Monday, November 07, 2016

Why we need inheritance taxes

The Herald yesterday pointed out the long-term consequences of Auckland's unrestrained housing bubble: increased disparities of wealth and the rise of an English-style class system:

Beckett faces becoming a victim of a new phenomena that is poised to create a tale of two Aucklands.

Economists say there are those who will inherit houses and those who will never afford one.

This "bequest bulge" driven by a combination of crazy house prices and baby boomer housing wealth may spark a return to the Victorian-style class system.

And that places Auckland at the precipice of an unprecedented shift back in time.

An Auckland house is expected to cost more than $3 million in 20 years time. And at that price, even people with university degrees and good jobs will be locked out of the housing market. The only people able to afford to own their own home will be those who inherited one from their parents.

This is not the sort of New Zealand anyone wants to live in. Inherited wealth disparities on this scale are exactly why many of our ancestors fled Britain - and why we strangled our incipient would-be aristocracy at birth in the 1890's with land taxes. As for how to stop it again, the answer is simple: tax it. We used to have inheritance taxes, which limited the ability of the ultra-wealthy to pass on social disparity. We should bring them back.