Inherit the windfall—A Commentary by Bruce Ackerman ’67 and Anne Alstott ’87
Inherit the windfall
By Bruce Ackerman ’67 and Anne Alstott ’87
Thanks to the leadership of Labour, the next generation of Britons will enjoy two kinds of inheritance. Everybody gets up to £1,000 in baby bonds to help them start off in life. And children of the rich will get lots more whenever their parents give up the ghost.
The Blair government made the child trust fund a centerpiece of its re-election campaign in 2001. But curiously, the Brown government hasn't linked the two forms of inheritance in the present debate over inheritance taxation. Instead, it has chosen to compete with the Tories on the Tories' terms - while Cameron promises a £1m exemption, Darling asks the rich to settle for only £600,000 tax-free.
This is not a game that Labour has can win without transforming itself into Tory-lite. Better by far to reframe the debate by linking the two forms of inheritance - by funding baby bonds with the tax on inheritance. With this link firmly in the public mind, further Conservative efforts to slash inheritance tax will be understood as attempts to reduce the baby bond, generating a new question: which is the better way to organize the transfer of wealth between generations?
Baby bonds are a form of citizen inheritance. Young adults get the money regardless of whether their parents are stockbrokers or schoolteachers, computer geeks or construction workers. All have helped build Britain, and all may rightfully demand that their children share in the wealth they have helped create.
Private inheritance proceeds on a very different premise - kids get their money on the basis of blood, not effort or common citizenship. This system of blood-inheritance may, to some extent, be justified in terms of incentives - perhaps the parents won't work as hard if they know that Junior's inheritance has been slashed from a million to a half-million by the nasty Labour government. But surely Junior can't complain too energetically. After all, he hasn't chosen his parents, and he can't claim credit for their great success in the marketplace. What is more, Junior has generally benefited greatly from his parents' position while they were alive. It seems churlish for him to complain when he only gets a few hundred thousand tax-free upon their demise.
A stand-alone inheritance tax seems bizarre - a macabre levy on family tragedy. Rather than accepting the Tory focus on the plight of housing-millionaires, tying the level of baby bonds to the taxation of private inheritance would challenge all Britons to consider seriously the question of intergenerational justice.
Citizen inheritance is not only based on fundamental notions of fairness. It also provides a start-up fund to every Briton when he or she is beginning adult life and really needs it. In contrast, private inheritance is increasingly a system under which 90 year olds are passing on their fortunes to 60 year olds - not precisely the ideal moment for them to use their windfall to maximum advantage in making their life meaningful.
Our point, we emphasize, is not to oppose any and all forms of private inheritance. We simply suggest that the Labour government make the most of one of its leading innovations of the past decade, and challenge the Tories, and society more generally, to think again about the trade-off between citizenship inheritance and family inheritance in giving the next generation a fair start in life in tomorrow's Britain.
Bruce Ackerman and Anne Alstott, professors of law at Yale, are authors of The Stakeholder Society.