What would happen if very little wealth was ever inherited?
By Bitcoins arent the future? Follow Mon, 31 Oct 2011, 10:12pm 5,913 views 77 comments
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Boca Raton, FL
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If society produces automation that can effectively and without human interference perform all work needed to be done to fully satisfy human demands, then the solution is simply to nationalize the robotic task force and let everyone retire to their own private island, built by the robots of course. No one has to work, and we all have a high quality of life.
Where economists and business men see problems, engineers see solutions.
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This post is less logical than bitcoins.
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Miike says
Yes, my favorite Thomas Jefferson quote is "Life, Liberty, and the unquestioned right to the labor of my parents".
Or maybe it was "There is also an artificial aristocracy founded on wealth and birth, without either virtue or talents [...] The artificial aristocracy is a mischievous ingredient in government, and provisions should be made to prevent its ascendancy."
I always get those mixed up.
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Skokie, IL
country_stroll says
I don't think so.
Hogwash.
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Bellingham, WA
Inherited wealth is part of the problem but it is not the major problem.
Per-capita health care is $8000 in the US and half that everywhere else.
Paris Hilton isn't lifting $4000 out of my wallet every year, but our health care system is.
Inherited real property tax basis is something of a massive problem in California, especially income property. This is just retarded.
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Davis, CA
After the Bubonic Plague came the Renaissance.
Freeing up wealth to CIRCULATE instead of being buried in circle-jerk finance games is always a good idea.
The Walton family would hate this idea.
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33 male
Fort Mill, SC
The Rockefeller family STILL enjoys the fruits of their ancestor's labor 100 years after the breakup of Standard Oil. Not a single member of that family have been innovative enough to create wealth since - that is, everything that anyone in that family has achieved since has been only because of John D's wealth. Under the current system, this wealth will surely exist for 100 years more....
How is that fundamentally different from the feudal aristocracy popular in Medievel Europe?
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33 male
Fort Mill, SC
Just some fun math....
Assuming 30 years between generations and a 5% average growth rate, inherited wealth will never decrease under the exemption as long as each split of the estate has four or less offspring, regardless of the tax rate above the exemption.
That is, under the current exemption of 10 million, an estate that is split 4 ways (2.5M each) will grow to exceed 10 million by the time that generation goes to pass it on the next. Only inflation would erode the relative value of that wealth through time. 95 years from now at 2.5% inflation, that inheritance is still in excess of $1M in todays dollars. It takes about 190 years for its real value to fall to $100k. In about 215 years, the value in todays dollars will finally fall below the median annual household income of $50k.
This scenario is if tax rates are 100% above the $10M exemption. Lower tax rates expand the number of generations that it takes to get the transfer to $10M.
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Well the original argument for non profits about 100 or so years ago was largely a way to hide wealth. Olympic sized swimming pools, massive libraries, access to the latest a/v equipment were all in some of those victorian era ones.
The funny thing about the estate tax is although it can be raised to where it was very few really pay it. Estate planning largely can avoid paying for it to start with.
But at the same point with wealth the argument should also examine what is being bought. Ever see Brewsters Millions? He spent tons of money on a rare stamp only to mail it. He ran for office and gave way tons of food and drink only to say don't vote for me.
The IRS will clamp down on people giving money away...but if someone just buys things and gives them away that's away around it.
One issue when scandle hit is frankly people waste other peoples money on items that drop in value.
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46 male
Menlo Park, CA
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I'm not sure about taxing legitimately created and saved wealth, but I am sure that we should heavily tax wealth derived from mere ownership of wealth. The rich should not be paid to be rich.
We should tax unproductive rent-seeking and not tax actual productive labor at all. So the interest on inheritances should be taxed at 100%, for example. But some guy earning all his income from physical labor should have 0% income tax.
The tax system should allow the lower and middle classes to rise. The tax system should not protect unproductive trust-fund babies and all their descendants from ever having to do any real work, ever.
Every single policy of the Republican party (and half the policies of the Democrats) are designed to enrich and protect the aristocracy at the expense of the 99%.
Even the issues that don't seem at first to be protecting the aristocracy (God, gays, guns, flag) are designed to divide us and make us easier to conquer by the aristocracy.
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Moraga, CA
To me it's just as important where a person's income comes from as how much income he/she has when determining tax rates. If someone like Oprah can overcome just about every disadvantage society throws at her and ends up a billionaire through her own productive endeavors then I don't think she should face punitive tax rates just b/c she's in the 1%; Income which is the fruit of one's labor and the product of one's endeavors should be lightly taxed compared to income which is the unearned proceeds from a trust or inheritance. Someone with a $20K per year trust fund should pay a much higher rate on that income than the billionaire who earned his/her wealth through their own legal activities. Also, while it is true that our genetic inheritances are unequal and some people are naturally more gifted and intelligent than others, the person with the superior genetic inheritance must still apply their gifts and intelligence in the work place in order to produce an income - so genetic inheritance is not analogous to monetary inheritance.
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Interesting ideas here. How would a higher rate be applied to the interest/return on inherited wealth?
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Patrick says
How is it that they are being "paid" to be rich? They are not being given any additional money, but rather left to keep what is actually rightfully theirs. The money that these wealthy people leave behind to their children has already been taxed and they should be given the right to do whatever they wish with it. Your logic is clearly delusional as it would mean that no parent would be able to leave anything to their children since you propose a 100% inheritance tax. Your ideas actually strike at the core of what this country stands for. Every American's dream is to provide a better life for your kids than what you have had. Your suggestions crush this idea.
Yes, life is not fair and all of us cannot be filthy rich. But it doesnt mean we have to drag the rich down to our levels to make us feel better.
Also, I would prefer if you left politics out of your website as it is clear that you have a strong bias without very good reason to back it up. You lose credibility and I find myself as well as many others losing interest in your website.
feel free to respond so others may read, but I doubt Ill be back to check up on your reply
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Estate Tax: limits the concentration of wealth, power, and privilege while redistributing the tax burden.
Sounds fair to me.
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Have you ever heard the phrase: "Shirtsleeves to shirtsleeves in two generations"?
Just because you inherit wealth does not mean that you will be able to maintain that wealth. Property rights of descent and devise are based on honoring the wishes of the person who freely earned and amassed the wealth legally within the confines of our laws.
You can say that the descendants have not earned the money, but then again, neither have you. Either way, it's immaterial. The wishes of the person whose blood, sweat and tears went into earning the money should be honored. "Society" doesn't work until late at night, weekends, holidays, etc., to grow a business -- people do.
The probate laws assume that the wealth creator would want his or her heirs to inherit the wealth (a fair assumption). But a will or trust can give the estate to a charity, or the government, a foundation, or a friend.
Providing for ones family after death is one of the chief drivers of wealth creation. If laws are enacted that remove that incentive people won't work as hard. This has been tried in communist countries during the last century. It failed miserably.
Property rights are a fundamental cornerstone of liberty. If you don't own the products of your own labor then you're a slave. This is unarguably true during life so why should this change at death?
My advice to the author is to stop envying others success. Make your own luck by working hard. But, don't be too successful or the jackals like yourself will circle around your own deathbed.
Cheers!
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We don't exactly have a direct taxation on wealth because frankly that would run avow of the 5th amendment. Let's say 12 or so years ago someone bought a bunch of gold coins ($275 each) they died and left them to their grandkids and they are now worth more than 5x that. The government frankly is not going to know.
Sales taxes are dependent on a sale, income taxes are dependent if someone has earned income, capital gains taxes depend if someone had a gain. The estate tax I'd say is the only real tax on "wealth" but since it is payable upon time of death and people have lived longer estate planning largely nullifies it as any real source of taxation.
Bill Gates put most of his money in his foundation..by law they have to spend 3% a year.
Way back in the day old wealth tended to build large structures. I hear in Europe that's how large estates developed. It does not stand out so much now but to have a mansion BEFORE suburbia was made really stood out at the time. Now there's plenty of ways to spend money and divert it.
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I would have to wonder if this was done in the Soviet Union and if so how did that work out?
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russell says
If you can call being a celebrity "productive". Oprah is about as "productive" as Jerry Springer, Rush Limbaugh, and Paris Hilton. Celebrities don't produce anything, they just extract wealth from their duped followers and groupies who buy their crap/books/endorsed products. Oprah specifically is almost like a cult leader and/or televangelist.
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how odd .... folks want to take something earned by one person and hand it to whomever they feel deserves it .... seems so foreign.
It was wrong for the RElenders to privatize gain while making loss a public matter. It is just as wrong to make profit a public matter and then privatize the losses. If Heinz makes good catsup, then Heinz can keep their money and I do not deserve any of it. It was Heinz that took the gamble, and was the winner ... to the victor goes the spoils. I do not want to be on the hook for saving Joe's Catsup, ala Solendra, due to leftist activity in Gov.
Let the capitalism work.
Repopulate mexico.
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Miike says
Fair enough. But what about the risk of ending up with a society with a parasitic aristocracy that just collects the fruits of everyone else's labor? Also, with enough money a person can buy politicians...and thus buy laws that further entrench a their power to effectively enslave their fellow citizens.
Remember, this is America. There is no such thing as "right and wrong" here...just money and power. We despise any kind of ultimate moral authority. In America, might makes right. It took a WAR to end slavery, for crying out loud.
So if we the 99.9% don't want to be slaves to the 0.1%, we'd better tax the 0.1%. Remember it was Warren Buffet that came out and said there was in fact a "class war" and that his side was winning big time.
I used to believe in American Exceptionalism, capitalism, etc...until the Big Banks were bailed out. Then I realized the U.S. is just another third-world kleptocracy with a government for sale to the highest bidder. Crony caplitalism is the name of the game in America.