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I was just discussing this as a result of watching this video: https://www.youtube.com/watch?v=-asltUUvcGU https://www.youtube.com/watch?v=-asltUUvcGU in which

I was just discussing this as a result of watching this video: https://www.youtube.com/watch?v=-asltUUvcGU https://www.youtube.com/watch?v=-asltUUvcGU in which they discuss the result of the western capitalist system loosely resembling a meritocracy, except in the case of inherited wealth. An exceptionally productive individual can generate billions, but then when he dies the money goes to his heirs which may not have done anything to deserve commanding that much wealth other than having been raised by (and having the genetics of) the exceptionally productive individual, which is a far cry from being exceptionally productive themselves. My thought was to create a cap on inheritance. Enough so that the heirs would be able to live a normal middle class life without working, but not be disgustingly wealthy like the parent. ~$5 million seemed like enough to live off interest for a lifetime. I don't think productivity would be disincentivized too much by this, as the productive individuals still get to use their wealth as long as they're living. It'd probably be pretty difficult to plug all the loopholes but I think it's worth thinking about. edit: another thing, we could lighten some other taxes (income, property, whatever) for this increased death tax such that the overall government tax income remains roughly the same, to make the proposal more palatable. Overall, everyone keeps more of their wealth, and the playing field is leveled and we're a bit closer to an actual meritocracy.

nickthemagicman 9y ago
I love this. It's about moderation. That's how.the estate tax is supposed to function.
crdoconnor 9y ago
Most of this wealth probably has nothing to do with merit. For every Steve Jobs there's a whole bunch of people who did nothing more than sit on property that appreciated in value and yielded rents. The tax system seems to prefer this to actually earning money for some reason.
- nicolashahn 9y ago
  True, and almost everyone would be unaffected by the law I proposed. If you have two children, you'd need >$10 million in assets for it to affect you. I guess what I proposed is a fix for just the super-rich's inheritance, but it's low hanging fruit and there's a lot of it.
- jogjayr 9y ago
  > The tax system seems to prefer this to actually earning money for some reason. The tax system favors unearned income over earned income to adjust for risk. If you work a job you're guaranteed to be paid for the hours you worked (assuming an honest employer). Investments have no guarantees and you could lose all the money you put in. There's an argument to be made that the top tax rate for unearned income is too low in some countries, but it makes sense to me that the tax rate for unearned income should always be less than the tax rate for the same amount in earned income.
  - ridgeguy 9y ago
    There may be reasons unrelated to investment risk. For example, the risk of losing an earned income stream because my (assumed honest) employer (fires me, goes bankrupt, etc.) seems much higher than the risk of losing an unearned income stream based on my investment in bonds backed by the US government.
    - walshemj 9y ago
      I think they where talking not about tbills, guilts or consols but riskier shares
      - marxwasright 9y ago
        The rise of passive investment strategies has neatly proved that no skill and little luck is required to grow existing capital in the modern society.
        gbacon 9y ago
        So what are you waiting on?
        TheCoelacanth 9y ago
        The initial capital investment. I wasn't just handed it by my parents; I have to save it up from my earned income.
laretluval 9y ago
> deserve ?? Who gets to determine who deserves what?
- nicolashahn 9y ago
  Good question, and one that economics has been trying to solve for thousands of years. This is just one idea that I think might make for a more just world under my own (possibly misguided, but let's discuss it) ethics.
- learnstats2 9y ago
  I suggest it is not difficult to find a better determinator than parental wealth.
  - gbacon 9y ago
    Likewise there must be one better than envy.
  - ericd 9y ago
    Are you a parent? I'm not sure you understand what you're playing with here.
    - learnstats2 9y ago
      I'm not sure what your point is. Determining someone's future on parental wealth means determining someone's future on a lack of parental wealth - and a vast majority of parents don't have meaningful wealth. So we're (society is at present) consigning a majority of children to a life of missed opportunity and missed potential. I don't see how that can be a good thing.
      - ericd 9y ago
        My point is that if you were a parent, you'd probably realize that for many parents, a large part of the reason they strive to earn is to be able to leave their children in the best possible position in life. It's not something we should be trying to "correct" by removing that ability from parents, and it's uncomfortable to have the government trying to get in between that relationship, beyond the normal inheritance taxes. Also, parental wealth doesn't "determine their future" any more than the quality of the parents does. It's certainly a leg up, all else being equal, but it's very possible to live an enjoyable and fulfilling life without much wealth if you're willing to get outside of the focus on consumption, and personally, I'd generally take poor, loving parents over rich, uncaring/selfish/narcissistic parents. Who you're born to will always be a lottery that leaves winners and losers, even if everyone is equally wealthy. You'll get variable quality genetics, if nothing else, at least until we completely master human genetic engineering.
perfmode 9y ago
Is this the idea behind the estate tax?
- nicolashahn 9y ago
  Yes, but currently it's a % of the estate. I think right now the highest bracket is 40% (correct me if I'm wrong) so an inheritance of $500 million is still $300 million after the estate tax.
  - cobookman 9y ago
    And don't forget that after ~13 years of 4% interest you'd have the full 500 million. So long as you have a good financial advisor you're estate will go up in value over time.
yks 9y ago
Exactly, there is nothing wrong with individuals not doing anything useful and just modestly living on inheritance but it's a serious problem (if not the most serious for mankind) when people who just happen to win the birth lottery are able to bend societies to their will via lobbying, propaganda or outright hereditary rule.
gbacon 9y ago
I encourage you to read The Millionaire Next Door by Thomas Stanley because it will disabuse you of these and many other prejudices.
- yorwba 9y ago
  Since you appear to have read that book, maybe you could summarize the part that you have in mind?

nickthemagicman 9y ago

I love this. It's about moderation. That's how.the estate tax is supposed to function.

crdoconnor 9y ago

Most of this wealth probably has nothing to do with merit. For every Steve Jobs there's a whole bunch of people who did nothing more than sit on property that appreciated in value and yielded rents. The tax system seems to prefer this to actually earning money for some reason.

nicolashahn 9y ago
True, and almost everyone would be unaffected by the law I proposed. If you have two children, you'd need >$10 million in assets for it to affect you. I guess what I proposed is a fix for just the super-rich's inheritance, but it's low hanging fruit and there's a lot of it.
jogjayr 9y ago
> The tax system seems to prefer this to actually earning money for some reason. The tax system favors unearned income over earned income to adjust for risk. If you work a job you're guaranteed to be paid for the hours you worked (assuming an honest employer). Investments have no guarantees and you could lose all the money you put in. There's an argument to be made that the top tax rate for unearned income is too low in some countries, but it makes sense to me that the tax rate for unearned income should always be less than the tax rate for the same amount in earned income.
- ridgeguy 9y ago
  There may be reasons unrelated to investment risk. For example, the risk of losing an earned income stream because my (assumed honest) employer (fires me, goes bankrupt, etc.) seems much higher than the risk of losing an unearned income stream based on my investment in bonds backed by the US government.
  - walshemj 9y ago
    I think they where talking not about tbills, guilts or consols but riskier shares
    - marxwasright 9y ago
      The rise of passive investment strategies has neatly proved that no skill and little luck is required to grow existing capital in the modern society.
      - gbacon 9y ago
        So what are you waiting on?
        TheCoelacanth 9y ago
        The initial capital investment. I wasn't just handed it by my parents; I have to save it up from my earned income.

laretluval 9y ago

> deserve ?? Who gets to determine who deserves what?

nicolashahn 9y ago
Good question, and one that economics has been trying to solve for thousands of years. This is just one idea that I think might make for a more just world under my own (possibly misguided, but let's discuss it) ethics.
learnstats2 9y ago
I suggest it is not difficult to find a better determinator than parental wealth.
- gbacon 9y ago
  Likewise there must be one better than envy.
- ericd 9y ago
  Are you a parent? I'm not sure you understand what you're playing with here.
  - learnstats2 9y ago
    I'm not sure what your point is. Determining someone's future on parental wealth means determining someone's future on a lack of parental wealth - and a vast majority of parents don't have meaningful wealth. So we're (society is at present) consigning a majority of children to a life of missed opportunity and missed potential. I don't see how that can be a good thing.
    - ericd 9y ago
      My point is that if you were a parent, you'd probably realize that for many parents, a large part of the reason they strive to earn is to be able to leave their children in the best possible position in life. It's not something we should be trying to "correct" by removing that ability from parents, and it's uncomfortable to have the government trying to get in between that relationship, beyond the normal inheritance taxes. Also, parental wealth doesn't "determine their future" any more than the quality of the parents does. It's certainly a leg up, all else being equal, but it's very possible to live an enjoyable and fulfilling life without much wealth if you're willing to get outside of the focus on consumption, and personally, I'd generally take poor, loving parents over rich, uncaring/selfish/narcissistic parents. Who you're born to will always be a lottery that leaves winners and losers, even if everyone is equally wealthy. You'll get variable quality genetics, if nothing else, at least until we completely master human genetic engineering.

perfmode 9y ago

Is this the idea behind the estate tax?

nicolashahn 9y ago
Yes, but currently it's a % of the estate. I think right now the highest bracket is 40% (correct me if I'm wrong) so an inheritance of $500 million is still $300 million after the estate tax.
- cobookman 9y ago
  And don't forget that after ~13 years of 4% interest you'd have the full 500 million. So long as you have a good financial advisor you're estate will go up in value over time.

yks 9y ago

Exactly, there is nothing wrong with individuals not doing anything useful and just modestly living on inheritance but it's a serious problem (if not the most serious for mankind) when people who just happen to win the birth lottery are able to bend societies to their will via lobbying, propaganda or outright hereditary rule.

gbacon 9y ago

I encourage you to read The Millionaire Next Door by Thomas Stanley because it will disabuse you of these and many other prejudices.

yorwba 9y ago
Since you appear to have read that book, maybe you could summarize the part that you have in mind?