If your plan is to turn the estate tax into a mechanism to fight “dynastic wealth” through confiscatory levels of taxation, the wealthy will just give most of their money away while they’re still alive. I don’t think anyone disputes Grandpa Hilton’s right to give Paris Hilton a large financial gift while he’s still living. The fact that the wealthy often choose to do so upon their death is merely a matter of convenience that would change if the government decided to prohibit it (via a confiscatory estate tax).
Gifts are also subject to taxation, or does the Trillion-Dollar Theft Bill do away with that also?
Are you still here? Did I miss your cite for the claim that a country’s GINI correlates with a country’s prosperity?
I’m not an estate tax lawyer but I think the universal gift and estate tax credit applies to anything transferred during life or at death. That’s $5 million.
If he gives her anything more than that then a gift tax applies. In fact, I think most of the estate planning in the $5-$20 million range involves a combination of annual gift tax limitations and the uniform gift and estate tax credit plus other stuf.
I think you’ve accurately restated current law. I was responding to your proposal:
In order for that to work, I think you’d also have to support a gift tax that “approaches 100% for amount above a few million dollars”, right? Otherwise the wealthy will just give it away during their lifetime and pay the much lower gift tax if they exceed the exception limit, right?
Well, if we do that, then this argument doesn’t apply:
because you’re also confiscating the money of the still-living.
And I work not just to benefit myself, but my family and unrelated loved ones as well. And you all benefit from that work. A few million dollars spread over 30 grandkids isn’t making anyone rich. If you insist on taxing it you could always tax it at the recipients’ levels. I’m not sure how that would come out in the wash.
Please: “confiscating at gun point.” Failure to emphasize that immoral force is applied during the theft is to misrepresent a fundamental tenet of Farnabyism.
Great let’s spend a few billion on pyramids and we can demonstrate their value when people take pictures of them.
Of course in economics, we can demonstrate that a particular process has added value when, in an exchange, the output is more highly valued than the inputs. Can you demonstrate that roads have added value in an economic sense? No. Government does not engage in voluntary exchange with taxation and spending.
I cannot make that claim anymore than you can make the claim that they do have value.
Ah OK, I see what you are trying to say. I think you are taking my statement about the living out of context.
However you are correct, any estate tax would need corresponding adjustments in the gift tax to backstop it.
So in what way is society better off with all that money in the hands of Paris than the hands of the productive person that created it?
In practice no one ever pays the gift tax, why pay today what you can try to get repealed when Trump is in office
Taxing the inheritance is a reasonable form of estate tax reform but the heirs didn’t like it because it would be treated as ordinary income and what they want if for it to get passed on with no taxation at any level.
We generally give assets of an estate a stepped up basis at death so if you started a company in your garage for $100 and it was worth $20 million when you died, the basis was immediately increased to $20 million and you paid estate taxes on the $20 million estate (with all applicable exclusions). This was done because we used to be really bad at keeping track of basis. Now we are much better at it and we could do a mark to market at death but they don’t even want that. They want the assets (which had frequently never been taxed) to pass tax free with a stepped up basis to the heirs.
As I’ve said before, it’s not society’s money, it’s Grandpa Hilton’s, and he ought to be free to decide what to do with it. If he wants to give it to Paris to waste in riotous living, that’s his prerogative.
Almost no one pays the estate tax too, and that number will get closer to zero the closer the estate tax gets to 100%.
You have weirdly narrow concepts of what constitutes value.
One of the primary concepts in government spending is the concept of public goods. Goods that no one would pay for on their own but provide economic value to society far in excess of its cost BUT would not provide that much value to any single market participant so you either need a lot of negotiations and collective action costs to get that road built or you could just have a government collect taxes and build the road.
Does the government always get it right? Obviously not:
But neither is the free market.
But over time are these government projects beneficial to society? Of course.
I can make a fairly compelling argument for feeding hungry children as well.
Of course they have value. The property value of the property adjacent to more developed roads is almost always higher than the property value of property that is not adjacent to a surfaced road. Rents are almost always higher at roadside than in the middle of the woods. Of course roads provide value (in most cases).
I find removal of the basis step-up much more agreeable than taxing the assets at a high rate. My father owns some stocks with a basis damn near zero. It feels very odd that they would be treated so differently if he were to sell them vs if I inherited them and sold them.
The benefit to society is that it has benefit to the grandfather knowing he has provided for his grandaughter (although in the specific case of Paris Hilton he is giving almost all of his money to charity and her inheritance, though quite large is likely to most, would be less than one year’s salary to her).
The second benefit to society is that rich people invest their money in the capital markets as you mentioned before. This is a productive use of their money. When taxes are high such as the estate tax that money goes from being used for the highest value investments to tax shelters. There is an entire industry devoted to helping rich people give their money to their heirs and not to the government. All of that money spent for lawyers, accountants, and tax specialists is a waste to society since smart people are being diverted from productive uses. To stop this would mean changes to the tax code like you mentioned before about gift taxes. It is in society’s best interest for taxes to destroy as little value as possible through deadweight loss. Since the estate tax raises so little money, less than 1 percent of revenue, and the costs are so high, it would be better for society to lower the estate tax and raise money for the government in a more efficient way.
I have been busy but it is nice to be missed.
The link between wealth and income inequality is nuanced. In my research it seems the consensus is that for poor and medium income countries income inequality leads to higher growth and more wealth. Once a country becomes wealthy that stops being true. My thought is this is true because as industry captures government regulators they choke off new wealth and growth slows but returns normalize over sectors.
The US is so much richer than Europe because this process started later and took longer. Thus one of the reasons the US is richer is because of income inequality as I said. I have not had the time to research this as much as I would like to be sure.
Is your point that I am showing fine financial acumen by leaving my money to be handled by professionals? Would I not be showing that same acumen by using it myself and doing with it as I like?
They haven’t? The bar you’ve set for the success of what I’ve done with my inheritance money is “put it in a bank”. Why do you find that it is likely that people who would instead have my inheritance would not put it in a bank? As someone who, in reality, has no rich inheritance, I can tell you that banks don’t only have savings accounts with wealthy heirs.
Are you rejecting the entire notion of taxation and government and embracing anarchism as a viable political system? Or do you accept that some level of taxation is necessary for a normal society to function?
If you accept the general idea of taxation then explain why you and I should pay taxes and Grandpa Hilton shouldn’t have to.
So the current situation is that taxes exist but a lot of potential tax revenue gets diverted by loopholes and a lot of potential useful man-hours are wasted figured out how to divert that money into those loopholes.
Your solution would be to eliminate the taxes. This would eliminate the revenue but it would also eliminate the lost man-hours. You feel the gain from these man-hours being used in a more productive manner would make up for the lost revenue.
Here’s another potential solution: eliminate the loopholes. Set up a tax code with no loopholes where people have to actually pay the tax rate. With no loopholes in existence, there would be no reason to waste man-hours looking for them. We’d collect more revenue and we wouldn’t have any productive man-hours being diverted in tax avoidance schemes.