Well, as a means of separating them from children, I’d call it a mixed success.
You have to believe that government will make more productive use of the capital that accumulates to them than private citizens to support this idea. Since governments have historically been terrible at making productive use of capital, I don’t think this is a great idea, in the least. Government should tax as much as is required for the proper functions of government, and no more.
The most effective way of reducing dynastic wealth and power is, quite simply, dynasties themselves. Look at the list of America’s richest people. Nobody on that list is more than 2 generations into their wealth, and in fact most of the ‘family’ names are from just one family - the Waltons. If dynastic wealth and power accumulation were a serious problem, every single person on that list should have been from whichever family had the most money 300 years ago.
We work hard to provide for them, yes. That is not necessarily tied to leaving something behind for them.
That’s why I say income taxes should be reduced accordingly. This is not a measure designed to increase tax revenues.
The list of America’s richest people is a list (by definition) of outliers. In any event, while the people at the very top may rise and fall relatively quickly (although two generations is an awfully long time), they don’t rise and fall very far.
OP, I’d be interested in reading a few paragraphs of this blogger’s thesis. If you feel it would be inappropriate to post a link to him on the Dope, you can send it to me by PM.
The suspicion I’m harboring is that he could be building a strawman that so discredits the concept of estate taxation that any followers he has become advocates for eliminating it entirely.
Uh - the Pew .pdf says:
So taken the other way - 60 percent of those raised in the top quintile are no longer at the top. 47% of those raised in the top quintile drop below the middle.
Sounds like it doesn’t last.
With over 10 trillion dollars in debt, its not a matter of governmemt using capital, its a matter of repaying the capital that has already been used.
The choices you make early in life have the greatest impact on your life. The most important being choice of parents. With that said, your cite isn’t rally about dynastic wealth.
I don’t believe there is much in the way of cons for a very high inheritance tax.
The pros are easy. It breaks up entrenched old money, lessens oligarchs. Makes people actually work and give back to society for their wealth. Reduces income inequality. Many people will probably spend their inheritance before hand, or give it to their kids as gifts and pay the subsequent gift tax, which helps out the greater public good. It helps redistribute income more fairly and ensures you’re not simply rich because you got lucky, but because you’re a benefit to society somehow.
The cons are mostly on the rich geezer’s side. They have to pay taxes (boo!). The kids can’t inherit a life of wealth without paying most of that off (tough shit!) in taxes, they actually have to work for a living. Rich people will be mad. People, supposedly, are so greedy and self-centered that they will refuse to create and innovate because they can’t pass it down to their kids (who does that anyway?). Money may be squandered somehow near the end of life instead of being put to good use.
The only thing that I would like to see, if we had a high inheritance tax, is to have some kind of protection from people who die suddenly. I don’t want a person to be totally unprepared to pay off the huge tax should their rich parents unexpectedly die. Its not the kid’s fault, and they should be given enough time to settle the estate fairly
But…then if each person is paying the same amount as they would have otherwise, the amount they have left over is also…exactly the same. How would this help achieve what you want?
The thing is though, some small accumulations of wealth are a good thing. I’m not talking about Sam Walton type wealth, but rather the situation where say… someone’s parents die and leave them a house, a couple of cars, and a few tens of thousands of dollars in the bank.
This kind of thing can go a long way toward paying for their grandchildren’s schooling, or if the children don’t own a house, it gives them a boost out of renting and into homeownership.
It’s the kind of thing that can give a working class family that financial breathing room to become middle class.
That’s why the floor amount needs to be reasonably high- so that people can inherit things like houses, cars and a moderate amount of cash and investments.
Above that floor, maybe even make it progressive, so the Feds take 99% of Warren Buffet’s assets, but 2% of someone who inherits 750k.
Ahem. How did the 10 trillion dollar debt get there in the first place? Government spending money unproductively perhaps?
If you’re proposing some sort of one time tax collection(which can happen over a longer period, maybe when the world economy has recovered, to please the Keynes-ians) to repay current debt with built in safeguards to prevent it from happening again for a long time, yeah I could be behind that.
People who are pro inheritance taxes have not even shown that “entrenched old money” exists as a problem. It’d be nice if you could do that. All the claims about how inheritance taxes can then naturally go on to benefit the economy can then be taken in turn.
The blog is in Greek, that’s why I didn’t post the link. I will pass some excerts through Google Translate and post them here.
He is definately not setting up a strawman there. I belive XT nailed it in one: leftist wet dreams.
A 99% tax is pretty confiscatory. I would say that the lowest estate tax should be a mark to market at death and the highest estate tax should be progressive to no more than about 50%. Right now the exclusion is about 5 million. Thats probably a lot higher than it needs to be to promote financial independence.
You can argue whether a deficit is the result of too much spending or too little revenue but our federal debt didn’t start to balloon until we started making unnecessary tax cuts (a la supply side economics). Then the deficit shrank when Clinton raised tax rates. Then they went up again when Bush lowered tax rates. Sure tehre were other factors but the fact remains that if we had kept Clinton’s tax rates through the bush eyars, Obama would have inherited a much MUCH smaller national debt and fiscal deficit.
I think we can solve the problem with wage driven inflation.
What are you asking? Are you denying that old money exists, or that it is a problem? And it would follow naturally that taxes government takes in are used for the public good, that’s what government does
And the people who oppose these proposals have not shown that inheritance taxes are a problem. It’d be nice if they could do that. All the claims about how inheritance taxes will naturally go on to hurt the economy can then be taken in turn.
My point is that you can’t beg the question by simply assuming your side is the correct one and the other side has the burden of proving you wrong.
It’s pretty much the status quo, so the burden of proof would be on the folks wanting to radically change the equation. Are there any historical examples of governments basically seizing the assets of people once they die and denying them to their family or chosen heirs or designated recipients of their wills that can show how this would or could be a positive thing? Or some data showing that this is some sort of problem that we, as a society, simply must fix?
It’s a dumb idea.
Hypothetical:
If I start a company, say a farm or factory that makes widgets, and then I work my entire life and build the company until it is worth 10 million dollars. The company may be a wholly owned private company or one where I just own the majority of shares, either way, the company comprises >95% of my net worth. When I die, I would like to pass this company on to my daughter and I have been teaching her farming (or widget making) her entire life. With an inheritance tax, when I die either my daughter has to give up on this dream or she has to take out a loan to essentially buy the company from government and now what was a perfectly profitable and sound business with no debts has a debt to value ratio near 1 and is no longer sound and may not be profitable with the interest payments.
Well that sure sucks! And if my daughter (who is well trained and really wants to farm widgets for a living) decides to just say screw it and start a new business up from scratch without all the debt, what is the government going to do with the factory? Put it up at auction so some rich investment bank or hedge fund can buy it and then hire my daughter or someone like her to run it? Well that worked well for the people! Or maybe the the government can just install some crony as CEO and hopefully the company will continue to be well run… Sure…
I’m as liberal and 99% as they come, but if you really stop and think what inheritance taxes really mean they are a stupid idea (IMNSHO). Better to tax income and capital gains at a high rate, then the government could get a lot of money if I or my daughter ever wanted to sell the widget farm and live on easy street. While the capital is productive, it should be left alone!
There are all sorts of ways to protect active family businesses. In fact we use almost all of them.
I am indeed asking you to show that old money exists, and that it is a problem. Also, it does not, at all, follow naturally that what government does is the public good. If you need any proof of that, look around at the world. Many, many more people live under terrible governments than good ones.
I don’t know where I draw the line, but I tend to think the super-wealthy should be subjected to a simple, airtight estate tax which confiscates most of their wealth on death. (From one generation to the next, death of a husband or wife should still result in all assets going to the spouse without being confiscated.)
I’m a conservative and think you have to allow people to reap outsized rewards in our society for the economy to function optimally. But people will still seek those rewards even if they can’t pass $40bn on to their children. There is really no huge positive to allowing accumulations and passing on of vast wealth, and it’s a good revenue source.
Now, the devil is in the details. I think “normal” Americans should be able to more or less pass stuff on, like a lifetime of accumulated equity in a home, random household stuff, an “ordinary” amount of market investments and etc. I think the traditional estate size thresholds from the past decade, ranging from $1m to $5.25m are probably in the right ballpark. Anything over that I would tax very, very heavily and at some higher level I’d just tax at 100%.