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By far, the best investment Warren Buffett ever made was to let his kids know that they would have to earn their own money. Also, I'm now dying to know how man
by logfromblammo 9y ago
By far, the best investment Warren Buffett ever made was to let his kids know that they would have to earn their own money.
Also, I'm now dying to know how many economists in total have an opinion on estate taxation. They ought to know better than anyone else that sometimes proportions are more significant than absolute values.
My own, not-an-economist opinion is that the estate tax is bad, only because it waits until someone has died before making an intervention, then tries to do too much, all at once, and probably too late to make a difference. The letter is correct in that death should not be a taxable event. The tax should probably be invoked every time wealth is transferred from an elder benefactor to a younger, adult recipient, and defined such that all the trusts and offshore accounts and sham business arrangements are transparent to the taxing authority. If your "job" is to be an executive assistant to mommy or daddy, and for that you earn six figures, then the taxing authority should be able to determine the amount paid in excess of the median executive assistant and levy the nepotism tax on that. The idea is not to make money, but to discourage certain behaviors. If the rich people avoid the tax by employing their peers' children instead of their own, that's fine; it gives those kids the opportunity to work for a boss that won't cut them slack just to avoid awkwardness at the holidays.
The estate tax isn't just a tax on a parent's hard work and success. It is a tax on spoiled little rich kids, who never learned the value of actual work in the economy, who then go on to own companies and control what people do in them. It's a tax on being disconnected from the conditions experienced by lower classes, wherein it is essential to earn what you get, rather than accept whatever it is you think you deserve as your birthright.
I don't begrudge rich people their ability to provide additional opportunities to their children. But when their children turn out to be aristocratic twits, I also feel the desire to teach them the hard lessons that the rest of us likely got much earlier in our lives, to perhaps make them better, more empathetic people. And those are lessons best learned by not having so much money that self-discipline and self-sacrifice are never necessary. I get the feeling that fewer people would be laid off by stack ranking or to shore up quarterly results if those doing it had some inkling of what it means to be the one laid off--the panic, the fear, the depression, the austerity, and maybe even the irrational optimism.
- RhysU 9y agoI look forward to you extending your argument to proposing a $0, not $11M, exemption.
- logfromblammo 9y agoA tax designed around my specific prejudice against the non-working scions of rich parents would have to do something to incentivize the accumulation of workplace experience. So I'd probably tie any exemption on it to earned income. $0 just encourages avoidance of the tax entirely. Ideally, everyone should get the experience of working a low-wage job for unskilled labor between the ages of 16 and 21, and a job that barely makes ends meet between 21 and 25. It teaches you the unmitigated constant panic of being a responsible adult in the real world. If you have already walked your mile in poor-people's shoes, and you then go on to negatively affect other people's lives using your parents' money, then at least it won't be because of ignorance. So perhaps if you work at least 32 hours every week, your immediate exemption is median individual/household income minus your earned gross income, with an additional deferred exemption equal to your earned gross income, starting 7 years later and repeating every year until your death, but capped at 10 times median income for your filing status. As an example, here is the work history of a child of a very rich person--one who has a perfect aversion to paying the rich-kid tax: Year Age Filing Earned Immediate Deferred Income 1 18 single $15k $17k $0 $32k 2 19 single $16k $16k $0 $32k 3 20 single $17k $15k $0 $32k 4 21 single $18k $14k $0 $32k 5 22 single $20k $12k $0 $32k 6 23 single $45k $0 $0 $45k 7 24 married $55k $4k $0 $59k 8 25 married $60k $0 $15k $75k 9 26 married $63k $0 $31k $94k 10 27 married $65k $0 $48k $113k 11 28 married $67k $0 $66k $133k 12 29 married $68k $0 $86k $154k 13 30 married $0 $0 $131k $131k 14 31 married $0 $0 $186k $186k 15 32 married $0 $0 $246k $246k 16 33 married $0 $0 $309k $309k 17 34 married $0 $0 $374k $374k 18 35 married $0 $0 $441k $441k 19 36 married $0 $0 $509k $509k 20-38 37-55 married $0 $0 $509k/yr $9671k This is a reasonable model for someone who works wage labor before and while attending university, then gets a white-collar job after graduation. Assuming the parents are 25 years older than the kid, and will die at age 80, working for 12 years allows tax-free transfer of a total of about $12M while the parents still live. So that makes it easy to drop the exemption on any levied-at-death inheritance tax to $0. The fortunate child never has to live at less than the 50th percentile, yet still has a major incentive to work longer and earn more on their own merits. In this instance, "retiring" at age 32 instead of 30 would have likely capped the deferred exemption at $590k in year 21. Even working at minimum-wage jobs for 40 years eventually caps the deferred exemption amount.