In an appropriate follow-up to his recent essay on capitalism, Michael Copeland discusses one of the great inhibitors of capitalism.
How Not to Build a Country — Inheritance Tax
by Michael Copeland
Uncle George (not his real name) died some ten years ago. He was in his late eighties, much afflicted by Parkinson’s, and had been in a nursing home for about a year. He had served in the army in the war, and for a while afterwards. Otherwise he had spent his life running a business. It was a business that his father had started from scratch, at a very difficult time in the Depression of the 1930s, when the firm he had previously directed had been obliged to close by the sudden loss of its export market.
Businesses are vulnerable: they can easily suffer loss and be forced to close, even well-known big firms like Woolworths, Wedgwood, Parker Knoll, and so on. The firm, a small one, relied heavily on the post for distribution, and was very nearly strangled out of business by the unions in the postal strike. Uncle, though not a natural businessman, steered the company through those stressful and difficult times. That can be regarded as his achievement, in holding on to the enterprise and guiding it in succeeding decades, though it affected his health. He used to stay at the office late in the evenings, where, he explained, he could work without interruptions. Much attached to his work, he remained at the helm much too long — until he was 80. He did not have a family: the firm was his whole life, and only reluctantly, as Parkinson’s took over, did he part with the company.
After retiring, Uncle kept a close eye on matters economic. He berated the house-price rush, and foresaw the financial crash some two years beforehand: “I am very worried about this,” he used to say; “I think there is going to be a recession. What are the people in the Treasury doing?”
Uncle lived simply, in a small flat. Parkinson’s prevented him from driving, so he gave up his car. At root insecure, he retained the proceeds of the firm’s sale towards health care, operations, and long-term care, which he paid for himself, and which, of course, are large costs, quite unquantifiable in advance. He already had his own savings, and had looked after the funds his parents had left him, but he was no landed Duke with rolling acres. He had what he had been able to save prudently AFTER paying business tax, income tax, capital gains tax, and after meeting expenses of living. But no, there is the further raid made by inheritance tax, at nearly half the value of all assets beyond the threshold. All assets means everything — flat, furniture, pictures, jewellery, savings, cash in the bank, investments — the works. He made some arrangements to mitigate the tax on his estate. In the event, when he died, those arrangements did not have effect.
The inheritance tax on his estate was considerable. It amounted to more than the sale proceeds of the firm — his life’s work. Gone. Taken. The question arises: what had he been working for? Where is the justification for penalising someone who has, at some stress, maintained employment for others and who has made provision for his retirement so as not to draw on taxpayer funds? He was an endangered species: an employer. Many families depended on him. His firm generated wealth: it produced things that were not there before, and which customers bought. It may sound easy to do, but it is difficult and stressful, exacting a health toll on those that perform it. Most unfair is it to inflict concerns about parting with funds on such people when they are elderly, infirm, and uncertain of the future.
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A chef in the employ of former President Obama drowned last night while paddle boarding in a pond behind Mr. Obama’s mansion on Martha’s vineyard. Tafari Campbell, 45, was reported missing yesterday evening, and his body was discovered today. Based on videos posted to his Instagram account, Mr. Campbell was a competent swimmer, but even so he drowned in eight feet of water.
