Mick Clifford: Inheritance tax 'reform' calls show gulf between haves and have-nots

Inheritance tax is a contentious issue, especially for those wealthy enough to pay it

Today, inheritance tax is, to the greatest extent, a tax on the runaway property market.

We saw covered in the media last week two extremities of society, the power of affluent middle-aged folk, and the plight of children who start life having to fight against all the odds.

First, the poor people being asked to pay tax on large windfalls.

The headline on the Sunday Independent (March 22) read like an accusation.

‘State takes in record €1bn inheritance tax as Taoiseach Micheál Martin pledges reform.’

The Sindo was not an outlier. During the week, this newspaper featured the issue of inheritance tax, again as if it was an unfair toll being levelled on a cohort who are weighed down with disadvantage.

This positioning is reflected in the body politic where the issue is constantly raised as if a large number of ordinary people are being bled dry by the State.

Last October, Simon Harris described the current threshold for the tax — €400,000 for offspring — as “unfair and punitive”.

A few years ago the Commission on Taxation and Welfare reported that in order to fund services into the future it would be necessary to effect measures such as  lowering thresholds for inheritance tax.

Last year, the Government raised the thresholds.

A few facts from the real world wouldn’t go astray. According to an analysis by the ESRI in 2024, around one third of households receive a large inheritance.

This, to the greatest extent, represents those at the upper reaches of the socio-economic ladder.

Among the recipients the median amount received is €100,000, nowhere near the threshold for paying tax for offspring.

Around 3% of all households inherit more than €335,000

Those who inherit more than €335,000 — which was the threshold until it was raised in 2025 — represented around 3% of all households.

Today, inheritance tax is, to the greatest extent, a tax on the runaway property market. For instance, a typical family of three offspring can inherit a family home worth €1.2m before stumping up a penny on tax.

Claims that people should be allowed to inherit the family home for which their parents worked all their lives represent little more than spin.

Yes, people worked hard to pay off mortgages. However, the value of the family home bears no resemblance to the size of a mortgage. It is instead exponentially inflated at a time when an awful lot of people can’t buy homes at all.

But, say the poor put-upon inheritors, what about keeping the home in the family? No problem. There is provision for a person occupying the family home for three years to inherit it free of tax.

If you’re not occupying the home, surely its value is exclusively as an asset.

Surely, in an alleged republic, you should pay a small amount in tax if you’re inheriting a huge windfall on the back of a soaring property market.

Low rate of domestic property tax in Ireland

All of this, remember, is in a state where the domestic property tax is a fraction what it is elsewhere.

On these pages last week, a case was made about the low thresholds for those inheriting from other than a parent. It was cast an unfair system for people without children. This is factually inaccurate; it is the inheritor that pays the tax, not the deceased childless person.

Certainly there is disparity between the thresholds for offspring and others, but an attempt to address this would have to include a commitment to lowering thresholds for offspring.

That ain’t going to happen.

Instead, we continue to be subjected to a constant bleating from the upper echelons of the socio-economic ladder that paying a proportionate amount of tax is just so unfair.

Another story last week highlighted the plight of a group for whom inheritance tax might as well be the name of a space station on Mars.

Currently there are 6,000 children in the care of the State.

What's your view on this issue?

You can tell us here

Each and every one of these kids was taken into State care because it was determined that to continue living in the homes into which they were born would diminish their prospects of any kind of a stable or productive life.

So the State stepped in.

Long research across all kinds of societies shows that this cohort of children are most likely in adulthood to face issues such as addiction, encounter violence, be involved in crime, inflict pain - either physical or financial - on other people, end up imprisoned and ultimately lead lives less lived.

That is not to say all children in care end up like that, or even a majority, but compared to those who have the advantage of growing up in a stable and loving environment they are starting with major disadvantages.

Last week the office of the ombudsman for children produced a report that showed between 2020 and 2026 the child and family agency Tusla received less than half of the amount of funds it said was required to provide a service.

There are problems with the functioning of Tusla which deserve serious attention but above and beyond that it is chronically underfunded.

In the report the ombudsman Niall Muldoon asks how as a country we have fallen so far that we appear unable to provide a highly vulnerable child with a safe and stable place to live.

“Children in care have already overcome so much in their short lives, so when the State steps into the role of parent, it is incumbent on them to make sure it does so knowing with absolute certainty that it can make those lives better,” Mr Muldoon said.

Concerns over the level of funding for Tusla

“Our report also highlights the current challenges in the system and our concerns over the level of funding being made available to Tusla,” Mr Muldoon told reporters.

“It is hard to fathom why, despite an increase of over 100% in referrals over the past 10 years and an expanded remit over that time, Tusla would receive just 48% of what it asked for in pre-budget estimates between 2021 and 2026.”

Perhaps one reason why there is not enough political attention paid to a basic function in an alleged republic is that energy tends to be focused not on those most in need, but on those who can lobby relentlessly, or shout the loudest.

Nobody likes paying tax. It is, however, as inevitable as death if one wants to exist in an organised society and all the advantages that come with that.

There are sometimes legitimate complaints of how taxes are spent, whether value for money is optimised, and how cognisant the state is about waste.

The riposte — often from those who regard taxes as some form of evil — is that they would be happy to pay if the money was spent well.

That contention should attract a large dollop of scepticism.

The reality is successive governments have fashioned the tax system on a very narrow base, about which there are frequent and serious warnings.

And still, wealthy interests attempt to chip away at that base at a time when the State, as outlined by Niall Muldoon, can’t even properly fund care for some of the most vulnerable children in society.