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Over $70T of inherited wealth over next decade will widen inequality, economists
- christkv 1y agoInheritance is in most cases the only way young people in a lot of European countries can even own their own home
- mdrzn 1y agoLet's just make the first million (€/$) "tax free", everything else increase progressively up to 100% over 100 millions or any other value.
- risyachka 1y agoMaybe thats why we need to focus on the underlying issue instead of using inheritance to postpone it/burden next generation with it. And what do you suggest for those that don't have any inheritance?
- 317070 1y agoThat sounds like a lottery for housing, with extra steps? Hypothetical scenario: we have 100 houses, and 200 young families looking for one. Your solution in effect is: let's give 100 houses to the 100 young people with an inheritance. That sounds arbitrary. Lack of housing is a disconnected problem from inheritance taxes.
- kfterrg67 1y agoHow is it arbitrary? You realise these are the offspring of the deceased? Children are not randomly assigned to taxpaying citizens.
- ghuffed 1y ago[dead]
- 317070 1y agoEddington is a fictional community, with 2 people: Ed and Sue. Unfortunately, due to lack of housing, they only have 1 house. The decision is made to hand it to Sue, because Ed's _parents_ were alcoholics that drank their life away. The decision is not necessarily wrong. But the reasoning to base someone's fortune on the merits of their parents is very arbitrary. Why not base it on their own merits or needs?
- ghuffed 11mo ago[dead]
- 317070 11mo agoSure, almost all parents want the best for their children. But not every child has a parent that can or wants to provide the best for them. You are framing the issue as a right you have for society to provide for your children when you are dead. I am framing the issue as a right everyone has for society to provide for them, irregardless of who their parents were when those parents were still alive.
- ghuffed 11mo ago[dead]
- AlexeyBelov 11mo agoAre you and kfterrg67 the same person? Ban evasion?
- ghuffed 11mo ago[dead]
- 317070 11mo ago> I would respect you far more if you candidly admitted that you are violently envious of wealthier and happier families, and wish to manipulate the levers of the state to crush them and steal their property on your behalf. I don't think that is accurate, but let me try to get as close as possible with something that is accurate: * I am not envious of people with wealthy and happy families. After all, I have exactly such a family. * I am empathetic with people that don't have such a family. * I recognise that there are a lot of the former, who are wealthy beyond their needs due to no merit of their own, while there are a lot of the latter who live below their needs despite their merits. * I want the state to provide for the poor up to what they need, and to fund it they can take some from the rich who got it without merit. * Inheritance is the perfect place. After all, the estate is given for neither merit nor need. And the owner of the estate doesn't exist anymore, so has no more moral rights.
- einszwei 1y agoYour analogy is plain wrong. To start with people with inheritances can and do own multiple homes.
- 317070 1y agoI'm sorry, I genuinly don't understand your point. Could you expand a bit?
- einszwei 1y ago> Hypothetical scenario: we have 100 houses, and 200 young families looking for one. Your solution in effect is: let's give 100 houses to the 100 young people with an inheritance This assumes that each family only gets a single house. With enough wealth you can buy out all the houses (not considering other factors)
- 317070 11mo agoOf course? I think we are debating the same side of this point though: "Inheritance is a horrible way to divide prosperity within society, as it doesn't take into account the wants or needs of the people still alive." If that is not the case, I unfortunately still didn't get your point.
- JAlexoid 1y ago> Inheritance is in most cases the only way young people in a lot of European countries can even own their own home Only if you don't build enough new homes in places where people desire to live, because you can own a home - just not where you want to actually live.
- skippyboxedhero 1y agoThat is a problem with housing and supply-side in European countries. The reason there is an issue with housing is the same reason why these articles appear declaiming the political risks (notice, Stigliz only says the risk is political...his friends losing office) of inequality. This will continue forever, it is ingrained in human nature, it is why it took tens of thousands of years for economic growth to happen from the birth of modern human society.
- mft_ 1y agoThat observation is correct, but I'd challenge the implication that "therefore inheritance must be allowed to continue in its current form". Why are houses so expensive? Alongside challenges and inefficiences related to permits and building (as plenty discussed elsewhere) housing is also used as an investment asset by people with money to invest. This ranges from individuals buying an apartment to rent out, to large investment and private equity firms buying up whole swathes of real estate. When the global money supply is increased (e.g. post-2008 crash, post-Covid, etc.) a lot of it ends up with the rich, who then invest directly or indirectly in asset classes including housing. (Also see how e.g. classic car prices have increased since ~'08). Until this mechanism is recognised as the cause of asset appreciation and measures are put in place to reverse this trend, the current cost-of-living issues will continue to worsen. Sadly, most politicians are already rich enough to benefit from this situation, and so --in the unlikely event that they even recognise this as a cause-- are unlikely to strongly advocate for measures to address it. Additionally, politics in many countries is too intertwined with big business to mean that such a revolutionary concept would be entertained. tl;dr: addressing the huge progressive accumulation of wealth by the rich --of which inheritance is one aspect-- is what is needed to address the continual appreciation in so many asset classes, including housing.
- JAlexoid 1y ago> Until this mechanism is recognised as the cause of asset appreciation What do you mean "until"? It's the core of many of European "dreams". Take UK for example, where there's a concept called "property ladder". This property ladder is the promise of ever increasing property values, to build wealth(it's a pyramid scheme). This "always appreciating" promise is not just subtextual, it's literally the core of the method for becoming wealthy. Whole economies in Europe are built around this constant real estate appreciation and first-home-buyers' support. This is becoming the case in US as well, to lesser extent. US has a much more dynamic property market, than the wealthy Europe. Politicians will bend over backwards to protect this "dream"... and at this point it is screwing over the new generation.
- mft_ 1y ago> What do you mean "until"? It's the core of many of European "dreams". Sorry if I was unclear; I'm not referring to the "housing ladder" here, but rather that the accumulation of wealth (accelerated in recent years) by the already-rich has driven investment patterns that have in turn driven the appreciation of many asset classes that sit behind the current "cost of living crisis". If one accepts this premise, then an obvious solution would be wealth taxation, of which inheritance tax is one form. But very few people in the politican/economics sphere are seriously talking about wealth taxation. (There are some, e.g. Gary Stevenson, and Zack Polanski is gently flirting with it as a policy.)
- farseer 1y agoThat is the way of the world, capitalism specifically. The only way to counter is a fair tax system and good spending on education up to college level.
- kwanbix 1y ago100% agree with you.
- cynicalsecurity 1y agoCapitalism creates inequality, but in a socialism/communism economy there would be either no money or no goods. Everyone would be equally poor, not just some.
- Drakim 1y agoWhy would there be no money under socialism?
- blargthorwars 1y agoNo money is a bit of hyperbole, but fundamentally, nobody really wants to work hard for the exclusive benefit of everybody else. Greed is an innate human trait.
- cynicalsecurity 1y agoBecause it would be stolen by the government. Ask people in post-Soviet countries about how Soviet governments were stealing money from their bank accounts, from all citizens collectively. No one believed in money under socialism in the USSR. The government could always pull a funny trick called "and now... it's gone". Be happy, comrade, that only your money is gone, you could also be in prison.
- andrepd 1y agoThe work of Piketty [0] and others shows that wealth inequality has surpassed pre-WWI historical maximums. The postwar "golden age of capitalism" has given way, from the 70s until today, to a neoliberal system that simply doesn't serve most people on the planet. It's an unfortunate fact that significant change happens rarely without large convulsions, e.g. after a major war, because I don't see this being sustainable even medium-term. [0] https://en.wikipedia.org/wiki/Capital_in_the_Twenty-First_Century https://en.wikipedia.org/wiki/Capital_in_the_Twenty-First_Ce... and subsequent
- findthewords 1y agoEverything in economics always boils down to 1. supply and demand and 2. taxation. One can simply look at historical income taxes in the USA and their progressiveness and conclude that over time taxes tend to regress until some economic calamity or war happens, after which taxes become extremely progressive again for a short while (top income tax rate bracket of 75% to 90%). See for yourself, it's all there: https://files.taxfoundation.org/legacy/docs/fed_individual_rate_history_nominal.pdf https://files.taxfoundation.org/legacy/docs/fed_individual_r...
- u_sama 1y agoI would not cite Piketty, Zucman or Saez who are the hardest fighters of the wealth inequality thesis as they usually mix political advocacy and have been criticized in their methodology and have been under a fair share of controversies. Btw I have grouped them because this is how they are usually treated, both by the fact they are all French economists but also on the fact they all push for the same inequality thesis 1: https://www.davidsplinter.com/AutenSplinter-2024-ReplyToPSZ.pdf https://www.davidsplinter.com/AutenSplinter-2024-ReplyToPSZ.... 2: https://philmagness.com/2014/12/an-empirical-critique-of-thomas-pikettys-capital-in-the-21st-century/ https://philmagness.com/2014/12/an-empirical-critique-of-tho... 3: https://qz.com/1725562/elizabeth-warrens-economic-advisers-are-in-a-controversy-over-wealth-and-taxes https://qz.com/1725562/elizabeth-warrens-economic-advisers-a... EDIT: Here is the rebuttal for 2 by Piketty himself: http://piketty.pse.ens.fr/files/capital21c/en/Piketty2014TechnicalAppendixResponsetoFT.pdf http://piketty.pse.ens.fr/files/capital21c/en/Piketty2014Tec... courtesy of andrepd
- phplovesong 1y agoThis is just wrong. If we skip the ultra rich totally and focus on normal families inheritance is THE way to help you decendants. Right now (where i live) you pay a big tax on inheritance, this is ok if you only inherit cash. In 99% of inheritances this is not the case. You inherit family home, a cottage etc. Then you must sell because you cant afford to pay for it. Now the asset is gone forever and the next generation will most likely inherit nothing. Its really hard to keep anything of value in the family because of this, that one house that was purchased for 60K is now somehow worth 600K (even it has all kinds of problems) and you need to take a loan just to keep it. By taxing inheritance its sure that decendants that work basic jobs will forever be poor.
- mdrzn 1y agoLet's just make the first million (€/$) "tax free", everything else increase progressively up to 100% when you go over X millions or any other arbitrary value we decide.
- __s 1y agoMay want to say where you live, in US estate tax is exempt under 13M
- blitzar 1y agoNot sure about parent comment but UK - everything over £325,000 (USD ~450,000) is taxed at 40%.
- phplovesong 1y agoEurope. Here we tax everything, usually twice.
- ro_sharp 1y agoYou can sell the asset, so how does anyone inherit nothing? Someone who wants to spend an inheritance is going to do it, whether it’s liquid (cash) or marginally less so (real property)
- 1y ago
- b3lvedere 1y agohttps://www.youtube.com/watch?v=Gxd23UVID7k&t=29s https://www.youtube.com/watch?v=Gxd23UVID7k&t=29s
- shoubidouwah 1y ago1) set a generous threshold over which your inheritance gets taxed, inflation adjusted (e.g, 2M not including the principal residence) 2) tax 100% above it. (should only concern a fraction of a fraction of cases) 3) put all this tax's proceeds in a sovereign wealth fund 4) at 21, a citizen gets access to her redistributed generational wealth 5) profit
- kachapopopow 1y agoI think the bigger issue is that people are hording wealth instead of spending it in general making money work for them and not for the greater economy which is the only thing giving their money substance long-term. Well, long-term is longer than human lifetime so I guess there's no real reason for them to worry about it either.
- johnnyanmac 11mo agoWell yes. That's why trickle down economics doesn't work in practice. Becsuwe billionaires don't stimulate the economy through spending.
- boxed 1y agoI've heard this take a lot and it doesn't make much sense to me. How exactly are ultra rich "hoarding wealth instead of spending it"? Afaik most of the net worth of the ultra rich is in ownership of companies (stocks) or loans (eg bonds). That money is all out there in the world working. Isn't the fact that the ultra rich are using their wealth productively the reason we have growing wealth inequality? Because active money grows faster than inflation, which is why they get richer compared to the rest of us over time.
- kachapopopow 1y agoIt's more of a problem that the money is only used to make more money rather than being used for services or productive work.
- 11mo ago
- jongjong 1y agoWhat terrifies me most about this is that those in power will keep getting younger, dumber and more complacent. I feel like communism is inevitable at this point. People know communism isn't the solution, but they will still vote for it because at least it pretends to stand for equality. We're going to reach a point of such extreme inequality that even the pretense of equality provided by communism would be welcomed by the majority. In a way, the pretense of equality sets a floor on inequality; because, in a communist system which calls all humans equal, any actual inequality has to be either hidden or justified... This requires effort. A system which pretends to stand for equality can only become so unequal before it loses its ability to justify itself; then it collapses. By contrast, our current system makes no claims about human equality, quite the opposite; it exaggerates and propagandizes the inequality of humans and human ability as a means to justify its failures in terms of human resource allocation. For example, our current system sees homelessness not as a failure of its resource-allocation capabilities but as a kind of efficiency. It does so by dehumanizing the homeless; painting them as lazy and incapable of value-creation; deceptively conflating 'value creation' with 'value extraction' in the process. Our system keeps trying to portray the 'value extraction' endeavors of the entrepreneur class as being on the same level as the 'value creation' of the working class... They will not acknowledge the reality that 'value extraction' is the main cause of wasted human potential. It is our current system itself which fails to efficiently allocate the most valuable resource in society; people's time and energy. Our current system implies that human life is of such low intrinsic value, that some people aren't even worthy of having a roof over their heads, all while it deprives them of their right to build their own roofs (with regulations). Our system loves to blame individuals for its oppression and it loves it even more when they blame themselves for it; it seizes any opportunity it can to demonize beaten-down intelligent people who understand the mechanics of its oppression and it idolizes egotistical idiots who have never experienced struggle and who therefore don't have much difficulty in taking full credit for everything (good) which happens to them... It's not difficult to take full responsibility for your situation when only good things happen to you... But watch how these people behave when things go belly-up. They're off to the Caymans, never to be heard from again... The system is remarkably lenient on them.
- jake200 1y ago> People know communism isn't the solution, but they will still vote for it because at least it pretends to stand for equality. Genuinely curious - why isn't communism the solution? And in your opinion, what are some better solutions? I haven't studied much about political/economic ideologies and at this point don't even know where to start. I do agree with some of what you are saying, but I don't understand why communism wouldn't be be a step in the right direction.
- bawolff 1y agoWhy would this increase inequality? Inheritence generally goes from rich person to rich person. I would normally assume the rate of equality would stay roughly constant in the face of inheritence.
- sleight42 1y agoImagine wealth as a virus. If inheritance isn't there to prune out variants, the virus mutates and propagates. People who start off wealthy go on to accumulate and centralize even more wealth.
- insane_dreamer 1y agobecause r > g (see Piketty[0]) if returns on inherited wealth outperform growth, then the percentage of growth captured by the wealthy grows over time, exacerbating inequality estate taxes can help mitigate that, but they are "anti-American" [0] https://en.wikipedia.org/wiki/Capital_in_the_Twenty-First_Century https://en.wikipedia.org/wiki/Capital_in_the_Twenty-First_Ce...
- bawolff 1y agoYes, but how does inheritence affect that? Its not like inheritence makes money appear out of nowhere. Every inherited dollar is taken from a rich person who died. The amount of inequality should stay roughly the same as you are just transfering money between rich people. You aren't creating any new money, nor are you concentrating it in fewer hands. Why would inequality increase after inheritence instead of just staying the same? The returns on wealth after it is inherited isn't going to be higher then the returns that same wealth would have gotten prior to it being inherited. Its still the same amount of money.
- thrance 11mo agoDeath is often called the great equalizer. By reducing/nullifying inheritance taxes you ensure wealth concentration will escape it, and aggravate the issue. We already live in a country (world, really) where more income is gained through owning capital than through working. However you look at it, it is really hard to justify.
- ZeroGravitas 1y ago> If poor people knew how rich rich people are, there would be riots in the streets. -- Chris Rock
- aids_bomb 1y agoEh, their entire pedophile paradise got exposed and the most it’s done is cause some political beefs.
- johnnyanmac 11mo agoThe information is highly compromised. Some believe it's a hoax. So that doesn't help. But yes it will be sad seeing how many will still defend the rich once there's irrefutable evidence. There's still Holocaust deniers 80 years later after all.
- Amorymeltzer 1y agoThe Slate Money podcast had a recent episode of their "Money Talks" series that interviewed Ray Madoff, author of the new book The Second Estate. It was an interesting listen—could've been longer, IMO—and I appreciated the discussion about the history of the inheritance tax in the US and how it has become useless, largely through political inaction refusing to close tricks/loopholes. I'll be checking out from my library (once it's in the system!).
- puretruth81 1y agoinheritance taxes are just mafia theft, no matter how you rationalize it
- shigawire 1y agoAccording to many on this site. All taxation is theft. This desensitize me to this argument.
- blitzar 1y agoAccording to many on this site. All taxation on their 500k salary and 3mil in stock is theft. According to the same people. Passing $1mil to your children is immoral and should be banned. I suspect they love expensive shiny things and hate their children.
- conception 1y agoThe (actual and would be) aristocracy loves this take.
- blitzar 1y agoits actually grave robbing, the person is litterally dead.
- ghuffed 1y ago[dead]
- Ekaros 1y agoWell, everyone is member of this mafia. The problem is that lowest on the totem pole are not served by it.
- jmyeet 1y agoMany in the US expecting an inheritance from their baby boomer parents are in for a rude shock. Why? Because their assets are going to get eaten up by retirement living and end-of-life care. If you still own your assets when you go into care, Medicaid is going to use up all those assets before paying for it and this could be tens of thousands a month with long-term medical care. You can avoid this is you plan ahead. Medicaid has a 5 year lookback on gifts so you need to transfer assets 5+ years before you need to pay for care but most people haven't done that. For those who say this is the only way people get ahead, you are correct but you're missing the point. That shouldn't be the case and it's non sustainable. In the 1990s, the average house price in London was £70k. Now it's >£700k. It doesn't have to be this way. It shouldn't be this way (for a healthy society). I've come to believe that this century will see a point where there's simply nothing left to exploit, nothing left to transfer from the working class to the ultra-wealthy. And as has always been the case historically, that's going to end with a more violent form of wealth redistribution (eg French revolution, Russian revolution).
- blitzar 1y ago> the average house price in London was £70k. Now it's >£700k. It doesn't have to be this way. It shouldn't be this way (for a healthy society) 10x in 35 years is compounded rate of return of under 7%, which is not far off the average mortgage rate over that period of time. Add in some maintenance and that might even represent a loss in real terms over that period of time.
- jmyeet 1y agoHouses shouldn't be investments. Wages aren't 10x in that same period. All the increasing house price has done is transfer wealth from the younger generation to the older generation.
- blitzar 1y agoWages havent kept up with the cost of a bag of rice either, I wouldnt suggest that rice has transfered wealth from the young to the old. The underlying problem for the UK is wages - workers make less in real terms and pensions paid to the older generation go up by the highest of all the rates. Taxation is the transfer of wealth from the younger generation to the older generation - the older generation paid less in and are getting more out.
- philipallstar 1y agoWealth inequality is not an intrinsic bad, and it's not even worth striving to reduce. The only thing that matters is the average (pick your average) standard of living. There's no point paying a fortune to have all the people who created the most value leave your country just so you can reduce a pointless metric, especially when all it does is get the state more money to spend on itself rather than reduce your costs or increase what you get for your costs.
- einszwei 1y agoWhere do you think the money that is accrued by the most wealthy will be spent/invested/parked? What will its effects be on the broader economy? Assuming that the money is all used for altruistic purpose, I could agree with your point. But we know that this money is often used for not so altruistic purposes like investing in PE which asset strip the productive parts of economy or use the money to influence politics and elected representatives via lobbying.
- vorpalhex 1y agoOr building companies that employ tens or hundreds of thousands.
- johnnyanmac 11mo agoAnd then they lobby to reduce protections and layoff haphazardly to male sure there's no career progression. Then when that's exhausted you move everything overseas because that's still too expensive. Yup, altruistic job nakers, huh?
- kamaal 1y ago>>Where do you think the money that is accrued by the most wealthy will be spent/invested/parked? In most advanced economies today, that's equity. The ordinary person thinks of wealth as money lying around in the bank, which the rich person refuses to spend on anything useful. And instead either hoards, or spends on luxury things which cause resentment to the remainder. The real question is for most people today its easier than ever to invest and then give it to their children. Why aren't people doing it?
- prmph 1y agoWhy is this post buried, I wonder? It's in the 263th position, alongside posts from 4 days ago, and keep rapidly going down. Really weird.
- AnimalMuppet 11mo ago77 points, 178 comments. When comments are more than points, it trips the flamewar detector (if I understand correctly).
- Balgair 1y agoAside: Inheritance laws are one of those little thought of things that end up making huge differences in a society. The classic one is the changes in Sparta’s inheritance system that essentially caused their downfall. Originally every citizen had an equal plot of land, the economic base that allowed him to be a hoplite (Sparta help ~80% of their population as slaves, helots, as state property). But as Spartan men died in wars, inheritance laws were forced to let daughters inherit and merge estates through marriage, wealth, and land, and thus it all concentrated fast. By Aristotle’s time, nearly half the land was owned by women outright, and the number of citizens had then fallen to a few hundred as citizenship was tied to these land plots. The result was that the city that once fielded the most formidable army in Greece simply ran out of Spartiates to fill the ranks. Perversely, they all kept this going instead of breaking up the consolidated plots, as citizenship was tied to freedom and voting power. So, the less of them there were the better off the rich were, as they had more voting power and wealth at home (wealth was land, as Sparta forbid money in it's borders, well, sorta). So, power domestically was inverse to foreign power. And we all know when countries get into these situations they always go towards domestic power over national security.
- redwood 11mo agoThank you for this perspective. It's very clarifying.. through this lens it makes a lot of sense that periods after large scale military endeavors lead to egalitarian moments. All these citizen soldiers so to speak will demand their share and elites will feel it is owed
- ckemere 1y agoLooking at the discussion I’m struck by how there are really two “goods” that are conflicting in people’s minds. Many of those of us who are parents embrace the idea of sacrificing to make our kids lives easier and better than our own. We recognize how what our parents have provided us has helped us and want to give even more to our own children/grandchildren. It seems to be a general principle of society that we should enact policies that encourage people to sacrifice for their children? But also the accumulation of wealth drives so many negative issues in society that we want to lessen. And extreme wealth seems to make things even worse.
- ryandrake 1y agoSociety and policy makers seem to have a lot of trouble understanding scale and orders of magnitude. We declare some broad principle, like "It's good to make our kids lives easier and better than our own." and we apply it regardless of whether the dollar value is $10K, $10M, or $10B. But someone passing down $10B to their children is totally different than someone passing down $10K, and needs to be handled differently by the law. We have coarse, ham-fisted step functions like "inheritance tax only affects inheritances over $X" but you can't have a single threshold for these things. It has to be progressive with a sliding scale, otherwise you get all the negative issues around wealth accumulation. Other Example: why can't we have income tax thresholds that go all the way up to $1T/year? Why is the absolute top income tax bracket something like $600K? Really? Are we really saying that we should tax someone who makes $600K exactly like we tax someone who makes $600M? or $6B?
- senordevnyc 1y agoIt would be awesome if we taxed someone making $6B the same as someone making $600k, but we don't even do that. When I was making $600k, I was paying close to 50%. No one making $6B is paying anywhere near $3B in taxes on that income.
- rsynnott 11mo agoWhy would it widen economists? Are extra-wide economists particularly a problem?
- prmph 11mo agoI see what you did there. But, maybe more inequality does indeed increase the waistlines of economists, as they they find more fodder for paid "analysis".