The Problem: Inheritance tax is wildly unpopular, often avoided, and does little to reduce inequality.
The Solution: Use revenue from inheritance tax to provide cash pay-outs to citizens.
Inheritance tax (IHT) was famously described as paid ‘only by those who dislike their families more than the taxman’.
It remains a tax that most people with an inheritance to pass on seek to avoid as best they can, and it brings in a fraction of total government tax revenue.
Designed as a way to enhance social mobility and reduce equality, it is of questionable effect in its current state.
Therefore, I suggest that, instead of the revenue from IHT going into the government coffers for general taxation, it is instead handed out to citizens as cash grants.
Given that IHT is designed to reduce inequality, this seems eminently sensible. Also, many people will never receive a bequest of any significant value, so handing out IHT wealth as cash grants would help to address that inequality.
Putting cash into people’s hands is a highly cost-efficient method of support.
I suggest that there are two categories of recipients. The first are those deemed worthy, through having a lack of funds but working very hard for their families and/or communities. For example, working parents in the public sector on low incomes, such as teachers in schools for disabled children, those working in the prison sector, and so on. So, a pool of people on low incomes doing worthy jobs would be in with a chance of receiving 50% of the funds.
The other 50% would be distributed purely at random to all citizens in the UK, form age 1 day to 100 years and above. I’m a firm believer that no-one can be certain who is best placed to receive rewards, so random allocation is often a great way to go. It also means even the wealthy could benefit from the tax, so makes it more inclusive (if perhaps not as effective at redistribution, however wealthily people would likely spend it all, so it would still inject money into the economy to spur job creation).
IHT generates around £5 billion annually, so I suggest there should be five hundred thousand grants of £10,000 distributed each year. That would reach a large number of UK households, providing vital funds to help those most in need and also extra cash for others to spend and help grow the economy and create jobs.
A very simple system, low cost to administer with very clear benefits, and one that is likely to be more popular with citizens at large as well as being a more effective way to re-distribute wealth than through general government spend.
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