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The estate tax has been nearly the best way of reducing wealth inequality, second only to the income tax. Like many wealthy individuals off of Hacker News, you

by ihsw2 9y ago

The estate tax has been nearly the best way of reducing wealth inequality, second only to the income tax. Like many wealthy individuals off of Hacker News, you more than likely have a Roth IRA account that houses Vanguard mutual funds. John C Bogle (or Jack Bogle), the founder of the Vanguard Group, has consistently and wholeheartedly supported the estate tax as a time-tested means of reducing income inequality. The estate tax has a deep and lengthy history stretching back centuries and (unfortunately) there is a dearth of economic data pointing to it being beneficial to society. It is nonetheless important to emphasize the mutual respect and shared responsibility between the wealthy and non-wealthy. I am by no means a rabid Communist but rather a right-leaning individual that feels strongly about this subject -- there is most definitely precedent for the estate tax's usefulness. The basis of the argument against the estate tax is capital flight and that is just a weak red herring that ignores how immobile most wealth is.

jimhefferon 9y ago
> there is a dearth of economic data pointing to it being only beneficial to society. Possibly you meant "wealth" of data?
- ihsw2 9y ago
  I meant dearth of data, and I have rephrased the paragraph to more clearly convey the intention. While there is a lack of supporting data, the intent is important.
pico303 9y ago
Um, just wanted to kindly point out you may not have meant “dearth”, which means, “a scarcity or lack of.” Perhaps “abundance”?
- walshemj 9y ago
  That is what they ment.
  - ihsw2 9y ago
    Indeed, there is a lack of supporting data and enforcement is weak at best, but it is a matter of mutual respect and shared responsibility between the wealthy and non-wealthy.
deleted 9y ago
[deleted]
chimeracoder 9y ago
> The estate tax has been nearly the best way of reducing wealth inequality, second only to the income tax. That's an assertion that's often repeated axiomatically by non-economists, but it's not borne out by the data. Aside from the fact that the estate tax raises embarrassingly little revenue[0], the number of individuals who actually pay the estate tax is pretty low. Furthermore, it's inherently a tax that doesn't capture the true benefits of inherited wealth, and there's no way to to turn death into a taxable event that does - even if you imposed an estate tax of 100%. Friedman has written an entire book explaining why the estate tax is inherently broken and unfixable. His criticisms of the estate tax are only controversial politically; they are generally accepted by economists, even those that don't advocate repealing the estate tax for other reasons. > and there is a dearth of economic data pointing to it being only beneficial to society. I'd agree that there's a dearth of economic data pointing to the benefits of an estate tax. [0] $19.3 billion, which is about half a percent of total federal revenue, and not nearly enough to make a dent in wealth inequality
- Cederfjard 9y ago
  What are the true benefits of inherited wealth?
  - Clubber 9y ago
    Your family can be politically powerful for generations, just like the monarchs.
  - pzone 9y ago
    1) It's your money. You should be free to decide what to do with it. 2) If you can't decide what to do with your money, you have less incentive to work hard for it. 3) If your choice is either to spend your money frivolously or have it expropriated, you'll spend it frivolously. 4) Distorting savings and investment decisions is one of the most damaging forms of taxation. A tax on inherited wealth is a tax on savings. 5) It's very difficult to write down a theoretical utilitarian welfare model that suggests an estate tax is a good idea. (It's easy to write a model where inheritances are optimally subsidized.)
will4274 9y ago
> The estate tax has been nearly the best way of reducing wealth inequality, second only to the income tax Any source for this claim? Comparison of countries with and without estate tax and their wealth inequality? My impression was the data was quite mixed
gvb 9y ago
> The estate tax has been nearly the best way of reducing wealth inequality, second only to the income tax. Evidence does not bear out this assertion. The Rockefeller Trust is a well documented example of a huge inheritance that was not subject to an estate tax. The common and relatively simple solution to the estate tax is to create trust fund(s) to hold the money. Ref: https://www.fool.com/investing/2016/09/01/how-rich-is-the-rockefeller-family-today.aspx https://www.fool.com/investing/2016/09/01/how-rich-is-the-ro... The name John D. Rockefeller has long been associated with immense wealth. In his book Outliers, author Malcolm Gladwell estimated the value of Rockefeller's fortune at its peak, in today's dollars, at $318.3 billion. You read that right: John D. Rockefeller, the founder of Standard Oil, was over three times richer than Bill Gates is today. [...] You may know that upon his death, the majority of John D. Rockefeller's wealth went to his only son, John, Jr. But in reality, things are a bit more complicated. In fact, a trust was created, as well as several other entities designed to manage the family money, all to ensure that Rockefeller's descendants continue to live as only Rockefellers can.
- ihsw2 9y ago
  You are absolutely correct that it is legally challenging to enforce the estate tax, which is why I am arguing that it should be strengthened as it is important to our democracy. The Rockefeller fortune would have never materialized without the foundation of public laws, public education, and infrastructure that formed the bedrock of American industry in our grandfather's time -- this bedrock continues to support vast fortunes to this day.
  - JumpCrisscross 9y ago
    > I am arguing that it should be strengthened as it is important to our democracy If the goal is reducing inequality, the estate tax is an inefficient battleground. It's politically-expensive territory and policy-wise ineffective compared to e.g. raising the top tax rate or eliminating the carried-interest deduction. (I have come to this conclusion grudgingly, as someone who believes oligarchic dynasties are bad.)
- jameslk 9y ago
abc03 9y ago
Estate tax (most non-anglo countries have inheritance tax) is today promoted by left-wing but is originally supported by liberals. Therefore, you are probably not a communist.
thescribe 9y ago
If the justification for a tax is social engineering and not revenue for a budget or project it is probably not a just tax. This tax happens to align with commonly held values, but that alone does not justify the tax.

by ihsw2 9y ago

jimhefferon 9y ago

> there is a dearth of economic data pointing to it being only beneficial to society. Possibly you meant "wealth" of data?

ihsw2 9y ago
I meant dearth of data, and I have rephrased the paragraph to more clearly convey the intention. While there is a lack of supporting data, the intent is important.

pico303 9y ago

Um, just wanted to kindly point out you may not have meant “dearth”, which means, “a scarcity or lack of.” Perhaps “abundance”?

walshemj 9y ago
That is what they ment.
- ihsw2 9y ago
  Indeed, there is a lack of supporting data and enforcement is weak at best, but it is a matter of mutual respect and shared responsibility between the wealthy and non-wealthy.

deleted 9y ago

[deleted]

chimeracoder 9y ago

> The estate tax has been nearly the best way of reducing wealth inequality, second only to the income tax. That's an assertion that's often repeated axiomatically by non-economists, but it's not borne out by the data. Aside from the fact that the estate tax raises embarrassingly little revenue[0], the number of individuals who actually pay the estate tax is pretty low. Furthermore, it's inherently a tax that doesn't capture the true benefits of inherited wealth, and there's no way to to turn death into a taxable event that does - even if you imposed an estate tax of 100%. Friedman has written an entire book explaining why the estate tax is inherently broken and unfixable. His criticisms of the estate tax are only controversial politically; they are generally accepted by economists, even those that don't advocate repealing the estate tax for other reasons. > and there is a dearth of economic data pointing to it being only beneficial to society. I'd agree that there's a dearth of economic data pointing to the benefits of an estate tax. [0] $19.3 billion, which is about half a percent of total federal revenue, and not nearly enough to make a dent in wealth inequality

Cederfjard 9y ago
What are the true benefits of inherited wealth?
- Clubber 9y ago
  Your family can be politically powerful for generations, just like the monarchs.
- pzone 9y ago
  1) It's your money. You should be free to decide what to do with it. 2) If you can't decide what to do with your money, you have less incentive to work hard for it. 3) If your choice is either to spend your money frivolously or have it expropriated, you'll spend it frivolously. 4) Distorting savings and investment decisions is one of the most damaging forms of taxation. A tax on inherited wealth is a tax on savings. 5) It's very difficult to write down a theoretical utilitarian welfare model that suggests an estate tax is a good idea. (It's easy to write a model where inheritances are optimally subsidized.)

will4274 9y ago

> The estate tax has been nearly the best way of reducing wealth inequality, second only to the income tax Any source for this claim? Comparison of countries with and without estate tax and their wealth inequality? My impression was the data was quite mixed

gvb 9y ago

> The estate tax has been nearly the best way of reducing wealth inequality, second only to the income tax. Evidence does not bear out this assertion. The Rockefeller Trust is a well documented example of a huge inheritance that was not subject to an estate tax. The common and relatively simple solution to the estate tax is to create trust fund(s) to hold the money. Ref: https://www.fool.com/investing/2016/09/01/how-rich-is-the-rockefeller-family-today.aspx https://www.fool.com/investing/2016/09/01/how-rich-is-the-ro... The name John D. Rockefeller has long been associated with immense wealth. In his book Outliers, author Malcolm Gladwell estimated the value of Rockefeller's fortune at its peak, in today's dollars, at $318.3 billion. You read that right: John D. Rockefeller, the founder of Standard Oil, was over three times richer than Bill Gates is today. [...] You may know that upon his death, the majority of John D. Rockefeller's wealth went to his only son, John, Jr. But in reality, things are a bit more complicated. In fact, a trust was created, as well as several other entities designed to manage the family money, all to ensure that Rockefeller's descendants continue to live as only Rockefellers can.

ihsw2 9y ago
You are absolutely correct that it is legally challenging to enforce the estate tax, which is why I am arguing that it should be strengthened as it is important to our democracy. The Rockefeller fortune would have never materialized without the foundation of public laws, public education, and infrastructure that formed the bedrock of American industry in our grandfather's time -- this bedrock continues to support vast fortunes to this day.
- JumpCrisscross 9y ago
  > I am arguing that it should be strengthened as it is important to our democracy If the goal is reducing inequality, the estate tax is an inefficient battleground. It's politically-expensive territory and policy-wise ineffective compared to e.g. raising the top tax rate or eliminating the carried-interest deduction. (I have come to this conclusion grudgingly, as someone who believes oligarchic dynasties are bad.)
jameslk 9y ago

abc03 9y ago

Estate tax (most non-anglo countries have inheritance tax) is today promoted by left-wing but is originally supported by liberals. Therefore, you are probably not a communist.

thescribe 9y ago

If the justification for a tax is social engineering and not revenue for a budget or project it is probably not a just tax. This tax happens to align with commonly held values, but that alone does not justify the tax.