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I have much sympathy with the argument that inheritance tax should be 100% because rich parents shouldn't confer an entitlement to wealth. But it seems to me th

by gjm11 14y ago

I have much sympathy with the argument that inheritance tax should be 100% because rich parents shouldn't confer an entitlement to wealth. But it seems to me that this simply wouldn't work because (1) people will be very strongly motivated to get around it (because "help your children" is a really, really strong human drive and presumably always will be) and (2) it will be very hard to make that very difficult (because, e.g., it means you have to impose severe restrictions on gifts, you might have to have retroactive confiscation of gifts years after they're given if the giver dies, etc. And because it really can't be that hard to conceal part of your estate, or find indirect ways to benefit your children, if you're strongly enough motivated to do so). I think it's almost certain that the effect of trying to impose a 100% inheritance tax would be that the rich-and-dishonest would find ways to get around most of it, and the poor-and-honest would get screwed even worse than they already do.

_delirium 14y ago
I think some of those problems could be mitigated if we focused less on relatively low levels of wealth, and more on very large ones. To me, the fact that someone can inherit $10m and live a life of leisure without working for it is sort of meh, I guess it's not fair in a sense, but it's difficult to do much about, as you say, and overall is not a huge problem. On the other hand, someone inheriting $10b can do more than just live a life of leisure: that kind of multi-generational concentration of wealth significantly changes societies, producing quasi-aristocratic families that have oversized influence, and really damaging any sort of pretense to an egalitarian society with a level playing field (something Thomas Jefferson, for example, was very worried about). So imo inheritance taxes should be mostly aimed at very large fortunes and trusts, stuff in the $100m+ range, not $5m inheritances. Other benefits are that a large exemption would avoid causing problems for inheritance of family businesses, and greatly reduce the number of people affected (which in turn should reduce administrative expenses).
- rdl 14y ago
  I agree that inheritance is bad (for society AND for the recipients), but I think a lot of the issue could be addressed through social pressure to donate much of a fortune past a certain level on death (or irrevocably donate it while alive, retaining control, as a trust). Failing that, a 25-50% inheritance tax probably works, although without the free step up in basis in the current code.

by gjm11 14y ago

_delirium 14y ago

I think some of those problems could be mitigated if we focused less on relatively low levels of wealth, and more on very large ones. To me, the fact that someone can inherit $10m and live a life of leisure without working for it is sort of meh, I guess it's not fair in a sense, but it's difficult to do much about, as you say, and overall is not a huge problem. On the other hand, someone inheriting $10b can do more than just live a life of leisure: that kind of multi-generational concentration of wealth significantly changes societies, producing quasi-aristocratic families that have oversized influence, and really damaging any sort of pretense to an egalitarian society with a level playing field (something Thomas Jefferson, for example, was very worried about). So imo inheritance taxes should be mostly aimed at very large fortunes and trusts, stuff in the $100m+ range, not $5m inheritances. Other benefits are that a large exemption would avoid causing problems for inheritance of family businesses, and greatly reduce the number of people affected (which in turn should reduce administrative expenses).

rdl 14y ago
I agree that inheritance is bad (for society AND for the recipients), but I think a lot of the issue could be addressed through social pressure to donate much of a fortune past a certain level on death (or irrevocably donate it while alive, retaining control, as a trust). Failing that, a 25-50% inheritance tax probably works, although without the free step up in basis in the current code.