Inheritance tax: boon or bane

  8 May 2024 Hindu news paper contained a rousing article arguing for inheritance taxes. Unfortunately the article fail to convince anyone. It does not even make a good case against inequality.

 These kind of arguments are often emanate from soft core socialists. It is to fool the neutral reader who want to do good. But as the saying goes, 'road to hell is paved with good intentions'.

 One of the supporting data in the article is really reveals the truth. It is the fact that, India managed to reduce the wealth of top 1% during 1965 to 1985.From around 16% in 1965 it dropped to 6% 1985. Which is around 40% of national wealth in 2023.

 Now let us remember the two decades dominated by Indira Gandhi. India's poverty was around 40%, per capita income around $300, and 'Garibi Hatao' was a major slogan. In addition to that India saw war, emergency and dwindling of Forex reserves.

 Coming to the current era of liberal economics of Dr. Manmohan Singh and his vocal successor Narendra Modi. The unequal Indian poverty is less than 9% by old standards. Per capita income is $2400 and is regional behemoth. No one care much about poverty anymore; all political campaigns are based on aspirations of the middle class.

 Hence the choice is clear you can be unequal and well or you can be equally poor. Choice is yours.

 It could be understood by a simple analogy. Imagine marks in a class test. Some scores a perfect hundred, some scores bare minimum. What if we make a rule that anyone who scores over the pass marks should give the excess marks to another. Now; some students see that they can get by without work. Others see no matter how hard they try, they will only get the same mark as others. I will let you imagine what will happen to the average score.

 Surely economy works differently! Does it? As mentioned in the Hindu article itself, India had a wealth tax in the past. It was stopped finally because administrative cost of collecting it was higher than revenue received. 

 Inheritance tax will suffer the same fate. Because people accumulate wealth so that they can transfer it to their children. If they are told that their children would suffer huge inheritance tax, they would shift it other places. Making India much poorer than it actually is. I think Switzerland and Mauritius is already rich enough. 

 High net worth individuals are not tied to any country, are smart and work harder than our government employees. My money is on them shifting money with ease. What do you think?