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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 mone

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.
  - josephcsible 6y ago
    > But of prices on... what? Yaacts? It's not like people are going to start buying 1000x more bread loaves and corollas. And then what will the yacht company do with all of the money? > it might even drive down prices of certain goods. More demand => economies of scale => lower prices => more demand => ... That's not consistent with economic theory. Economies of scale don't work "forever". At some point, the per-unit price will start to rise with quantity again.
    - throwawaygh 6y ago
      > And then what will the yacht company do with all of the money? Employ people. Reinvest. Raise wages. Expand to new markets. Throw better Christmas parties. Buy the CEO another yacht. You know, run their business. > That's not consistent with economic theory. Economies of scale don't work "forever". At some point, the per-unit price will start to rise with quantity again. You mean we won't get $10 yacht?! ;-) Anyways, that part of my original pose was supposed to be tounge-in-cheek. The point is, I don't think bidding up the prices of real estate in a few super-upper-class retirement snowbird communities is the end of the world. Yes, inflation will happen. But only in certain asset classes that I don't care much about.
  - austincheney 6y ago
    I wonder what would happen with those luxury goods when the wealthy party dies and nobody else can afford the maintenance costs on these things.
- tryptophan 6y ago
  Yep. The parent makes the ever-so-prevalent mistake of assuming that spending( as opposed to greedy hoarding of investments!) is what drives growth and progress.
  - turbinerneiter 6y ago
    How does hoarding of I investments drive progress, or is there some double sarcasm that flies over my head?
- JamesBarney 6y ago
  It's a recipe for increased inflation by increasing money velocity marginally. Not hyper inflation. Of all the money being transferred per year, little of it is transferred via inheritance. And and even smaller amount of the total money transferred via inheritance is above $10 million range. So maybe you'd see a 0.1% or 0.01% tick up in inflation. Setting inheritance rats at 100% above 21 million is a silly idea, but not because of a risk of hyper inflation.
- charwalker 6y ago
  It likely won't inflate the price of apples or whole chickens. It may drive up home prices or create a new market for super luxury vehicles. Consider that some big name billionaires could spend millions per day and not see a dent in their overall fortune. Imagine if you needed to spend $5 million a day, how quickly would you run out of things to buy that isn't collector cars, houses, or private companies?
nullc 6y ago
Marry someone young before you die, give them the wealth tax-free. That is a loophole which is extremely hard to close.
- austincheney 6y ago
  Is that really a loop hole? If anything it’s just a temporary delay.
  - nullc 6y ago
    It can be chained forever.
m-ee 6y ago
Wouldn’t they just do what a Apple did? Hold it offshore and wait for a conservative administration to declare a tax holiday that allows them to repatriate it at little to no cost.
- austincheney 6y ago
  How patient is the recipient? Either they are willing to wait, for possibly longer than their life, or they have to leave the US to access that money and not return to the US with that money. If those are unacceptable and they have no wealth, because it’s locked up overseas, they could bring it all back for taxation minus 10 million.
turbinerneiter 6y ago
I mean that is what taxes on companies are supposed to do. In all smaller companies I know, at the end of the year, they try to spend as much of their profit as possible in a way that enabled growth the next year. They keep the profit low because it is being taxed. For the state, both is fine - more profit leads to more tax, more growth also leads to more tax AND more employment, and better products due to research and so on. Tax evasion and off shoring breaks this and the negative effect is far greater than the actual loss in tax. It breaks the system that incentives companies to invest in their futures rather than their shareholder's cashing out.
elicash 6y ago
I once looked into something like this -- a UNIVERSAL, 100% death tax. When I googled it, it appeared that it could almost, but not quite, replace the federal income tax if you should solve for the fraud and loophole issues. (Which, I don't think you can btw.) Then you think about, what happens when parents die in a car wreck to the kids? So maybe what you implement is some type of National Life Insurance federal program, geared towards minors or maybe more broadly across the population. Tweaks to Social Security survivor benefits, essentially. There are also weird questions like, what happens to a company that's singularly owned by the newly deceased? It's sold to the highest bidder, even if it's company run by the whole family? I don't actually favor this policy for the obvious reasons people will list. But I think it's an interesting question that gets to what it means to have something closer to equality of opportunity.
- msla 6y ago
  > Then you think about, what happens when parents die in a car wreck to the kids? Assuming the parents had sufficient foresight, there would be a blind trust established for the children which will provide for them. Or maybe not a blind trust. Maybe some other instrument or institution. Whatever it is, you can be assured it would be common to the point of being established using a standard form in the local library, much like how simple wills can be created today.
jayd16 6y ago
Wouldn't you just invest the money and leave the stocks to be inherited? Not that that's bad.
tathougies 6y ago
Or people would just gift the money via a business. Add you and your kids name to an LLC. Invest money. Voila...
- charwalker 6y ago
  I doubt any of us on this forum have all the information, expertise, etc to create a fully fledged tax overhaul bill. There will always be a loophole if the people writing the bills (or influencing those writing the bills) stand to benefit. We also need to address lobbying and dark money in politics. Like everything, these issues are way more complex beneath the surface than are generally understood.
CorruptedArc 6y ago
I see no world were this doesn't end poorly. You either see mass emigration of the wealthy at old age or an incentivisation of illicit off the books banking (both domestically & offshore). I can't think of anyone who'd be willing to hand over the majority of their wealth to the government upon death. It would become common practice to attempt to circumvent this. If everything above 10 million is taken as a death tax you can be sure no estates are going to be worth over 10 million publicly.
- austincheney 6y ago
  My thinking about the emigration is that if wealthy old people leave so that they can leave wealth to their heirs they are dooming their heirs to a hard decision: leave to access that wealth or stay with access to the wealth capped at 10 million. The only harm that I see in this is that a few inheritors leave the country. Creatively reducing the values of estate wealth to the taxable cap would increase access to like conditions for people who normally have access to that much wealth and not much more which greatly lowers wealth distribution in the top 1% which is still a good thing.
- mnm1 6y ago
  Emigrating does not absolve one of the duty to pay taxes in the US. Renouncing citizenship does, but doing so for tax reasons is already illegal and those that do would be taxed anyway when renouncing.
AnthonyMouse 6y ago
> 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. Moving money offshore is how companies avoid income tax. The way families avoid inheritance tax is employment. Your family has a business. It's worth a hundred million dollars and makes five million dollars a year in profit. The five million dollars is going to be taxable income to somebody anyway, so you pay it to your kids as salary (a tax deduction for the parents/business), and most of the compensation is paid in the form of shares in the business. By the time the parents die the kids already own most or all of the business and what's left is below the threshold for inheritance tax. There's a reason they say the only people who pay it are the ones who didn't plan ahead.

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.
- josephcsible 6y ago
  > But of prices on... what? Yaacts? It's not like people are going to start buying 1000x more bread loaves and corollas. And then what will the yacht company do with all of the money? > it might even drive down prices of certain goods. More demand => economies of scale => lower prices => more demand => ... That's not consistent with economic theory. Economies of scale don't work "forever". At some point, the per-unit price will start to rise with quantity again.
  - throwawaygh 6y ago
    > And then what will the yacht company do with all of the money? Employ people. Reinvest. Raise wages. Expand to new markets. Throw better Christmas parties. Buy the CEO another yacht. You know, run their business. > That's not consistent with economic theory. Economies of scale don't work "forever". At some point, the per-unit price will start to rise with quantity again. You mean we won't get $10 yacht?! ;-) Anyways, that part of my original pose was supposed to be tounge-in-cheek. The point is, I don't think bidding up the prices of real estate in a few super-upper-class retirement snowbird communities is the end of the world. Yes, inflation will happen. But only in certain asset classes that I don't care much about.
- austincheney 6y ago
  I wonder what would happen with those luxury goods when the wealthy party dies and nobody else can afford the maintenance costs on these things.
tryptophan 6y ago
Yep. The parent makes the ever-so-prevalent mistake of assuming that spending( as opposed to greedy hoarding of investments!) is what drives growth and progress.
- turbinerneiter 6y ago
  How does hoarding of I investments drive progress, or is there some double sarcasm that flies over my head?
JamesBarney 6y ago
It's a recipe for increased inflation by increasing money velocity marginally. Not hyper inflation. Of all the money being transferred per year, little of it is transferred via inheritance. And and even smaller amount of the total money transferred via inheritance is above $10 million range. So maybe you'd see a 0.1% or 0.01% tick up in inflation. Setting inheritance rats at 100% above 21 million is a silly idea, but not because of a risk of hyper inflation.
charwalker 6y ago
It likely won't inflate the price of apples or whole chickens. It may drive up home prices or create a new market for super luxury vehicles. Consider that some big name billionaires could spend millions per day and not see a dent in their overall fortune. Imagine if you needed to spend $5 million a day, how quickly would you run out of things to buy that isn't collector cars, houses, or private companies?

nullc 6y ago

Marry someone young before you die, give them the wealth tax-free. That is a loophole which is extremely hard to close.

austincheney 6y ago
Is that really a loop hole? If anything it’s just a temporary delay.
- nullc 6y ago
  It can be chained forever.

m-ee 6y ago

Wouldn’t they just do what a Apple did? Hold it offshore and wait for a conservative administration to declare a tax holiday that allows them to repatriate it at little to no cost.

austincheney 6y ago
How patient is the recipient? Either they are willing to wait, for possibly longer than their life, or they have to leave the US to access that money and not return to the US with that money. If those are unacceptable and they have no wealth, because it’s locked up overseas, they could bring it all back for taxation minus 10 million.

turbinerneiter 6y ago

I mean that is what taxes on companies are supposed to do. In all smaller companies I know, at the end of the year, they try to spend as much of their profit as possible in a way that enabled growth the next year. They keep the profit low because it is being taxed. For the state, both is fine - more profit leads to more tax, more growth also leads to more tax AND more employment, and better products due to research and so on. Tax evasion and off shoring breaks this and the negative effect is far greater than the actual loss in tax. It breaks the system that incentives companies to invest in their futures rather than their shareholder's cashing out.

elicash 6y ago

I once looked into something like this -- a UNIVERSAL, 100% death tax. When I googled it, it appeared that it could almost, but not quite, replace the federal income tax if you should solve for the fraud and loophole issues. (Which, I don't think you can btw.) Then you think about, what happens when parents die in a car wreck to the kids? So maybe what you implement is some type of National Life Insurance federal program, geared towards minors or maybe more broadly across the population. Tweaks to Social Security survivor benefits, essentially. There are also weird questions like, what happens to a company that's singularly owned by the newly deceased? It's sold to the highest bidder, even if it's company run by the whole family? I don't actually favor this policy for the obvious reasons people will list. But I think it's an interesting question that gets to what it means to have something closer to equality of opportunity.

msla 6y ago
> Then you think about, what happens when parents die in a car wreck to the kids? Assuming the parents had sufficient foresight, there would be a blind trust established for the children which will provide for them. Or maybe not a blind trust. Maybe some other instrument or institution. Whatever it is, you can be assured it would be common to the point of being established using a standard form in the local library, much like how simple wills can be created today.

jayd16 6y ago

Wouldn't you just invest the money and leave the stocks to be inherited? Not that that's bad.

tathougies 6y ago

Or people would just gift the money via a business. Add you and your kids name to an LLC. Invest money. Voila...

charwalker 6y ago
I doubt any of us on this forum have all the information, expertise, etc to create a fully fledged tax overhaul bill. There will always be a loophole if the people writing the bills (or influencing those writing the bills) stand to benefit. We also need to address lobbying and dark money in politics. Like everything, these issues are way more complex beneath the surface than are generally understood.

CorruptedArc 6y ago

I see no world were this doesn't end poorly. You either see mass emigration of the wealthy at old age or an incentivisation of illicit off the books banking (both domestically & offshore). I can't think of anyone who'd be willing to hand over the majority of their wealth to the government upon death. It would become common practice to attempt to circumvent this. If everything above 10 million is taken as a death tax you can be sure no estates are going to be worth over 10 million publicly.

austincheney 6y ago
My thinking about the emigration is that if wealthy old people leave so that they can leave wealth to their heirs they are dooming their heirs to a hard decision: leave to access that wealth or stay with access to the wealth capped at 10 million. The only harm that I see in this is that a few inheritors leave the country. Creatively reducing the values of estate wealth to the taxable cap would increase access to like conditions for people who normally have access to that much wealth and not much more which greatly lowers wealth distribution in the top 1% which is still a good thing.
mnm1 6y ago
Emigrating does not absolve one of the duty to pay taxes in the US. Renouncing citizenship does, but doing so for tax reasons is already illegal and those that do would be taxed anyway when renouncing.

AnthonyMouse 6y ago

> 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. Moving money offshore is how companies avoid income tax. The way families avoid inheritance tax is employment. Your family has a business. It's worth a hundred million dollars and makes five million dollars a year in profit. The five million dollars is going to be taxable income to somebody anyway, so you pay it to your kids as salary (a tax deduction for the parents/business), and most of the compensation is paid in the form of shares in the business. By the time the parents die the kids already own most or all of the business and what's left is below the threshold for inheritance tax. There's a reason they say the only people who pay it are the ones who didn't plan ahead.