And, I should add, bullshit arguments about “double taxation” to the contrary, there are often taxes associated with the transfer of money from one party to another and taxing the transfer of money to one’s heirs is no worse a crime in principle than taxing my money that I have already paid income tax on when I go out and use it to buy a car. And, in actual practice, the estate tax is a much more painless tax than almost any other tax. (In fact, I remember a guy at work saying that he thought that leaving large amounts of money to one’s heirs should be considered a form of abuse. And, indeed, conservatives do tend to worry very much about giving handouts to people who don’t work to earn it. They talk about how it breeds a culture of laziness and dependency. However, this seems to apply only to meager welfare payments. When, instead, someone receives a substantial handout from their wealthy relatives’s estate, this is apparently a wonderful thing that is so important to allow to occur with its full glory that we dare not tax it and had better instead raise our taxes from elsewhere!)
Society took it’s claim in taxes when the money was earned in the first place. Are you saying that some new claim spring into being upon a person’s death?
I agree that the “double taxation” claim is easily debunked. But that still leaves open the issue of why a person who earns money can’t give it to someone else without the government grabbing some of it.
Which is why most people want to leave their estates to their heirs.
Everybody can leave their estates to their heirs…and then the heirs are going to get taxed on that income.
The Estate tax is about the most painless tax their is since it is only a tax on unearned income. It’s no different than taxing lottery winnings.
But you deny that this moral claim extends so far as to be able to dispose of it as you wish.
I own my property in theory. But insofar as an inheritance tax exists, I am deprived of one of the fundamental rights of property - the right to dispose of it as I wish.
Sure you “own” that car. But you can’t let your wife drive it without paying a fee. Sure you “own” that house. But, after you die, your children aren’t allowed to live there without paying rent to the government.
This is not the argument being made, either in the OP or by your own posts.
The argument is that estates ought to be taxed at a level likely to reduce or eliminate inherited wealth. The contention was made that it is “unfair” for families to accumulate and pass on estates that are more valuable than others. Therefore, any significant amount of money ought to be taxed out of existence rather than passed on to children.
You are correct. Conservatives tend to value family bonds over government, and feel rather strongly that it is much more a function of family to provide for one another than that anyone looks to Uncle Sam as the deep pockets. But you are right, the primary locus of responsibility and interdependence is families, not the federal government.
As I have mentioned at least twice, it is legitimate in principle to impose taxation to fulfill the necessary functions of government. But the principle of “you have too much, so the government should take it away and reduce you to the level of everybody else” is not a legitimate function of government. I am not being harmed in any sense by another person owning more than I do, and therefore I am not being harmed in any sense by another person leaving more money to his heirs than I am likely to receive. I am being harmed when the government denies me any of my property rights simply because Joe Liberal can’t sleep at night knowing that my father created a successful business, and that he won’t get his hands on it when my father dies.
Regards,
Shodan
Dead people have no rights.
Parasites who inherit giagantic amounts of money need to pay taxes on it. They also need to pay taxes on any unearned income that accrues from that undeserved and unearned wealth.
Why do you think that only people who work should pay taxes while people who don’t work should be exempt?
BTW, Cite for anyone not being able to pass on a business to their heirs?
I didn’t think so.
Society claims taxes on many different contexts and situations. That’s the crux, isn’t it?
What Shodan and other “estate tax is unfair” proponents is that this one situation is “special.”
You, John Mace, agree that the double tax argument is not valid. Why, then, is the estate tax due a special exemption, any more than, say, a property tax? All that is is a tax on stuff you already own, bought with money already taxed. And property transfers are also subject to tax, even if the give is still alive (in fact, if you’re still alive, the money gift tax threshhold is much lower!).
Why is the estate tax so special?
give = giver
Notice that I used the word “some”; it is what is commonly known as a modifier. And, in fact, those folks do have the right to dispose of it as they wish; however, the government has a right to tax that just as they have a right to tax me when I go out and buy what I wish.
Well, thanks for telling us what we are arguing. However, could you point to where there has been an attempt made at the political level to introduce some sort of totally confiscatory estate tax, which is what it would take to tax inheritance out of existence? In fact, the political battle is between those who want to eliminate the estate tax completely and those who want to keep it in place (while likely allowing the already-high exemptions to continue to rise).
This is a great way to avoid my point which is that conservatives worry about a culture of dependency created in people. They seem to talk about this dependency itself as being a destructive thing…even destructive to that person. And yet, when this dependency is created by inheriting a large sum of money rather than getting meager welfare payments from the government, this concern seems to totally vanish.
Well, in fact I think that inequalities do create harms to people. For example, when some people have a lot more money than others, it can drive up housing prices to the point in some areas where the poor and even the middle class can’t afford to live in any parts of some regions except ones where the housing is bad and there are lots of problems associated with poverty like crime.
Also, inequalities occur because of choices that we have made in structuring our society. When more and more of the gains in our society go to a smaller and smaller few, that reflects a poor choice in my opinion. From 1979 to 2000, the average real income went up 40% while the median income went up only 15%. This means that if the same gains had been spread equally (and I mean in percentage terms, not dollar terms) so that the inequality had remained constant rather than growing, then those at the median would have seen increases nearly 3X what they saw…And, those at the bottom even a larger factor. [This assumes the society as a whole had made the same gains. Some argue that it is not a zero sum gain and, while this is technically true, it seems doubtful to me that we would have seen gains so dramatically less if the economy had been structured so that inequality was kept constant rather than exploding. There may be some tradeoffs between equality and efficiency but at the level at inequality that we have, it is doubtful that the tradeoff is very strong. In books like “The Winner Take All Society,” it is even argued that we may be at the point where the tradeoff doesn’t exist at all and that the extreme inequality has become a drag on efficiency.]
I wrote what follows after coming across the quoted statement below. After reading the remainder of the thread, however, I feel that my post contribution may be
A. Viewed as redundant
B. Fall on deaf ears
C. Considered too silly or simple for GD
D. All the above
Nevertheless, here goes:
I have an idea here (but I don’t usually play with the big kids during recess so treat me gently). I have this notion in my head that the accumulation of wealth is analogous to cosmic accretion.
Like our economy, the currency of the primordial universe was not distributed uniformly. Mostly there were tiny dust motes spread across the vastness of space. Occasionally, a few dust motes would cling together making a clump (analogous to the way my wealth increases each month when my paycheck is deposited). Forces binding such small collections together tend to be weak, and in a chaotic universe they often fall apart -my wealth at the end of the month.
Now rarely, a few clumps come together, and then a few more. At a certain point the collection of matter reaches a critical mass where the forces binding it together exceed (on average) those forces pulling it apart. Not only that, the local collection of mass begins to act upon it’s surrounding to accumulate more and more. The growth becomes self-sustaining and while some growth ceiling likely exists, the ceiling is far above the mass of the surrounding dust motes. Sounds a bit like Wal-Mart’s business strategy, no?
Doesn’t wealth act in a similar fashion? Do we have the Rockefellers and Carnegies because each family member is a driving force of capitalism or because an ancestor of theirs accumulated a supra-critical mass of wealth? If so, would this not provide a greed-envy independent rationale for wealth redistribution (i.e. to combat the self-sustaining nature of wealth)? This is especially in the case of inheritance. Wouldn’t it serve the cause of the incentive-driven capitalist engine to reduce wealth at the top thus re-creating the incentive it took to earn the critical mass of it?
choosybeggar: Your musings bring up a couple thoughts wiht me.
First, I think that some of what you say is similar to the thesis in “The Winner-Take-All Society” by Robert Frank and Philip Cook. In that book, they argue that, for a variety of reasons, we are moving to a society in which the markets have a “winner-take-all” character. In such a market, a few people end up getting extraordinarily wealthy…i.e., what are small differences in talent or abilities (or luck) get magnified into huge differences in outcome. This creates a very unstable situation and one that can potentially lead to a lot of inefficiencies as people spend a lot of effort to get the few top prizes. (An analogy of inner city kids vying to make the NBA might be useful in this regard.)
Second, I agree that for a variety of reasons, wealth tends to beget more wealth. One reason is that the easiest way to get money is to have money because people are willing to pay you a return on that money simply for “investing it,” i.e., lending it to them. Another reason, as you note, is that there are advantages to being big…i.e., if you are Walmart then you can achieve great economies-of-scale, pressure people to sell to you at bargain-basement prices and so on. A final reason is that wealth also tends to translate into political power which then tends to translate into being able to get the government to do favorable things for you.
And if wealth is self-sustaining, doesn’t that take the sting out of the disincentivizing argument? The original kitty was most certainly earned but its survival into perpetuity is (at least partly) a function of mass action.
Firstly, it’s not just me, since we treat inhereted wealth differently than wealth obtained thru work (ie, there is a large exemption already in place).
Property tax is based on the idea that property owners are paying for government services to protect that property. (I don’t fully buy that argument, but it’s a legitimate argument that can be made). If you inherent property, you still have to pay property tax just like everyone else.
As I said earlier, I’d like to see all income treated exactly the same so that people don’t make decisions about how to get income based on how it is taxed. And for capital gains to be treated the same, it needs to be indexed for inflation.
But the particular problem with inheritance is that it could (and I emphasize could) force the heirs to sell some inherited assets in order to pay the tax. Having a high deductible ameliorates that, and I think the higher the better.
As for the tax on gifts being lower when you’re alive, well you don’t get to choose the time of your death, so I can see why there might be a different treatment. I also suppose that if we just allowed anyone to give anyone else money without it being taxed, a lot of employers would decide to “give” their employees money instead of paying them a salary, no?
First of all, only about two percent of all inheritences are even subject to an estate tax and it’s only on very large amounts. The net is that the parasitic heir is still going to receive a huge chunk of unearned wealth so who cares if they have to sell something? It’s not like they’re actually losing anything.
Oprah Winfrey recently gave a bunch of people free cars. Many of those people have said they can’t afford the income tax on the cars so they had to sell the cars. That’s the way it goes and that’s the way it should go.
We all agree that taxes are necessary, so why shouldn’t it follow that they should be levied in the most painless ways. Skimming some inherited wealth from a few Rockefellers and Kennedys and Bush’s cause them far less pain than having to raise tax on middle class families who actually have to work for a living.
If you didn’t earn, you have no right to whine about the governmemnt taking a cut, especially since the government is what made it possible for some robber baron to accumulate that wealth in the first place.
Parasitic heir? See my comment after your “skimming wealth” quote.
Only because of the existing high deductible. Some in this thread have argued for lowering the deductible, in which case it would be much higher than 2%. I suspect you’d fall in the category of wanting the deduction to be lowered, so I think it’s disingenuous of you to cite that statistic.
I submit there is a different emotional attachment to grandma’s heirlooms than there is to the car that Oprah gave someone. That’s all.
And you wonder why you’re on “the list”! 
Robber baron? Yes, everyone who makes a lot of money is a robber baron. :rolleyes: For that comment, you are sentenced to an additional six more months on “the list”!!
Because at the moment there isn’t one. Just to be clear.
It was repealed during the first Bush term as part of the package of tax cuts. (In point of fact, the “Bush tax cuts” of the first term were just a Trojan Horse used to slip the elimination of the estate tax past the American people without too much debate.)
But the repeal was temporary. I expect Bush will seek to “make the Bush tax cuts permanent” pretty soon now, including making “permanent” the elimination of the estate tax.
(And I use that last set of quotation marks advisedly.)
The Estate Tax never applied to grandma’s heirlooms, Mace, unless those heirlooms included the Hope Diamond or the Heinz ketchup fortune.
Can you outline your idea of what the estate tax should be? We had one poster who said the exemption should be $50k. That covers a lot more items than the Hope diamond. What should be the tax rate, and what should be the exemption?
Right now the exemption is 1.5 mill. It’s going to increase to 3.5 mill in 2009. In 2001 it was 675 K. I don’t believe it has ever been as low as 50K (at least in terms of what that means relative to inflation).
I could live with an exemption of 10 mill.
Oh, and the rate should be 50% (right now it’s 48%)