year olds will not be the same as the complacent, wealthy baby boomers of today.

          I do not begrudge my parents spending their money while they are alive – God knows that they deserve it after all their hard work – but I will not deny that any inheritance (even as little as $10,000 as Alexander suggests) would be of great benefit. I am sure that my own parents would be horrified at the suggestion that the Government should get another go at their money, given that they have already paid their taxes when they earned it in the first place.

          It is my belief that death duties on inheritances are im-pious in the strict meaning of the word.

          • Peregrinus says:

            However, you make the mistake – perhaps natural for one of your own vintage – of assuming that the average 55 year old is like yourself.

            Actually, if the average 55-year old is like myself, he’d be nothing like 55 years old.

            Believe me, Perry, by the time that I am 55 years old, my currently 20 year old car will be 30 years old, and I will not be seeking to redecorate my house but to finally be able to afford to put a deposit on one, and that rather than paying for the dream boat, I will be trying to support my own children through their university course.

            The world is changing. Tomorrow’s 55-year olds will not be the same as the complacent, wealthy baby boomers of today.

            And, to the extent that that’s a problem, I don’t think it’s a problem we should rely on inheritances to resolve. Apart from anything else, waiting until you are in your mid-50s doesn’t look like the optimal solution to me. By your own account, you might to be in a position to buy a house just about the time your kids are leaving home. Isn’t that a bit late?

            If an employed, working man with a not very large family can’t feed, house and care for his family in frugal comfort on his earnings we have a problem. And, far from looking to untaxed inheritances to solve the problem, I suggest that they may actually be part of it. Why are you living in a low tax country, and yet paying high income tax? Why, of particular relevance to you, is there no mortgage interest income tax relief available to make it possible for you to buy a house with your own earnings, as there would be in most comparable countries?

            The answer is that the Australian government is heavily reliant on income tax, and neglects other sources of revenue. You, David, are paying high income taxes so that people who are considerably better off than you will not have to suffer capital taxes. There may be some trade-off for you in the future if your parents leave assets to you, but (a) it’s long deferred, whereas your need to house your family is immediate and (b) it’s only a partial recompense; you are still probably worse off overall. And, of course, there are many people whose earnings are comparable to yours, but who have no expectation of inheriting very much, or anything. For them, it’s all downside.

            I think also we need to separate out the question of whether there should be an inheritance tax from the question of what a reasonable inheritance tax would look like. In other countries, inheritance tax models:

            – do not tax a widow or widower inheriting from a spouse

            – have a fairly generous tax-free allowance for a child inheriting from deceased parents (in Ireland, for example, this allowance is the equivalent of about $690,000)

            – may have an exemption for someone inheriting the home in which they already live

            – will have other reliefs and exemptions.

            I’ve no idea how much you might inherit from your parents (and I hope the day is long deferred), but if we assume a sum which represents the deposit on a house, or a couple of years’ university fees, or a replacement car, or even all three of these there is no reason why an inheritance tax regime typical of other OECD countries would affect you very much, or at all. You might be more affected if your parents were substantially wealthy, or if you inherited a large sum from a distant cousin.

            • Schütz says:

              Well, Perry, your models for an “inheritance tax” are a little more comforting than the rather draconian taxes that have existed in this country in the past.

              And thank you for your sympathy of my plight! I should make very clear that I in no way look forward to the day when I shall receive an inheritance from my parents. As you say, may that day be long deferred.

              Still I don’t see a direct connection between the absence of an “inheritance tax” and Australia’s shitty situation in regard to housing .

              One thing that really pissed me off (you are getting the sharp end of my anger here – apologies!) during the election campaign is that none of the parties had any idea whatsoever about what to do to make housing more affordable in this country. Something is really rotten in the system to get us to where we are now.

              Still, I don’t know how anyone is really going to be able to fix it. No one who owns a house wants the value of the house they own to go down, but housing values would practically need to be reduced by 50% to make them “affordable”.

              Of course, the problem is not solved by being a renter, because rent prices go up when housing prices go up. I don’t know what the solution is, but I wish that someone did!

            • Peregrinus says:

              I know I sound like I’m saying that all problems are caused by the tax system, and all problems can be solved by tweaking the tax system. But I’m about to say it again.

              Part of the housing problem is tax-driven. You have your prosperous 55-year old baby boomers again, whose families are largely raised. They are at the peak of their earning power, but the demands on their income are going down. So they have plenty of surplus income, and you can only spend so much of it on foreign holidays, particularly when you are still working. And, not unlike yourself and in fact almost everyone except Trevor Caldwell and me, they think it’s a good thing to accumulate that surplus income to leave an inheritance for their children.

              Ah, but how to invest it? We’re looking at a 25- to 30-year horizon here. Investments which show capital appreciation will be subject to income tax on the gain when they are finally realised, and over that timeframe the gain should be pretty large. That’s almost as bad as inheritance tax, isn’t it? But, gosh, look – if you invest the money in your own main residence, any growth in value is tax-free. So, if you want to maximise your children’s inheritance, buy the biggest house you can, and live in it. You don’t need five bedrooms, a “media room” and an industrial-size air-conditioning plant? Never mind; it’s a very sound investment.

              That’s how the incentives are set up, and that’s how people respond to them. So we now have the bizarre situation that Australia builds the largest homes in the world, and sells them to 55-year olds whose children have left home, or are about to – or would be about to if they could afford housing. Which they can’t, because the price of houses has been driven up by the weight of money pumped into the market by 55-year olds looking for tax-sheltered investments to shelter the wealth they hope one day to leave to their children.

              So, if I were Supreme Ruler of Everything I’d abolish the capital gains tax relief on private residences, or limit it so that it only covered the value of a modest family home, and use the resulting revenue to fund mortgage interest relief (again, perhaps limited so that it covers the mortgage on a modest family home). Two things would result:

              – Baby boomers looking to invest would no longer have a tax incentive to invest in their own homes. We might therefore see some switch towards investment in rental properties, so increasing the proportion of of properties available for rent. We might also see a switch towards, e.g., stocks and shares, so reducing overall demand for housing and reducing upward pressure on prices. And we should see a particular reduction in demand for large homes, and builders/developers refocussing towards smaller homes – the kind that younger people want to rent or buy.

              – Young adults (once working, and so earning an income) would find it easier to afford a mortgage, because of the tax relief, so making home acquisition that bit easier. This, too, would stimulate demand for the kind of homes that young adults want, and give builders an incentive to provide more of them.

              A more radical solution – for this I would have to be Supreme Ruler of Everything with a Very Thick Hide – would be to consider incentives to encourage our prosperous 55-year old baby boomers with surplus income to use some of it to finance the acquisition of houses by their children. Or, to put it another way, don’t wait until you die to be piously charitable to your children; do it now. (But the quid pro quo would have to be an expectation that your children would be piously charitable to you, should the need arise.)

              This goes beyond tax. It strikes me that in our day we have two phenomena happening at the same time. First, we live longer than ever – most of us expect to see the far side of 75, and many of us the far side of 80. Secondly, the extended, multi-generational family is very weak. Young adults would be uncomfortable to “live off” their parents once they are earning themselves; elderly parents would be uncomfortable at the prospect of depending on their adult children to finance any kind of elderly care, retirement care or medical care that they might need. Thus older people are encouraged to hold on to their wealth, and younger people would not be disposed to accept it if offered. In fact this is inefficient; the wealth would probably be better employed meeting the real and immediate needs of younger adults for housing than being held in reserve against the hypothetical future needs of older adults for high levels of care. I don’t quite know how to go about changing these attitudes, though.

          • Louise says:

            It is my belief that death duties on inheritances are im-pious in the strict meaning of the word.

            Totally agree 100%.

            And yes spiritual goods are far more important than temporal/material ones, but these are still goods. And I personally think it’s important to hand on to posterity even the little one has. $10,000 off our mortgage would be a help. And it’s better paying off our debt than going to the guvvermint which will only piss it up the wall (on Gay Pride marches and crappy modern art) anyhow.

            My parents could die at any time (they are around 70 yo) and I’m 41, with a mortgage and 6 children – one of whom is a newborn. So, not exactly a 55yo empty-nester who’s rolling in it!

            the idea of just *consuming* what ought to be the children’s inheritance is anathema to me. I hate it with a passion.

  3. Peregrinus says:

    Well, the thought is not particularly well-expressed, but there is a point lurking in there.

    Asutralia currently collects about 31.5% of GDP every year in taxes. By the standards of the prosperous democracies of the OECD, this is fairly low; the average is 39.4% of GDP.

    Nobody is complaining about low taxes, of course. But this low tax take contrasts oddly with my experience when I moved here from Ireland. Although my earnings in Australia were considerably lower in Australia, I found I was paying a much higher percentage of them in tax.

    I’m not complaining; I chose to move here; I certainly don’t regret the choice. But my experience points to the fact that, while Australia is a comparatively low-tax economy, Australian workers pay comparatively income high taxes. How so?

    A narrow tax base, is the answer. 65% of Australia’s taxes are collected through taxes on income. This is the highest percentage of all the OECD countries.

    We also have very high transaction taxes (stamp duties).

    So where are the low taxes?

    Australia has low capital taxes – i.e. taxes on accumulated wealth. Property tax – the annual charge that you pay to your local council – is probably the main capital tax in Australia. But it’s low by international standards. And it only taxes capital to the extent that you choose to hold it in land and buildings. Capital held in stocks, shares, bank deposits, etc is wholly untaxed.

    In other countries, either an annual wealth tax or taxes on inheritances and gifts form an important component of capital taxation.

    Australia could have lower income taxes and/or stamp duties (and/or lower GST) if it had higher capital taxes. And, by reference to what most other prosperous democracies have done, Australia has tilted heavily towards taxing income and transactions, and away from taxing capital. You can argue the toss about whether this is a good thing or not, but it is certainly true that Australia is something of an outlier. Even the wealth-friendly US taxes wealth more heavily than Australia does.

    One undeniable truth is that this tax policy favours those who have accumulated wealth over those who have yet to do so. The more income tax, etc, you have to pay, the more difficult it is to accumulate wealth, and so benefit from Australia’s generous low-tax treatment of wealth. You could say, in fact, that the benefit of Australia low overall tax take flows entirely to the wealthy – those who must live off their earned income pay the same, or higher, taxes than they would pay in other prosperous democracies.

    I am struck by your mention of “the wealth that belongs to my household when I die”. I understand the sentiment, of course, but the idea bears examination. It seems obvious that what you earn belongs first and foremost to you (and what your children earn will belong, in due course, to them). But in what sense do your accumulated unspent earnings belong, after your death, to “your household”? They don’t belong to you, because dead people don’t own things. We can see a sense in which they belong to your children, but is this conditional on your leaving it to them? In respecting your wishes in this regard, are we acknowledging the rights of the (deceased) David, or of his children? If the latter, wouldn’t it follow that the money belonged to your children regardless of your wishes? (I.e. you would have no right to leave it to, say, the Charitable Fund for the Relief of Sick and Indigent Bloggers.) In fact, subject to some broad limits, you do have the right to leave your wealth to the CFRSIB, so it seems that in respecting the rights of an inheritance to be untaxed we are actually respecting the rights of the dead, not the rights of the living.

    There is a contrast here in your assertign the “ownership” of your children over what you leave behind you in stronger terms than you assert their ownership of what they themselves create and earn by their own efforts. You accept that they will pay taxes on their income; is their right to their income so much weaker than their right to whatever you fail to spend in your riotous old age? Why should they pay taxes on what they earn in priority to what they receive of your bounty?

    Oh, and as far as I can see Trevor Caldwell isn’t actually arguing that his accumulated wealth will be best disposed of by the state. Read him carefully and you’ll see that his optimal solution is that he should dispose of it himself – by spending it, by giving it to people and causes that he cares about, etc (which may of course include his children). An inheritance tax would incentivise him to do this.

    • Fr John Fleming says:

      Peregrinus, we should not be persuaded by “keeping up with the Joneses” arguments. It matters not one whit that we are lower taxed than some other countries. That we are lower taxed that some does not necessarily mean we have a “low” rate of taxes. It might mean the others are being too highly taxed!

      • Peregrinus says:

        I’m not saying that our taxes are too low. I’m saying that they are levied disproportionately on income, and not enough on other revenue sources, with the result that income earners receive none of the benefits of our low overall taxes, and those with signficant amounts of accumulated capital receive the entire benefit.

        I’m not advocating a raising of taxes, but a rebalancing of the existing tax burden so that it is spread more widely across different revenue sources.

    • Louise says:

      I’m inclined to think that income tax is wicked too. Historically, when it occurred, it was rarely over 10%. And then, there was no income tax in Australia until (I think) WW2. For the war. Which ended quite some time ago!

      If we’re going to tax something (and taxes are required for the common good) then we ought to tax consumption (of non-essentials).

  4. Gareth says:

    Greens are queer.

    Oh really

  5. Fr John Fleming says:

    The irrationality of T Caldwell is that he is against inheritance because he thinks that “we all should make our own way in the world and not expect anything for nothing – and that includes an inheritance” and yet has no trouble in accepting the material, social, religious, and political inheritance that he like all of us receives from previous generations. In any case, he can will his own stuff to “the environment” if he wants. Nothing is stopping him make that choice. But the Greens should not be allowed to stymie other people’s free choices to care for their own.

    • Peregrinus says:

      He’s not being irrational. He makes the point that inheriting material possessions is unimporant. In a letter about death duties, nothing he says leads me to think that he is talking about anything else, or that his comments apply to culture, values, belief, knowledge, none of which is subject to inheritance tax.

      As I’ve argued to David above, I think his views are quite consistent with Christian thinking. There are one or two parable from the gospels that I could quote at this point, but I’m sure I don’t have to.

      • Schütz says:

        He makes the point that inheriting material possessions is unimportant

        Which IS an irrational argument IF the passing on of one’s material possessions to one’s children is an act of pious charity.

        You could just as well argue that giving any material sustenance to anyone else is “unimportant” – but we know that this is not the case. We are urged to give to those in need. The problem with your assumption, Perry, is that you assume that my children do not need what they stand to inherit from their parents. On what basis do you make this assumption? If indeed they DO need it, would it not be im-pious of the Government to take it away from them?

    • Louise says:

      and yet has no trouble in accepting the material, social, religious, and political inheritance that he like all of us receives from previous generations

      and which he has probably squandered

  6. Cherub says:

    Well he is being irrational. If the argument is that we should only have what we ourselves have earned then is is nonsense. We inherit everything. If he has a better argument let him mount it and I will listen to it. His argument is clear and doesn’t need a gloss on it it to make it acceptable. Anyone can leave his or her money to whomever they wish. And that includes one’s own family. And to provide for your family is a good and not to be taken from people on the basis of socialist presuppositions of others who want to impose heavy death duties on the basis that the state knows better. The state rarely knows better. It may have different priorities but that is a far cry from “knowing better” in some objective sense.

  7. Fr John Fleming says:

    I agree with Cherub.

    • Peter Golding says:

      I also agree with Cherub.
      In any event,you cannot vote for the watermelons and not be intellectually challenged.

      • Schütz says:

        Well, I think a lot of us will be “intellectually challenged” in the strict sense as we scramble to gather together our rather confused thoughts on a range of issues and make the rationality of our arguments against the Greens “policies” as clear as we possibly can – otherwise those who do not allow any matter to “challenge them intellectually” will just say “Yeah, man, that sounds great, let’s do it!”

        • Peter Golding says:

          David,the phrase”intellectually challenged”was used in this instance to indicate an absence of intellect,rather like
          someone who is bald is often referred to as being follicly challenged.(ie.an absence of hair)

  8. Tony Bartel says:

    I find it very hard to grasp the logic behind a death tax or a wealth tax.

    Presumably whoever earned the money, paid tax on it when he or she earned it (putting tax minimization schemes to one side for the sake of the argument).

    To tax the residue of what has already been taxed seems like double dipping.

    I have no difficulty with paying tax on profit earned from capital. But there seems to be no reason but envy to tax the capital itself.

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