Tuesday, January 25, 2005

The New Poor

Last sunday's Observer started a campaign against inheritance tax (IHT). The accompanying comment piece by Jill Insley contains some specious reasoning.

It claims the Tax is "distorting family life" and "undermining the property market"? And if it was, would that be such a bad thing?

The example given in Jill Insley's piece of a nurse who wanted "something to leave to the kids" is specious. Even though the house is valued at over the IHT threshold "the kids" still get a substantial inheritance. The comment that "[the kids] will have to hand over thousands of pounds , which she scrimped to save" is as fallacious as it is misleading. Those thousands of pounds (if that is the size of the IHT bill) come purely from house price inflation.

Is the Observer really arguing that those with an inheritance of over a quarter of a million pounds are not rich? Woe to this new poor. What of those who have an inheritance of several hundred pounds? Are these the old poor?

In a world where billions live on less than 2 US dollars a day a major UK newspaper is arguing that having an inheritance of a quarter of a million pounds does not make you rich.

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