Wednesday, 16 July 2008

Conservatives surveyed on which tax they'd cut first

ConservativeHome reports that the tax most preferred to be cut first by their respondents, was Inheritance Tax. While this clearly identifies those people as likely to be land owners, it does also hint at a tax that would be popular to reform.

Inheritance tax taxes wealth such as cash, shares, property and possessions. It partly acts as a tax on the untaxed gains of personal land ownership, but it also acts as double taxation on income that has already been taxed. It's a particularly distorting tax.

As an economy, we want taxes that encourage economic behaviour, and tax behaviour that deprives others of economic value.

If we are to do what is popular, it would be far more effective to raise the same revenue from a land or resource tax.

Perhaps the best approach would be to replace council tax above band H with a land value tax, which would raise additional revenue from those who's properties are in particularly popular areas, and scrap inheritance tax.

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