Padraic P. McGuinness, “Take from the dead to give to the living,”
The Weekend Australian, July 17-18, 1993, p. 2.

Should we bring back death duties? The case for doing so to restore inter-generational equity is becoming overwhelming.

This is not just another proposal to increase taxes. While there is a very good case for an across-the-board temporary increase in income taxes to help the unemployed both by way of retraining and job-subsidy, any such proposal is inevitably seized upon by vested interests to demand more spending on their own pet priorities.

But one of the main causes of unemployment is the lack of savings and the wage-levels of those privileged enough to have jobs; to propose an increase in income taxes to help those excluded from the workforce by the selfishness of the employed is only to propose a redressal of the balance.

A similar argument applies to death duties. As the proportion of the population in the older age groups increases, the cost of medical and other support services for the elderly increases, and the pensions and unfunded superannuation entitlements of the baby boomers loom as a crippling financial impost on the post-baby boom generation, new fiscal means will have to be found to finance these payments.

What better proposal than to make the beneficiaries, whose legacies show they can afford it, pay up when they no longer have any need for the money?

In the “good old days” there were no pensions or free hospitals, no Medicare scheme to provide expensive care for the old, frail and dying. Their children were expected to stump up; and of course those who had no children, or who had been abandoned by them, died in misery and poverty.

These days the State, the welfare system, has taken over the role of the children for most old people — why then should the State not be the legatee, the first claimant to the estate, of those it has supported through old age, sickness and death? If the heirs abandon their responsibility, surely they should also forfeit their claim to inheritance.

Thus there is a very good case for all old-age pension payments to be recoverable from the estate of the deceased. In the case of those who have no property, there is no problem. They should be treated with compassion and supported in decent circumstances at a reasonable standard of living. If they are sick, they should be cared for; if they incur expensive medical bills (as most people these days do in their last decade of life) they should be treated without charge.

But why on earth should those people who die with considerable assets not be assumed to be liable for repayment of these expenses? The classic example is of an elderly widow left with a large house in which she has spent most of her life. To impose a means test on the pension in terms of that house is objectionable and unfair — but the children who will benefit from the inheritance of such a house have no proper claim to it unless they have supported their mother. The first claim on the sale value of the mother’s house ought to belong to the community that has paid her pension.

This applies equally to the huge costs of medical support for many old people. If they are to receive the treatment they have the right by any humane criterion to receive, but have assets which after death can be applied to payment for that treatment, surely the community has a better claim than the children who would otherwise benefit.

This has little if anything to do with the envious proposals for death duties or other forms of inheritance tax from those who see it as a means of destroying large estates or confiscating the wealth of those who have had fortunate parentage. While there may be a case for such taxes — indeed, there is a very good argument to be made for a 100 per cent inheritance tax, since anything of value parents have to pass on to their children should have been achieved, by way of upbringing and education, long before their deaths — there are problems in erecting disincentives to the accumulation of wealth. To prevent either the accumulation or passing on to the next generation of wealth is likely to damage the health of any economy severely.

But we are facing a generational problem, unlike that faced by any other generation in history, in that we have a welfare State which was designed not to “make the rich pay” but to make the young and the next generations pay. The welfare State, as it has developed in the rich countries, is a one-generation affair — the baby boomers took from their parents, while at the same time they erected a welfare system which will enable them to take from their children.

And the children of those who have accumulated capital assets, from the family house on, are the only members of the paying generation who have any prospect of compensation for the burdens which they will inherit.

It is only equitable, therefore, that their own dereliction of duty — their failure to support their parents, their imposition of their relatively asset-rich parents on welfare and health support services which they could well have afforded to pay for, their presumption that the pensions and superannuation of their parents could be raised from the general taxpayer — should be dealt with by inheritance taxes.

This would undoubtedly create social tensions. How many of the baby boomers have blithely assumed they can purchase the loyalty of their children by promising an inheritance sometime, while at the same time loading their pension entitlements and their medical expenses on to the conveniently amorphous generation of the young? Virtually the only members of the post-baby boom generation who are going to get any compensation are those whose inheritance has been protected at the expense of those without property, and the poor.

It is not just an urban problem, of course. Much as we should be concerned about the plight of the undercapitalised rural producers who are suffering in the present drought and recession, why should we assume any assistance given them should not be repayable from their assets at death? There is not a God-given right for the children of farmers to inherit a property unencumbered because of the problems of their parents.

The principle suggested has, indeed, quite wide application. Unemployment benefits, education expenses, health subsidies throughout the whole of life, as well as unfunded pension and superannuation benefits and medical expenses, could better be collected at death rather than levied on the living taxpayers and begrudged to the genuinely poor.

It would no doubt create an incentive to dispose of assets before death, as inheritance taxes always do. There are few difficulties in this if such taxes are explicitly related to payments to the old, and it is made clear, for example, that any pensions, medical expenses, etcetera, would be in principle recoverable from assets held or transferred after retirement age.

There is a widespread misconception the baby boom generation has paid, through taxation and superannuation contributions, through the Medicare levy and its equivalents, for the entitlements they anticipate. The truth is they have not. The community of the next century has a moral right to recover the shortfall from their estates.

(in order of appearance on Economics.org.au)
  1. Where Friedman is a pinko
  2. The Economic Guerrillas: A lecture in honour of Maxwell Newton
  3. The Libertarian Alternative
  4. Libel laws block insider's revelations of Australia's industrial mess
  5. But perhaps the merchants of doom have a point
  6. The Origins of Paddy McGuinness
  7. The Itch for Influence
  8. LA safe from religious poverty
  9. Aunty should hang up her boots in face of premature senility
  10. Warning: health is a budget hazard
  11. New ABC Tory chief won't rock the boat
  12. Time to sell the ABC
  13. Youth victims of the welfare con
  14. Paddy McGuinness on class sizes (1991)
  15. More teachers won't solve the problems in our schools
  16. Paddy McGuinness on Catholics and wealth distribution
  17. Paddy McGuinness proposes inheritance tax equal to handouts received by deceased
  18. Let them swim nude
  19. Time to legalise heroin
  20. State-sponsored sports rorts
  21. The blight of the baby-boomers
  22. To reduce the problems of crime and corruption, legalise heroin
  23. We should ban Olympics
  24. Evidence shows heroin policy is not working
  25. Wowsers deny society while killing children
  26. Will Australia compete?
  27. Canberra's social revolution
  28. Paddy McGuinness in 1994 on the 2012 class size debate
  29. Why not pay for the ABC?
  30. Paddy McGuinness on David Stove
  31. Sometimes the truth hurts
  32. Paddy McGuinness on compulsory, informal and donkey voting, and breaking electoral laws
  33. Thomas Sowell, McGuinness, Aborigines and other minorities
  34. Genocide with kindness
  35. Hyde, McGuinness and Sturgess on Chaining/Changing Australia
  36. Paddy McGuinness defends comparing IQ of races
  37. Do-gooders should glorify smokers
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