Can Public Opposition to Inheritance Tax be Weakened?

AuthorRajiv Prabhakar
Published date01 July 2009
Date01 July 2009
Subject MatterArticles
© The Author(s), 2009.
Reprints and Permissions:
200907 24(3) 227–244
Can Public Opposition to
Inheritance Tax be

Rajiv Prabhakar
London School of Economics, UK
Inheritance tax is the subject of recent political controversy in Britain. Public
opinion appears to be a major barrier to boosting this tax. Evidence exists that
suggests considerable public disquiet with inheritance tax. Recently, some
commentators have argued that the way that inheritance tax is presented or
‘framed’ could enhance public support for this tax. This article presents
original focus group evidence on this claim. I note that while opposition to
inheritance tax is deep-rooted, framing can help mitigate opposition. This
article is important because it provides evidence on a live area of policy
inheritance tax, land tax, public opposition
Inheritance tax has been the subject of recent political controversy in Britain.1 Until
October 2007, the first £300,000 of a person’s estate was left untouched while the
remainder was taxed at 40 per cent (although there are exemptions from inheritance
tax for legacies to a spouse, civil partner, UK charities, UK political parties and
some national institutions such as the National Trust).2 Inheritance tax only forms
a small part of the total tax raised by government. For instance, in 2006–7, inheri-
tance tax represented only 0.8 per cent of the total tax yield (for comparison,
income tax and value added tax comprised 34 per cent and 18 per cent respective-
ly; Her Majesty’s Revenue and Customs, 2007a). In 2004–5, inheritance tax raised
approximately £2.9bn. This yield increased in 2006–7 to £3.5bn (Her Majesty’s
Revenue and Customs, 2007b). An important part of the reason why inheritance tax
DOI: 10.1177/0952076709103809
Rajiv Prabhakar, Centre for Philosophy of Natural and Social Sciences (CPNSS), London School of
Economics, Houghton Street, London WC2A 2AE, UK. [email:]

Public Policy and Administration 24(3)
receipts have risen over the past three years is that the numbers paying this tax has
increased. For example, Her Majesty’s Revenue and Customs reports that the esti-
mated numbers of those paying taxes on transfers at death rose from 29,000 in
2003–4 to 33,000 in 2006–7 (Her Majesty’s Treasury, 2007c).
At the 2007 Conservative party conference, Shadow Chancellor George Osborne
promised to raise the £300,000 threshold for paying the tax to £1m (Osborne,
2007). An earlier Conservative party policy review on economic competitiveness
headed by John Redwood had recommended abolishing inheritance tax altogether
(Economic Competitiveness Policy Group, 2007; see also Conservative Party,
2004). This Conservative stance contrasts with calls from centre-left observers to
boost inheritance tax. A Fabian Society Commission on Life Chances and Child
Poverty (2006) records that the proportion of total marketable wealth held by the
wealthiest 1 per cent of the population rose from 17 per cent in 1991 to 24 per cent
in 2004. The Commission continues that outside the wealthiest 10 per cent, the
proportion of wealth held by the population fell from 53 per cent to 44 per cent over
the same period. These observers insist that inheritance tax is crucial for tackling
wealth inequality. Although various justifications might be offered for wealth
inequality, such as the incentives this might provide for economic development,
these commentators insist that present levels of wealth inequality in Britain hamper
both efficiency and individual freedom. Taxing wealth is aimed at preventing
wealth inequalities being entrenched as they cascade down the generations
(Commission on Life Chances and Child Poverty, 2006; Commission on Taxation
and Citizenship, 2000; Diamond and Giddens, 2005; Maxwell, 2004).
The Conservative demand to raise the inheritance tax threshold appears to be
popular. Some commentary suggests that this dissuaded Gordon Brown from
announcing a snap election in October because the promise struck a chord in
marginal seats (Barker et al., 2007; Watt, 2007). The Conservative pledge also
perhaps stimulated Chancellor Alistair Darling to announce changes in his 2007
pre-budget report and comprehensive spending review on October 9 (Jenkins,
2007). Unused parts of a nil rate allowance could now be transferred between
married couples or civil partners. A person whose spouse or civil partner had died
could now claim the unused part of the nil rate band of their former partner.
Darling stated that these changes would come into immediate effect, and would
apply regardless of when their former partner or spouse had passed away (reported
on This means that the
combined tax free allowance for married couples or civil partners would now be
£600,000 rather than £300,000, and that by 2010 this combined allowance would
rise to £700,000 (Her Majesty’s Treasury, 2007). Jill Insley (2007) points out that
these changes do not apply to the 4m unmarried couples or single parents, siblings
or carers. Thus, the changes privilege the descendants of married couples or civil
partners over those from other groups.
Existing evidence highlights the unpopularity of this tax. Studies in Britain indi-
cate that a majority of people are opposed to this tax (Hedges and Bromley, 2001;

Prabhakar: Can Public Opposition to Inheritance Tax be Weakened?
Lewis and White, 2006). In the USA, William Gale and Joel Slemrod (2000,
2001a,b) note the reform of estate tax attracts intense attention. They record that
although less than two per cent of people who die owe estate tax, and in 1999
raised around one and a half per cent of federal revenue, in 1999 both Houses of
Congress voted to abolish this tax (this was vetoed by President Bill Clinton). Gale
and Slemrod (2001a; 2001b) suggest that estate tax provokes debate because it
cuts across several sensitive issues, such as the trade-off between equity and effi-
ciency. Gale and Slemrod (2001a; 2001b) review various options for reforming
estate tax, including replacing estate duty with a capital gains tax that taxes gains
accrued but not realized at death. They reject a capital gains tax, arguing it would
not raise as much revenue as an estate tax and be much less progressive (2000;
2001a). Instead, they propose changes that would raise the threshold and reduce
the rates on estate tax (2000; 2001a). Michael Graetz and Ian Shapiro report that a
conservative coalition succeeded in forcing through a repeal of estates duty in
2001, although there is a sunset clause that means that this legislation has to be
renewed in 2010 (Graetz and Shapiro, 2005). In Sweden, Henrik Hammer,
Sverker Jagers and Katarina Nordblom conducted a survey of public attitudes
towards a range of taxes and found that the top three taxes that their respondents
wanted to reduce or abolish were real estate tax (70%), inheritance tax (66%) and
gift tax (63%) (Hammer et al., 2006). On 17 December 2004, the Swedish parlia-
ment voted to repeal inheritance and gift tax from 2005 (Ohlsson, 2007). This was
followed up with a vote in the Swedish parliament to accept proposals from the
centre-right coalition government to abolish wealth and property taxes in 2008.3
Elsewhere, Australia, Canada and New Zealand have no estate or inheritance tax
(Edwards, 2006).
A natural conclusion to draw from this is that proposals to tax inheritances are
highly unlikely to win public support. Robert Goodin comments that, ‘Inheritance
taxes have long been the “third rail” of tax policy, touch them, and you are dead,
politically’ (Goodin, 2003, p. 70). This poses a problem for egalitarian reformers.
Inheritance tax is supported as a way of guaranteeing equal opportunity for all.
However, such a tax appears to find little favour among the public.
In this article I ask whether the options for inheritance tax are as limited as exist-
ing evidence seems to suggest. I make no assumption about the desirability or
otherwise of inheritance tax. My aim rather is to address the question of whether
those disposed towards this tax can win public support for such a policy. I argue
that although inheritance tax stokes opposition, if inheritance tax is put in the
wider context of other taxes and care is taken on how inheritance tax is presented
then there may be potential for reform. This draws on evidence gathered from a
qualitative study I conducted on public attitudes to inheritance tax. This article is
important because it provides evidence on a live area of policy debate.

Public Policy and Administration 24(3)
Existing Studies
Several studies have provided information on public opinion on inheritance tax.
Alan Hedges and Catherine Bromley (2001) conducted a quantitative survey of
public attitudes to taxation for the Fabian Society Commission on Taxation and
Citizenship. This covered 1717 adults in the summer of 2000. These researchers
found that 51 per cent of respondents thought that inheritances tax should be abol-
ished, while around 20 per cent thought that the threshold at which inheritance tax
starts should be raised from its then level of £250,000 to at least £500,000. The
remainder believed that the current level should be kept or reduced, with two per
cent thinking that all inheritances should be taxed. Hedges and Bromley also
examined attitudes to other taxes. They found that 58 per cent of respondents
thought that income tax was too high or much too high; 76 per cent...

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