IFS say David Cameron’s inheritance tax cut would disproportionately benefit the wealthy
The independent Institute for Fiscal Studies has said the Conservatives' plan, if they win the General Election, to cut inheritance tax for homes worth up to £1m would disproportionately benefit the wealthy.
George Osborne told the Andrew Marr show the Tory party supported "the basic human instinct to provide for your children." Under the current system homes worth between £350,000 and £1m are subject to 40 per cent rate of Inheritance tax.
However, the Tories' opponents will seek to make the most of an IFS statement released today detailing the distributional aspect of the policy:
Since the children of those with very large estates are disproportionately towards the top of the income distribution the gains from this (and in fact any) inheritance tax cut will also go disproportionately to those towards the top of the income distribution.
Paul Johnson, director of the IFS, also warned that "tax privilege associated with an asset like housing” could “drive up” prices.
It remains to be seen whether the pledge will help lift the Tories poll numbers as we approach the week where the parties unveil their manifestos. Labour will hoping to caricature the policy as a giveaway to the rich and reinforce the image of the Conservatives as a party of the wealthy.
But the pledge has already received a ringing endorsement from the influential grassroots campaign group the Taxpayers' Alliance (TPA).
"The Death Tax is fundamentally immoral, hitting families at the worst possible time, and any attempt to alleviate the burden is welcome," said the TPA's chief executive Jonathan Isaby.
"For too long, successive Chancellors have allowed more and more people to be dragged into the top band by refusing to move the thresholds, and correcting for that is well overdue."
"This is a welcome first step towards the abolition of the most hated tax in Britain, one that penalises people for working hard and trying to pass on a better life to their children and grandchildren."
According to polling from YouGov, Inheritance tax is by far the most unpopular tax in Britain with close to 60 per cent regarding it as unfair.
George Osborne's pledge to cut the so-called "death tax" at the 2007 conference Conservative Party conference was widely credited with giving the Conservatives a bounce in the polls and scaring Gordon Brown out of calling an election he was likely to win.
