Indo - "State takes in record €1bn inheritance tax as Taoiseach Micheál Martin pledges reform"

[arbitron]

Sounds like a good idea. We should give that system a try at some point

Yes, it's mystifying to have governments who claim to be centrist and pro-market but then support policies that undermine productivity.

I had a look at what the various parties have said. FG want to raise the thresholds, FF want to reduce the 33% CAT rate. So they mainly benefit bigger recipient. SF want to raise the rate and reduce the thresholds. They will also penalise people who get smaller amounts.

Interestingly the Greens prioritise reducing income tax and the Soc Dems say that inheritance should not be treated more favourably than earned income. Much more beneficial to the average worker.

Superb post arbitron. Should be compulsory reading.

There are rules against torture and brainwashing

 

[Purple]

SF want to raise the rate and reduce the thresholds. They will also penalise people who get smaller amounts.

I've always said that if you are old and rich then you should vote for Sinn Fein, as their policies favour older rich people, but if you are young and not rich then they are the last Party you should vote for.

 

[Itchy]

Yes, it's mystifying to have governments who claim to be centrist and pro-market but then support policies that undermine productivity.

Because this is demonstrative of the prevailing attitude in a nutshell.

If I work hard and have good fortune along the way, earn a large amount of money, pay plenty of tax on it along the way, why should my children have to pay tax once again on it again when I die?

The CAT tax and thresholds are for the benefit of the disponer (generally old and rich people i.e. voters) and not the receivers of a gift.

 

[ClubMan]

The CAT tax and thresholds are for the benefit of the disponer (generally old and rich people i.e. voters) and not the receivers of a gift.

Surely it's the opposite? It's the recipient of a gift/inheritance who benefits from the CAT exemption thresholds.

CAT group thresholds

This page explains the thresholds, rates and aggregation rules for calculating Capital Acquisitions Tax

www.revenue.ie

CAT group thresholds​

Each Capital Acquisition Tax (CAT) group has a tax-free threshold amount. The threshold applies to the total taxable benefits you have received in that group. You must include the taxable value of any previous gifts and inheritances received since 5 December 1991 in the same group.

You only pay tax on the value of a gift or inheritance above the tax-free group threshold amount.

 

[Purple]

Surely it's the opposite? It's the recipient of a gift/inheritance who benefits from the CAT exemption thresholds.

It is the opposite but that's not the way older people think.

 

[Purple]

If I work hard and have good fortune along the way, earn a large amount of money, pay plenty of tax on it along the way, why should my children have to pay tax once again on it again when I die?

There's a few reasons.

Firstly it creates a more meritocratic society. That's the main reason.

Secondly most people's wealth is due to the value of their home. Most of that value in most cases is due to capital price appreciation and so is unearned wealth upon which they have paid no tax. So in most cases they didn't earn the money and they didn't pay tax on it.

 

[patfert1]

The aristocracy pass power and wealth by birth, with minimal role of merit/competition. Economic position is largely predetermined by the family you are born into. There are barriers to outsiders as privilege is maintained by lineage and inter-marriage, with capital concentrated narrowly within families. Preservation of wealth is incentivised. Houses, land, tax avoidance.

While I concur with some aspects of your argument, I really don't see any relevancy of the aristocracy and monarchy to inheritance tax in an Irish context. Like Ireland, the USA also doesn't have a monarchy, yet still little or no inheritance tax in most states. By and large, those with money in Ireland made it themselves, not because 500 years ago they were on the winning side of a battle.

Secondly most people's wealth is due to the value of their home. Most of that value in most cases is due to capital price appreciation and so is unearned wealth upon which they have paid no tax. So in most cases they didn't earn the money and they didn't pay tax on it.

Yes, if we are talking about the average joe's family home only. Many of those fortunate to have a bit more money bought investment properties, which indeed appreciated in value, but these were speculative investments which carried risk and could have also resulted in loss - as indeed was the position for many after 2007. Along the way they paid tax on rental income, property tax, RTB registration, VAT on work done, etc. Profit in such cases is not unearned wealth.

Because if my employer has paid tax on their profits, then they use that for my wages, why do I pay PAYE?

Profit and resulting corporate tax is calculated after wages are paid. Tax is not paid twice, in this case. I do appreciate the general thrust of your argument though, even if I differ on certain points.

 

[Fortune]

So you're in favour of higher inheritance taxes, more taxes on unearned wealth and a reduction in the higher rate of income tax?

Yes, but my post was to highlight how capitalism hasn't rewarded work

 

[Purple]

While I concur with some aspects of your argument, I really don't see any relevancy of the aristocracy and monarchy to inheritance tax in an Irish context. Like Ireland, the USA also doesn't have a monarchy, yet still little or no inheritance tax in most states.

Yes and the USA has very high levels of intergenerational wealth and very low levels of social mobility; those born poor in America are more likely to die poor than in any country in the EU. In other words the "American Dream" is more attainable in Europe than it is in America.

By and large, those with money in Ireland made it themselves, not because 500 years ago they were on the winning side of a battle.

No, by and large it's because of money printing which reinflated assets after the 2008 crash and Covid money printing inflated them again more recently.

Yes, if we are talking about the average joe's family home only.

That's where most wealth in this country is held.

Many of those fortunate to have a bit more money bought investment properties, which indeed appreciated in value, but these were speculative investments which carried risk and could have also resulted in loss - as indeed was the position for many after 2007. Along the way they paid tax on rental income, property tax, RTB registration, VAT on work done, etc. Profit in such cases is not unearned wealth.

Yep, I'm one of those people. My pension, family home and investment assets are worth more than twice as much as they would be if I hadn't been bailed out after the 2008 crash with borrowed money that will have to be repaid by by my children's generation and their children's generation.

My children have the benefit of the investment I've made in their education and the pier group they have been exposed to because I can afford to live in a "nice" area. Eventually they'll get hundreds of thousands of Euro in gifts and inheritance from money I didn't earn and upon which I didn't pay any tax. The current system suits me and my family. That doesn't make it right.

 

[Purple]

Yes, but my post was to highlight how capitalism hasn't rewarded work

No, our form of socialism hasn't rewarded work. That's mainly because our populist politicians conflate wealth and income. The Shinners talk about having a higher level of income tax on high earners and call it wealth tax. It is no such thing.

 

[Sister Sara]

Here is a chart courtesy of Copilot so if there are errors excuse me.

If Inheritance tax were the issue of the next GE (unlikely), and I have construed some of the views here correctly, then SF and PBP could expect a bounce in votes from some unlikely AAM posters?

 

[patfert1]

That's where most wealth in this country is held.

Right, but if we are thinking about inheritance beyond the existing allowances, it's usually not the family home. And of course the edge cases of a very valueable family home inherited by just 1 or 2 children.

Yes and the USA has very high levels of intergenerational wealth and very low levels of social mobility; those born poor in America are more likely to die poor than in any country in the EU. In other words the "American Dream" is more attainable in Europe than it is in America.

I wouldn't argue with that. My main point is that I don't see connection with monarchy and aristocracy in the Irish context (but that was another poster).

No, by and large it's because of money printing which reinflated assets after the 2008 crash and Covid money printing inflated them again more recently.

I haven't heard this before. Can you elaborate?

inheritance from money I didn't earn and upon which I didn't pay any tax

Didn't earn as a salary, yes. But I'd argue that if you invested in property, you accepted a risk-reward ratio, that worked out well in the longer run, and therefore you earned it in a different sense. You could have left the money in the bank, then you would have earned only a miniscule return.

 

[C_Pike]

Right, but if we are thinking about inheritance beyond the existing allowances, it's usually not the family home. And of course the edge cases of a very valueable family home inherited by just 1 or 2 children.

Indeed, only a miniscule number of people pay any CAT each year and a tiny minority of the overall population pay it over a lifetime. Any reduction in CAT would be borne through the tax system by every other taxpayer, which is its own kind of unfairness.

I haven't heard this before. Can you elaborate?

The long story short is that to prop up the system post 2008, central banks flooded the world with money and lavished us with low interest rates, and this money and these interest rates chased up asset prices. Similar happened during covid. The S&P 500 has returned an average of 13.5% per annum 2009-2025 inclusive, versus 10.4% 1991-2007. Cumulatively that difference would turn a €10,000 investment from €44k to €76k. Many other asset prices impacted by the same effect.

Many of us have just been very lucky to be invested over this period. Yes, we make decisions to save and invest. But so did people in the 1970s when the average annual return was 3.2% (and inflation turned that into a negative real return).

Didn't earn as a salary, yes. But I'd argue that if you invested in property, you accepted a risk-reward ratio, that worked out well in the longer run, and therefore you earned it in a different sense. You could have left the money in the bank, then you would have earned only a miniscule return.

Key word here: You. You took the risk. You had the option to spend it all on holidays and fine wine. You didn't. Whomever you leave it to can pay some tax for the benefit of receiving all this, from their point of view, risk free money.

 

[patfert1]

Indeed, only a miniscule number of people pay any CAT each year

Well, it doesn't seem very equitable if a miniscule number of people paid 1billion last year.

State takes in record €1bn inheritance tax as Taoiseach Micheál Martin pledges reform​

 

[ArthurMcB]

Theres two sides to this (obviously):

1. Should inheretance be taxed more, given that it is unearned? Particularly in context that earned income taxed so heavily.

2. Should benefactor be penalised for getting money from parent etc that has probably been earned through hard work and taxed already?

Both sides have merit and the answer is to balance both with an appropriate rate.

What that rate is, im not sure but it should reflect both sides.

I dont think it should be increased much, given point 2, above.

I dont think it should be lowered much, give 1, above.

 

[Zenith63]

Both sides have merit and the answer is to balance both with an appropriate rate.

What that rate is, im not sure but it should reflect both sides.

I think this over simplifies things too much, 97% of the population are not going to benefit from a reduction but would fund much of it through tax increases or income tax decreases they forego.

 

[Purple]

If Inheritance tax were the issue of the next GE (unlikely), and I have construed some of the views here correctly, then SF and PBP could expect a bounce in votes from some unlikely AAM posters?

Sinn Fein conflate wealth and income. They want to abolish wealth tax (AKA property tax) and increase income tax but call it a wealth tax. It is a cynical populist policy. They also want to increase social transfers to old people, the richest demographic in the country. Therefore no, as someone who believes in a society based on equality of opportunity and that welfare should go to those who actually need it, Sinn Fein are the last party I've vote for (and that's not even considering their lionising of child killers and terrorists).

 

[Purple]

2. Should benefactor be penalised for getting money from parent etc that has probably been earned through hard work and taxed already?

It probably hasn't been earned and they probably haven't paid tax on it.

 

[Purple]

Right, but if we are thinking about inheritance beyond the existing allowances, it's usually not the family home. And of course the edge cases of a very valueable family home inherited by just 1 or 2 children.

Yes, the family home usually makes up the bulk of the inheritance.

I haven't heard this before. Can you elaborate?

@C_Pike explained it very well.

Didn't earn as a salary, yes. But I'd argue that if you invested in property, you accepted a risk-reward ratio, that worked out well in the longer run, and therefore you earned it in a different sense. You could have left the money in the bank, then you would have earned only a miniscule return.

My home wasn't bought as an investment. I bought it for its use value. My pension doubled in value in 8 years without me putting a cent into it. None of the appreciation in either was earned.

 

[patfert1]

My home wasn't bought as an investment. I bought it for its use value. My pension doubled in value in 8 years without me putting a cent into it. None of the appreciation in either was earned.

I had assumed you had investment properties other than the family home, but ok. Regarding growth in pension, I would argue this is earned income. You build a wall and get paid, it is earned income. You sit at a desk and do paperwork for your employer, it's earned income. You run your own business, it's earned income - or loss, since now you take a risk. You sit at home and actively invest in the stock market, it's earned income (or loss). You sit at home and watch tv all day, with your savings invested in a passive market tracker... so now, is this or is this not earned income (or loss)? I would argue it is still earned income, similar scenario like a day trader but with little or no effort on your part. And now it's only a small step from that to your pension gain (or loss). Likewise, gain in value in a speculative investment property - which can go up or down in value - is very much earned income in my view. Just the other end of the spectrum for geting paid for building a wall.