The Inheritance Tax Is Far Too Low(nytimes.com)
nytimes.com
The Inheritance Tax Is Far Too Low
https://www.nytimes.com/2020/06/24/opinion/inheritance-tax-inequality.html
359 comments
Much as I take a more moderate view about taxation (some things that taxes go to fund are in fact ineffective and wasteful), I respect strongly the inheritance tax not just in revenue raising but in behavior influencing. (those who are on the receiving end of the tax, for reasons others have given here)
And I do not for one second buy the ridiculous argument, both on this tax and other taxes, that "money shouldn't be double-taxed".
Money is taxed every time it changes hands! Money doesn't have a "history", except where we create loopholes to allow it to, which disproportionately go to those who have the means to track and create vehicles that have "history". Poor people don't have capital gains.
The inheritance tax, though you may not think it intuitively, is a strong way for our society to renew itself and find new talent. It takes work to fight against those who would silently change the rules to start favoring the old and idle. (who are the ones who most have the ability to change the rules)
And I do not for one second buy the ridiculous argument, both on this tax and other taxes, that "money shouldn't be double-taxed".
Money is taxed every time it changes hands! Money doesn't have a "history", except where we create loopholes to allow it to, which disproportionately go to those who have the means to track and create vehicles that have "history". Poor people don't have capital gains.
The inheritance tax, though you may not think it intuitively, is a strong way for our society to renew itself and find new talent. It takes work to fight against those who would silently change the rules to start favoring the old and idle. (who are the ones who most have the ability to change the rules)
The notion that there's even significant wealth held by private individuals is total fiction. Compare yearly flows of money to private wealth. The global GDP is estimated at around $150T, and total global private wealth at perhaps $200T.
You could literally confiscate all private wealth in the world and it would run out in a few years.
Most people just don't realize this simple fact. We hear about how just a few people hold most of the world's wealth and it creates this image of enormous control and influence. But when you compare it to flows of money you realize how little of world's economic output these "super rich" people have captured for themselves.
You could literally confiscate all private wealth in the world and it would run out in a few years.
Most people just don't realize this simple fact. We hear about how just a few people hold most of the world's wealth and it creates this image of enormous control and influence. But when you compare it to flows of money you realize how little of world's economic output these "super rich" people have captured for themselves.
The first question I have to ask myself about increasing taxes is,
can the government do a better job of distributing these resources than whoever is doing that Job now?
and what does better mean?
Living in the US with the government that is currently in place I feel confident that the government can't do a better job than the current system in place to handle inheritance, no matter what the definition of better is. So giving the government more money via inheritance tax is a bad idea.
can the government do a better job of distributing these resources than whoever is doing that Job now?
and what does better mean?
Living in the US with the government that is currently in place I feel confident that the government can't do a better job than the current system in place to handle inheritance, no matter what the definition of better is. So giving the government more money via inheritance tax is a bad idea.
I am inclined to believe it comes down to a fundamental error in our current way of taxation. Which is that we primarily tax work or the added value. While luck (the lottery, having rich parents) is not taxed at all or at measurable lower rates.
Question is why is that? And wouldn't it be fairer to tax work (effort) less and luck more?
Question is why is that? And wouldn't it be fairer to tax work (effort) less and luck more?
i can't believe how many posters here defend this immoral nonsense taxing already taxed legally gained money
if the rich obtain the money legal way and taxed them why they should be punished for being more successful than others and responsibly leaving the money to children? basically what defendants of inheritance tax say you should not try to be successful because you will be punished by losers for it, it's income tax all over again (unless your country has flat rate for everyone)
if the rich obtain the money legal way and taxed them why they should be punished for being more successful than others and responsibly leaving the money to children? basically what defendants of inheritance tax say you should not try to be successful because you will be punished by losers for it, it's income tax all over again (unless your country has flat rate for everyone)
Yes, especially for the top 1% and 0.1%. However, they're the ones who have enough money to pay for ways to hide their wealth from taxation, so an inheritance tax would be a high + low attack on the middle, further cementing the inequality divide.
Definitely. People build their wealth, partially, on the achievements of others. They should be taxed on property.
I've never understood why people think that just because, e.g., their parents created a business worth millions of dollars, they should get that for free.
Obligatory reading for believers in inheritance tax:
https://iea.org.uk/blog/how-high-tax-sweden-abolished-its-di...
https://iea.org.uk/blog/how-high-tax-sweden-abolished-its-di...
I doubt any sufficiently wealthy family "inherits" anything, the owning is done by a trust or company with obscured cross-border ownership.
Inheritance is for the rest of us.
Inheritance is for the rest of us.
People who think billionaires are so rich have never seen a federal budget.
You could guillotine a billionaire a day and their money wouldn't pay for nought. (Not even considering that their "networths" are always tied up in stocks.
As for using the term 1%, people rarely stay in the bracket for long, people change and move through different economic brackets all the time through their lives.The biggest indicator of wealth is age.
Others have commented on it, but inter-generational wealth is important for various reasons. Cultures that plan for their children's children make a lot of sense. I'd wager the West has some weird hedonism/individuality and we rarely just stop thinking of ourselves. Adding further estate taxes just removes even more incentive to work towards creating an inter genertional family. Rich families are also just better with money because it's what they know. Redistributing that money to others could just make it end up in coin machines.
You could guillotine a billionaire a day and their money wouldn't pay for nought. (Not even considering that their "networths" are always tied up in stocks.
As for using the term 1%, people rarely stay in the bracket for long, people change and move through different economic brackets all the time through their lives.The biggest indicator of wealth is age.
Others have commented on it, but inter-generational wealth is important for various reasons. Cultures that plan for their children's children make a lot of sense. I'd wager the West has some weird hedonism/individuality and we rarely just stop thinking of ourselves. Adding further estate taxes just removes even more incentive to work towards creating an inter genertional family. Rich families are also just better with money because it's what they know. Redistributing that money to others could just make it end up in coin machines.
There is a simple fix to this. You have to get rid of the stepped-up basis. Then anything passed down will be taxed at the prevailing tax rates. All these extra rules and tricks wouldn't be needed.
This is extremely unpopular because the upper 20% of society wouldn't be able to pass down their homes and what is left of their retirement accounts tax-free. That is why you have a stepped-up basis with an exclusion limit that has an extremely punitive tax rate that encourages gaming the system.
But you can see the political equilibrium. Regular folk think big inheritances are being taxed while they get to pass on their house tax free and the big inheritances go through all kinds of loopholes to avoid actual taxation. It is very American.
This is extremely unpopular because the upper 20% of society wouldn't be able to pass down their homes and what is left of their retirement accounts tax-free. That is why you have a stepped-up basis with an exclusion limit that has an extremely punitive tax rate that encourages gaming the system.
But you can see the political equilibrium. Regular folk think big inheritances are being taxed while they get to pass on their house tax free and the big inheritances go through all kinds of loopholes to avoid actual taxation. It is very American.
I'd posit that the passing of substantial wealth and capital between generations is one of the chief drivers of social decay. In the long term, it causes an immense amount of power to devolve into the hands of a small group of people who have done nothing to prove that they have the wisdom necessary to wield such power for the benefit of humanity.
I have always wondered what would happen if an inheritance tax were pushed to 100% for sums greater than 10 million. At that point the only way to hide the money would be to move it off shore, but then that money would be permanently off shore. The consequence of that is that it is mostly beyond reach of US taxation but in order to access that money people would have to leave the US, so it almost becomes a citizenship tax. I am basing a lot of this reasoning on what happened to the billions in wealth when large tech companies tried to dump it in Ireland to avoid taxes. The money doesn’t just disappear unless the companies are willing to never get it back or move to Ireland (corporate offices and primary investors).
There would also be economic consequences for those not wanting to evade tax laws because there is now a compelling reason to perform the impossible: spend all that damn money before the tax man gets it. That is one hell of an economic stimulus, but also means large injections of cash into charities and scientific research, and commercial investment.
To me all these options seem like a net positive.
There would also be economic consequences for those not wanting to evade tax laws because there is now a compelling reason to perform the impossible: spend all that damn money before the tax man gets it. That is one hell of an economic stimulus, but also means large injections of cash into charities and scientific research, and commercial investment.
To me all these options seem like a net positive.
I hope that we could carve out exemptions for first-generation wealth. Reparations may never happen in the US, but if a family went from slavery to wealth in a few generations, perhaps the least we could do is exempt them from the inheritance tax. Maybe this is a controversial take, I don’t know, but it seems like it might make a small step towards lessening inequality.
Chaps my hide with broke journalist mentality:
"This means that 40 percent of why some Americans are extraordinarily well off has nothing to do with smarts, hard work, frugality, lucky gambles or entrepreneurial ingenuity. It is simply because they were born to rich parents."
In the US at least, it isn't hard if in lower middle class or above to invest small sums over long periods to get large amounts. It is simply that they are not doing it, or do not know why one should. To blame that one's own parents or grandparents did not do it, yet anothers did is victim blaming another's actions when they should look at their own descendants action.
In the US at least, it isn't hard if in lower middle class or above to invest small sums over long periods to get large amounts. It is simply that they are not doing it, or do not know why one should. To blame that one's own parents or grandparents did not do it, yet anothers did is victim blaming another's actions when they should look at their own descendants action.
Would be interesting to see what would happen if the tax were increased. Would there be a mass transfer before it went into affect? I wonder how the current age categories of wealth accumulation compare with previous generations.
Transferable copyright is way worse imho. I have no idea why we subsidize rent-seeking by the kids of inventors (or sometimes, people who had nothing to do with the original invention).
A lot of people here are concerned that taxing the rich will just make them hide their money offshore.
It should be noted, then, that it's gotten a lot harder for Americans to go offshore with their money due to two recent things:
1. Expatriation tax - https://en.wikipedia.org/wiki/Expatriation_tax
2. Foreign tax compliance act - https://en.wikipedia.org/wiki/Foreign_Account_Tax_Compliance...
When taken together, it means that Americans are basically unable to ever leave American taxation. No other nation has the ability to restrict their citizens like Americans do while their citizens are abroad.
This is bad news if you want to own a company while living abroad (you can't unless it's American or you'll be double taxed), live in a lower taxed country, or renounce your citizenship if you make more than something like 139k a year.
Any tax applied to America's rich would not result in money leaving the country - it's no longer really possible.
I wholeheartedly support strong inheritance tax. Dynasties are bad things and create bad systems. The US is uniquely positioned to enforce it even if it means that citizens are basically serfs to their country.
It should be noted, then, that it's gotten a lot harder for Americans to go offshore with their money due to two recent things:
1. Expatriation tax - https://en.wikipedia.org/wiki/Expatriation_tax
2. Foreign tax compliance act - https://en.wikipedia.org/wiki/Foreign_Account_Tax_Compliance...
When taken together, it means that Americans are basically unable to ever leave American taxation. No other nation has the ability to restrict their citizens like Americans do while their citizens are abroad.
This is bad news if you want to own a company while living abroad (you can't unless it's American or you'll be double taxed), live in a lower taxed country, or renounce your citizenship if you make more than something like 139k a year.
Any tax applied to America's rich would not result in money leaving the country - it's no longer really possible.
I wholeheartedly support strong inheritance tax. Dynasties are bad things and create bad systems. The US is uniquely positioned to enforce it even if it means that citizens are basically serfs to their country.
Imagine how much it would stimulate the economy if we did this! Instead of building up wealth to ensure the success of future generations, old people would be forced to use it or lose it. The Buicks, 0-entry bathtubs and high-end mobility scooters would be flying off the shelves with all this unlocked capital being forced to consume. Think of all the new JOBS!
Now that's what I call progress!™️
Now that's what I call progress!™️
Interesting to me is that not-taxing inheritances is sort of a giant tax break. If your parent dies and they had bought a house for $100,00 and now it is worth $1,100,000. So a capital gain of $1,000,000. If they had sold the house they would have had to pay capital gains on the house, minus an exemption amount ($250,000 for single and $500,000 for married).
But you as the beneficiary get to take that house and immediately sell it and pay $0 in capital gains on it. So that tax is actually forgiven on death. If you held on to the house then you would pay capital gains on any gains from the value of it upon inheritance.
But you as the beneficiary get to take that house and immediately sell it and pay $0 in capital gains on it. So that tax is actually forgiven on death. If you held on to the house then you would pay capital gains on any gains from the value of it upon inheritance.
Inheritance tax is not a wealth tax (the person who accumulated the wealth has died), it's just another income tax (which NYT wants to raise to an absurdly high rate).
Taxing wealth is far more equitable than taxing income; taxing wealth gives low-medium earners more discretion to spend on needs like housing, clothing, food, child care, education, transportation, etc (needs that differ between families, and which families are better equipped to assess than the government), while taxing income gives the government a share of people's money before they can decide what to do with it. Tax wealth while people are alive (on an annual basis), rather than destroy a company/farm/estate by having the government swoop in and take an enormous share of it (do we really want the government in the business of taking over companies and farms?)
Of course, wealthy people who don't want to pay taxes could buy yachts and fancy cars, but that could be remedied easily by instituting high sales taxes on luxury items.
Taxing wealth is far more equitable than taxing income; taxing wealth gives low-medium earners more discretion to spend on needs like housing, clothing, food, child care, education, transportation, etc (needs that differ between families, and which families are better equipped to assess than the government), while taxing income gives the government a share of people's money before they can decide what to do with it. Tax wealth while people are alive (on an annual basis), rather than destroy a company/farm/estate by having the government swoop in and take an enormous share of it (do we really want the government in the business of taking over companies and farms?)
Of course, wealthy people who don't want to pay taxes could buy yachts and fancy cars, but that could be remedied easily by instituting high sales taxes on luxury items.
High inheritance taxes tend to single out individual proprietorship businesses for punishment. I remember when I was young, watching newly-widowed farm wives lose everything to inheritance taxes. It was heartbreaking. The tax code changed so that stopped happening -- too late for some.
In the end, frequent tweaks to the inheritance tax code is just a full employment act for trust & estate lawyers.
What we need instead of our current convoluted taxation scheme is a progressive consumption tax -- but that is a rant for another day. (No, I don't mean a sales tax or a VAT. The government already gets all the data on your income and your total savings/investments. consumption = income - net_savings. Apply progressive table. Done.)
In the end, frequent tweaks to the inheritance tax code is just a full employment act for trust & estate lawyers.
What we need instead of our current convoluted taxation scheme is a progressive consumption tax -- but that is a rant for another day. (No, I don't mean a sales tax or a VAT. The government already gets all the data on your income and your total savings/investments. consumption = income - net_savings. Apply progressive table. Done.)
I have a hard time figuring what the purpose of taxes is with our huge deficits. It's almost like taxes exist only to redistribute wealth? Recovering even 50% of all inheritances via taxes does not make a dent in the deficit.
I think America could start by simplifying the tax code so the richest Americans/American corporations still pay taxes.
Then America could stop spending so much on subsidies and global policing.
Once America has done this (this == approach a budget more similar to the rest of the developed world), if it still needs to, then I think a simple wealth tax makes sense.
I don’t see the argument for taxing inheritance which is already fraught with loopholes and complicated edge cases.
Then America could stop spending so much on subsidies and global policing.
Once America has done this (this == approach a budget more similar to the rest of the developed world), if it still needs to, then I think a simple wealth tax makes sense.
I don’t see the argument for taxing inheritance which is already fraught with loopholes and complicated edge cases.
Rich people don't pay inheritance taxes. There are a gazillion ways to pass on money without falling prey to estate taxes. The only people effected are middle-class folks not savvy enough to avoid the tax.
The richest of the rich simply leave everything to a charity or foundation that their children draw salaries from (as well as having the use of the foundations estates, planes, etc.) Case in point... Warren Buffet; he's always going on about he isn't leaving anything to his children, but plans on giving it away to charity. What isn't frequently mentioned is that the kids 'own' the charities.
https://www.nbcnews.com/businessmain/warren-buffett-his-birt...
The richest of the rich simply leave everything to a charity or foundation that their children draw salaries from (as well as having the use of the foundations estates, planes, etc.) Case in point... Warren Buffet; he's always going on about he isn't leaving anything to his children, but plans on giving it away to charity. What isn't frequently mentioned is that the kids 'own' the charities.
https://www.nbcnews.com/businessmain/warren-buffett-his-birt...
Inequality is not static, it is rather dynamic.
Nassim Taleb makes some good points about that here[2], for instance, ~ 70% of Americans will spend a year in the top 20% and only ten percent of the wealthiest five hundred American people or dynasties were so thirty years ago.
[1] https://www.nasdaq.com/articles/generational-wealth%3A-why-d...
[2] https://medium.com/incerto/inequality-and-skin-in-the-game-d...