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What’s the argument FOR an inheritance tax, when it comes to fairness? The person who’s passsing the money down already paid tax on the money, whether income ta
by bluedevil2k 3y ago
What’s the argument FOR an inheritance tax, when it comes to fairness? The person who’s passsing the money down already paid tax on the money, whether income tax or capital gains tax. The government already got a hefty chunk of that earned money. Why should it be taxed again? Especially when we see how inefficient the government is at spending money for the public good.
- Projectiboga 3y agoActually the capital gains basis gets reset at either date of death or 9 months later. So no not all that capital was taxed properly. Even saving $100K a year and getting 8% growth can't generate that scale of wealth, even if you save at that level for 40 years.
- egonschiele 3y agoGetting a leg up in life because your parents left you a big inheritance, is unfair to those who don't. There are many different types of fairness, not just one.
- bluedevil2k 3y agoThis is one of the silliest comments I’ve read on HN: it’s not fair to have successful parents that love you, therefore the government must step in and fix that.
- CPLX 3y agoThey aren’t taxing love they’re taxing money. We always tax money when it transfers from one person or entity to another.
- bluedevil2k 3y agoNo we don’t. In fact we rarely tax intra-family money transfers. When I pay for my kids’ college, that’s not taxed. Buy then a car at 16 - untaxed.
- CPLX 3y agoRight and give them the car two years later and it is taxed, subject to the gift tax exceptions and so on. Proving my point that the rule is that money is taxed when it changes hands and the exceptions are exceptions.
- sokoloff 3y agoA couple gifting their 18 (or 38) year old kid a car is unlikely to exceed the gift tax exemption.
- Patxitxi 3y agoWe should tax money to use it for love. Not love money to not use in anything else than private enjoyment.
- medvezhenok 3y agoThe argument is slightly different. It's not economically efficient to allocate wealth to children according to their parents' abilities (as opposed to the children's abilities). Doing the latter (as opposed to the former) will maximize the aggregate wealth of a society.
- Turing_Machine 3y agoIt's not "fair" that I'm only slightly above average height and will therefor never be an NBA star. It's not "fair" that I'm a competent musician at best -- far, far below professional level. Are you arguing that no one should be allowed to be a pro basketball player or musician? You should go read a story called Harrison Bergeron by Kurt Vonnegut.
- tylerhou 3y agoYes, it isn't fair that some people are taller than others, or more talented. The way we account for that is is not by outlawing behaviors. Rather, we levy progressive income taxes so that people who are lucky can help people who are less lucky. The most talented basketball players pay a large income tax that helps provide services to those who were not born lucky. I don't see why estate taxes are any different. It is not fair that some people are born into rich families while others are born into poor families. Nobody is suggesting we outlaw inheritance. But levying an appropriate tax on inheritance and preventing tax avoidance schemes is one way to compensate the unlucky. Vonnegut was also a socialist (according to Wikipedia).
- Patxitxi 3y agoAgree
- Turing_Machine 3y agoSorry, you're dodging. Most professional musicians (and other artists) are far from wealthy. Should they have to pay high taxes as well, for "fairness"?
- Turing_Machine 3y agoMaybe instead we could, e.g., force streaming services to play an equal number of songs from every musician (or imagined musician), regardless of talent. Want to listen to Bach? Okay, but you have to listen to five hundred songs from untalented randos before hearing a Bach piece. That would be "fair", yes?
- Patxitxi 3y agoAgree 200%
- Eddy_Viscosity2 3y agoThere a meritocracy argument in favor of inheritance tax. Those inheriting did not earn that wealth, therefore they should not receive it. Maybe instead there could be a lottery. Any wealth over some threshold (say $10M) is divided into $100k prizes and awarded to random citizens like a lottery.
- jpetso 3y agoThis angle makes me think that we're going about the whole inheritance tax thing the wrong way. It's not the parent's estate that should be taxed. They have indeed earned all the money fair and square, and should be able to pass it on as they see fit. Instead, let's think about a tax on receiving inheritances. Limiting the money hose where the inequality actually happens, at the person that hasn't worked for the money and through pure happenstance comes into riches while others are not getting remotely equal opportunities. That person should be the one to consider when proposing an inheritance tax. Maybe a lifetime tax-free limit on receiving inheritances, cumulatively, from any source. [Edit: This way, we can also elegantly solve the "can't pass down the family business" problem: Allow the inheritance tax to be paid in long-term installments by the recipient, with interest, allowing the inheriting child to keep the asset but make them work for part of the value they got out of it. Remaining tax debt at the time of the child's death would be due immediately at the time of their own death.]
- jemmyw 3y agoJust treat it like income. Doesn't matter when your parents gifted you the money, before or after they died, it's income received.
- meristohm 3y agoThe money is gained on the backs of so many other people who helped make the infrastructure that made wealth accumulation possible. Taxes ideally pay for things that benefit enough of us, like roads, education, housing, and health care and sure, defense, since we're still combative and territorial humans.
- Patxitxi 3y agoYeap
- notacoward 3y agoThis "double taxation" argument has nothing to do with fairness. It's rules lawyering, not ethical reasoning. It also ignores the fact that money is usually taxed when it changes hands - income tax, sales tax, etc. Yes, again and again and again. The one notable exception - which the article even mentions - is certain kinds of inheritance. Thanks to the basis step-up, a lot of wealth has evaded the kind of taxation that every other kind of transfer typically incurs. > Especially when we see how inefficient the government is at spending money for the public good. Pure political cant, unrelated to the matter at hand and particularly to any issue of fairness. It does, however, underscore the ideological motivation behind an otherwise ridiculous argument.
- Turing_Machine 3y ago> It also ignores the fact that money is usually taxed when it changes hands - income tax, sales tax, etc. I don't think they're "ignoring the fact". I think they're arguing that it's wrong. Those aren't the same thing.
- deleted 3y ago[deleted]
- Patxitxi 3y ago[flagged]
- alexschnapp 3y agoThese are mostly federal taxes. Not city/state. So public good as in the 800 billion defense spending, wars, etc?
- pmoriarty 3y agoIf you've got a better idea for how we can keep a tiny minority from absolutely dominating the rest of society, If like to hear it. I really don't get why so many people are so eager to empower a class of people that can make the rest of us do their bidding. It shouldn't matter how many websites, shoe stores, or or newspapers they or their ancestors make, that shouldn't make them the boss of us.
- sokoloff 3y agoAt the moment of death, capital gains tax on unrealized gains has not yet been incurred. The estate tax is one way to force those gains to be taxed (but not the only way, of course).
- readthenotes1 3y agoThat sounds fair and reasonable when you're talking about stocks, but if you talk about a small family farm who's owners typically have very little capital other than the land, are you proposing that they sell the farm in order to keep it?
- CPLX 3y agoExempt the farm from taxes if you like farms. Whatever. That’s a public policy choice. But don’t say we’re talking about a fucking farm when you’re advocating for no taxes on a diverse network of private equity positions and real estate holdings.
- readthenotes1 3y agoDon't assume you can read "fucking" more into what I wrote than what I wrote and cast your anger on me. It's all public policy choice, and if you think that it's simple, than lay it all out for us after you've considered all the consequences (immediate, secondary, "unintended", and unintended) and get back to us.
- sokoloff 3y agoI'm merely correcting an objectively incorrect claim: "The person who’s passsing the money down already paid tax on the money, whether income tax or capital gains tax." I'm not advocating for increasing the estate tax (nor even necessarily closing the capital gains stepped-up-basis upon death). I am advocating for having our facts straight.
- maxerickson 3y agoA $12 million family farm may be stretching the definition of 'small'. Like it would be pretty amazing if that value was just due to land appreciation and had nothing to do with their management and investment decisions.
- theGnuMe 3y agoThe inheritors didn't earn it.
- deleted 3y ago[deleted]
- BrotherBisquick 3y agoSo?
- notnaut 3y agoThe question was about fairness. When concentrated wealth goes to a selected individual or group of individuals, it is usually seen as "fair" when it has been earned in some way. This didn't need to be explained, right?
- mcntsh 3y agoIf you're the spouse or child of an earner you technically didn't "earn" their money either, right? Inheritance is the same concept... you work and make money to provide to your family.
- bluedevil2k 3y agoNeither did the government. Why shouldn’t the person who did earn it get to decide what happens to it? After all, they could choose to donate some to the government. No one does though, voluntarily, because we all know that money would get wasted.
- pavlov 3y ago“The government” isn’t a fixed entity. It is what people want to be funded. Wealthy Americans donate enormous amounts of money to entities that would be publicly funded in many other countries: universities, hospitals, concert halls… Everybody wants to give money to something where they get their name on a wall and the envy of their rich peers. Meanwhile projects that could be more beneficial to society but don’t have the prestige factor languish. An inheritance tax would level the playing field.
- fhd2 3y agoIf you spend that money you pay VAT. The company you paid pays their employees, who pay income tax. Whenever money exchanges hands, it's taxed - pretty much. Seems fair to me, though as a father working to leave something for my kids, I fully understand the sentiment. In Germany, children already pay inheritance tax starting at 400k EUR (half a house where I live).
- vel0city 3y ago> The person who’s passsing the money down already paid tax on the money Why should I pay sales tax? I already paid tax on the money as income tax. Why should I pay income tax on that money? That money was already taxed through payroll taxes before the employer paid me. Why should the employer pay payroll taxes on that money? They already paid income taxes on it. Why should companies pay income taxes on that money? They already paid sales taxes. You don't pay taxes on literally the serial numbers of the notes being moved, you usually pay taxes when those monies move between entities.
- mcntsh 3y agoFor me, this comment just highlights how egregious taxation already is.
- Incipient 3y agoYet how woefully it has failed to curtail growing inequality. The well off have proven for millennia they won't support the hardest hit on society. Governments have to do that.
- readthenotes1 3y agoAnd yet what is a government except people who are doing what they can to maintain the power they have?
- Incipient 3y agoOh yeah when thy rich can mostly openly, or at least legally, buy politicians nothing will change. I hope the US can pull themselves out, but everyone seems stuck quibbling over the extremes of minor issues, rather than important difficult topics.
- readthenotes1 3y agoOr worse, quibbling over minor issues to avoid settling important problems so that there's a platform to motivate votes
- roenxi 3y agoSpeaking in extreme generalities, the people in favour of taxes believe that there is only a tenuous link between improving society and getting paid money. That the state's view of what would be an improvement is superior to the view of wealthy individuals. Anyone being wealthy is somewhat suspect because they have claim on resources and the pro-tax types don't believe they can use those resource more effectively than a government. From that perspective, the handover of assets that happens during an inheritance is a great time for a tax - they don't believe that the inheritee will use the money to improve the world, they don't believe that the deceased was making optimum use of those funds and so this is an opportunity to level the playing field for the next generation and redirect assets to a more fundamentally wise and fair state. I don't agree with that view (the USSR alone, let alone all the other attempts...) but it is internally consistent.
- pmoriarty 3y agoTaxed money could simply be passed on to the population in equal amounts. Then each individual could decide what to spend it on.
- jjj123 3y agoPro-tax type here, this quote is not accurate for me: “ pro-tax types don't believe [private entities] can use those resource more effectively than a government” It’s not that they’re less effective, it’s that the public should get some say in how the money is used. I don’t want a small group of people single handedly deciding the “most effective” way for them to use their wealth, because it inevitably leads to whatever allows them to continue holding power. I’d rather money be used less efficiently, but in the public’s interest, than in the interest of a few powerful people. No matter how philanthropic they appear. I don’t trust the US govt much. But I trust them to spend money in a way that’s, say, 15% more democratic than the Koch brothers would. That’s good enough for me.
- CPLX 3y agoI’m on your side as well. These arguments are rarely in good faith but when they are I think it’s possible to write a succinct answer. Society is better when we do. That’s why we should.
- jabradoodle 3y agoOtherwise wealth accumulates in the hands of an asset holding class which makes everything more expensive for everyone else.
- googlerx 3y ago> The person who’s passsing the money down already paid tax on the money. If they're passing down cash yes, but if they pass on assets like stocks or real estate, the cost basis gets stepped up to the fair market value at the time of death (in the US at least). So any capital gains accrued on those assets prior to the death of the person passing them on are just never taxed.
- voisin 3y agoThere isn’t a deemed disposition at the fair market value at the time of death? I thought the estate paid that capital gain which is why the inheritor receives it at the new FMV?
- HDThoreaun 3y agonope.
- CPLX 3y agoNo. It’s completely fucking indefensible and sitting there in plain sight.
- humanrebar 3y agoI think the argument is that certain kinds of inheritance, like real estate and ownership in small businesses, cannot survive the taxes. It's the "what about the family farm/store/restaurant?" argument.