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People ought to be able to enjoy the wealth they've earnt over their lifetime without having to defend it from the state. But when they die, IMO their wealth o

by cbeach 11y ago

People ought to be able to enjoy the wealth they've earnt over their lifetime without having to defend it from the state. But when they die, IMO their wealth ought to be redistributed to society. Their own kids didn't earn it any more than the neighbour's kids did. I'm okay with increasing inheritance tax provided we simultaneously reduce income tax rates. That would produce a fairer society where people are more productive. There will be those who (fairly) contest the double taxation aspect of inheritance tax, but please consider the benefits to society of reducing income tax as a result of raising inheritance tax. Parents could argue that it's up to them what they give their kids. That's true. But watch "Made in Chelsea" to see what happens when kids get a large inheritance. Horrendous! :-) Obviously tax collection is also an issue here - people will naturally try to avoid inheritance tax, and it will be very hard to stop them. No easy answers to that.

bko 11y ago
Milton Friedman makes a good argument against the distribution of wealth that addresses your concern directly. Definitely worth a watch. https://www.youtube.com/watch?v=MRpEV2tmYz4 https://www.youtube.com/watch?v=MRpEV2tmYz4
elcapitan 11y ago
What would be the difference between inheritance and just giving your children money as long as you are alive? Would you be barred from that as well? So you could spend your money on whatever you want, but not give it to a very particular group of people?
- AnimalMuppet 11y ago
  If I understand correctly, there are limits to how much you can give your kids before taxes kick in. It used to be something like $10K/year and $150K/lifetime above the $10K/year. And if you used the $150K/lifetime, it cut into what they could inherit without taxes. IANAL, and that was a while ago. I don't know what the current rules are.
nugget 11y ago
The inheritance tax already kicks in at a pretty high rate above $5 million and change. Are you advocating for an even higher rate? Close to 100%? If so, keep in mind that inheritance and gifting (while still alive) are directly connected. A 100% inheritance tax means you functionally prevent people from giving any sizable amounts of property to any other person (sans spouse presumably). This has a lot of implications. Even under such a system, if I am a wealthy parent, can I invest in a child's startup? What's the difference between a legitimate investment versus a transfer of wealth masked as an investment? Can I buy a 5th house in the city in which my child lives and allow them to live there rent free forever, or will the Government want to impute rental income? Will we create a new layer of (expensive, game-able) bureaucracy to decide what's fair use versus unfair use? Will the fact that effective transfers of wealth now require a higher degree of sophistication make inequality even worse? My point being that these types of taxes tend to introduce a lot of complexity, cost, and inefficiency (and that's before considering the inevitable loopholes that lobbyists pay to include). And ultimately, lots of unintended consequences. I agree that the tax system can and probably should be used as a tool to encourage more equality but let's do it in a simpler and more efficient way, like land value and other consumption taxes.
- cbeach 11y ago
  Absolutely right on the complexity and loopholes. As I said - very hard to collect this in practise. But then again there are ways of legitimately avoiding income tax too. I agree with raising consumption taxes.
xlm1717 11y ago
To be fair, of course they're gonna make it look horrendous. It's a reality show, after all!
ThomPete 11y ago
The double taxation argument never really made sense to me. If the same person is taxed twice for the same money then yes. But if you give money to your child when you die you are not going to be taxed twice. Instead you were taxed and your child will be taxed. If you are against taxation on inheritance based on the argument of double taxation then you are also against the idea of taxation for almost any other use of money. If go to work, get a salary is taxed on it and then go out and buy something for those money then you could might as well claim that it's double taxation. Following that logic. That's of course not how it works. If I inherit money my parents made I am getting those without having done anything besides being lucky this was my dad. Of course there should be a tax on that, especially for all those who claim that it's unfair that you work hard and get taxed. People who claim that tax on inheritance is double taxation are confusing the money with the involved parties.

by cbeach 11y ago

bko 11y ago

Milton Friedman makes a good argument against the distribution of wealth that addresses your concern directly. Definitely worth a watch. https://www.youtube.com/watch?v=MRpEV2tmYz4 https://www.youtube.com/watch?v=MRpEV2tmYz4

elcapitan 11y ago

What would be the difference between inheritance and just giving your children money as long as you are alive? Would you be barred from that as well? So you could spend your money on whatever you want, but not give it to a very particular group of people?

AnimalMuppet 11y ago
If I understand correctly, there are limits to how much you can give your kids before taxes kick in. It used to be something like $10K/year and $150K/lifetime above the $10K/year. And if you used the $150K/lifetime, it cut into what they could inherit without taxes. IANAL, and that was a while ago. I don't know what the current rules are.

nugget 11y ago

The inheritance tax already kicks in at a pretty high rate above $5 million and change. Are you advocating for an even higher rate? Close to 100%? If so, keep in mind that inheritance and gifting (while still alive) are directly connected. A 100% inheritance tax means you functionally prevent people from giving any sizable amounts of property to any other person (sans spouse presumably). This has a lot of implications. Even under such a system, if I am a wealthy parent, can I invest in a child's startup? What's the difference between a legitimate investment versus a transfer of wealth masked as an investment? Can I buy a 5th house in the city in which my child lives and allow them to live there rent free forever, or will the Government want to impute rental income? Will we create a new layer of (expensive, game-able) bureaucracy to decide what's fair use versus unfair use? Will the fact that effective transfers of wealth now require a higher degree of sophistication make inequality even worse? My point being that these types of taxes tend to introduce a lot of complexity, cost, and inefficiency (and that's before considering the inevitable loopholes that lobbyists pay to include). And ultimately, lots of unintended consequences. I agree that the tax system can and probably should be used as a tool to encourage more equality but let's do it in a simpler and more efficient way, like land value and other consumption taxes.

cbeach 11y ago
Absolutely right on the complexity and loopholes. As I said - very hard to collect this in practise. But then again there are ways of legitimately avoiding income tax too. I agree with raising consumption taxes.

xlm1717 11y ago

To be fair, of course they're gonna make it look horrendous. It's a reality show, after all!

ThomPete 11y ago

The double taxation argument never really made sense to me. If the same person is taxed twice for the same money then yes. But if you give money to your child when you die you are not going to be taxed twice. Instead you were taxed and your child will be taxed. If you are against taxation on inheritance based on the argument of double taxation then you are also against the idea of taxation for almost any other use of money. If go to work, get a salary is taxed on it and then go out and buy something for those money then you could might as well claim that it's double taxation. Following that logic. That's of course not how it works. If I inherit money my parents made I am getting those without having done anything besides being lucky this was my dad. Of course there should be a tax on that, especially for all those who claim that it's unfair that you work hard and get taxed. People who claim that tax on inheritance is double taxation are confusing the money with the involved parties.