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A 100% inheritance tax would encourage wealthy people to consume their wealth, rather than invest it for the long term. This will make the wealthy enjoy their

A 100% inheritance tax would encourage wealthy people to consume their wealth, rather than invest it for the long term. This will make the wealthy enjoy their wealth more, but it will make society poorer while also making it less free. If you think about it, someone earning a lot of money but not consuming it engages in altruistic behavior. You earn money by providing goods and services for others, but then instead of enjoying the money, you work at investing it and managing it to provide even more goods and services for others!

grahamburger 8y ago
I think there's an argument to be made that the opposite is true - if the wealthy are spending their money then it's going to someone, after all. That someone is likely home builders, artisans, restaurants, clothiers, etc rather than offshore tax havens.
- sokoloff 8y ago
  Yes, the wealthy would presumably engage lawyers and business advisors to help their offspring and people they like create companies for the next generation. Maybe my son would like to open a travel agency. Maybe then I'd like to use that travel agency almost exclusively so that I could keep tabs on his progress and offer my advice. Oh look, his travel agency, despite being extraordinarily expensive, is very successful and now I don't have any money left to pay inheritance tax on...
  - ericd 8y ago
    Well, that travel agency does end up paying corporate and then dividend taxes on the earnings... and anything paid out directly to the son as salary means income taxes.
jon-wood 8y ago
Doesn't consuming wealth, rather than investing long term, end up as a net positive for society though? This may be a naive view, but it seems money placed as an investment has less of an impact, at least on the local economy, than money spent on more immediate things. At the very least it seems likely that money spent in the pursuit of consuming your wealth before death would result in it being somewhat more evenly spread amongst those who need the money, people working in bars, restaurants, manufacturing. Long term investments are more likely to end up being added to the coffers of large companies who may not even have any use for that money and just cycle it further round the investment economy to no real end.
- agent008t 8y ago
  I don't think so. Consider what happens to real resources. Consuming wealth is the equivalent of a rich person buying a yacht (i.e. having it built, paying all these people money) and then burning it down. How is society better off? The scarce workers who would have been employed elsewhere, doing something productive, wasted their time building the yacht. The materials that went into it were wasted. The engineers, managers that oversaw its construction wasted their effort. Consuming scarce resources, rather than investing them, by its very definition makes society poorer.
  - CamTin 8y ago
    I think this is the right way of thinking (ie a materialist view, which looks at what an economic system means in real resources), but it's obviously more complicated than a binary choice between "rich people spending all their money on non-productive toys" and "rich people investing all their money into socially useful enterprises". The invested (saved, not consumed) resources that rich people have won't necessarily go to socially useful enterprises. Instead, they'll probably be invested in things whose main purpose is to create more capital for the capitalist class to invest, not to decrease human suffering. The two things have historically been correlated, but there's no guarantee that this will last forever, and good reason to think that it won't. At some point (and maybe we've already reached it) we will have enough capital for everyone in the world to live a maximally happy life. Arguably, any investment beyond that point (beyond what is necessary to maintain that capital sock, and perhaps grow it at the same rate as population growth) is malinvestment, since if our goal is to maximize human happiness, additional capital is useless beyond that point, so we should use those resources to do something else. The obvious problem with this line of thought is determining when we've got "enough" capital, and therefore when we can stop playing capitalism and whack up the gains. Obviously 1918 Russia was the wrong time and place to do that, but hindsight is 20/20. Another issue is that a lot of our capital stock is not in the form of physical stuff, but institutions, contracts, and relationships that a socialist revolution would actually destroy. The reason Amazon is worth so much money is not because of all the physical stuff it owns, but because of the structure, contracts, and relationships within the company itself allow that physical stuff to be more productive than other physical stuff employed by other firms, and indeed even by the laws that allow firms to exist at all. Any "revolution" will obviously severely disrupt a lot of these relationships, from employer-employee relationships, to government contracts, IP laws, etc. Indeed, that's the whole point of a socialist revolution, but similar things on a smaller scale are faced with almost any progressive policy proposal: changing the social contract to be more beneficial to workers and redistribute society's wealth can actually reduce the amount of wealth in the society. That doesn't mean we shouldn't do it, since less wealth distributed more evenly will probably be a net positive for the majority of people, but we can't pretend this problem doesn't exist. It's a conundrum that I rarely see the Left wrestle with, but I think we need to.
benj111 8y ago
My hypothesis would be that wealth would be more spread out. So you may have less concentrated long term investment, not necessarily less overall. I'm interested how society would become less free. Would it not increase social mobility? Or are you thinking of something else?
- agent008t 8y ago
  See my reply above. By less free, I mean that anyone who wants to leave their children the fruits of their labour is now unable to do so. The more restrictions on individuals, the less free a society is. And it is a very big motivator for some people - many people value the standard of living of their children higher than their own. But I do get your utilitarian argument. After all, every next dollar of our wealth we value less than the previous one. So in this sense, I can see why you would think that redistributing that wealth would make the society better off overall. But I think you misjudge the effects of consumption vs investment and of the incentives on the overall wealth of a society.
  - Maarten88 8y ago
    > The more restrictions on individuals, the less free a society is. I think this is a fallacy. Freedom, when defined this way (taken to its extreme), is not desirable for society as a whole. It only helps the wealthy and powerful and works against the poor. If you are poor or indebted, you are not really free, even if there are no individual restrictions. People in need will probably be inclined to "freely" take out loans, giving up their freedom. Wealthy people may want to keep a good portion of society in need so they'll always be "freely" working for them.
    - heurist 8y ago
      Having to work full time for a salary to live a middle class life feels like unbounded indentured servitude sometimes. We have significant benefits over historical indentured servitude but the freedom is still lacking. 40+ hours of my week, including prime creative hours, for potentially 45+ years of my life are given to my employer so I can live in a decent house, buy healthy food, pay for my family's needs, travel once or twice a year, etc. I am giving up time/energy I'd rather give to my family and creating art/innovative technologies from the thousands visions and ideas I have every year. My situation, though far from unique, is one I've gotten myself into. Getting out now requires me to put my personal desires aside for many years, maybe decades, while working to become wealthy enough to hopefully enjoy true freedom while I am still young and energetic. Who knows if that will pan out. The alternatives are lower pay, more "free" time, or intermittent bursts of high pay/free time. Neither of those are freedom (fiscal autonomy) in my mind, only an illusion of it. I could talk about this all day but I'll stop there...

grahamburger 8y ago

I think there's an argument to be made that the opposite is true - if the wealthy are spending their money then it's going to someone, after all. That someone is likely home builders, artisans, restaurants, clothiers, etc rather than offshore tax havens.

sokoloff 8y ago
Yes, the wealthy would presumably engage lawyers and business advisors to help their offspring and people they like create companies for the next generation. Maybe my son would like to open a travel agency. Maybe then I'd like to use that travel agency almost exclusively so that I could keep tabs on his progress and offer my advice. Oh look, his travel agency, despite being extraordinarily expensive, is very successful and now I don't have any money left to pay inheritance tax on...
- ericd 8y ago
  Well, that travel agency does end up paying corporate and then dividend taxes on the earnings... and anything paid out directly to the son as salary means income taxes.

jon-wood 8y ago

Doesn't consuming wealth, rather than investing long term, end up as a net positive for society though? This may be a naive view, but it seems money placed as an investment has less of an impact, at least on the local economy, than money spent on more immediate things. At the very least it seems likely that money spent in the pursuit of consuming your wealth before death would result in it being somewhat more evenly spread amongst those who need the money, people working in bars, restaurants, manufacturing. Long term investments are more likely to end up being added to the coffers of large companies who may not even have any use for that money and just cycle it further round the investment economy to no real end.

agent008t 8y ago
I don't think so. Consider what happens to real resources. Consuming wealth is the equivalent of a rich person buying a yacht (i.e. having it built, paying all these people money) and then burning it down. How is society better off? The scarce workers who would have been employed elsewhere, doing something productive, wasted their time building the yacht. The materials that went into it were wasted. The engineers, managers that oversaw its construction wasted their effort. Consuming scarce resources, rather than investing them, by its very definition makes society poorer.
- CamTin 8y ago
  I think this is the right way of thinking (ie a materialist view, which looks at what an economic system means in real resources), but it's obviously more complicated than a binary choice between "rich people spending all their money on non-productive toys" and "rich people investing all their money into socially useful enterprises". The invested (saved, not consumed) resources that rich people have won't necessarily go to socially useful enterprises. Instead, they'll probably be invested in things whose main purpose is to create more capital for the capitalist class to invest, not to decrease human suffering. The two things have historically been correlated, but there's no guarantee that this will last forever, and good reason to think that it won't. At some point (and maybe we've already reached it) we will have enough capital for everyone in the world to live a maximally happy life. Arguably, any investment beyond that point (beyond what is necessary to maintain that capital sock, and perhaps grow it at the same rate as population growth) is malinvestment, since if our goal is to maximize human happiness, additional capital is useless beyond that point, so we should use those resources to do something else. The obvious problem with this line of thought is determining when we've got "enough" capital, and therefore when we can stop playing capitalism and whack up the gains. Obviously 1918 Russia was the wrong time and place to do that, but hindsight is 20/20. Another issue is that a lot of our capital stock is not in the form of physical stuff, but institutions, contracts, and relationships that a socialist revolution would actually destroy. The reason Amazon is worth so much money is not because of all the physical stuff it owns, but because of the structure, contracts, and relationships within the company itself allow that physical stuff to be more productive than other physical stuff employed by other firms, and indeed even by the laws that allow firms to exist at all. Any "revolution" will obviously severely disrupt a lot of these relationships, from employer-employee relationships, to government contracts, IP laws, etc. Indeed, that's the whole point of a socialist revolution, but similar things on a smaller scale are faced with almost any progressive policy proposal: changing the social contract to be more beneficial to workers and redistribute society's wealth can actually reduce the amount of wealth in the society. That doesn't mean we shouldn't do it, since less wealth distributed more evenly will probably be a net positive for the majority of people, but we can't pretend this problem doesn't exist. It's a conundrum that I rarely see the Left wrestle with, but I think we need to.

benj111 8y ago

My hypothesis would be that wealth would be more spread out. So you may have less concentrated long term investment, not necessarily less overall. I'm interested how society would become less free. Would it not increase social mobility? Or are you thinking of something else?

agent008t 8y ago
See my reply above. By less free, I mean that anyone who wants to leave their children the fruits of their labour is now unable to do so. The more restrictions on individuals, the less free a society is. And it is a very big motivator for some people - many people value the standard of living of their children higher than their own. But I do get your utilitarian argument. After all, every next dollar of our wealth we value less than the previous one. So in this sense, I can see why you would think that redistributing that wealth would make the society better off overall. But I think you misjudge the effects of consumption vs investment and of the incentives on the overall wealth of a society.
- Maarten88 8y ago
  > The more restrictions on individuals, the less free a society is. I think this is a fallacy. Freedom, when defined this way (taken to its extreme), is not desirable for society as a whole. It only helps the wealthy and powerful and works against the poor. If you are poor or indebted, you are not really free, even if there are no individual restrictions. People in need will probably be inclined to "freely" take out loans, giving up their freedom. Wealthy people may want to keep a good portion of society in need so they'll always be "freely" working for them.
  - heurist 8y ago
    Having to work full time for a salary to live a middle class life feels like unbounded indentured servitude sometimes. We have significant benefits over historical indentured servitude but the freedom is still lacking. 40+ hours of my week, including prime creative hours, for potentially 45+ years of my life are given to my employer so I can live in a decent house, buy healthy food, pay for my family's needs, travel once or twice a year, etc. I am giving up time/energy I'd rather give to my family and creating art/innovative technologies from the thousands visions and ideas I have every year. My situation, though far from unique, is one I've gotten myself into. Getting out now requires me to put my personal desires aside for many years, maybe decades, while working to become wealthy enough to hopefully enjoy true freedom while I am still young and energetic. Who knows if that will pan out. The alternatives are lower pay, more "free" time, or intermittent bursts of high pay/free time. Neither of those are freedom (fiscal autonomy) in my mind, only an illusion of it. I could talk about this all day but I'll stop there...