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Inheritance tax was the original solution to this. Someone could be as rich as Croesus during their lifetime, but on their death returned the money from whence

by pcrh 9y ago

Inheritance tax was the original solution to this. Someone could be as rich as Croesus during their lifetime, but on their death returned the money from whence it came. Their offspring could benefit from a generous endowment of a proportion of this wealth, say 10%-20%. Edit: and no sneaking about with Trusts, either.

conanbatt 9y ago
Inheritance taxes are always avoidable, and they could also have devastating consequences. Even if you could effectively prevent a single coin getting to the hands of your children, that would mean lavish expenditures, not investment.
- pcrh 9y ago
  Tax avoidance is a perennial problem, to be sure. There's always an "arms race" between the taxers and the avoiders, but that isn't a reason not to have taxes in the first place.
  - conanbatt 9y ago
    In the context of evaluating a tax, the ability to avoid it and the difficulty to apply it is definitely one key design concept. A tax on people that eat their brocoli would be highly impractical!
    - pcrh 9y ago
      You're correct in that it's foolish to institute an uncollectable tax, but I don't think inheritance tax necessarily falls into that category any more than, say, capital gains taxes.
      - conanbatt 9y ago
        Is paying for your kids education inheritance? Are pre-paid company contracts for a lifetime inheritance? etc etc. There are some definite difficulties in implementation. But even then, my argument is that it could be a really harmful tax if it could be applied at all.
        pcrh 9y ago
        The evidence is that allowing large inheritances is harmful to society at large. It allows for an accumulation of economic influence within too few hands, and the creation of an entrenched elite. The "Founding Fathers" of the US were particularly opposed to it for this reason. One would have to balance the "harm" caused to the children of wealthy people for not inheriting wealth (mostly when they are around 50-60 yr old themselves), with the harm caused to society at large.
        conanbatt 9y ago
        What evidence? > One would have to balance the "harm" caused to the children of wealthy people for not inheriting wealth (mostly when they are around 50-60 yr old themselves), with the harm caused to society at large. I wonder if we could think of other examples of how harming a minority of people can be good for society at large. But regardless of the moral standpoint of the remark you said, you also have to account the harm it does to society to make people spend extra time hiding their wealth and spending it more frivolously.
        pcrh 9y ago
        My point is that there's no obvious harm implicit in denying people an inheritance. They did nothing to earn it. There's no inherent right to be bequeathed wealth; that this is evident is that it is nigh on impossible to sue one's parents (or their estate) for not willing their wealth to you (in the US; under Napoleonic law, there is a right to inherit). Many people spend inherited wealth frivolously. Business acumen isn't known to be genetically determined, whereas political influence is certainly affected by wealth and pedigree, see George Bush the first and the second.
        sokoloff 9y ago
        In the other direction though, there is inherent right (IMO). I have the right, in my pursuit of happiness, to make allocations of my lawfully earned money to my current needs, to my retirement savings, to my children's clothing and education, and other such pursuits and accounts as I see fit. There is harm to the donor to abolishing inheritance. I don't want to live in a world where "I farm this land, just as my father, his father, and his father for 5 generations has done." is not possible.
- frgtpsswrdlame 9y ago
  You've asserted several times in this thread that there are devastating consequences to the estate tax but never explain what those might be. Care to enlighten?
  - conanbatt 9y ago
    The idea of inheritance taxes are that once you are dead, you don't care about paying taxes. However, leaving wealth for your children is a huge economic incentive. As Friedman puts it: "People go to an irrational length to provide their kids a better life than they will ever get". If you could effectively put 100% tax on inheritance(which you can't in practice), it means your utility of leaving wealth around becomes 0. Now you want to spend that wealth as much as possible, and it turns into consumption. You would sell and spend everything you have for lavish expenses, which means a reduction in capital investment, which means slower economic growth. https://www.youtube.com/watch?v=MRpEV2tmYz4 https://www.youtube.com/watch?v=MRpEV2tmYz4
    - frgtpsswrdlame 9y ago
      Yeah I'm totally okay with that, a certain point society has to serve its people and not just the abstract view of growth at all costs. Consumption is good for the economy and inheritance taxes are necessary to provide equality of opportunity.
      - conanbatt 9y ago
        > Consumption is good for the economy I doubt hedonist consumption is what Keynes had in mind. > inheritance taxes are necessary to provide equality of opportunity. Lets take this to the extreme: lets say that your father could not provide you with anything but minimum substance until your coming of age (18?). Anything given to you by your parents would be taxed away. This means that you now cannot go to any college that is not provided to you by credit. But you have no assets and no income, so nobody will loan you any money. Plus, you don't have money for rent, so you need to work immediately to pay for your own place. Maybe you feel sympathy for the millions of people that actually live that, but how is forcing everyone to go through that be better for society at large? Or think what it would mean for the state to actually do that: what if you had to build any infrastructure built by a previous generation from scratch, because "its not fair the SF bridge is nicer than the Brookly bridge, its inherited". The emotional answer I have against advocating inheritance tax is that the goal is not to be fair, its to be better. And certainly fair by destruction, by removing everything, is not better.

by pcrh 9y ago

conanbatt 9y ago

Inheritance taxes are always avoidable, and they could also have devastating consequences. Even if you could effectively prevent a single coin getting to the hands of your children, that would mean lavish expenditures, not investment.

pcrh 9y ago
Tax avoidance is a perennial problem, to be sure. There's always an "arms race" between the taxers and the avoiders, but that isn't a reason not to have taxes in the first place.
- conanbatt 9y ago
  In the context of evaluating a tax, the ability to avoid it and the difficulty to apply it is definitely one key design concept. A tax on people that eat their brocoli would be highly impractical!
  - pcrh 9y ago
    You're correct in that it's foolish to institute an uncollectable tax, but I don't think inheritance tax necessarily falls into that category any more than, say, capital gains taxes.
    - conanbatt 9y ago
      Is paying for your kids education inheritance? Are pre-paid company contracts for a lifetime inheritance? etc etc. There are some definite difficulties in implementation. But even then, my argument is that it could be a really harmful tax if it could be applied at all.
      - pcrh 9y ago
        The evidence is that allowing large inheritances is harmful to society at large. It allows for an accumulation of economic influence within too few hands, and the creation of an entrenched elite. The "Founding Fathers" of the US were particularly opposed to it for this reason. One would have to balance the "harm" caused to the children of wealthy people for not inheriting wealth (mostly when they are around 50-60 yr old themselves), with the harm caused to society at large.
        conanbatt 9y ago
        What evidence? > One would have to balance the "harm" caused to the children of wealthy people for not inheriting wealth (mostly when they are around 50-60 yr old themselves), with the harm caused to society at large. I wonder if we could think of other examples of how harming a minority of people can be good for society at large. But regardless of the moral standpoint of the remark you said, you also have to account the harm it does to society to make people spend extra time hiding their wealth and spending it more frivolously.
        pcrh 9y ago
        My point is that there's no obvious harm implicit in denying people an inheritance. They did nothing to earn it. There's no inherent right to be bequeathed wealth; that this is evident is that it is nigh on impossible to sue one's parents (or their estate) for not willing their wealth to you (in the US; under Napoleonic law, there is a right to inherit). Many people spend inherited wealth frivolously. Business acumen isn't known to be genetically determined, whereas political influence is certainly affected by wealth and pedigree, see George Bush the first and the second.
        sokoloff 9y ago
        In the other direction though, there is inherent right (IMO). I have the right, in my pursuit of happiness, to make allocations of my lawfully earned money to my current needs, to my retirement savings, to my children's clothing and education, and other such pursuits and accounts as I see fit. There is harm to the donor to abolishing inheritance. I don't want to live in a world where "I farm this land, just as my father, his father, and his father for 5 generations has done." is not possible.
frgtpsswrdlame 9y ago
You've asserted several times in this thread that there are devastating consequences to the estate tax but never explain what those might be. Care to enlighten?
- conanbatt 9y ago
  The idea of inheritance taxes are that once you are dead, you don't care about paying taxes. However, leaving wealth for your children is a huge economic incentive. As Friedman puts it: "People go to an irrational length to provide their kids a better life than they will ever get". If you could effectively put 100% tax on inheritance(which you can't in practice), it means your utility of leaving wealth around becomes 0. Now you want to spend that wealth as much as possible, and it turns into consumption. You would sell and spend everything you have for lavish expenses, which means a reduction in capital investment, which means slower economic growth. https://www.youtube.com/watch?v=MRpEV2tmYz4 https://www.youtube.com/watch?v=MRpEV2tmYz4
  - frgtpsswrdlame 9y ago
    Yeah I'm totally okay with that, a certain point society has to serve its people and not just the abstract view of growth at all costs. Consumption is good for the economy and inheritance taxes are necessary to provide equality of opportunity.
    - conanbatt 9y ago
      > Consumption is good for the economy I doubt hedonist consumption is what Keynes had in mind. > inheritance taxes are necessary to provide equality of opportunity. Lets take this to the extreme: lets say that your father could not provide you with anything but minimum substance until your coming of age (18?). Anything given to you by your parents would be taxed away. This means that you now cannot go to any college that is not provided to you by credit. But you have no assets and no income, so nobody will loan you any money. Plus, you don't have money for rent, so you need to work immediately to pay for your own place. Maybe you feel sympathy for the millions of people that actually live that, but how is forcing everyone to go through that be better for society at large? Or think what it would mean for the state to actually do that: what if you had to build any infrastructure built by a previous generation from scratch, because "its not fair the SF bridge is nicer than the Brookly bridge, its inherited". The emotional answer I have against advocating inheritance tax is that the goal is not to be fair, its to be better. And certainly fair by destruction, by removing everything, is not better.