A denigration of ‘making money’ is a failure to understand what it is. Money is merely a tool for defining value. People use money as a stand-in for value because it’s easy to understand and compare. The amount of money people make is simply the amount that other people value their time and resources. Hence people who make a lot of money are good at making other people place a higher value on their time. Why is that an unworthy objective?
As for the OP, policies with equality as their declared objective are bound to fail because they ignore a fundamental reality - people are not equal. I’m all for equality of opportunity, and policies that promote social mobility through making the market a fairer place, but to try and ensure equality of outcomes is to handicap yourself with respect to reality. Every socialist system that has tried and failed is testament to this. I’m from a country that has been down that road (we once had 97% marginal tax rates for the very rich), and I’ve seen first hand the social and economic devastation it causes. To paraphrase Milton Friedman and an anonymous wise man, the road to serfdom is paved with good intentions. Be careful where yours may take you.
http://onpoint.wbur.org/2010/12/15/teddy-estate
The estate tax has been fought by the rich for obvious reasons. They want more and more money. Teddy Roosevelt was a proponent of the tax because he saw the swollen fortunes of the rich as more than just a pile of money. The rich have far greater impact on policy than the poor. They have access to the makers of laws and regulations. He figured the accumulation of wealth through families was dangerous to the country.
I think the Koch brothers would disagree. But are they just sitting around piling money? Nope, they are deeply involved in the political process to get rules that would benefit then even more. Huge fortunes that go through generations would develop a royalty behind the scenes.
It is, effectively, 35% on amounts higher than $5M. I consider 35% to be too high. So do most of the wealthy, thus the various methods that are used to go around it.
Except that when you have a lot of money you can make a lot more money by hiring someone competent to invest it for you.
Often it is true that money comes from value. It is often also true that the people making the decisions on pay for a person are obligated to that person, or are in a situation where they both get to decide on the others’ pay. Notice that the owners of a corporation, the stockholders, do not get to make compensation decisions, and have just been awarded the right to vote on them in a nonbinding way - after much kicking and screaming by the C-class.
Most people do not have an estate of five million dollars so effectively their estate tax rate is zero.
Ten years ago, the estate tax rate allowed an exemption of the first $675,000 with a tax of 55% of everything above that. During the Bush administration that was lowered to an exemption of the first $5,000,000 with a tax of 35% of everything above that. These changes obviously benefit people with family fortunes.
As I’ve said above, there’s no economic justification for family fortunes. They don’t fit in with capitalism or free market principles. The United States is a republic so we have no reason to base policies on dynastic and aristocratic principles.
Family fortunes’ justification is the right to own property. You are not entitled to other people’s money. It’s not yours. Those people can dispose of it in any way they consider proper. Including leaving it to their progeny.
Only if that’s the way they choose to leave the money to their progeny. There are lots of ways to do it. You make the estate tax too onerous, and other ways will be used.
And in the first case, if you have the ability to select a competent, honest person to handle your money, and reward them for doing so, I don’t know that you can be said to be undeserving of your money. Plus, it isn’t like people are keeping their money under mattresses. It is, like you said, being invested. This means that as a resource, it is being made available to others. Of course it isn’t being made available for free of cost, but surely you’re not saying it should be? Investment isn’t(or shouldn’t be) without risk to the owner of the resource either. And can and should principal-agent issues be addressed? Sure. But government should not legislate outcomes.
Little Nemo - there is an economic justification for family fortunes - it is that most people work to get family fortunes, not just personal fortunes. Ambition stems from being able to provide status and wealth for yourself and for your children. The selfish gene cares about not just itself, but for its immediate progeny and close relations as well.
That said, I do see some justification for estate taxes, but not in the form they currently exist. For one thing, government has gotten its slice of the dying person’s income through taxes levied on them throughout their life. Why should it get more when they die? For another, government has a very poor track record of managing money. It often makes wrong decisions, and often for very wrong reasons.
Instead of an estate tax, how about some fixed percentage* of rich people’s money go to a venture capital fund that they can choose from a list of independently managed VCs? This makes their capital available to entrepreneurs that may actually do some good with it.
Also, in America, the top 20 list of richest people are all self made billionaires, and the only families in there are Koch and Walton, which are just one generation down from when the fortunes were made! If the rich did just keep on getting richer, surely more names from the Rockefellers and the Mellons would be in there?
*(20%? Or whatever number is optimal in that it will cause less loss through evasion than from the lower percentage)
I’m not seeing it. Are you saying that parents will work hard and earn a fortune that can pass on to their children - but only if that fortune is taxed at a rate of 35% or less? If the rate was 55%, these same parents would decide “Screw the kids. We’re not going to bother making any money. We’ll move to a trailer park instead.”
This is kind of hard for me to believe. Especially in view of the fact that the estate tax rate was 55% as recently as ten years ago. I’m pretty sure that there were family fortunes before then.
So it doesn’t appear that a 55% estate tax rate will make people decide to forego earning a family fortune.
The same reason the government can charge me income tax and then charge me sales tax. There’s no precedent saying a person can’t be taxed more than once. People are routinely taxed multiple times and estate taxes are just another form of that.
And estate taxes are one of the best taxes in terms of incentives. Unlike an income tax or a property tax or a sales tax, an estate tax doesn’t change anyone’s behavior. Nobody chooses when they die.
And it seems more than fair to me. The person who earned the money is dead - he or she obviously has no more need for money. So it’s a tax on people who will be least effected by the tax.
That’s like claiming the Yankees are a terrible team because they didn’t score a single touchdown all season.
Government isn’t a business. It’s not supposed to turn a profit. Government is a public service.
In my opinion, a terrible idea. Let people decide on their own how to invest their money. There’s no justification for the government stepping in and telling people how they should invest their money.
Which I think demonstrates a point I made above. People who inherited money are generally no better at investing than people who didn’t inherit money. Which means there’s no justification for biasing tax rates in their favor in the hopes it’ll make the economy grow.
This misconception is repeated over and over and OVER and OVER. Kaddafi may be dead, but we are losing the Fight against Ignorance.
Please pay attention:
Most large estates are in the form of capital gains. Let’s work a specific example. Your Daddy buys 10,000 shares of IBM for $50 a share, waits until it’s $150 a share and then dies. You hold the stock for a little while, sell it for $160 a share, and pay capital gains tax ONLY on the $10-per-share appreciation between your inheritance and your sale. No capital gains tax is ever paid on the appreciation between $50 and $150.
Let’s summarize in a larger font. The capital gains on that stock, which appreciated from $50 to $150 during your Daddy’s lifetime are UNTAXED except for the estate tax. If there’s no “death” tax, that profit goes completely untaxed. Whether the estate tax is the appropriate way to tax that profit is a separate question, but to say the profit was already taxed is inexcusably ignorant.
(We’re watching! Repeat the same ignorance within the month, and we’ll be annoyed. )
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