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Wednesday 9 July 2008

Balls wants a 100 per cent tax on inherited brains

Irwin Stelzer admires the Schools Secretary, and so regrets that his admissions policy prevents schools from taking account of a pupil’s prospects of success. Bad news all round

But it gives no weight to the interests of the latter two. It ignores the need of other students not to be lumbered with incompatible or potentially disruptive classmates, and it ignores the needs of the institution — to maintain its standards. Public policy that ignores the interests and legitimate needs of all the parties affected by it is, to put it mildly, badly crafted.

Worse, Balls’s 100 per cent tax on cultural and intellectual assets hard-earned by parents and passed on to their children threatens to reduce parents’ incentives to work hard and contribute to the nation’s intellectual capital. Studies show that high inheritance taxes are not a significant disincentive to work and thrift by those destined to shuffle off this mortal coil sooner rather than later, which is one reason such material wealth can be taxed without triggering a significant reduction in incentives. But we are not dealing here with material wealth. We are dealing with cultural and social assets: to make them non-transferable might well be to reduce parents’ incentive to work, and to sacrifice, and therefore their incentive to add to the nation’s stock of human and intellectual capital by investing in their offspring.

As one who received several letters from universities advising me that their Jewish quotas were filled, but do try again next year, I applaud the schools minister’s desire to make opportunity more equal, especially in a country in which class distinctions have led to the underutilisation of its human capital, it is admirable. But his attempt to use the power of central government to make irrelevant every indicator of good parenthood, to make it impossible for the admissions process to give weight to a student’s past behaviour and performance, or to a family’s preference for the ethos of one school as compared to others, is not. Equality of opportunity requires taxing intergenerational transfers of material wealth; maximising incentives to work by keeping marginal tax rates low, especially for low earners; creating strong incentives to good behaviour by maximising penalties for antisocial behaviour; devising tax policies that create strong incentives to the formation of traditional families. All policies Balls and his party find unattractive.

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