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Jimbo, how much U.S. wealth do you think is hereditary?

Most wealthy people in the US are born to wealth. Most of them had the advantages of wealth passed on them by their parents long before they inherited a dime.

How much US wealth do *you* think is hereditary?

The answer is not settled by the way and is subject to a great amount of debate between economists.

Jimbo: I know a hell of a lot more self-made millionaires than heirs. I would point out that being children of someone rich carries a lot of benefits, but the money source isn't yours until the rich parent dies.

I would be interested to know what ratio of Americans on the Forbes wealthiest 1000 list are self-made vs. heirs/heiresses.

Oh my. And I even used to like Motorhead when I was a teenager.

I guess now's not a good time to launch into my "eliminate all forms of income and gains taxation" set of irresistibly logical arguments...

As someone who made all of my own money by sacrificing many things others choose not to, and further as someone who has been the source of much backfill to parents, aunts and uncles, and siblings, my short answer to this proposal is "No. You'll tax my money out of my cold dead hands".

I'll translate my money into another currency and ship it off shore if you try to take it from me much beyond the current soaking I get. And no, I'm not kidding.

When do we get a real fiscally conservative political party again? I'm impatiently waiting.

According to this survey, 44% of the Forbes 400 inherited their wealth:

http://www.faireconomy.org/press/archive/Pre_1999/forbes_400_study.html

70% were born to wealthy families.

I am not saying everyone inherits their wealth, but there is not as much class mobility in the United States as people here like to think. Most of the "self-made" millionaires I know were born to upper-middle class parents, who were professionals of some sort or another. None of them are old enough to have inherited any wealth directly from their parents, but they gained a lot from having an upbringing where their parents were able to give them every advantage, as well as not having to worry about paying for college.

Mostly I am just bitter though, since I grew up poor and had to pull myself up by my own bootstraps. I guess I shouldn't bitch that much though, since I guess I am one of those "self-made" millionaires myself now.

No. You’ll tax my money out of my cold dead hands

That sounds like a vote for an estate tax to me. IMHO not a bad idea; you're letting people keep the fruit of their labor, and helping keep an aristocracy from forming.

If I were designing a tax system, I would include estate taxes for those same reasons. The goal wouldn't be to drain wealth from the Kennedey's but come on, all the arguments against taxes have to diminish somewhat after you're dead.

Inheritance should be taxed as either a gift, or income. I'm not particular either way.

Man you guys are taking a thread that started with a pirate flag too seriously.

I'm still picturing the first 10 minutes of Monty Python's "Meaning of Life", the Crimson Permanent Assurance segment. Reminds me I need to watch YellowBeard again too.

AVAST, YE SCURVY DOGS!

Jimbo,
Randy has spoken to this, and I have a similar background to yours. I actually believe not having at some point in one's youth makes you a better manager of wealth later on.

I should note that one consistent factor I've observed in success was essentially education. There's always the trust fund kids and the blue-collar "worked their way up", but those seem to be the outliers. I think if the goal is to improve class mobility, you need to reach kids in elementary school and make them realize that there are more options in life than "president", "sports star", and "working at the tire shop". This is unfortunately not something free markets are optimized to provide.

I'm with ya, Randy. Tax consumption. The more of a burden on society, the more that commodity gets taxed.

I would have an estate tax, though. Otherwise you'd have people who only ever amassed money and didn't spend it. Although if they didn't spend it, maybe they couldn't exert influence, which would require transfer or consumption...

Who would determine how much of a burden to society something is? Why have a tax that is avoidable by the ones who can afford the tax the most? No matter how creative I get, I can't think of a fairer tax than a progressive income tax.

Estimated average incomes derived partly from per capita GDP. Not a good measure, as they're based on a population mean of GDP, which doesn't say anything about distribution or typical pay packet sizes/actual measured incomes.

http://www.infoplease.com/ipa/A0934562.html

also the IMF World Economic Outlook database could be worth a look, but also uses per capita GDP...

Who would determine how much of a burden to society something is?

The elected representatives of the people. Same as always.

OK, so they would go commodity by commodity?

What expertise would a politician have as to the social impact of every commodity?

Bill Gates' dad wrote a book recently recommending estate taxes, and remarking on the legal system of property and ownership that creates the super-wealthy, i.e. once you've got it, no-one can really take it away from you, just ask Paris Hilton...

Why America Should Tax Accumulated Fortunes, B. Gates Sr.

What about the corruption this then opens up as industry lobbyists fight to counter scientists reporting to legislators?

I don't mean to spar, I've just always hated the concept of consumption taxes, because I've always been cynical about the fact it is normally Republicans who hate income taxes who propose them because they know they are regressive. Just my opinion though.

Consumption taxation empowers the people with a say in which behaviors they deem of value. The current system robs me of the chance to tune my behavior according to my own set of ethics and values.

We covered this ad naseum 2 or 3 threads ago.

Any "progressive" income tax or even a pure flat income tax is still regressive in terms of valuing productivity. There is no reason to tax my marginal dollar earned at the same or greater rate than the last aside from pure income confiscation and redistribution inevitably to someone who has failed to value productivity -- that includes the lazy poor as well as the lazy rich and the parasite corporation.

Just tax the damned value chain and consumption and leave income & gains out of it. Period. No one can complain if they are honest about it. Oh no, someone with less money has to pay more of their income to buy something. You don't say. Aside from DS' uncanny ability to alter the foundational theorems of mathematics, one can never avoid such a truism no matter how much you redistribute and reengineer.

"Progressive" taxation is the original Orwellian concept. It is regressive. Think about it. It really is.

The wholesale sales tax here used to go commodity by commodity, with differing rates of sales tax on each item, similar to import duty systems. The system was replaced by a 'flat', nearly universal goods and services tax (GST) pegged at 10%. The UK VAT is 17½% by contrast, which hurts a lot more as a non-progressive tax. Italy has 5 or 6 different rates, which makes more work re collection and categorisation -- one of the aims of a 'good' or efficient tax system is simplicity. Scrapping a wholesale sales tax on goods allowed the govt to take a slice of the services pie for the first time, however, similar to VAT systems everywhere -- the ratio of cost of goods vs services in society is swinging more towards services all the time... and services are more likely to recur than goods...

However, the 10% rate is 'fair' in that it is still supplemented by a progressive income tax system. It is harder to avoid such taxes, except for some 'black economy' areas in trades, etc. The tax was lifted on 'unprocessed' foodstuffs, so you could eat basic foods without being taxed.

I'm grumpy with Ozzies right now anyway. I always have to have conference calls in the middle of the damned night. Move your damned island to a more reasonable time zone already.

I'm really trying to see it your way, I promise, I just can't make the connection. I do agree with your premise in the first paragraph.

Aside from DS’ uncanny ability to alter the foundational theorems of mathematics

hmm, and how is progressive regressive? and what final outcome are you regressing to?

Ok Randy, since I know you have achieved some wealth, one could question your motive? We both seem to agree that progressive taxation is OK (I infer this by your stating my system is regressive and bad) so a wealthy person saying he supports a tax that is discretionary to him has to raise a red flag.

The other part that I struggle with is that I don't want government making a judgement call on every single thing I buy and whether it is good or bad. I think this is a blatant abridgement of basic freedom of commerce.

But nothing is absolute, I don't care about tobacco sin taxes, and all that good stuff, hell even oil taxes, knock yourself out, but it then gets to trans fat oils, and fertilizers and then it doesn't stop.

It all partly depends on whether you see a community as a bunch of atomised, disconnected individuals with only a cash nexus between them, or as an interconnected and interdependent whole, where everyone depends on someone for something. You may also want to recognise basic citizenship rights such as adequate food and clothing and shelter in a society which has a clear abundance or surplus. Once you realise that everyone depends on everyone else -- and the rich depend on everyone else to make them rich, one tiny slice of money at a time -- then the idea of the 'self made' millionaire of course becomes quite ludicrous -- the 'self made' millionaire was able to manipulate others and their economic relations in a way that disproportionately benefitted him or herself at everybody else's expense. Is this to be admired or congratulated? Not particularly, in my book. Australian Aboriginals have no strong sense of personal property, everything is the collective property of the tribe and is exchanged freely on request as the need arises to use it -- which of the two societies is actually more 'advanced'?

Both ultimately tax production if you think about it, so why not take it on the front end, and let people accumulate, and spend as they see fit. I do believe that people spending (not going into debt) is what gets things going so I don't understand why we would discourage it. Just look how people avoid sales taxes now by buying online.

Love the points DS, I was actually thinking the same thing. Gasoline for instance has a retail and wholesale use (we drive our cars, but business also transport) so the taxes just keep getting multiplied all the way up the value chain.

Or, to put it another way, given that the surrounding society made the rich rich, to the point where they have far more than they can ever use, then that society can equally well take some of the excess wealth back to give to the others, in the form of a 'progressive' tax on income. Income is the most direct measure of how socially secure you are, after all, it is the medium that secures your wellbeing. Thus, we talk about income taxes being 'direct' and VATs being 'indirect'...

I gained the same respect for the Polynesian cultures as well. Here it is generally asserted that communal type societies don't last, but for some reason those cultures have existed for thousands of years. Everyone has a place and a purpose.

Malcom says: Ok Randy, since I know you have achieved some wealth, one could question your motive?

Holy pot calling the kettle black, Batman! :o

Geez, Malcom, maybe you think a progressive tax is a great idea because you haven't (yet?) achieved some wealth?

At least VAT at a federal level isn't as discretionary as sales tax. Here in the states, the system is so silly people easily get around it. In California to stop people buying cars out of state, you pay the sales tax when you register the car.

Brand,
No, I've done OK, I was just playing devil's advocate. It doesn't seem to be a question that a progressive income tax actually taxes wealth, the issue seems to be the morality of it. Though I am honestly trying to understand how it becomes regressive in Randy's view.

From my observation I spend much less that people who are horribly poor. I own my house outright, and I have solar, so I don't even have an electric bill. That's why I know that wealthy people are wealthy (said many times here by different people) because we don't spend like other people. My trash can is almost empty when I put it out each week, and my neighbors (has always been the case) are all overflowing with boxes and all kinds of waste.

I have seen it suggested in a few places that hunter-gatherer societies are sufficiently productive that they effectively lack the concept of scarcity. This would put them somewhat outside the bounds of economic analysis.

I also submit that those cultures never came close to making it out of the gravity well, or understanding the genome. To spend eons without attempting to understand the universe is a foreign mindset to me, and one I find strangely depressing.

I've just always been the black sheep of my circles because I don't resent taxes. I feel like I get a decent value for living in a free, generally disease free, peaceful society, with decent infrastructure. People thought I was nuts when I just happily paid a ton of money in gains taxes on investment properties because I knew a 1031 was just delaying the inevitable. I've seen so many people play games with taxes and it is just not worth it.

I've thought that as well requiem, I just respect the order of the societies, but during American Indian Studies I became depressed envisioning societies with no dates or history books, just stories passed down with no reference in time. Different mindset though. At lease those societies don't go in circles God --> No God = Evolution --> Maybe God = Intelligent Design.

Malcolm Says:
Love the points DS, I was actually thinking the same thing. Gasoline for instance has a retail and wholesale use (we drive our cars, but business also transport) so the taxes just keep getting multiplied all the way up the value chain.

The GST is only levied on the final consumer, though, there's no multiplier effect -- every business carefully claims 'input credits' all the way back up the line for the GST they were charged by the preceding vendor. Naturally, the introduction of the GST required a radical transformation of accounting systems and more interaction with the Tax Office -- requiring filing a monthly or quarterly 'acitivity statement' and remitting the GST to govt -- and a lot of shopkeepers resented becoming a tax collector for the govt... Not sure how it works in US with state-based VATs, if there are any...

"Geez, Malcom, maybe you think a progressive tax is a great idea because you haven’t (yet?) achieved some wealth?"

This is inline though with my concerns that people love to stick it to someone else. That's why I get fired up during prop 13 discussions as well.