I am following a certain blogger who holds the view that inheritance tax should be raised to 90-100%. If one cannot pay the tax, the assets will go to the state. According to him, society will be better off in the long run if everybody is forced to start from zero.
But I can’t see that happening. If such a law passed, the state would very soon end up owning a very large portion of property, because many people will be unable to pay to essentially re-buy the house owned by their parents. The whole thing feels like USSR version 2.0
Am I missing something? Would a very high inheritance tax have any positive effect for the society as a whole?
Well, after the riots and most likely civil war, I suppose the folks who proposed and pushed through such a ridiculous policy would be posed for gun fire…and what’s not to like about that?
No, there isn’t any positive effect that would come out of this as it would be monumentally unpopular and stupid…and probably wouldn’t really even get that much in taxes as people would find myriad other ways to hide or divert the money so that the government couldn’t put their hands on it. It’s basically just a left wing loonies wet dream without any basis in reality wrt being political feasible. Like the dream of taxing all of The Rich™ at ridiculously high rates, it’s not going to happen for a variety of reasons that left wingers never seem to grasp. The real debate is going to be over where, exactly, the bar should be set…and that bar is going to be a few percentage points plus or minus where it is today, not huge shifts upward.
But yes, if the gov’t decided to take that much in inheritance tax, you’d better believe that people would find a less-taxed method to transfer wealth to their families.
High inheiritance taxes are great for estate lawyers and accountants, as the wealthy look for ways to divest themselves of assets during their lifetimes to avoid them. One of the simplest is to just put the assets into a trust, with your descendants as the beneficiaries. The imaginary benefits to society will never occur as only the lazy or ill-advised will fail to avoid the punitive inheiritance rates.
Similarly super-high marginal rates of income tax are probably a waste of time as well, as those on the mega incomes can afford competent advisors who can find a way to avoid them through income splitting, or if worst comes to worst Depardieuing to a country with a lower tax rate.
IMHO the best way to increase the tax take (if that’s your goal) is to keep the tax system as simple as possible and make it hard to avoid. And certainly not use the tax system for other things like promoting favoured industries and the like. Tax should solely be for revenue gathering, nothing else.
I’d have a top income rate of say 25% consistent across all entities (trusts, companies, individuals whatever), a VAT/GST rate of around 10% or so, a land tax of maybe 2% of value and no deductions/tax breaks for all sorts of flavour of the month purposes. And no deductions for charitable donations.
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Sounds like a conservative loonie’s wet dream.
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Or, could be a moderate poking fun at both sides. It’s moot, however, since it’s never going to happen. I’d say that if anyone DID manage to raise the inheritance tax in the US to 90-100%, unless there was some fundamental shift in attitude, that Bad Things:trade_mark: would happen, so feel free to insert your own take on that.
As mentioned, I don’t think it would be very popular. When I die, the government confiscates everything I saved, along with my house. Where is my wife supposed to live?
How about privately owned businesses? Farms? Is the government going to grab those too?
You are going to have to have exemptions, in which case it simply turns into a Full Employment Act for lawyers and estate planners.
If we take the OP seriously as a proposed framework for socialplanning, then an extreme inheritance tax is still only a small part of the problem. What happens to the money raised is one other question? Also, how do the markets react to the glut of property and capital assets that would suddenly be made available? What is the proposed social good that will come of this?
Simply taking moey away from would-be inheritors doesn;t accomplish any good by itself. Unless one wants to propose that benefiting from another’s labor is inherently bad and should be prevented by government action. Even taking a “Utopian design” approach, where we don’t need to overcome existing political forces, I find it hard to see a strong argument for near-universal confiscation of property at death.
People would find ways around this, find ways to leave money to their kids to get around the law. So it is laffer’s curve in action. People can create charitable trusts and put their kids in charge, or go overseas, or do lots of other things.
FWIW, there has been a systematic campaign to convince people who will never earn or have nearly enough money to pay the inheritance tax that they themselves will be hit by it. So this is a pretty charged issue. However barely 1% of estates pay the tax, of the ones that do most don’t pay very much.
Besides the tax doesn’t raise much, it raises 20-30 billion a year in its current form. If it were 90% and applies to estates worth 5 million or more, I’m guessing it wouldn’t collect more than 40-60 billion a year. Not a small amount, but not a huge deal either.
What positive effects would it have (aside from extra revenue)? Arguably it would be anti-plutocracy and make it harder for small groups of entrenched billionaires and their children to influence the course of the nation. That can be good and bad depending on your view. The Waltons, the Kennedys, the Rockefellers, the Kochs, etc.
Those sort of confiscatory rates never work. People would lust leave the country before they die.
The inheritance tax is supposed to do two things besides raise revenue: prevent dynastic accumulations of wealth and have almost no effect on the vast majority (like 99%) of the population.
To those who think that you can just lawyer your way around an estate tax, you are assuming that the laws are as airtight as we can make them today. They’re not even close, it is a porous seive with gaping holes in it. I could construct an effective estate tax with very little trouble (especially if we are only concerned about taxing the really large fortunes).
I’m one of those people who thinks inheritance taxes should be sky-high (and income taxes lowered accordingly). I don’t see any reason it should apply to a primary residence, though, which are already excluded from existing inheritance taxes.
It would only encourage the transfer of assets while living, instead of waiting for death.
Because of the variability in the estate tax, and the variability in land value, we have already put all of my parent’s assets into a trust, with the ownership spread across two generations (mine and my children) and control in mine.
In effect, my parents own nothing. The side benefit is that they don’t have to worry about their assets being spent down when it is time for long-term care - since they have none. In fact, we can charge them rent for living in their home - thereby reducing even further their free cash flow in regards to certain treatments.
I can do all of this thanks to an income stream that supports accountants and lawyers in three states. For folks with a little less cash flow - they are screwed.
I agree - this is simply what it took to ensure that an estate tax would not result in the loss of a family property. Once we started putting the property into the shielded trust, things snowballed and we added everything else.
Hell - we put all of the guns into a separate firearms trust as well, to simplify the transfer in case new laws or regulations are passed.
Certainly, wealthy people will find ways around the law. It’s not the effect, it’s the principle; inheritance is antithetical to the meritocracy we claim to live in.
Yet it’s concordant to the society we ACTUALLY live in…and also basic human nature. There is a natural human desire to leave something to their kids, spouses, family or just simply to whoever they want to leave it too…and a natural aversion to having the government snag all the stuff (wealth, property, etc) that a person manages to accumulate for The Good Of Society(arr). We already pay taxes…why should society have dibs that trump our own kids, family or friends/consorts/spouses/whatever on all our stuff after we die as well?
:dubious: You do realize that leaving stuff to your kids and or family (or friends/close companions/whatever) is all part of human strategy for survival, right? It’s closely tied to human behavior throughout history and transcends any given society…which is why, even in communist societies it never worked out and never will. Even in societies where no one owns anything you see people striving to give their kids/companions/etc some sort of competitive advantage.
I disagree. Part of the reason we work hard is to provide for our families, and to leave something behind for them. We want to give our friends and family a chance to go further and do more. This is why we don’t charge a gift tax when dad pays for graduate school, for example.
A high inheritance tax won’t eliminate the Paris Hilton’s (they will have the best attorneys, shelters and trusts that money can buy). It won’t give us more of a meritocracy - instead it will make it worse. The very rich will never feel the pain, it is the middle class who will be left in the rain.
That’s why you abolish family concordantly - the would-be cheat can’t sneak his wealth to his children if his children were separated from him by the state at birth and he has no idea who they are.
If your parents can distribute everything during the lifetime, then you are probably not talking about dynastic wealth. If you are concerned about long term care planning (AKA medicaid planning) you are probably not talking about dynastic accumulations of wealth. There’s always the exception but truly dynastic accumulations of wealth cannot be given away during lifetime without cheating.
I’ve seen trusts for machine guns to make transfer easier, is the notion that some osrt of stealth law will be passed so that you will only have time to transfer the trust but not the guns?
It would be useful if the rule you promulgate was effective instead of just making a statement.
My understanding is that is why Priests cannot get married.
