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The Inheritance Tax Is Far Too Low

• sesuximo 6y ago
  I think America could start by simplifying the tax code so the richest Americans/American corporations still pay taxes. Then America could stop spending so much on subsidies and global policing. Once America has done this (this == approach a budget more similar to the rest of the developed world), if it still needs to, then I think a simple wealth tax makes sense. I don’t see the argument for taxing inheritance which is already fraught with loopholes and complicated edge cases.
• programmarchy 6y ago
  Yes, especially for the top 1% and 0.1%. However, they're the ones who have enough money to pay for ways to hide their wealth from taxation, so an inheritance tax would be a high + low attack on the middle, further cementing the inequality divide.
  • Loughla 6y ago
    100% with you on this. I am set to inherit a large sum of money when my grandfather dies (150-200k). And yes, 'large sum' is what I said. I honestly thought about writing 'life-changing' sum, because that will allow me to eliminate all of my debt, and substantially change my lifestyle. I'm exactly who this would bite in the ass. I have neither the know-how, nor the real money to spend on moving things around to hide it from taxation. Edit: I know the first million, as illustrated in the scenario this article presents, is exempted. I'm using myself as an example. The point still stands - extreme wealth would be hidden, and the rest of us would have to pay.
    • arn 6y ago
      But there's a large exception. You won't be taxed on that amount. You presently get the first $23 million tax-free before any inheritance tax kicks in... and then only for the amount above $23 mil.
      • MereInterest 6y ago
        Agreed. Having more than $23 million in inheritance definitely puts one above "middle class".
        • beamatronic 6y ago
          Perhaps, in some low-cost-of-living areas.
          • MereInterest 6y ago
            $23 million, assuming a low yield of 5% annually, means that a person is receiving $1.15 million every year. The average income in the top 5% of the Bay Area is $808k/year [1]. This is ignoring every other source of income, and only looking at passive income received as a result of already having significant wealth. [1] https://www.kqed.org/news/11799308/bay-area-has-highest-income-inequality-in-california https://www.kqed.org/news/11799308/bay-area-has-highest-inco...
    • saalweachter 6y ago
      > An even better approach would be to replace the estate tax with an inheritance tax. Under an inheritance tax, heirs would simply pay income and payroll taxes on their inheritance above a large exemption, just as others do on their wages. > If an inheritance tax exempted the first $1 million received over one’s lifetime and applied the highest income and payroll tax rates to amounts above that threshold, it would raise $790 billion over the next decade.
    • mercutio2 6y ago
      Are you sure you understand the estate tax? Even before Bush-era increases to the estate tax exemption, estate taxes only cut in on $1 million and larger estates. These days, the exemption is $5 million. Putting the exemption back down to $1 million doesn’t sound like it would heavily impact you unless your grandfather had a lot of beneficiaries.
      • deleted 6y ago
        [deleted]
      • saalweachter 6y ago
        > Putting the exemption back down to $1 million doesn’t sound like it would heavily impact you unless your grandfather had a lot of beneficiaries. This is also the difference between an estate and an inheritance tax. If someone has a $25 million estate and divides it evenly among 25 heirs, under an estate tax with a $23 million exemption and a 40% tax above that, each heir gets $968k. Under an estate tax with a $1 million exemption, each heir gets $616k. Under an inheritance tax with a $1 million exemption, each heir gets $1 million.
        • sgt101 6y ago
          The main thing is to encourage it to be distributed to a large number of heirs because if 10 people get $1m they will spend far more than 1 person getting $1m and will pay sales tax, property tax and so on with it, also the people they spend it with will do the same and so on. The problem comes when folks pass $10m + pools down through generations.
          • rpiguy 6y ago
            Large accumulators of wealth simply dodge estate taxes all together. They put the money in a foundation and their heirs get a draw on the foundation for the rest of their lives. Whatever reforms are put in place should focus on minimizing that ability to dodge the taxes. Estate taxes are strange things in that they don't affect the poor and middle class because few people inherit more than 1 million dollars and we have exemptions for family farms and inherited small businesses. It also doesn't hurt the ultra-rich, who easily evade inheritance taxes. It hits a very narrow band of wealthy between the middle class and the ultra-rich.
    • jellicle 6y ago
      > Edit: I know the first million, as illustrated in the scenario this article presents, is exempted. I'm using myself as an example. The point still stands - extreme wealth would be hidden, and the rest of us would have to pay. So you know that a) you will pay zero taxes under current law even if you received fifty times as much money and b) you'd pay zero taxes under the proposal in the article and yet c) you still use yourself as an example of someone who would pay taxes. Do I have it right?
    • mithr 6y ago
      > I know the first million, as illustrated in the scenario this article presents, is exempted. I'm using myself as an example. The point still stands - extreme wealth would be hidden, and the rest of us would have to pay. Except, the point doesn't really stand, does it? Those with "extreme wealth" will indeed be taxed, because those sums would be much greater than 150-200k. Some percentage will find ways to avoid it, but that is true with any law, and those that do will have to make some tradeoffs to do so. "The rest of us", which in this case includes you (and me), will not at all be affected by this. We would only be affected by this as we get closer to having that kind of extreme wealth ourselves. And that's the whole point of only taxing the larger amounts -- that it does not impact the rest of us, and in fact you are precisely not someone this will "bite in the ass". To go a bit further, you yourself say that you consider 150-200k to be a large sum of money, maybe even life-changing. All of these estate taxes, with their minimums in the millions, would absolutely still let you receive life-changing amounts of money as inheritance -- much larger than what you already consider to be life changing -- and only start taxing the portion of it that is more "excessive".
  • brokensegue 6y ago
    even before the tax was cut by Bush only like 2% of estates were taxed. hardly the middle. your estate has to be millions ($23MM according to the article) for this to even begin mattering.
    • programmarchy 6y ago
      $23MM+ is the middle, though. Upper middle, but still middle. You're not really a power player in national politics until you are a billionaire (i.e. the top 1%), and that's where the real power inequality lies. For example, Sheldon Adelson recently pledged to drop $100MM into Trump's 2020 campaign, and like the article mentions, he "used a different strategy involving trusts to avoid $2.8 billion in estate and gift taxes between 2010 and 2013".
      • ceejayoz 6y ago
        $23M net worth puts you squarely in the top 1%. I'm not sure how anyone can claim that's middle class. That there's a rarefied 0.01% doesn't make everyone else middle class; it just means we've got a small (numerically, at least) tier of ultra-wealthy.
        • programmarchy 6y ago
          Like I said, people with $23MM net worth aren't influencing national elections with their wealth, though. That's what puts them in middle -- they may live a luxurious life, but they have very little real power. You'd seem to prefer we ignore the existence of the ultra-wealthy, without appreciating the massively outsized influence they have. By pretending they don't exist or don't matter, you are holding them unaccountable for the power they wield on a national, and global scale. Yet they have the most responsibility to bear when it comes to inequality. So you can scapegoat the middle class, but you're just doing a favor to those ultra-rich who hold real power, by eliminating their potential middle competitors for them. This is the high + low vs middle power dynamic.
          • ceejayoz 6y ago
  • ceejayoz 6y ago
    > Today, the first $23 million that a couple transfers is entirely exempt from the estate tax. I think the middle class will be just fine.
  • jimhefferon 6y ago
    > so an inheritance tax would be Is it not possible to imagine effective laws? Near me is a Gilded Age estate, a magnificent place. My understanding is that with the introduction of income tax, the family was eventually forced to turn it over to be a nonprofit in the 1970's. So, if my understanding is right, even folks who were staggeringly wealthy were not able to completely defeat the cross-generational effect of the law.
    • klenwell 6y ago
      > Is it not possible to imagine effective laws? Good question. The Defund the Police movement should take notes from the conservative Starve the Beast movement. Defund the Police: Because Our Modern Supercriminals Are Too Smart for Law Enforcement Anyways. https://en.wikipedia.org/wiki/Starve_the_beast https://en.wikipedia.org/wiki/Starve_the_beast
      • charwalker 6y ago
        That's more or less what some cities are going for albeit with shifting the released funds to community support programs, training, and other resources instead of into the pockets of donors and the rich via tax cuts and putting the strain on the deficit. One issue is that most states and municipal governments are required to balance their budget each year or be in the black. I think there are only 2 states that don't have that law. Consider the loss of sales tax and more methods for municipal funding. Unfortunately, to meet that balanced budget requirement many may need to gut several departments through 2020/2021 and starting with the police budget is politically savvy but perhaps won't provide funding for alternative programs but just drop some red ink. I don't think the federal government is functional, split as it is, to address these budget shortfalls and allow local governments to address these issues. I'm hopeful the (likely, by the sources I follow) pending economic disaster is recognized before the election and the feds work together to prevent another major recession slip. Unlikely but hopeful.
        • klenwell 6y ago
          > That's more or less what some cities are going for albeit with shifting the released funds to community support programs, training, and other resources instead of into the pockets of donors and the rich via tax cuts and putting the strain on the deficit. Agreed. The solution for my community? Simply reverse the trends in the graph found here: https://voiceofoc.org/2020/06/oc-shifted-millions-from-public-health-in-last-decade-while-doubling-sheriff-spending/ https://voiceofoc.org/2020/06/oc-shifted-millions-from-publi...
  • grecy 6y ago
    > Yes, especially for the top 1% and 0.1%. However, they're the ones who have enough money to pay for ways to hide their wealth from taxation So because the ultra-rich have found ways to skirt the laws, are you suggesting we just don't bother making the laws? Surely this is a game of whack-a-mole, and it's in society's best interest to keep going after them.
    • deleted 6y ago
      [deleted]
• underdeserver 6y ago
  Definitely. People build their wealth, partially, on the achievements of others. They should be taxed on property.
  • maerF0x0 6y ago
    If compounding returns are subject to additional taxation then why wouldnt the government be responsible for such a property itself (compounding returns on tax base for investments). For example an investment in irrigation ought to increase the output of agriculture and therefore increase their tax base...
  • jeremiahhs 6y ago
    Wealth is already taxed, which paid off the debt to society. Grabbing what is left after someone dies is just theft.
  • chasd00 6y ago
    if you're going to tax wealth because it was partially built on the achievements of others then you need to tax poverty because it's partially managed by the income of others.
• dhosek 6y ago
  I've never understood why people think that just because, e.g., their parents created a business worth millions of dollars, they should get that for free.
  • jokit 6y ago
    Your position is that everyone but the family of those who built wealth should "get it for free"?
  • soccerdave 6y ago
    I've never understood why the government thinks that just because someone has died, they deserve 40+% of money that has already been taxed.
    • wrren 6y ago
      Because we live in a society.
      • rs999gti 6y ago
        > Because we live in a society. Why don't I have a downvote button for this?
        • boxfire 6y ago
          because you don't have 501 karma, and you probably won't at this pace.
    • rs999gti 6y ago
      What the government gives it must first take away
    • happytoexplain 6y ago
      This is a poor argument - it contains no distinction from any taxed transaction. All money changing hands has "already been taxed" in the way you are using the phrase. Unless you are saying that all tax is wrong, in which case you should definitely make that argument rather than this much more specific one.
• lazyjones 6y ago
  Obligatory reading for believers in inheritance tax: https://iea.org.uk/blog/how-high-tax-sweden-abolished-its-disastrous-inheritance-tax https://iea.org.uk/blog/how-high-tax-sweden-abolished-its-di...
  • klmadfejno 6y ago
    This post is about sweden. Off the bat, they don't seem especially comparable because they note that spouses needing to pay inheritance tax was one of the primary problems. Spouses don't do that in the United States (for good reason).
• noja 6y ago
  I doubt any sufficiently wealthy family "inherits" anything, the owning is done by a trust or company with obscured cross-border ownership. Inheritance is for the rest of us.
  • elliekelly 6y ago
    Indeed. This is why I also take issue with the “wealth is lost in three generations” line that’s often repeated. When I worked for a Bank & Trust Company we had a lot of clients who were “broke” on paper but had a substantial trust (controlled by the bank) that paid for just about every conceivable expense.
• jeremiahhs 6y ago
  Why is left wing screed so welcome here? Why do people think it's okay to steal a family business? Jealousy.
  • happytoexplain 6y ago
    Tax/regulation and liberty need to be balanced for a society to remain civilized. I think the attitude you're expressing is one of the most dire challenges to achieving that.
    • jeremiahhs 6y ago
      People can't be civilized if they don't take someone else's money, which has already been taxed? That's quite a threat of an unruly mob in a desire to quench jealousy.
  • AdamN 6y ago
    I'm actually surprised how many people on this board are given so much and are still so selfish. I suppose I answered my own question.
    • jeremiahhs 6y ago
      I believe it is selfish to grab what is not yours. A difference of definition.
• thomasfromcdnjs 6y ago
  People who think billionaires are so rich have never seen a federal budget. You could guillotine a billionaire a day and their money wouldn't pay for nought. (Not even considering that their "networths" are always tied up in stocks. As for using the term 1%, people rarely stay in the bracket for long, people change and move through different economic brackets all the time through their lives.The biggest indicator of wealth is age. Others have commented on it, but inter-generational wealth is important for various reasons. Cultures that plan for their children's children make a lot of sense. I'd wager the West has some weird hedonism/individuality and we rarely just stop thinking of ourselves. Adding further estate taxes just removes even more incentive to work towards creating an inter genertional family. Rich families are also just better with money because it's what they know. Redistributing that money to others could just make it end up in coin machines.
  • psychometry 6y ago
    Clearly you didn't read the article, otherwise you'd know that even slight increases in this tax would fund important public services. You'd also know that the U.S. has among the lowest levels of class mobility among developed nations. People born rich stay rich; people born poor stay poor.
    • thomasfromcdnjs 6y ago
      This is simply not true, read the other comments on how much wealth is retained per generation. As for the your last sentiment, I'd also remind people that wealthy inequality is not a very big problem if the standards of living are also improving. Most "poor" people have plasma televisions, iPhones, fridges, their own living quarters and more choice of food than a king 300 years ago would have.
      • psychometry 6y ago
        Maybe try looking at objective indicators of wealth distribution instead of peering into people's windows and noting what kind of TVs they own...
  • 6y ago
• avernon 6y ago
  There is a simple fix to this. You have to get rid of the stepped-up basis. Then anything passed down will be taxed at the prevailing tax rates. All these extra rules and tricks wouldn't be needed. This is extremely unpopular because the upper 20% of society wouldn't be able to pass down their homes and what is left of their retirement accounts tax-free. That is why you have a stepped-up basis with an exclusion limit that has an extremely punitive tax rate that encourages gaming the system. But you can see the political equilibrium. Regular folk think big inheritances are being taxed while they get to pass on their house tax free and the big inheritances go through all kinds of loopholes to avoid actual taxation. It is very American.
  • toast0 6y ago
    The step-up in basis is super useful though, because you can't ask the decedant what their cost basis was, and it's not always easy to find that out (especially if their record keeping was poor). The current exemption amounts are rediculous though. Something closer to $1M with inflation adjustment and a lein/payment plan option for illiquid assets such as the family business/farm would make a lot more sense.
    • avernon 6y ago
      If they can't obtain the cost basis then it should be zero. The vast majority of people have assets like stocks and property where records are maintained by third parties. And if its so old or so disorganized to not know, then a cost basis of zero probably isn't too far off.
• lmoml 6y ago
  I'd posit that the passing of substantial wealth and capital between generations is one of the chief drivers of social decay. In the long term, it causes an immense amount of power to devolve into the hands of a small group of people who have done nothing to prove that they have the wisdom necessary to wield such power for the benefit of humanity.
  • JamesBarney 6y ago
    The vast majority of the super wealthy right now did not inherit the bulk of their wealth. I don't think this would even rank in my top 5 list of causes of social decay.
  • bialpio 6y ago
    Interesting point, I think I could get behind this way of thinking. Normally, I'd prefer to be taxed mostly on consumption (sales tax, VAT, etc), so my views were that inheritance tax should be lowered - the heirs will be taxed when they spend what they got anyway (or they can sit on the unused pile of cash, fine)1. Unfortunately, society seems to equate rich with smart, hard working, or deserving in some other way, and that is not really the case with people that got their money from their parents. 1) This assumes there are no tricks around inheriting assets that have unrealized gains, I don't know how this works in the US. EDIT: fixed (?) asterisk. EDIT2: replaced asterisk with 1, cannot figure out how to escape it.
• austincheney 6y ago
  I have always wondered what would happen if an inheritance tax were pushed to 100% for sums greater than 10 million. At that point the only way to hide the money would be to move it off shore, but then that money would be permanently off shore. The consequence of that is that it is mostly beyond reach of US taxation but in order to access that money people would have to leave the US, so it almost becomes a citizenship tax. I am basing a lot of this reasoning on what happened to the billions in wealth when large tech companies tried to dump it in Ireland to avoid taxes. The money doesn’t just disappear unless the companies are willing to never get it back or move to Ireland (corporate offices and primary investors). There would also be economic consequences for those not wanting to evade tax laws because there is now a compelling reason to perform the impossible: spend all that damn money before the tax man gets it. That is one hell of an economic stimulus, but also means large injections of cash into charities and scientific research, and commercial investment. To me all these options seem like a net positive.
  • josephcsible 6y ago
    > there is now a compelling reason to perform the impossible: spend all that damn money before the tax man gets it. Isn't that a recipe for hyperinflation?
    • throwawaygh 6y ago
      >> there is now a compelling reason to perform the impossible: spend all that damn money before the tax man gets it. > Isn't that a recipe for hyperinflation? But of prices on... what? Yaacts? It's not like people are going to start buying 1000x more bread loaves and corollas. On the contrary, it'd probably deflate prices of housing in major "investment" markets, as families off-load second/third/fourth houses. And for the luxury goods, it might even drive down prices of certain goods. More demand => economies of scale => more efficient production => lower prices => suddenly affordable to a larger market => more demand => ... But the original premise is kinda depressing. There is an alternative to blowing all your money on hedonism. You can substantially ramp up your donations, for example. I think you'd see an explosion of small churches/local colleges/community centers/etc. with $100M+ endowments.
• gdubs 6y ago
  I hope that we could carve out exemptions for first-generation wealth. Reparations may never happen in the US, but if a family went from slavery to wealth in a few generations, perhaps the least we could do is exempt them from the inheritance tax. Maybe this is a controversial take, I don’t know, but it seems like it might make a small step towards lessening inequality.
  • Someone1234 6y ago
    So you want to carve out an exemption that will largely benefit non-minorities and increase wealth inequality, in the name of helping minorities and closing the wealth inequality gap? That's quite some spin there. How about we take in more tax from the wealthy, regardless of their ethnic origins, and use that money to provide better social safety nets for the poorest who are also disproportionately minorities due to system and historical racism? You know, close the wealth gap, instead of further increasing it. Or heck, if you're really serious about this then tax the wealthy and pay actual reparations. It doesn't make any rational sense to pass a tax cut for the wealthiest in the name of "some of them could be minorities too!" It makes far more sense to tax all the wealthy, then help minority populations who would benefit more greatly. The top 1%'s kids will have to survive without that third house or yacht, even if they're minorities.
    • gdubs 6y ago
      Why such an antagonistic reply? An honest reading of my comment is that I’m speaking primarily of black millionaires — while leaving the door open that there are other groups also deserving of exemptions. It’s fine to disagree — but the tone is rather over-the-top considering. Let’s have a conversation. I’m open to hearing why it’s a stupid idea. But if we attack each other for posting ideas — then people won’t put forward ideas out of fear of being attacked.
      • thomasfromcdnjs 6y ago
        I like your original post not because I agree with it but I think it outlines an important point. Allowing families to work uninhibited without fear of government coming and taking everything allows these families (cultures) to get ahead.
• czbond 6y ago
  Chaps my hide with broke journalist mentality: "This means that 40 percent of why some Americans are extraordinarily well off has nothing to do with smarts, hard work, frugality, lucky gambles or entrepreneurial ingenuity. It is simply because they were born to rich parents." In the US at least, it isn't hard if in lower middle class or above to invest small sums over long periods to get large amounts. It is simply that they are not doing it, or do not know why one should. To blame that one's own parents or grandparents did not do it, yet anothers did is victim blaming another's actions when they should look at their own descendants action.
  • PhineasRex 6y ago
    Ah yes, the old "poor people just aren't as smart" myth. It's definitely their fault for not investing smartly and not the fact that they live paycheck to paycheck. Increasing inequality has nothing to do with the fact that wealth compounds on itself, it's just a coincidence. The reality that you and other "bootstraps" people ignore is that there is a basic cost-of-living. People need to make rent, they need to pay medical expenses, etc. If your income doesn't rise above this cost-of-living (which is true for literally half of the US population) you don't have any small amounts of money to invest. A lot of long-term investment vehicles have costs for taking out money early, which is a significant risk if you might need that money for an emergency. The wealthier you are, the more ways there are to increase your wealth and there is absolutely a floor under which you have no opportunities besides luck
    • czbond 6y ago
      I made no reference to intelligence, it was inferred. Many first generation wealthy live paycheck to paycheck, grind it out, figure the rules of the current game (which take persistent observation but not smarts). My take away is any family, from anywhere, can become wealthy in their future lineage. Which is an amazing thought.
  • ianleeclark 6y ago
    > In the US at least, it isn't hard if in lower middle class or above to invest small sums over long periods to get large amounts. Roughly 3/4 of the country lives paycheck-to-paycheck.
• danvoell 6y ago
  Would be interesting to see what would happen if the tax were increased. Would there be a mass transfer before it went into affect? I wonder how the current age categories of wealth accumulation compare with previous generations.
  • jacobush 6y ago
    The biggest inidicator of wealth is if your parents were wealthy. At least in the US.
• jimbob45 6y ago
  Transferable copyright is way worse imho. I have no idea why we subsidize rent-seeking by the kids of inventors (or sometimes, people who had nothing to do with the original invention).
  • throwawaygh 6y ago
    Transferable copyright and transferable real estate are the same thing imo. Not a huge fan of either, but I don't see how being the landlord's kid is any different from being an writers's kid. > kids of inventors Inventions are protected by patent or by trade secret, not by copyright. Patents have short shelf lives compared to copyright, mostly because mickey mouse was copyrighted but not patented.
    • jimbob45 6y ago
      The difference I see is that a landlord’s kid has to do 100% of the job his parent did or risk losing his landlordship. The writer’s kid doesn’t have to do anything at all. Also yes, you’re right. I should have said “work of art” rather than “invention” to emphasize that I mean copyright and not patent. Parents have far more reasonable durations.
      • throwawaygh 6y ago
        > The difference I see is that a landlord’s kid has to do 100% of the job his parent did or risk losing his landlordship Lots of people who own small numbers of properties just hire a broker/property management company to do all the work for them. Also, renting out even a single family home requires damn close to zero labor even without hiring out the work. I rent one out and spend approximately one day a year on managing the property. Property management is a job. Property ownership isn't. The former does not pay nearly as well as the latter, and for most property classes, the former mostly amounts to paying other people to do the actual work once every few years. TBH I imagine that maintaining a copyright with significant associated royalties also requires as much or more work than managing a property. You'd probably just hire a law firm or publisher to do all the work for you. If you didn't then you'd have to be monitoring for abuse, handling lawsuits, collecting royalties on contracts with publishers/distributors, etc. I think you probably over-estimate the labor involved in most property management, under-estimate the labor involved in IP management, and under-estimate how divorced management and ownership are in typical cases.
• reese_john 6y ago
  It is said that 70% of families lose their wealth by the 2nd generation and 90% by the 3rd[1] Inequality is not static, it is rather dynamic. Nassim Taleb makes some good points about that here[2], for instance, ~ 70% of Americans will spend a year in the top 20% and only ten percent of the wealthiest five hundred American people or dynasties were so thirty years ago. [1] https://www.nasdaq.com/articles/generational-wealth%3A-why-do-70-of-families-lose-their-wealth-in-the-2nd-generation-2018-10 https://www.nasdaq.com/articles/generational-wealth%3A-why-d... [2] https://medium.com/incerto/inequality-and-skin-in-the-game-d8f00bc0cb46 https://medium.com/incerto/inequality-and-skin-in-the-game-d...
  • seattle_spring 6y ago
    Seems like we're conflating wealth with income?
    • maerF0x0 6y ago
      Wealth is just the generative form of income expenditures. How do you tax the "wealth" that is being able to get free food from a food bank, or a monthly check from the government? How do you tax a bunch of experiences and education? I dont think we should tax "wealth" when it's just a choice of what to do with post tax income. And pre tax investments are taxed on their exit (eg 401k)
      • JamesBarney 6y ago
        > Nassim Taleb makes some good points about that here[2], for instance, ~ 70% of Americans will spend a year in the top 20% and only ten percent of the wealthiest five hundred American people or dynasties were so thirty years ago. In this specific instance wealth vs income matters because the above statement is true of income, but very untrue of wealth.
        • AnthonyMouse 6y ago
          What makes you think it's untrue of wealth? 80th percentile wealth in the US is a net worth of ~$500k. That's where most people are at retirement when your house is basically paid off and there is money in your 401(k).
• octaveguin 6y ago
  A lot of people here are concerned that taxing the rich will just make them hide their money offshore. It should be noted, then, that it's gotten a lot harder for Americans to go offshore with their money due to two recent things: 1. Expatriation tax - https://en.wikipedia.org/wiki/Expatriation_tax https://en.wikipedia.org/wiki/Expatriation_tax 2. Foreign tax compliance act - https://en.wikipedia.org/wiki/Foreign_Account_Tax_Compliance_Act https://en.wikipedia.org/wiki/Foreign_Account_Tax_Compliance... When taken together, it means that Americans are basically unable to ever leave American taxation. No other nation has the ability to restrict their citizens like Americans do while their citizens are abroad. This is bad news if you want to own a company while living abroad (you can't unless it's American or you'll be double taxed), live in a lower taxed country, or renounce your citizenship if you make more than something like 139k a year. Any tax applied to America's rich would not result in money leaving the country - it's no longer really possible. I wholeheartedly support strong inheritance tax. Dynasties are bad things and create bad systems. The US is uniquely positioned to enforce it even if it means that citizens are basically serfs to their country.
  • sesuximo 6y ago
    This is definitely what America is going for and definitely not the way things are right now. It’s very much possible to leave and or or move money legally.
    • octaveguin 6y ago
      Please explain because every bank in the world needs to report to the US about their American account holders. If you own a holding company in another country, you need to declare that and be taxed on it in addition to that country's tax. I know this because I own a business and wish to live abroad so I really would like to leave but I can't.
      • noja 6y ago
        What happens if you rent (instead of own) a holding company?
      • 6y ago
• tengbretson 6y ago
  Imagine how much it would stimulate the economy if we did this! Instead of building up wealth to ensure the success of future generations, old people would be forced to use it or lose it. The Buicks, 0-entry bathtubs and high-end mobility scooters would be flying off the shelves with all this unlocked capital being forced to consume. Think of all the new JOBS! Now that's what I call progress!™️
  • dominotw 6y ago
    > Instead of building up wealth to ensure the success of future generations I will and can retire now if I can't pass my wealth onto next generation. Removing experienced productive people out of workforce would be silly economic policy.
    • JamesBarney 6y ago
      I think only a very small percentage of the population would retire if estate taxes were increased even substantially.
      • dominotw 6y ago
        agreed. was just responding to gp's sarcastic comment seriously :p
  • bennysonething 6y ago
    Milton Friedman makes a good point (he completely disagrees with yours): parents passing on wealth to children is a good thing as it makes them invest. Not in trinkets of frivolous utility, but actual investments that puts money in important thinks like factories etc. If you'd. Prefer people to divert their wealth into pointless waste before the tax man gets it, then heavy inheritance tax is the way to do it.
    • rwcarlsen 6y ago
      I think the gp was making the same point via sarcasm.
• graton 6y ago
  Interesting to me is that not-taxing inheritances is sort of a giant tax break. If your parent dies and they had bought a house for $100,00 and now it is worth $1,100,000. So a capital gain of $1,000,000. If they had sold the house they would have had to pay capital gains on the house, minus an exemption amount ($250,000 for single and $500,000 for married). But you as the beneficiary get to take that house and immediately sell it and pay $0 in capital gains on it. So that tax is actually forgiven on death. If you held on to the house then you would pay capital gains on any gains from the value of it upon inheritance.
  • Judson 6y ago
    IRS FAQ on inherited assets is pretty good here: https://www.irs.gov/faqs/interest-dividends-other-types-of-income/gifts-inheritances/gifts-inheritances https://www.irs.gov/faqs/interest-dividends-other-types-of-i... Without any estate planning, you would pay $0 in capital gains because the basis resets to FMV at the time of death and the sale would be taxed as regular income (37% marginal bracket on $1,000,000 sale). By my reading, this doesn't seem like a giant tax break. Edit: Totally wrong. $0 taxes owed because basis is stepped up and sale is NOT treated as income.
    • graton 6y ago
      Well I paid $0 in taxes on my parent's death. And when we sold it no income tax was paid. Our accountant checked everything and made sure it was done correctly. From the page it does say: If you sell the property for more than your basis, you have a taxable gain. But your basis is set upon the FMV (Fair Market Value) of the property upon death of the decedent. The basis of property inherited from a decedent is generally one of the following: 1. The fair market value (FMV) of the property on the date of the decedent's death (whether or not the executor of the estate files an estate tax return (Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return)). Also, selling a house is not typically considered income. It is considered a capital gain. So you don't pay income tax on sale of a house. There might be exceptions if you are a real estate investor, but I don't have any expertise in that area.
• ralmidani 6y ago
  Inheritance tax is not a wealth tax (the person who accumulated the wealth has died), it's just another income tax (which NYT wants to raise to an absurdly high rate). Taxing wealth is far more equitable than taxing income; taxing wealth gives low-medium earners more discretion to spend on needs like housing, clothing, food, child care, education, transportation, etc (needs that differ between families, and which families are better equipped to assess than the government), while taxing income gives the government a share of people's money before they can decide what to do with it. Tax wealth while people are alive (on an annual basis), rather than destroy a company/farm/estate by having the government swoop in and take an enormous share of it (do we really want the government in the business of taking over companies and farms?) Of course, wealthy people who don't want to pay taxes could buy yachts and fancy cars, but that could be remedied easily by instituting high sales taxes on luxury items.
  • sesuximo 6y ago
    Wealthy people could also leave America
    • sachdevap 6y ago
      This is a big myth. Wealthy people are not going to just get up and leave America. Where do you think they would go?
      • sesuximo 6y ago
        Look at france. It added a wealth tax. A year later, it made international news when a billionaire stayed! I think they would go quite literally everywhere.
        • ralmidani 6y ago
          Last time I checked, America is still the best place for a millionaire to become a billionaire. Having arbitrary thresholds where people suddenly get taxed at obscene rates is, of course, foolish.
• dbcurtis 6y ago
  High inheritance taxes tend to single out individual proprietorship businesses for punishment. I remember when I was young, watching newly-widowed farm wives lose everything to inheritance taxes. It was heartbreaking. The tax code changed so that stopped happening -- too late for some. In the end, frequent tweaks to the inheritance tax code is just a full employment act for trust & estate lawyers. What we need instead of our current convoluted taxation scheme is a progressive consumption tax -- but that is a rant for another day. (No, I don't mean a sales tax or a VAT. The government already gets all the data on your income and your total savings/investments. consumption = income - net_savings. Apply progressive table. Done.)
  • dbcurtis 6y ago
    Wow. My heart-felt anecdote offended somebody. Down-votes don't contribute to the debate.
  • humanrebar 6y ago
    Also, folks with enough money will find a way to spend it on kids and grandkids one way or another: primary residences, targeted endowments, donations to private clubs their families enjoy, businesses that will keep their ancestors gainfully employed indefinitely, and so on.
  • JamesBarney 6y ago
    When was this? I don't remember there ever being an inheritance tax on property left to ones spouse.
    • dbcurtis 6y ago
      1970's. The limit on what you could leave to a spouse was low enough that during a period of rapid inflation it got badly out of whack with farm land values. It caught main-street businesses, too.
• flerchin 6y ago
  I have a hard time figuring what the purpose of taxes is with our huge deficits. It's almost like taxes exist only to redistribute wealth? Recovering even 50% of all inheritances via taxes does not make a dent in the deficit.
• supernova87a 6y ago
  Much as I take a more moderate view about taxation (some things that taxes go to fund are in fact ineffective and wasteful), I respect strongly the inheritance tax not just in revenue raising but in behavior influencing. (those who are on the receiving end of the tax, for reasons others have given here) And I do not for one second buy the ridiculous argument, both on this tax and other taxes, that "money shouldn't be double-taxed". Money is taxed every time it changes hands! Money doesn't have a "history", except where we create loopholes to allow it to, which disproportionately go to those who have the means to track and create vehicles that have "history". Poor people don't have capital gains. The inheritance tax, though you may not think it intuitively, is a strong way for our society to renew itself and find new talent. It takes work to fight against those who would silently change the rules to start favoring the old and idle. (who are the ones who most have the ability to change the rules)
  • DuskStar 6y ago
    > but in behavior influencing. Ah, yes - because of course we want people to spend all their money before they die instead of investing long-term for their children.
    • ianleeclark 6y ago
      These things aren't mutually exclusive. You could spend extravagantly on your child's education and give them a genuine leg-up on the competition.
      • DuskStar 6y ago
        Oh, sure - I'll spend extravagantly on their education, take them travelling around the world, do everything I can to set them up for success - but if I can't leave them my company, there's no reason not to run it into the ground for short-term gains before I die. Stock market "only cares about next quarter" anyways, after all...
        • ianleeclark 6y ago
• lurquer 6y ago
  Rich people don't pay inheritance taxes. There are a gazillion ways to pass on money without falling prey to estate taxes. The only people effected are middle-class folks not savvy enough to avoid the tax. The richest of the rich simply leave everything to a charity or foundation that their children draw salaries from (as well as having the use of the foundations estates, planes, etc.) Case in point... Warren Buffet; he's always going on about he isn't leaving anything to his children, but plans on giving it away to charity. What isn't frequently mentioned is that the kids 'own' the charities. https://www.nbcnews.com/businessmain/warren-buffett-his-birthday-gives-kids-600m-972645 https://www.nbcnews.com/businessmain/warren-buffett-his-birt...
  • ceejayoz 6y ago
    Middle-class folks are affected by a tax that starts at $23M of assets? I suspect not. It's fascinating how much propaganda has shaped this debate. People with a few hundred thousand dollars in their 401(k) somehow got tricked into thinking the "Death Tax" had anything to do with them.
    • lurquer 6y ago
      The rates vary depending on who is in power. They've been low, they've been high. You have no idea what the rate will be when you die. The point is, regardless of the rate, the rich -- people with access to good lawyers and accountants -- don't be pay it. It's a political 'soak-the-rich' tactic used by progressive politicians to get votes... it never 'soaks the rich'.
      • ceejayoz 6y ago
        That's an argument for fixing the loopholes.
        • lurquer 6y ago
          It is unfixable. This isn't a political issue. It's just a fact. Absent a complete totalitarian economy where every transaction is acrurinized, it will always be an easy tax to avoid. Consider income tax... consider the massive involvement of the govt required to enforce this tax. That is, employers are required to deduct the tax from every paycheck, reams if forms, thousands of agents... all that for one simple transaction: namely, paying someone for services. You can't have the same type of scrutiny for the totality of transactions that can effectuate the tranfer of money from one person to another.
• taxtionistheft 6y ago
  Taxation is theft. Nothing to discuss about it.
• closeparen 6y ago
  The important inter-generational wealth transfer these days are a) moving to a neighborhood with good schools, and b) paying for college. To intercept this inequality with taxation, you’d need to tax the beneficiaries of these gifts enough to wipe out the lifetime earnings advantages associated with skilled labor.
• taxtionistheft 6y ago
  France and many other countries already increased taxes before with devastating consequences. Don't think you can outsmart rich people and take their property without their permission.
• gadders 6y ago
  But for those who have children, isn't this the whole point? i.e. ensuring your children have a better life than you did yourself. In that view, surely passing on an inheritance is a good thing. Obviously, passing on $5bn to your kids is different than leaving them a $800k house mortgage free.
• auganov 6y ago
  The notion that there's even significant wealth held by private individuals is total fiction. Compare yearly flows of money to private wealth. The global GDP is estimated at around $150T, and total global private wealth at perhaps $200T. You could literally confiscate all private wealth in the world and it would run out in a few years. Most people just don't realize this simple fact. We hear about how just a few people hold most of the world's wealth and it creates this image of enormous control and influence. But when you compare it to flows of money you realize how little of world's economic output these "super rich" people have captured for themselves.
  • throwawaygh 6y ago
    > But when you compare it to flows of money you realize how little of world's economic output these "super rich" people have captured for themselves. Alternatively: starting with a lot of wealth allows you to allocate your time and resources to the accumulation of power and cultural influence, often without ever experiencing life as an average person. So you end up with super powerful people who never experienced the anxiety of waiting for payday or wondering about job security with a new baby on the way. The corrupting influence of that -- even more than the opportunity cost of the wealth -- is a good reason for a wealth tax on the very, very, very wealthy. Would Trump be president if he didn't have a $400MM head start? Would the Koch brothers have been able to exert so much influence over state policy in places like Kansas if they didn't inherit their father's wealth? And, if so, would they have the same policy preferences and demeanors? Nothing is impossible, by I wager the odds are closer to zero than to one on both counts.
    • auganov 6y ago
      Bloomberg and Steyer have pretty much disproved the notion that you can easily buy your way into politics. Most people don't even know who Steyer is. How many Steyers are out there? When a rich person tries to become notable and fails you just don't hear about them. When a rich person does something big you assume it's because of their wealth being their most apparent unique characteristic. President Trump is one of the few who made it. And he actually didn't spend that much money on the campaign at all. Switched to regular fundraising pretty fast. Sure, there's no question that his wealth is a big part of who he is. If anything he leveraged people's obsession with wealth rather than his wealth itself. You're still going to deal with nation state and corporate lobbying without private wealth. Successful private lobbying efforts get all attention because of how uncommon it is. How long have Koch brother[s] been at it? They pretty much were life long political activists. And most of that is out of personal conviction. Doesn't seem to me like they have attained any concerning levels of power at all given their dedication.
• jokit 6y ago
  The United States is the one nation on the planet that exists for the sole purpose of protecting the rights of the individual. Communism doesn't belong anywhere, certainly, but objectively least of all in the United States. In fact, communists conspire against the Supreme Law of the Land in the United States. Luckily for everyone, we're all (including communists) still free to leave, and go to literally anywhere else which would be less inappropriate than the U.S.. Why would communists attempt to change the one oasis meant to be libertarian?
• tenpoundhammer 6y ago
  The first question I have to ask myself about increasing taxes is, can the government do a better job of distributing these resources than whoever is doing that Job now? and what does better mean? Living in the US with the government that is currently in place I feel confident that the government can't do a better job than the current system in place to handle inheritance, no matter what the definition of better is. So giving the government more money via inheritance tax is a bad idea.
• Markoff 6y ago
  i can't believe how many posters here defend this immoral nonsense taxing already taxed legally gained money if the rich obtain the money legal way and taxed them why they should be punished for being more successful than others and responsibly leaving the money to children? basically what defendants of inheritance tax say you should not try to be successful because you will be punished by losers for it, it's income tax all over again (unless your country has flat rate for everyone)
• pintxo 6y ago
  I am inclined to believe it comes down to a fundamental error in our current way of taxation. Which is that we primarily tax work or the added value. While luck (the lottery, having rich parents) is not taxed at all or at measurable lower rates. Question is why is that? And wouldn't it be fairer to tax work (effort) less and luck more?
  • apta 6y ago
    > I am inclined to believe it comes down to a fundamental error in our current way of taxation. This is exactly it, what almost everyone fails to notice. If you look at other civilizations that do not impose income taxes, yet were successful, they did not have this entire mess that is the US taxation system. Islam dictates a "charity tax" called Zakat, that is calculated based on net worth, or produce (e.g. for farms and cattle). It is much, much easier system to calculate, and is strictly superior to whatever the US has going, as proof by how they have to keep revising the tax code and "closing loopholes", and proposing new taxes every time. There are several factors at play here. The most important other factor is that the modern economic system is based on parasitic, and morally bankrupt practices, most important of which is interest/usury. Take these out and the wealth inequality gap will fix itself very quickly.