Democracy vs equality

Democracy and economic equality are incompatible. That's the message we should take from reports (assuming them to be true) that Tory promises to cut inheritance tax have won them support.
There are two mechanisms at work here. One is adaptive preference formation. People from rich homes grow up with high expectations: they expect to afford nice country houses and high school fees. And if they can't, they infer not that they are too stupid to earn big money, but that something is wrong with the system.
By contrast, people from poor homes grow up with low expectations. As long as they can pay the leccy bill and aren't being harrassed too much by the dibble, they are content.
The upshot of this is that there's clamour to cut inheritance tax, but no comparable clamour to cut income tax on the pow-paid.
The problem here isn't just one for democracy. It's also one for utilitarianism. If we understand this as the fulfilment of subjective desires, utilitarianism can give too much to the unsatisfied rich and too little to the quiescent poor.
The second mechanism is that the rich have, partly perhaps inadvertently, some clever hegemonic strategies. People who expect to inherit a £500,000 house claim - with the help of the MSM - to represent "middle England", whilst those in relative poverty are stigmatized as chavs and the underclass. The fact is though that the latter are vastly more numerous  than the former.
The upshot is that politicians pander to active vocal minorities rather than the silent millions. So you can win votes by cutting inheritance tax and threatening to harass the unemployed.
This means the left has a problem. Democracy - at least in its current form - cannot promote equality.

Comments

[cityunslicker]

Not at all. What recent events show is that it is better to appeal to people's aspirations. many people would like to think they may inherit some good money and do not want it all stolen by the government.

That this is not a true reflection of their chances does not matter here; the appeal is to aspiration, as nearly all good political lines are.

To say that chavs and the underclass outnumber the middle class is something I would prefer confirmed by statistics too.

[MatGB]

And also the reports are that in the marginal constituencies, a chunk of swing voters were swayed by the IHT promise.

This shows the problem is with an electoral system that listens to the swing voters in swing seats more than it does to the rest of the country. It's not democracy that's the problem, it's FPTP. A better electoral system would negate this problem.

[jameshigham]

Rational expectation dictates that the poor will aspire though, Chris. then IHT becomes an issue.

[chris]

Sorry - I don't see how one can aspire in any meaningful sense to have rich parents. If a party wants to help people aspire to get rich through working and saving, thus leaving more to their kids, shouldn't it cut income taxes instead?

[Groucheaux]

@ cityunslicker - no, the appeal is to greed, a wholly different thing to aspiration.

[AMcguinn]

Might it not just be the case that income tax cuts are, by the magic of PAYE, almost invisible, while being hit for 50 or 100,000 in one go by inheritance tax is enormously visible, relative to the total amount raised?

[dearieme]

I expect that the mighty sum that people would like to leave to their children and grandchildren comes from sale of a house, so fiddling with income tax wouldn't, in their eyes, alter things much.

[dearieme]

Come to think of it, if there were an intellectual and decent Left, wouldn't it object to Inheritance Tax on the grounds that it is easily avoided by the rich, hits hard at the working middle and gives the chav poor no incentive to get off its arse?

[Scratch]

Alternatively, they could close the loopholes.

I love the question of inheritance, it gives the lie to rightist's thrusting, go-getting self image.

[Pseudonymous]

How often do you hear people complaining when offered any kind of tax cut?

About as often as you hear them complain about a spending increase.

"Democracy and economic equality are incompatible"

Is anything compatible with "economic equality", if not democracy?

[Sam]

"Sorry - I don't see how one can aspire in any meaningful sense to have rich parents. If a party wants to help people aspire to get rich through working and saving, thus leaving more to their kids, shouldn't it cut income taxes instead?"

One can't, of course - one aspires to be the rich parents, and wants to be able to keep one's hard-earned gains in the family, rather than having a chunk of it confiscated by the taxman just because someone died.

A modest wealth tax has all the anti-dynastic-wealth properties (if that's your thing) of IHT, without any of the problems associated with presenting (a minority of fairly well-off) people with a large tax bill just because a family member has died.

Fundamentally, there are two distinct questions - the question of how much tax revenue is required, and the question of how to equitably share the tax amongst the people. Having a wealth component to your tax bill, rather than just an income component, isn't a bad thing. IHT is a poor imitation of a wealth tax.

[Paul Evans]

I think that AMcguinn's point (above) hits the nail on the head here. Calling it Inheritance Tax is a good way of losing the argument. In theory, if it were sold the the public as a way of ensuring that people who don't have an inheritance could share the good fortune of those who do, then it could be popular. But the amounts redistributed to each of us would be tiny - and no-one would actually see any benefit from it even if that argument were made in the first place.

Most people don't see someone else paying tax as being something that does them any good. If they did, why would we tolerate indirect taxation replacing income tax?

[Mark Wadsworth]

"no comparable clamour to cut income tax on the low-paid"

For some strange reason, the only people calling for a tax cut for the low paid - in other words, doubling or trebling the personal allowance - are people traditionally seen as right wing, e.g. UKIP, Edward Leigh MP and so on. And me.

[Matt Munro]

"People who expect to inherit a £500,000 house claim - with the help of the MSM - to represent "middle England", whilst those in relative poverty are stigmatized as chavs and the underclass. The fact is though that the latter are vastly more numerous than the former."

Surely there are a lot more people in between though, people who don't expect to inherit a huge pile, but want a bit more than to be able to pay the leccy bill and steer clear of the law. They are the perneially unfashionable lower middle class whose vote is determined not by what their interests are now (those of the respectable working class) but where they expect them to be in the future (middle class). It was the floating voters of this "aspirational" class that kept Thatcher in power.
For this reason I think the economics of the inheritance tax debate are irrelevent, it's purpose as a policy announcemnet was to signal a future tax cutting intent.

I can't quote the source but I read somewhere that genuine chavs - unemployed, in council housing, no realistic prospect of employment beyond the menial) are about 10% of the population.

[Neil Harding]

Matt - And only 6% pay IHT, so the chavs at 10% ARE more numerous, which was Chris's point. The point for me is that the national average house price is just £210k, i.e most people are completely exempt from IHT. Even in London the average house price is only £354k. In 2 years time the IHT limit was due to rise to £350k to reflect this. But even at the current levels someone who inherits a £354k house would only have to pay £21k in IHT. Is it beyond the aspirations of someone (who has just been made £333k richer) to take out a £21k mortgage? The whole argument over IHT is ridiculous, if anything we should be lowering the limit, not raising it and tightening the rules to stop avoidance. IHT is the most moral tax we have - much more moral than council tax and VAT (that hit the poor disproportionately and the Tories introduced and doubled respectively). If you truly believe in aspiration, wealth taxes are top of your list. Clearly those at the top believe in privilege rather than merit as they try to claim.

[Matt Munro]

Why does VAT hit the poor disproportionately though ? It is, in theory, a tax on "luxury" (for which read maufactured) goods, and the majority of the poors income must by definiton be spent on essentials (food, utilities, public transport etc) which don't attract VAT. I'm not saying you're wrong, and it may be we have different interpretations of "poor", just unclear why that should be the case.