(Image: United Australia Party Facebook page)

Clive Palmer has reignited the “death tax” myth ahead of Queensland’s election, warning Labor would impose a hefty inheritance tax on a dead person’s assets.

He’s invested in lurid yellow billboards, mass text messaging and video adverts playing on TV channels and radio stations who, unironically, run them in between panel discussions on the ethics of Palmer’s tactics.

But Australia hasn’t had an inheritance tax in more than 40 years. We’re one of the few OECD nations without one, and — despite attempts in 2019 to frame Labor’s franking policy as a death tax — it hasn’t been on the policy agenda of either major party for some time.

The history of death taxes

The OECD average inheritance tax is 15%. Italy has one of the lowest inheritance tax rates in the world at 4%, while Japan has the highest at 55%.

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When Australia abolished the inheritance tax in 1979, just 9% of deaths were liable for the tax. Most people paid 3% of their estate’s value.

Interestingly, there’s evidence that dozens of those eligible for the death tax managed to cling on to life until the new year when the tax was no longer in force. 

Death tax as a political tool

As Palmer’s campaign has shown, there’s no national law that demands political advertising be factual (though South Australia and the ACT have some rules). 

Both major parties have engaged in misinformation. Labor produced the “mediscare” campaign in 2016, warning the Coalition would privatise Medicare, while macabre images of the grim reaper popped up last year warning of Labor’s franking policy.

It was effective, with voters struggling to separate the so-called death tax from some of Labor’s other policies. This year, however, it seems the argument is less effective.

Australia isn’t the only country to use death taxes as a political scare campaign. The US generally has an inheritance tax of 40%, though high thresholds mean it affects just 0.2% of Americans. The first US$11 million left to heirs goes untaxed.

Despite it being rarely implemented, Republican politicians often use fears of a death tax to their advantage. President Donald Trump attempted to repeal the tax in 2017, saying: “to protect millions of small businesses and the American farmer, we are finally ending the crushing, the horrible, the unfair estate tax, or as it is often referred to, the death tax.”

The taxes are a constant source of consternation in the UK. Inheritance tax sits at 40% for estates worth more than £325,000 (AU$594,000). In 2015, the conservatives’ landmark policy reduced the rate while in 2017 the government proposed (then scrapped) a sharp rise in asset distribution fees. 

Death taxes are also making headlines in South Korea following the death of Samsung chairman Lee Kun-hee. Inheritance tax is set at 50% in the country, meaning Lee’s family could owe billions.

Why is the death tax such an effective scare campaign?

Dr Lindy Edwards is a former economic adviser to the Department of Prime Minister and Cabinet and senior lecturer in international and political studies at UNSW Canberra. She told Crikey Australia’s lack of inheritance tax was at odds with our egalitarian history.

“It’s probably one of the most just taxes in terms of equal opportunity, and creating social equity,” she said.

Most people balk at the idea of a death tax because they think they’ll be disproportionately affected.

“I think the taxes speak to quite a primal sense to people wanting to provide for their kids … the heritage they want to hand down is being attacked,” she said, adding most people don’t fully understand how inheritance taxes would work.

“People look at things in terms of how it affects them. I’m not sure people understand the extent of income inequality in Australia, or just how much wealth is transferred between generations.”