Aside: Inheritance laws are one of those little thought of things that end up making huge differences in a society.
The classic one is the changes in Sparta’s inheritance system that essentially caused their downfall.
Originally every citizen had an equal plot of land, the economic base that allowed him to be a hoplite (Sparta help ~80% of their population as slaves, helots, as state property). But as Spartan men died in wars, inheritance laws were forced to let daughters inherit and merge estates through marriage, wealth, and land, and thus it all concentrated fast. By Aristotle’s time, nearly half the land was owned by women outright, and the number of citizens had then fallen to a few hundred as citizenship was tied to these land plots. The result was that the city that once fielded the most formidable army in Greece simply ran out of Spartiates to fill the ranks. Perversely, they all kept this going instead of breaking up the consolidated plots, as citizenship was tied to freedom and voting power. So, the less of them there were the better off the rich were, as they had more voting power and wealth at home (wealth was land, as Sparta forbid money in it's borders, well, sorta). So, power domestically was inverse to foreign power. And we all know when countries get into these situations they always go towards domestic power over national security.
1) set a generous threshold over which your inheritance gets taxed, inflation adjusted (e.g, 2M not including the principal residence)
2) tax 100% above it. (should only concern a fraction of a fraction of cases)
3) put all this tax's proceeds in a sovereign wealth fund
4) at 21, a citizen gets access to her redistributed generational wealth
5) profit
There are many solutions, many ways to limit the magnitude of differences of wealth.
But America is so thoroughly owned by the wealthy that implementing one of these solutions is not desirable. The legislature in America only works on behalf of the ultra wealthy and any legislation that passes will be to increase the magnitude of the wealth gap.
Also there's the aspect of how many Americans view themselves as temporarily inconvenienced millionaires. The average person doesn't want rules like this because they're sure it'll apply to them someday.
There's a reason why countries, like Sweden, have scrapped the inheritance tax - it doesn't work like that anymore.
The benefits of wealth are exercised long before the inheritance can be applied.
Your first home down payment, your education, your wealth generation while being on support by your parents, etc. - will push you off the ground faster, than any inheritance in a world where people easily live to 80-90. Most people hit retirement age, by the time their parents pass away.
By the time the treasure hoard gets passed on to the next generation, the inequality "damage" has already been done. If an inheritance tax has to be applied, this means society has already failed to stop runaway wealth accumulation and inequality.
I'd much rather we have checks in place to stop individuals from accumulating megawealth in the first place (or at least slow it down), rather than relying on an inheritance tax which takes effect long after the accumulation happened.
> The benefits of wealth are exercised long before the inheritance can be applied.
Agreed.
But isn't that an argument FOR a strong inheritance tax? Because inheritance doesn't actually help your children anyway? That seems like it was your argument.
With that argument taking 100% of the inheritance as tax and taking 0% is exactly the same, as the wealth transfer was done before anyway.
The only thing that I personally care about is the ability of ordinary people to build and retain wealth.
Wealth disparity doesn't grow because wealthy people are allowed to retain their generational wealth or not, it grows because the rest can't build and retain their wealth.
This isn't a zero sum game.
PS: I would also not trust the government or any political body to handle income from the inheritance taxes. So I would rather the children of wealthy people squander their wealth, than a politician transfer that wealth to their patron.
> Leif Pagrotsky, som då var näringsminister, har i efterhand avslöjat att avskaffandet av arvsskatten var en eftergift från Regeringen Persson till Svenskt Näringsliv
We have to reframe how taxes are viewed, by the wealthy.
There should be no wealth tax, but above a certain threshold - there should be a maintenance fee associated with the wealth. I get charged maintenance fee by my mutual funds, for example.
One of the purposes of the government is to protect and secure property... and that is what ultra wealthy are getting for a fraction of what they should be paying.
Capital gains should be taxed like income.
Fuel for private jets should be taxed like fuel for a car.
The corporations that generated large quantities of wealth for their owners should pay decent wages for their employees.
Arguably capital gains should be taxed at a higher rate than income. But that's not going to happen, because your home's change in value is capital gains.
This is, quite literally, the silliest thing I may have ever read.
Cool, cool. Work for 30 years, save up and have say $3M to retire on, based on stock market at an all-time high. You're not a robber baron or investment banker, just someone who worked a long time and saved and invested. Govt takes $1M away from you, you have $2M now. Market drops 25%. Now you have $1.5M.
Congrats, your "plan" resulted in someone like that having HALF of everything they saved up just gone.
Yeah, yeah, I know, "if you have $1.5M you don't NEED any more money." Sounds like something that only someone with something less than $1.5M would say.
You don't "need" your iPhone, or your flat screen, or whatever. The government should not be in the business of determining what you "need" and taking the rest.
6) wonder why this has no real impact as it only recovers wealth from people who are over $2m in wealth but below set-up-a-trust-to-move-your-families-money-to wealth, which is a fraction of the wealth. 7) See trust-as-a-service businesses boom until there's no additional revenue.
> tax 100% above it. (should only concern a fraction of a fraction of cases) 3) put all this tax's proceeds in a sovereign wealth fund 4) at 21, a citizen gets access to her redistributed generational wealth 5) profit
If you think you’ve seen zany tax schemes, just wait till they try implementing something as crazy as a 100% tax.
There’s also a moral question of why you feel entitled to not just a majority of the fruits of my labors, but apparently all of them.
There's an unproven assumption that somehow the inequality of outcome is 1) unjust, and 2) something to be "corrected."
The first has no foundation other than appeal to emotion to create in-group / out-group tribes ("eat the rich!") to then suggest what end up being power grabs that destroy the middle class and do nothing to the wealthy.
The second item requires destroying value. All economic activity comes from exchanges of value, which is intrinsically tied to time; that irreducible finite quantity to which everyone is subject. We've seen over and over again, when you try to destroy the concept of value, which is subjective and circumstantial for each individual, all you end up doing is causing human misery.
This obsession with taking other people's money rather than enabling opportunities to make your own is unhealthy, destructive, and immoral.
I think the bigger issue is that people are hording wealth instead of spending it in general making money work for them and not for the greater economy which is the only thing giving their money substance long-term. Well, long-term is longer than human lifetime so I guess there's no real reason for them to worry about it either.
I heard something on here about an investment bubble?
There is some kind of bizarre world that we live in that the article has a quote from Ramaphosa, the totality of his extraordinary wealth was generated by corruption, on the terrors of inequality.
Hoarding is, generally, not a real problem because it requires believing that wealthy people are not greedy. The problem is that most societies heavily incentivize irrational behaviour through disincentivizing investment. Strangely, these same places also have political cultures that focus heavily on inequality (again, there is no better example than South Africa) because genuine openness tends to be very disruptive politically.
There is no way to square the circle. The solutions are known, the problem is that human nature and political culture tends to prevent those solutions being realised (as it is more politically beneficial to continue to sell people lies: it is this group of people, they are the problem, if we can take their money and give it you then you will be rich).
I've heard this take a lot and it doesn't make much sense to me. How exactly are ultra rich "hoarding wealth instead of spending it"? Afaik most of the net worth of the ultra rich is in ownership of companies (stocks) or loans (eg bonds). That money is all out there in the world working.
Isn't the fact that the ultra rich are using their wealth productively the reason we have growing wealth inequality? Because active money grows faster than inflation, which is why they get richer compared to the rest of us over time.
Looking at the discussion I’m struck by how there are really two “goods” that are conflicting in people’s minds. Many of those of us who are parents embrace the idea of sacrificing to make our kids lives easier and better than our own. We recognize how what our parents have provided us has helped us and want to give even more to our own children/grandchildren. It seems to be a general principle of society that we should enact policies that encourage people to sacrifice for their children?
But also the accumulation of wealth drives so many negative issues in society that we want to lessen. And extreme wealth seems to make things even worse.
Society and policy makers seem to have a lot of trouble understanding scale and orders of magnitude. We declare some broad principle, like "It's good to make our kids lives easier and better than our own." and we apply it regardless of whether the dollar value is $10K, $10M, or $10B. But someone passing down $10B to their children is totally different than someone passing down $10K, and needs to be handled differently by the law. We have coarse, ham-fisted step functions like "inheritance tax only affects inheritances over $X" but you can't have a single threshold for these things. It has to be progressive with a sliding scale, otherwise you get all the negative issues around wealth accumulation.
Other Example: why can't we have income tax thresholds that go all the way up to $1T/year? Why is the absolute top income tax bracket something like $600K? Really? Are we really saying that we should tax someone who makes $600K exactly like we tax someone who makes $600M? or $6B?
It would be awesome if we taxed someone making $6B the same as someone making $600k, but we don't even do that. When I was making $600k, I was paying close to 50%. No one making $6B is paying anywhere near $3B in taxes on that income.
Why would this increase inequality? Inheritence generally goes from rich person to rich person. I would normally assume the rate of equality would stay roughly constant in the face of inheritence.
Wealth inequality is not an intrinsic bad, and it's not even worth striving to reduce. The only thing that matters is the average (pick your average) standard of living.
There's no point paying a fortune to have all the people who created the most value leave your country just so you can reduce a pointless metric, especially when all it does is get the state more money to spend on itself rather than reduce your costs or increase what you get for your costs.
Average standard of living can rise even if it decreases for 99.9% of people. Median standard of living is what you want to increase, and increasing wealth inequality does not help with that.
Where do you think the money that is accrued by the most wealthy will be spent/invested/parked? What will its effects be on the broader economy?
Assuming that the money is all used for altruistic purpose, I could agree with your point. But we know that this money is often used for not so altruistic purposes like investing in PE which asset strip the productive parts of economy or use the money to influence politics and elected representatives via lobbying.
>>Where do you think the money that is accrued by the most wealthy will be spent/invested/parked?
In most advanced economies today, that's equity. The ordinary person thinks of wealth as money lying around in the bank, which the rich person refuses to spend on anything useful. And instead either hoards, or spends on luxury things which cause resentment to the remainder.
The real question is for most people today its easier than ever to invest and then give it to their children. Why aren't people doing it?
That feels like it should be true, but it's not. Humans are hierarchical social animals, not logical loners. Their well being and happiness is tied to the group.
> the people who created the most value leave your country
You mean the workers? Why would they leave if inequality is reduced, that would mean their standard of living would increase?
Anyone who wants to leave is free to, people are tired of the threats, just do it already. The people who leave will be spiting their own faces, and the people who stay behind will fill the demand vacuum.
The Slate Money podcast had a recent episode of their "Money Talks" series that interviewed Ray Madoff, author of the new book The Second Estate. It was an interesting listen—could've been longer, IMO—and I appreciated the discussion about the history of the inheritance tax in the US and how it has become useless, largely through political inaction refusing to close tricks/loopholes. I'll be checking out from my library (once it's in the system!).
That sounds like a lottery for housing, with extra steps? Hypothetical scenario: we have 100 houses, and 200 young families looking for one. Your solution in effect is: let's give 100 houses to the 100 young people with an inheritance. That sounds arbitrary.
Lack of housing is a disconnected problem from inheritance taxes.
Eddington is a fictional community, with 2 people: Ed and Sue. Unfortunately, due to lack of housing, they only have 1 house. The decision is made to hand it to Sue, because Ed's _parents_ were alcoholics that drank their life away.
The decision is not necessarily wrong. But the reasoning to base someone's fortune on the merits of their parents is very arbitrary. Why not base it on their own merits or needs?
> Hypothetical scenario: we have 100 houses, and 200 young families looking for one. Your solution in effect is: let's give 100 houses to the 100 young people with an inheritance
This assumes that each family only gets a single house. With enough wealth you can buy out all the houses (not considering other factors)
That is a problem with housing and supply-side in European countries.
The reason there is an issue with housing is the same reason why these articles appear declaiming the political risks (notice, Stigliz only says the risk is political...his friends losing office) of inequality.
This will continue forever, it is ingrained in human nature, it is why it took tens of thousands of years for economic growth to happen from the birth of modern human society.
That observation is correct, but I'd challenge the implication that "therefore inheritance must be allowed to continue in its current form".
Why are houses so expensive? Alongside challenges and inefficiences related to permits and building (as plenty discussed elsewhere) housing is also used as an investment asset by people with money to invest. This ranges from individuals buying an apartment to rent out, to large investment and private equity firms buying up whole swathes of real estate. When the global money supply is increased (e.g. post-2008 crash, post-Covid, etc.) a lot of it ends up with the rich, who then invest directly or indirectly in asset classes including housing. (Also see how e.g. classic car prices have increased since ~'08).
Until this mechanism is recognised as the cause of asset appreciation and measures are put in place to reverse this trend, the current cost-of-living issues will continue to worsen. Sadly, most politicians are already rich enough to benefit from this situation, and so --in the unlikely event that they even recognise this as a cause-- are unlikely to strongly advocate for measures to address it. Additionally, politics in many countries is too intertwined with big business to mean that such a revolutionary concept would be entertained.
tl;dr: addressing the huge progressive accumulation of wealth by the rich --of which inheritance is one aspect-- is what is needed to address the continual appreciation in so many asset classes, including housing.
> Until this mechanism is recognised as the cause of asset appreciation
What do you mean "until"? It's the core of many of European "dreams".
Take UK for example, where there's a concept called "property ladder". This property ladder is the promise of ever increasing property values, to build wealth(it's a pyramid scheme). This "always appreciating" promise is not just subtextual, it's literally the core of the method for becoming wealthy.
Whole economies in Europe are built around this constant real estate appreciation and first-home-buyers' support.
This is becoming the case in US as well, to lesser extent. US has a much more dynamic property market, than the wealthy Europe.
Politicians will bend over backwards to protect this "dream"... and at this point it is screwing over the new generation.
> What do you mean "until"? It's the core of many of European "dreams".
Sorry if I was unclear; I'm not referring to the "housing ladder" here, but rather that the accumulation of wealth (accelerated in recent years) by the already-rich has driven investment patterns that have in turn driven the appreciation of many asset classes that sit behind the current "cost of living crisis".
If one accepts this premise, then an obvious solution would be wealth taxation, of which inheritance tax is one form. But very few people in the politican/economics sphere are seriously talking about wealth taxation. (There are some, e.g. Gary Stevenson, and Zack Polanski is gently flirting with it as a policy.)
This is just wrong. If we skip the ultra rich totally and focus on normal families inheritance is THE way to help you decendants.
Right now (where i live) you pay a big tax on inheritance, this is ok if you only inherit cash. In 99% of inheritances this is not the case. You inherit family home, a cottage etc. Then you must sell because you cant afford to pay for it. Now the asset is gone forever and the next generation will most likely inherit nothing.
Its really hard to keep anything of value in the family because of this, that one house that was purchased for 60K is now somehow worth 600K (even it has all kinds of problems) and you need to take a loan just to keep it.
By taxing inheritance its sure that decendants that work basic jobs will forever be poor.
Let's just make the first million (€/$) "tax free", everything else increase progressively up to 100% when you go over X millions or any other arbitrary value we decide.
A common proposal I'm fond of, is that you get a budget (of say 1 million) you are allowed to inherit tax free across the span of your life.
This incentivises the rich to split up their fortune, and allows the poor to keep control of objects with emotional luggage.
That said, if the value of your house has grown tenfold, it is most likely because the community added that value. And so I don't think it is necessarily wrong if that same community sees some of that value back.
you sell and after that its gone. If there is a house you can a) live in it (by doing so you cut your own families costs by a massive amount) or b) rent it and get a little extra each month.
Once you sell it you pay more taxes. Do you think any of the money you got will go to your kids, or even grandkids? Id say in 80% of all cases it will be long gone before that time comes.
Inheritance tax is usually only on values above a certain point, though. That point can easily be set reasonable high – say, 5% tax on all inheritance above €2M, and 40% on all inheritance above €10M, and normal families would hardly be affected.
In theory, it is nice; however, valuing assets is not easy, especially for the whole population. This arbitrariness clashes with the principle of equal rights in most constitutions.
On the other hand, taxing income is very easy since the number has a precise origin.
In every jurisdiction I know of if you inherit and live in it as your main residence you don’t need to pay. If you just inherit to rent it out and make money why shouldn’t you pay something for that like it were cash.
its such a feudal mentality that I really have trouble identifying with it. My parents are significantly wealthier than me, but i just have zero sense of being entitled to the fruits of their labor (though of course i have benefited from it) and even moreso their house... (i wish they had a cottage lol)
we all make our own way in the modern world and i feel as a society we try to not just leave it to fate and how gilded the vagina you crawled out of was
Ofc. But as a parent i WANT to give something to my children after i pass. Why should every generation "suffer" like the previous did?
What you do with your life is up to you, but having a guardrail can make life just that more pleasant. Life should not be about counting cents and going from pay-check to pay-check.
You are confusing "if only I get a high inheritance tax" with "if everyone gets a very high inheritance tax".
The inheritance tax has to go somewhere. It could go into science and infrastructure and then everyone gets richer. Or it could be paid out as a dividend, then everyone below the average gets richer. There are many options here. Just saying "inheritance tax bad" without talking about the output side of such a tax is by definition going to be... well.. weird.
Sure. But that's my point. It's the output of the tax system that matters almost entirely. The input being high or low is only relevant if the output is good. If the output is shit, yea, then we should lower the taxes.
So we shouldn't really argue for raising or lower taxes, we should argue for spending it better.
Ridiculous straw man, because this is like saying income tax should be abolished because minimum wage people can't afford it. Yeah no shit that's why it's progressive. In the case of inheritance, even a 0% bracket until ~1M$ will mean the tax leaves the middle class entirely unaffected while ensuring massive feudal-levels of generational wealth are at least curbed, and turned over to the commons.
It does not matter. If a person with 40K/year salary inherits a 800K house there is no way he can pay for the taxes. No bank will even give him a loan. The house is basically going to the highest bidder. This means you will most likely get a poor price on the house, and even worse when times are bad (like now) when no ones buying.
This means your 800K asset maybe gives you 650K, and from that sum you still pay the inheritance tax + sales tax (thats usually in the 20% range).
You will likely get somewhere in the 450-500K for an asset that was worth 800K.
Many in the US expecting an inheritance from their baby boomer parents are in for a rude shock. Why? Because their assets are going to get eaten up by retirement living and end-of-life care. If you still own your assets when you go into care, Medicaid is going to use up all those assets before paying for it and this could be tens of thousands a month with long-term medical care. You can avoid this is you plan ahead. Medicaid has a 5 year lookback on gifts so you need to transfer assets 5+ years before you need to pay for care but most people haven't done that.
For those who say this is the only way people get ahead, you are correct but you're missing the point. That shouldn't be the case and it's non sustainable. In the 1990s, the average house price in London was £70k. Now it's >£700k. It doesn't have to be this way. It shouldn't be this way (for a healthy society).
I've come to believe that this century will see a point where there's simply nothing left to exploit, nothing left to transfer from the working class to the ultra-wealthy. And as has always been the case historically, that's going to end with a more violent form of wealth redistribution (eg French revolution, Russian revolution).
> the average house price in London was £70k. Now it's >£700k. It doesn't have to be this way. It shouldn't be this way (for a healthy society)
10x in 35 years is compounded rate of return of under 7%, which is not far off the average mortgage rate over that period of time. Add in some maintenance and that might even represent a loss in real terms over that period of time.
Wages havent kept up with the cost of a bag of rice either, I wouldnt suggest that rice has transfered wealth from the young to the old.
The underlying problem for the UK is wages - workers make less in real terms and pensions paid to the older generation go up by the highest of all the rates.
Taxation is the transfer of wealth from the younger generation to the older generation - the older generation paid less in and are getting more out.
People keep saying things without understanding what that means. Only reason why anyone even wants a home is because its profitable to them on the longer run. Else renting works.
Either way the demand for home ownership will be way less if you simply tell people they will make big losses on that purchase.
That said, now imagine how housing works in a world where no one wants to buy a home, but everyone wants to rent one. That is you want to rent a resource which no one is building at the first place.
So this just glosses over several issues and ignores the big obvious solution.
The big obvious solution is a system like Vienna where ~60% of the housing is supplied by the government.
Oh and if no one wants to buy houses, great. Let the government take them over and then create rental stock, something the UK did until Thatcher came along [1].
You can also differentiate between personal home ownership and so-called "investment properties". That is, you punitively tax hoarding of housing as well as short-term speculation in hoousing. As one example, Switzerland (depending on canton) has pretty high capital gains taxes on housing that tend to decrease the longer you own the house [2].
We have a ton of shortsighted and downright destructive policy to increase house values (eg Prop 13 in California) that are often sold emotively. Prop 13 was sold as not kicking seniors out of their homes so we got a tax policy that essentially froze Disneyland's property tax to 1960s levels.
NYC builds a ton of real estate for no other purpose than allowing non-domiciled billionaires to park their wealth. I, for one, think that owning property in NYC (or anywhere) should make you resident for tax purposes. And the property tax system should be fixed but it's held hostage by upstate homeowners who like their subsidized tax rates on single family homes too much to let anything change.
Relying on private entities to provide houses by being landlords is an absolutely awful system.
The work of Piketty [0] and others shows that wealth inequality has surpassed pre-WWI historical maximums. The postwar "golden age of capitalism" has given way, from the 70s until today, to a neoliberal system that simply doesn't serve most people on the planet.
It's an unfortunate fact that significant change happens rarely without large convulsions, e.g. after a major war, because I don't see this being sustainable even medium-term.
I would not cite Piketty, Zucman or Saez who are the hardest fighters of the wealth inequality thesis as they usually mix political advocacy and have been criticized in their methodology and have been under a fair share of controversies. Btw I have grouped them because this is how they are usually treated, both by the fact they are all French economists but also on the fact they all push for the same inequality thesis
So you ask not to cite someone only because they believe in what they discovered and suggest to take action based on that?
Who has not been criticize in their methodology? Who do you expect to avoid any amount of "controversies" for such a political subject?
Your comment seems to be pure ad hominem. Also, discarding authors because they're French is kinda stupid: historically, quick advances in a field most often start at one time and place.
I never said to discard them because they are French, but the political ideas they advance are the centric positions of French culture which for every problem the solution is more taxes, taxes on the rich etc
It would be like expecting American economists to be very libertarian, or Chinese economists very interventionists. The culture of their countries reflects their ideas.
Economics is political, so it should come as no surprise that economists have political opinions about what should be done at the level of the economy. Or is only that which is vaguely left-wing that is "political" or "ideological", and mainstream neoliberal politics and economics are simply "objective" and "technocratic"?
I think it's important to separate the empirical and analytic part, to which you can apply objective criticisms, to the political part, with which you can agree or not but which should have no bearing on the former part.
Yes it is, and I because economics is political, I would appreciate putting an adjective describing the politics of the specific economists who are cited. If I cited a Hayek, as an "economist" it would be incredibly dishonest as his works are deeply libertarian and considered right wing. Mainstream neoliberal politics is right wing but not libertarian, very interventionist. But Piketty is left-wing, and it is dishonest leaving that part unsaid when citing him.
I agree, there is a difference between the technical and political parts. Sorry if I seemed dishonest, but I cited both the 2014 critique as well as a more general 2024 PSZ critique (from right wing POVs) including other economists who usually post on the same subject of income inequality. I will edit my original comment to include Piketty's rebuttals.
Everything in economics always boils down to 1. supply and demand and 2. taxation.
One can simply look at historical income taxes in the USA and their progressiveness and conclude that over time taxes tend to regress until some economic calamity or war happens, after which taxes become extremely progressive again for a short while (top income tax rate bracket of 75% to 90%).
What terrifies me most about this is that those in power will keep getting younger, dumber and more complacent.
I feel like communism is inevitable at this point.
People know communism isn't the solution, but they will still vote for it because at least it pretends to stand for equality.
We're going to reach a point of such extreme inequality that even the pretense of equality provided by communism would be welcomed by the majority.
In a way, the pretense of equality sets a floor on inequality; because, in a communist system which calls all humans equal, any actual inequality has to be either hidden or justified... This requires effort. A system which pretends to stand for equality can only become so unequal before it loses its ability to justify itself; then it collapses.
By contrast, our current system makes no claims about human equality, quite the opposite; it exaggerates and propagandizes the inequality of humans and human ability as a means to justify its failures in terms of human resource allocation.
For example, our current system sees homelessness not as a failure of its resource-allocation capabilities but as a kind of efficiency. It does so by dehumanizing the homeless; painting them as lazy and incapable of value-creation; deceptively conflating 'value creation' with 'value extraction' in the process. Our system keeps trying to portray the 'value extraction' endeavors of the entrepreneur class as being on the same level as the 'value creation' of the working class... They will not acknowledge the reality that 'value extraction' is the main cause of wasted human potential.
It is our current system itself which fails to efficiently allocate the most valuable resource in society; people's time and energy. Our current system implies that human life is of such low intrinsic value, that some people aren't even worthy of having a roof over their heads, all while it deprives them of their right to build their own roofs (with regulations).
Our system loves to blame individuals for its oppression and it loves it even more when they blame themselves for it; it seizes any opportunity it can to demonize beaten-down intelligent people who understand the mechanics of its oppression and it idolizes egotistical idiots who have never experienced struggle and who therefore don't have much difficulty in taking full credit for everything (good) which happens to them...
It's not difficult to take full responsibility for your situation when only good things happen to you... But watch how these people behave when things go belly-up. They're off to the Caymans, never to be heard from again... The system is remarkably lenient on them.
> People know communism isn't the solution, but they will still vote for it because at least it pretends to stand for equality.
Genuinely curious - why isn't communism the solution? And in your opinion, what are some better solutions? I haven't studied much about political/economic ideologies and at this point don't even know where to start. I do agree with some of what you are saying, but I don't understand why communism wouldn't be be a step in the right direction.
If I was nearing the end and I knew the state would be taking all of my assets upon expiry, I would make sure to go out with a bang if you catch my meaning. A few million could buy a lot of bang.
They'll have an epidemic of geriatric domestic terrorists on their hands.
That is the way of the world, capitalism specifically. The only way to counter is a fair tax system and good spending on education up to college level.
Counter-example: All the European, and world countries who have implemented the various inheritance, wealth taxes and heavy redistribution yet the inequality is still widening. Take France, Norway or Sweden as the ideal social democracies.
Argentina (the end game of social democracy) pre-Milei had a huge array of taxes and regulations which lead to the state misusing that money to actually enrich a small elite of politically aligned. Similar things and arrangements (under the form of subsidies to companies) will happen under Trump and levying more taxes will just give more opportunity for corruption.
Unlike people, capital has no nation. It can just move effortlessly from France to Switzerland to the Cayman Islands. That's why single-country initiatives to e.g. tax wealth (or even tax extremely profitable companies) are doomed to failure: those assets are easy to transfer and hide; if the UK passes a progressive wealth tax, all those global billionaires will just sell their empty houses in London and buy empty houses somewhere else.
Hence the proposal by many economists that the only solution is a broad agreement on a global progressive wealth tax, with at least the major blocs of the US and EU on board. See e.g. "A Brief History of Inequality".
This is basically a prisoner dilemma on a global scale where the incentives are for single marginalised nations to leverage the fact of being tax havens to survive globalisation. The dream of a single global tax is as possible as making China/US respect any of the agreements they have signed regarding trade and environment.
The same proposal is also criticized by many economists too, who argue that inequality has not risen as sharply as Piketty's crew claims, or that the bulk of that inequality is linked to the real estate, for which the only solution is build more houses and destroy the capital accumulation of older generation to the profit on newer ones.
Re real estate: indeed an LVT would go a long way to ameliorate the unsustainable situation regarding housing across Europe. It's a simple and efficient solution, and can be applied at the country level.
But I would argue that the situation in housing is actually a consequence, and not a separate phenomenon, of the broader issue of inequality-driven asset price inflation.
Fuly agree, LVT seems to be a good incentive. As well as de-regulating, easing or digitilazing all the bureaucratic processus related to building so that the time between wanting to build and actually built nears 0. Also introduce anti-democratic laws that push the will of the group over the individual house owners who are motivated to block new contructions to see their number go up.
Selling empty homes in London will increase supply of housing in London and lowering the price of housing, allowing less than wealthy people to accumulate wealth.
The problem with countries like UK is that real estate is the only way of obtaining, growing and keeping wealth there. And I mean the only.
Capitalism creates inequality, but in a socialism/communism economy there would be either no money or no goods. Everyone would be equally poor, not just some.
Because it would be stolen by the government. Ask people in post-Soviet countries about how Soviet governments were stealing money from their bank accounts, from all citizens collectively. No one believed in money under socialism in the USSR. The government could always pull a funny trick called "and now... it's gone". Be happy, comrade, that only your money is gone, you could also be in prison.
USSR operated under state capitalism, nothing like what any of the communists or socialists ever imagined. But I guess that is what USSR made socialism mean as a result.
BTW: Most of the world lives under state capitalism, not capitalism, not socialism, not any other form of economic system. The state has an unrestricted claim to any and all of your wealth.
Interestingly enough, when detractors like to point out countries where communism "failed", it's always countries that did not have a rich history of colonialism and exploitation of cheap labor forces around the world.
I was unlucky to see and live in socialism. European democracies are not socialism by a mile. They are capitalist countries with some socialist elements. Yes, it makes sense.
Social democracy is a Socialist philosophy and has been ever since the spring revolutions of 1848.
You seem to confuse capitalism with market economy. Germany's social market economy was conceived as an alternative to capitalism; a market economy with strong focus on unions and social fairness/justice. In other European countries is very similar.
Socialism core principles have always been égalite, solidarity and democracy. It's pretty silly to think that a highly hierarchical, unjust and undemocratic system has anything to do with Socialism.
Hint; it doesn't. It might say so on the marketing material ("Socialist Republic!") but that's just that - marketing to fool the numbnuts.
Aside: Inheritance laws are one of those little thought of things that end up making huge differences in a society.
The classic one is the changes in Sparta’s inheritance system that essentially caused their downfall.
Originally every citizen had an equal plot of land, the economic base that allowed him to be a hoplite (Sparta help ~80% of their population as slaves, helots, as state property). But as Spartan men died in wars, inheritance laws were forced to let daughters inherit and merge estates through marriage, wealth, and land, and thus it all concentrated fast. By Aristotle’s time, nearly half the land was owned by women outright, and the number of citizens had then fallen to a few hundred as citizenship was tied to these land plots. The result was that the city that once fielded the most formidable army in Greece simply ran out of Spartiates to fill the ranks. Perversely, they all kept this going instead of breaking up the consolidated plots, as citizenship was tied to freedom and voting power. So, the less of them there were the better off the rich were, as they had more voting power and wealth at home (wealth was land, as Sparta forbid money in it's borders, well, sorta). So, power domestically was inverse to foreign power. And we all know when countries get into these situations they always go towards domestic power over national security.
1) set a generous threshold over which your inheritance gets taxed, inflation adjusted (e.g, 2M not including the principal residence) 2) tax 100% above it. (should only concern a fraction of a fraction of cases) 3) put all this tax's proceeds in a sovereign wealth fund 4) at 21, a citizen gets access to her redistributed generational wealth 5) profit
There are many solutions, many ways to limit the magnitude of differences of wealth.
But America is so thoroughly owned by the wealthy that implementing one of these solutions is not desirable. The legislature in America only works on behalf of the ultra wealthy and any legislation that passes will be to increase the magnitude of the wealth gap.
Also there's the aspect of how many Americans view themselves as temporarily inconvenienced millionaires. The average person doesn't want rules like this because they're sure it'll apply to them someday.
No... Most americans are just plain ignorant(not in a malicious way, just impossible to parse the signal through the noise on many topics).
A lot genuinely have no idea that there's a very high lower limit on inheritance tax... at the same time they hate the ultra rich.
This is genuinely a very schizophrenic country.
There's a reason why countries, like Sweden, have scrapped the inheritance tax - it doesn't work like that anymore.
The benefits of wealth are exercised long before the inheritance can be applied.
Your first home down payment, your education, your wealth generation while being on support by your parents, etc. - will push you off the ground faster, than any inheritance in a world where people easily live to 80-90. Most people hit retirement age, by the time their parents pass away.
By the time the treasure hoard gets passed on to the next generation, the inequality "damage" has already been done. If an inheritance tax has to be applied, this means society has already failed to stop runaway wealth accumulation and inequality.
I'd much rather we have checks in place to stop individuals from accumulating megawealth in the first place (or at least slow it down), rather than relying on an inheritance tax which takes effect long after the accumulation happened.
A straightforward wealth tax would address this.
Something akin to a Zucman tax, a yearly tax on capital.
EU made this easy with the UBO register, it takes just political will.
Sweden is on of the most unequal countries in the world )
> The benefits of wealth are exercised long before the inheritance can be applied.
Agreed.
But isn't that an argument FOR a strong inheritance tax? Because inheritance doesn't actually help your children anyway? That seems like it was your argument.
With that argument taking 100% of the inheritance as tax and taking 0% is exactly the same, as the wealth transfer was done before anyway.
The only thing that I personally care about is the ability of ordinary people to build and retain wealth.
Wealth disparity doesn't grow because wealthy people are allowed to retain their generational wealth or not, it grows because the rest can't build and retain their wealth.
This isn't a zero sum game.
PS: I would also not trust the government or any political body to handle income from the inheritance taxes. So I would rather the children of wealthy people squander their wealth, than a politician transfer that wealth to their patron.
Pointing out here this comment wants to hold the successful back, not advance the poor. It's not a zero sum game.
It would be nice if you didn't put words in my mouth, but even HN is the internet
I'm pretty sure we scrapped it because the conservatives got into power.
Cool.
Inheritance tax doesn't work anymore, in any case.
It's not the 19th century and we shouldn't try fixing 21 century issues with 19th century remedies.
Wealth tax is all the rage, now.
A yearly tax of a few percent on all capital assets.
> Leif Pagrotsky, som då var näringsminister, har i efterhand avslöjat att avskaffandet av arvsskatten var en eftergift från Regeringen Persson till Svenskt Näringsliv
Well, not quite.
Why make it on inheritance then? Tax wealth 100% above 2M. I do think this would doom progress but would be a fun exercise.
Wouldnt it be easier just to tax all income above say $200,000 (minimum wage in SV) at 100%.
If a net worth of $2 mil is considered outrageous then surely that kind of salary would be considered equally so.
Most net worths over $2 mil are created by growth in share value, not by income/salary.
If you dont have any disposible income then you wont have any investments to grow in value.
Most income for high earning tech workers is in stocks and share value.
We can tax stock grants at 100%
We have to reframe how taxes are viewed, by the wealthy.
There should be no wealth tax, but above a certain threshold - there should be a maintenance fee associated with the wealth. I get charged maintenance fee by my mutual funds, for example.
One of the purposes of the government is to protect and secure property... and that is what ultra wealthy are getting for a fraction of what they should be paying.
Capital gains should be taxed like income. Fuel for private jets should be taxed like fuel for a car. The corporations that generated large quantities of wealth for their owners should pay decent wages for their employees.
There is a lot of low hanging fruit.
> Capital gains should be taxed like income.
Arguably capital gains should be taxed at a higher rate than income. But that's not going to happen, because your home's change in value is capital gains.
Homes already have giant flat exemptions for gains when sold.
So the wealthy will do what you and I do: shop for the best rate.
That rate will not be where you and I live. It will be some tiny foreign government.
A big government with military bases around the world could extend its tax base even to that tiny government.
Bombing people for more tax revenue seems like the wrong thing.
This is, quite literally, the silliest thing I may have ever read.
Cool, cool. Work for 30 years, save up and have say $3M to retire on, based on stock market at an all-time high. You're not a robber baron or investment banker, just someone who worked a long time and saved and invested. Govt takes $1M away from you, you have $2M now. Market drops 25%. Now you have $1.5M.
Congrats, your "plan" resulted in someone like that having HALF of everything they saved up just gone.
Yeah, yeah, I know, "if you have $1.5M you don't NEED any more money." Sounds like something that only someone with something less than $1.5M would say.
You don't "need" your iPhone, or your flat screen, or whatever. The government should not be in the business of determining what you "need" and taking the rest.
6) wonder why this has no real impact as it only recovers wealth from people who are over $2m in wealth but below set-up-a-trust-to-move-your-families-money-to wealth, which is a fraction of the wealth. 7) See trust-as-a-service businesses boom until there's no additional revenue.
8) Create tons of dead-weight loss in the economy as you attempt to regulate your way out of (7) by being clever with the tax code.
> tax 100% above it. (should only concern a fraction of a fraction of cases) 3) put all this tax's proceeds in a sovereign wealth fund 4) at 21, a citizen gets access to her redistributed generational wealth 5) profit
If you think you’ve seen zany tax schemes, just wait till they try implementing something as crazy as a 100% tax.
There’s also a moral question of why you feel entitled to not just a majority of the fruits of my labors, but apparently all of them.
This.
There's an unproven assumption that somehow the inequality of outcome is 1) unjust, and 2) something to be "corrected."
The first has no foundation other than appeal to emotion to create in-group / out-group tribes ("eat the rich!") to then suggest what end up being power grabs that destroy the middle class and do nothing to the wealthy.
The second item requires destroying value. All economic activity comes from exchanges of value, which is intrinsically tied to time; that irreducible finite quantity to which everyone is subject. We've seen over and over again, when you try to destroy the concept of value, which is subjective and circumstantial for each individual, all you end up doing is causing human misery.
This obsession with taking other people's money rather than enabling opportunities to make your own is unhealthy, destructive, and immoral.
I think you'd have to be a bit more complex than that.
Most 80 year olds know they arent going to live forever and would probably just transfer their assets a little early.
So people put the money in a trust or use another way to dodge it. I don’t think it’s nearly as easy to collect ad you hand wave.
[dead]
I think the bigger issue is that people are hording wealth instead of spending it in general making money work for them and not for the greater economy which is the only thing giving their money substance long-term. Well, long-term is longer than human lifetime so I guess there's no real reason for them to worry about it either.
I heard something on here about an investment bubble?
There is some kind of bizarre world that we live in that the article has a quote from Ramaphosa, the totality of his extraordinary wealth was generated by corruption, on the terrors of inequality.
Hoarding is, generally, not a real problem because it requires believing that wealthy people are not greedy. The problem is that most societies heavily incentivize irrational behaviour through disincentivizing investment. Strangely, these same places also have political cultures that focus heavily on inequality (again, there is no better example than South Africa) because genuine openness tends to be very disruptive politically.
There is no way to square the circle. The solutions are known, the problem is that human nature and political culture tends to prevent those solutions being realised (as it is more politically beneficial to continue to sell people lies: it is this group of people, they are the problem, if we can take their money and give it you then you will be rich).
well that's pretty much it, people aren't letting their money go, they are only spending money with the sole purpose of making more money.
I've heard this take a lot and it doesn't make much sense to me. How exactly are ultra rich "hoarding wealth instead of spending it"? Afaik most of the net worth of the ultra rich is in ownership of companies (stocks) or loans (eg bonds). That money is all out there in the world working.
Isn't the fact that the ultra rich are using their wealth productively the reason we have growing wealth inequality? Because active money grows faster than inflation, which is why they get richer compared to the rest of us over time.
It's more of a problem that the money is only used to make more money rather than being used for services or productive work.
Not really. After all that is the point of inflation, to tax people who hoard money.
They aren't hoarding it directly, they have it in stocks or other appreciating assets such as gold.
Looking at the discussion I’m struck by how there are really two “goods” that are conflicting in people’s minds. Many of those of us who are parents embrace the idea of sacrificing to make our kids lives easier and better than our own. We recognize how what our parents have provided us has helped us and want to give even more to our own children/grandchildren. It seems to be a general principle of society that we should enact policies that encourage people to sacrifice for their children?
But also the accumulation of wealth drives so many negative issues in society that we want to lessen. And extreme wealth seems to make things even worse.
Society and policy makers seem to have a lot of trouble understanding scale and orders of magnitude. We declare some broad principle, like "It's good to make our kids lives easier and better than our own." and we apply it regardless of whether the dollar value is $10K, $10M, or $10B. But someone passing down $10B to their children is totally different than someone passing down $10K, and needs to be handled differently by the law. We have coarse, ham-fisted step functions like "inheritance tax only affects inheritances over $X" but you can't have a single threshold for these things. It has to be progressive with a sliding scale, otherwise you get all the negative issues around wealth accumulation.
Other Example: why can't we have income tax thresholds that go all the way up to $1T/year? Why is the absolute top income tax bracket something like $600K? Really? Are we really saying that we should tax someone who makes $600K exactly like we tax someone who makes $600M? or $6B?
It would be awesome if we taxed someone making $6B the same as someone making $600k, but we don't even do that. When I was making $600k, I was paying close to 50%. No one making $6B is paying anywhere near $3B in taxes on that income.
> If poor people knew how rich rich people are, there would be riots in the streets. -- Chris Rock
Eh, their entire pedophile paradise got exposed and the most it’s done is cause some political beefs.
Why would this increase inequality? Inheritence generally goes from rich person to rich person. I would normally assume the rate of equality would stay roughly constant in the face of inheritence.
Wealth inequality is not an intrinsic bad, and it's not even worth striving to reduce. The only thing that matters is the average (pick your average) standard of living.
There's no point paying a fortune to have all the people who created the most value leave your country just so you can reduce a pointless metric, especially when all it does is get the state more money to spend on itself rather than reduce your costs or increase what you get for your costs.
Average standard of living can rise even if it decreases for 99.9% of people. Median standard of living is what you want to increase, and increasing wealth inequality does not help with that.
Where do you think the money that is accrued by the most wealthy will be spent/invested/parked? What will its effects be on the broader economy?
Assuming that the money is all used for altruistic purpose, I could agree with your point. But we know that this money is often used for not so altruistic purposes like investing in PE which asset strip the productive parts of economy or use the money to influence politics and elected representatives via lobbying.
Or building companies that employ tens or hundreds of thousands.
>>Where do you think the money that is accrued by the most wealthy will be spent/invested/parked?
In most advanced economies today, that's equity. The ordinary person thinks of wealth as money lying around in the bank, which the rich person refuses to spend on anything useful. And instead either hoards, or spends on luxury things which cause resentment to the remainder.
The real question is for most people today its easier than ever to invest and then give it to their children. Why aren't people doing it?
Your mistake is thinking that the ordinary person is sitting on a pile of cash.
The median person in the US has about $8k, which is basically enough to cover one emergency.
That feels like it should be true, but it's not. Humans are hierarchical social animals, not logical loners. Their well being and happiness is tied to the group.
Extreme wealth inequality means extreme power inequality.
Do you really think a world with extreme power inequality is anything good?
> the people who created the most value leave your country
You mean the workers? Why would they leave if inequality is reduced, that would mean their standard of living would increase?
Anyone who wants to leave is free to, people are tired of the threats, just do it already. The people who leave will be spiting their own faces, and the people who stay behind will fill the demand vacuum.
The Slate Money podcast had a recent episode of their "Money Talks" series that interviewed Ray Madoff, author of the new book The Second Estate. It was an interesting listen—could've been longer, IMO—and I appreciated the discussion about the history of the inheritance tax in the US and how it has become useless, largely through political inaction refusing to close tricks/loopholes. I'll be checking out from my library (once it's in the system!).
https://www.youtube.com/watch?v=Gxd23UVID7k&t=29s
Why is this post buried, I wonder?
It's in the 263th position, alongside posts from 4 days ago, and keep rapidly going down. Really weird.
Inheritance is in most cases the only way young people in a lot of European countries can even own their own home
That sounds like a lottery for housing, with extra steps? Hypothetical scenario: we have 100 houses, and 200 young families looking for one. Your solution in effect is: let's give 100 houses to the 100 young people with an inheritance. That sounds arbitrary.
Lack of housing is a disconnected problem from inheritance taxes.
Did you skip biology class? There's nothing 'arbitrary' about it. There's no lottery system for assigning children to parents.
Eddington is a fictional community, with 2 people: Ed and Sue. Unfortunately, due to lack of housing, they only have 1 house. The decision is made to hand it to Sue, because Ed's _parents_ were alcoholics that drank their life away.
The decision is not necessarily wrong. But the reasoning to base someone's fortune on the merits of their parents is very arbitrary. Why not base it on their own merits or needs?
Your analogy is plain wrong. To start with people with inheritances can and do own multiple homes.
I'm sorry, I genuinly don't understand your point. Could you expand a bit?
> Hypothetical scenario: we have 100 houses, and 200 young families looking for one. Your solution in effect is: let's give 100 houses to the 100 young people with an inheritance
This assumes that each family only gets a single house. With enough wealth you can buy out all the houses (not considering other factors)
How is it arbitrary? You realise these are the offspring of the deceased? Children are not randomly assigned to taxpaying citizens.
> Inheritance is in most cases the only way young people in a lot of European countries can even own their own home
Only if you don't build enough new homes in places where people desire to live, because you can own a home - just not where you want to actually live.
That is a problem with housing and supply-side in European countries.
The reason there is an issue with housing is the same reason why these articles appear declaiming the political risks (notice, Stigliz only says the risk is political...his friends losing office) of inequality.
This will continue forever, it is ingrained in human nature, it is why it took tens of thousands of years for economic growth to happen from the birth of modern human society.
Let's just make the first million (€/$) "tax free", everything else increase progressively up to 100% over 100 millions or any other value.
Maybe thats why we need to focus on the underlying issue instead of using inheritance to postpone it/burden next generation with it.
And what do you suggest for those that don't have any inheritance?
That observation is correct, but I'd challenge the implication that "therefore inheritance must be allowed to continue in its current form".
Why are houses so expensive? Alongside challenges and inefficiences related to permits and building (as plenty discussed elsewhere) housing is also used as an investment asset by people with money to invest. This ranges from individuals buying an apartment to rent out, to large investment and private equity firms buying up whole swathes of real estate. When the global money supply is increased (e.g. post-2008 crash, post-Covid, etc.) a lot of it ends up with the rich, who then invest directly or indirectly in asset classes including housing. (Also see how e.g. classic car prices have increased since ~'08).
Until this mechanism is recognised as the cause of asset appreciation and measures are put in place to reverse this trend, the current cost-of-living issues will continue to worsen. Sadly, most politicians are already rich enough to benefit from this situation, and so --in the unlikely event that they even recognise this as a cause-- are unlikely to strongly advocate for measures to address it. Additionally, politics in many countries is too intertwined with big business to mean that such a revolutionary concept would be entertained.
tl;dr: addressing the huge progressive accumulation of wealth by the rich --of which inheritance is one aspect-- is what is needed to address the continual appreciation in so many asset classes, including housing.
> Until this mechanism is recognised as the cause of asset appreciation
What do you mean "until"? It's the core of many of European "dreams".
Take UK for example, where there's a concept called "property ladder". This property ladder is the promise of ever increasing property values, to build wealth(it's a pyramid scheme). This "always appreciating" promise is not just subtextual, it's literally the core of the method for becoming wealthy.
Whole economies in Europe are built around this constant real estate appreciation and first-home-buyers' support.
This is becoming the case in US as well, to lesser extent. US has a much more dynamic property market, than the wealthy Europe.
Politicians will bend over backwards to protect this "dream"... and at this point it is screwing over the new generation.
> What do you mean "until"? It's the core of many of European "dreams".
Sorry if I was unclear; I'm not referring to the "housing ladder" here, but rather that the accumulation of wealth (accelerated in recent years) by the already-rich has driven investment patterns that have in turn driven the appreciation of many asset classes that sit behind the current "cost of living crisis".
If one accepts this premise, then an obvious solution would be wealth taxation, of which inheritance tax is one form. But very few people in the politican/economics sphere are seriously talking about wealth taxation. (There are some, e.g. Gary Stevenson, and Zack Polanski is gently flirting with it as a policy.)
This is just wrong. If we skip the ultra rich totally and focus on normal families inheritance is THE way to help you decendants.
Right now (where i live) you pay a big tax on inheritance, this is ok if you only inherit cash. In 99% of inheritances this is not the case. You inherit family home, a cottage etc. Then you must sell because you cant afford to pay for it. Now the asset is gone forever and the next generation will most likely inherit nothing.
Its really hard to keep anything of value in the family because of this, that one house that was purchased for 60K is now somehow worth 600K (even it has all kinds of problems) and you need to take a loan just to keep it.
By taxing inheritance its sure that decendants that work basic jobs will forever be poor.
Let's just make the first million (€/$) "tax free", everything else increase progressively up to 100% when you go over X millions or any other arbitrary value we decide.
A common proposal I'm fond of, is that you get a budget (of say 1 million) you are allowed to inherit tax free across the span of your life.
This incentivises the rich to split up their fortune, and allows the poor to keep control of objects with emotional luggage.
That said, if the value of your house has grown tenfold, it is most likely because the community added that value. And so I don't think it is necessarily wrong if that same community sees some of that value back.
You can sell the asset, so how does anyone inherit nothing?
Someone who wants to spend an inheritance is going to do it, whether it’s liquid (cash) or marginally less so (real property)
you sell and after that its gone. If there is a house you can a) live in it (by doing so you cut your own families costs by a massive amount) or b) rent it and get a little extra each month.
Once you sell it you pay more taxes. Do you think any of the money you got will go to your kids, or even grandkids? Id say in 80% of all cases it will be long gone before that time comes.
Maybe a home that’s been in the family for a long time has more than just monetary value to the people inheriting it.
I wonder what would happen if your parents didn't leave the house to anyone, and you don't claim it but squat it.
The majority of people don’t inherit anything, so you are still luckier than most!
Crabs in a pot.
That was kind of my point. Most people dont inherit anything because its all gone. Taxes will eat it up eventually.
May want to say where you live, in US estate tax is exempt under 13M
Not sure about parent comment but UK - everything over £325,000 (USD ~450,000) is taxed at 40%.
Europe. Here we tax everything, usually twice.
Inheritance tax is usually only on values above a certain point, though. That point can easily be set reasonable high – say, 5% tax on all inheritance above €2M, and 40% on all inheritance above €10M, and normal families would hardly be affected.
In theory, it is nice; however, valuing assets is not easy, especially for the whole population. This arbitrariness clashes with the principle of equal rights in most constitutions. On the other hand, taxing income is very easy since the number has a precise origin.
In every jurisdiction I know of if you inherit and live in it as your main residence you don’t need to pay. If you just inherit to rent it out and make money why shouldn’t you pay something for that like it were cash.
UK. You have to pay your 40% within 6 months of death, even a main residence.
its such a feudal mentality that I really have trouble identifying with it. My parents are significantly wealthier than me, but i just have zero sense of being entitled to the fruits of their labor (though of course i have benefited from it) and even moreso their house... (i wish they had a cottage lol)
we all make our own way in the modern world and i feel as a society we try to not just leave it to fate and how gilded the vagina you crawled out of was
Ofc. But as a parent i WANT to give something to my children after i pass. Why should every generation "suffer" like the previous did?
What you do with your life is up to you, but having a guardrail can make life just that more pleasant. Life should not be about counting cents and going from pay-check to pay-check.
You are confusing "if only I get a high inheritance tax" with "if everyone gets a very high inheritance tax".
The inheritance tax has to go somewhere. It could go into science and infrastructure and then everyone gets richer. Or it could be paid out as a dividend, then everyone below the average gets richer. There are many options here. Just saying "inheritance tax bad" without talking about the output side of such a tax is by definition going to be... well.. weird.
Boy can i tell you, it does not go to "science". It goes 99% to paying for social security.
Sure. But that's my point. It's the output of the tax system that matters almost entirely. The input being high or low is only relevant if the output is good. If the output is shit, yea, then we should lower the taxes.
So we shouldn't really argue for raising or lower taxes, we should argue for spending it better.
What is a progressive tax?
Ridiculous straw man, because this is like saying income tax should be abolished because minimum wage people can't afford it. Yeah no shit that's why it's progressive. In the case of inheritance, even a 0% bracket until ~1M$ will mean the tax leaves the middle class entirely unaffected while ensuring massive feudal-levels of generational wealth are at least curbed, and turned over to the commons.
It does not matter. If a person with 40K/year salary inherits a 800K house there is no way he can pay for the taxes. No bank will even give him a loan. The house is basically going to the highest bidder. This means you will most likely get a poor price on the house, and even worse when times are bad (like now) when no ones buying.
This means your 800K asset maybe gives you 650K, and from that sum you still pay the inheritance tax + sales tax (thats usually in the 20% range).
You will likely get somewhere in the 450-500K for an asset that was worth 800K.
This is how to poor will remain poor.
UK is a country where a person with 70k of annual income can buy a home for 1mil.
The whole property market in UK is a pyramid scheme, time to realize that.
The whole system is FUBARed.
Many in the US expecting an inheritance from their baby boomer parents are in for a rude shock. Why? Because their assets are going to get eaten up by retirement living and end-of-life care. If you still own your assets when you go into care, Medicaid is going to use up all those assets before paying for it and this could be tens of thousands a month with long-term medical care. You can avoid this is you plan ahead. Medicaid has a 5 year lookback on gifts so you need to transfer assets 5+ years before you need to pay for care but most people haven't done that.
For those who say this is the only way people get ahead, you are correct but you're missing the point. That shouldn't be the case and it's non sustainable. In the 1990s, the average house price in London was £70k. Now it's >£700k. It doesn't have to be this way. It shouldn't be this way (for a healthy society).
I've come to believe that this century will see a point where there's simply nothing left to exploit, nothing left to transfer from the working class to the ultra-wealthy. And as has always been the case historically, that's going to end with a more violent form of wealth redistribution (eg French revolution, Russian revolution).
> the average house price in London was £70k. Now it's >£700k. It doesn't have to be this way. It shouldn't be this way (for a healthy society)
10x in 35 years is compounded rate of return of under 7%, which is not far off the average mortgage rate over that period of time. Add in some maintenance and that might even represent a loss in real terms over that period of time.
Houses shouldn't be investments.
Wages aren't 10x in that same period. All the increasing house price has done is transfer wealth from the younger generation to the older generation.
Wages havent kept up with the cost of a bag of rice either, I wouldnt suggest that rice has transfered wealth from the young to the old.
The underlying problem for the UK is wages - workers make less in real terms and pensions paid to the older generation go up by the highest of all the rates.
Taxation is the transfer of wealth from the younger generation to the older generation - the older generation paid less in and are getting more out.
>>Houses shouldn't be investments.
People keep saying things without understanding what that means. Only reason why anyone even wants a home is because its profitable to them on the longer run. Else renting works.
Either way the demand for home ownership will be way less if you simply tell people they will make big losses on that purchase.
That said, now imagine how housing works in a world where no one wants to buy a home, but everyone wants to rent one. That is you want to rent a resource which no one is building at the first place.
So this just glosses over several issues and ignores the big obvious solution.
The big obvious solution is a system like Vienna where ~60% of the housing is supplied by the government.
Oh and if no one wants to buy houses, great. Let the government take them over and then create rental stock, something the UK did until Thatcher came along [1].
You can also differentiate between personal home ownership and so-called "investment properties". That is, you punitively tax hoarding of housing as well as short-term speculation in hoousing. As one example, Switzerland (depending on canton) has pretty high capital gains taxes on housing that tend to decrease the longer you own the house [2].
We have a ton of shortsighted and downright destructive policy to increase house values (eg Prop 13 in California) that are often sold emotively. Prop 13 was sold as not kicking seniors out of their homes so we got a tax policy that essentially froze Disneyland's property tax to 1960s levels.
NYC builds a ton of real estate for no other purpose than allowing non-domiciled billionaires to park their wealth. I, for one, think that owning property in NYC (or anywhere) should make you resident for tax purposes. And the property tax system should be fixed but it's held hostage by upstate homeowners who like their subsidized tax rates on single family homes too much to let anything change.
Relying on private entities to provide houses by being landlords is an absolutely awful system.
[1]: https://www.theguardian.com/lifeandstyle/2024/mar/19/end-of-...
[2]: https://www.ubs.com/ch/en/services/guide/mortgages-and-finan...
The work of Piketty [0] and others shows that wealth inequality has surpassed pre-WWI historical maximums. The postwar "golden age of capitalism" has given way, from the 70s until today, to a neoliberal system that simply doesn't serve most people on the planet.
It's an unfortunate fact that significant change happens rarely without large convulsions, e.g. after a major war, because I don't see this being sustainable even medium-term.
[0] https://en.wikipedia.org/wiki/Capital_in_the_Twenty-First_Ce... and subsequent
I would not cite Piketty, Zucman or Saez who are the hardest fighters of the wealth inequality thesis as they usually mix political advocacy and have been criticized in their methodology and have been under a fair share of controversies. Btw I have grouped them because this is how they are usually treated, both by the fact they are all French economists but also on the fact they all push for the same inequality thesis
1: https://www.davidsplinter.com/AutenSplinter-2024-ReplyToPSZ....
2: https://philmagness.com/2014/12/an-empirical-critique-of-tho...
3: https://qz.com/1725562/elizabeth-warrens-economic-advisers-a...
EDIT: Here is the rebuttal for 2 by Piketty himself: http://piketty.pse.ens.fr/files/capital21c/en/Piketty2014Tec... courtesy of andrepd
So you ask not to cite someone only because they believe in what they discovered and suggest to take action based on that?
Who has not been criticize in their methodology? Who do you expect to avoid any amount of "controversies" for such a political subject?
Your comment seems to be pure ad hominem. Also, discarding authors because they're French is kinda stupid: historically, quick advances in a field most often start at one time and place.
I never said to discard them because they are French, but the political ideas they advance are the centric positions of French culture which for every problem the solution is more taxes, taxes on the rich etc
It would be like expecting American economists to be very libertarian, or Chinese economists very interventionists. The culture of their countries reflects their ideas.
NB: J'habite en France
The entire concept of economics without politics is nonsensical. They are one and the same.
I completely agree, thus no article should say "economists" but libertarian economist, social-democratic economist etc
Because the politics precede the findings
Eh, you're either honest with yourself or you're not. There's no need to add ideology.
Economics is political, so it should come as no surprise that economists have political opinions about what should be done at the level of the economy. Or is only that which is vaguely left-wing that is "political" or "ideological", and mainstream neoliberal politics and economics are simply "objective" and "technocratic"?
I think it's important to separate the empirical and analytic part, to which you can apply objective criticisms, to the political part, with which you can agree or not but which should have no bearing on the former part.
Anyway if you want to be honest you can also link to Piketty's rebuttal to the criticism, e.g. http://piketty.pse.ens.fr/files/capital21c/en/Piketty2014Tec...
Yes it is, and I because economics is political, I would appreciate putting an adjective describing the politics of the specific economists who are cited. If I cited a Hayek, as an "economist" it would be incredibly dishonest as his works are deeply libertarian and considered right wing. Mainstream neoliberal politics is right wing but not libertarian, very interventionist. But Piketty is left-wing, and it is dishonest leaving that part unsaid when citing him.
I agree, there is a difference between the technical and political parts. Sorry if I seemed dishonest, but I cited both the 2014 critique as well as a more general 2024 PSZ critique (from right wing POVs) including other economists who usually post on the same subject of income inequality. I will edit my original comment to include Piketty's rebuttals.
Everything in economics always boils down to 1. supply and demand and 2. taxation.
One can simply look at historical income taxes in the USA and their progressiveness and conclude that over time taxes tend to regress until some economic calamity or war happens, after which taxes become extremely progressive again for a short while (top income tax rate bracket of 75% to 90%).
See for yourself, it's all there:
https://files.taxfoundation.org/legacy/docs/fed_individual_r...
What terrifies me most about this is that those in power will keep getting younger, dumber and more complacent.
I feel like communism is inevitable at this point. People know communism isn't the solution, but they will still vote for it because at least it pretends to stand for equality.
We're going to reach a point of such extreme inequality that even the pretense of equality provided by communism would be welcomed by the majority.
In a way, the pretense of equality sets a floor on inequality; because, in a communist system which calls all humans equal, any actual inequality has to be either hidden or justified... This requires effort. A system which pretends to stand for equality can only become so unequal before it loses its ability to justify itself; then it collapses.
By contrast, our current system makes no claims about human equality, quite the opposite; it exaggerates and propagandizes the inequality of humans and human ability as a means to justify its failures in terms of human resource allocation.
For example, our current system sees homelessness not as a failure of its resource-allocation capabilities but as a kind of efficiency. It does so by dehumanizing the homeless; painting them as lazy and incapable of value-creation; deceptively conflating 'value creation' with 'value extraction' in the process. Our system keeps trying to portray the 'value extraction' endeavors of the entrepreneur class as being on the same level as the 'value creation' of the working class... They will not acknowledge the reality that 'value extraction' is the main cause of wasted human potential.
It is our current system itself which fails to efficiently allocate the most valuable resource in society; people's time and energy. Our current system implies that human life is of such low intrinsic value, that some people aren't even worthy of having a roof over their heads, all while it deprives them of their right to build their own roofs (with regulations).
Our system loves to blame individuals for its oppression and it loves it even more when they blame themselves for it; it seizes any opportunity it can to demonize beaten-down intelligent people who understand the mechanics of its oppression and it idolizes egotistical idiots who have never experienced struggle and who therefore don't have much difficulty in taking full credit for everything (good) which happens to them...
It's not difficult to take full responsibility for your situation when only good things happen to you... But watch how these people behave when things go belly-up. They're off to the Caymans, never to be heard from again... The system is remarkably lenient on them.
> People know communism isn't the solution, but they will still vote for it because at least it pretends to stand for equality.
Genuinely curious - why isn't communism the solution? And in your opinion, what are some better solutions? I haven't studied much about political/economic ideologies and at this point don't even know where to start. I do agree with some of what you are saying, but I don't understand why communism wouldn't be be a step in the right direction.
inheritance taxes are just mafia theft, no matter how you rationalize it
Well, everyone is member of this mafia. The problem is that lowest on the totem pole are not served by it.
According to many on this site. All taxation is theft. This desensitize me to this argument.
According to many on this site. All taxation on their 500k salary and 3mil in stock is theft.
According to the same people. Passing $1mil to your children is immoral and should be banned.
I suspect they love expensive shiny things and hate their children.
The (actual and would be) aristocracy loves this take.
its actually grave robbing, the person is litterally dead.
If I was nearing the end and I knew the state would be taking all of my assets upon expiry, I would make sure to go out with a bang if you catch my meaning. A few million could buy a lot of bang.
They'll have an epidemic of geriatric domestic terrorists on their hands.
That is the way of the world, capitalism specifically. The only way to counter is a fair tax system and good spending on education up to college level.
100% agree with you.
Counter-example: All the European, and world countries who have implemented the various inheritance, wealth taxes and heavy redistribution yet the inequality is still widening. Take France, Norway or Sweden as the ideal social democracies.
Argentina (the end game of social democracy) pre-Milei had a huge array of taxes and regulations which lead to the state misusing that money to actually enrich a small elite of politically aligned. Similar things and arrangements (under the form of subsidies to companies) will happen under Trump and levying more taxes will just give more opportunity for corruption.
Sweden has no inheritance or wealth tax.
There was one until 2007, many countries had wealth taxes. Also in 2005 inheritance tax was repealed.
In France wealth tax was repealed in 2017 I think but will be soon reintroduced under a new form.
Specifically because those don't work at all. Not because some evil rich people decided to scrap them.
Unlike people, capital has no nation. It can just move effortlessly from France to Switzerland to the Cayman Islands. That's why single-country initiatives to e.g. tax wealth (or even tax extremely profitable companies) are doomed to failure: those assets are easy to transfer and hide; if the UK passes a progressive wealth tax, all those global billionaires will just sell their empty houses in London and buy empty houses somewhere else.
Hence the proposal by many economists that the only solution is a broad agreement on a global progressive wealth tax, with at least the major blocs of the US and EU on board. See e.g. "A Brief History of Inequality".
This is basically a prisoner dilemma on a global scale where the incentives are for single marginalised nations to leverage the fact of being tax havens to survive globalisation. The dream of a single global tax is as possible as making China/US respect any of the agreements they have signed regarding trade and environment.
The same proposal is also criticized by many economists too, who argue that inequality has not risen as sharply as Piketty's crew claims, or that the bulk of that inequality is linked to the real estate, for which the only solution is build more houses and destroy the capital accumulation of older generation to the profit on newer ones.
1: https://www.brookings.edu/articles/deciphering-the-fall-and-...
Re real estate: indeed an LVT would go a long way to ameliorate the unsustainable situation regarding housing across Europe. It's a simple and efficient solution, and can be applied at the country level.
But I would argue that the situation in housing is actually a consequence, and not a separate phenomenon, of the broader issue of inequality-driven asset price inflation.
Fuly agree, LVT seems to be a good incentive. As well as de-regulating, easing or digitilazing all the bureaucratic processus related to building so that the time between wanting to build and actually built nears 0. Also introduce anti-democratic laws that push the will of the group over the individual house owners who are motivated to block new contructions to see their number go up.
https://en.wikipedia.org/wiki/Expatriation_tax
Does all of this capital really do anything for a country if it's just being parked? Would we miss it?
Selling empty homes in London will increase supply of housing in London and lowering the price of housing, allowing less than wealthy people to accumulate wealth.
The problem with countries like UK is that real estate is the only way of obtaining, growing and keeping wealth there. And I mean the only.
Capitalism creates inequality, but in a socialism/communism economy there would be either no money or no goods. Everyone would be equally poor, not just some.
This is the argument made by people who would not work without getting paid for it.
If this were universally the case, open source would not exist.
And yet unpaid internships are still a thing as the point is education, not direct financial compensation.
Why would there be no money under socialism?
No money is a bit of hyperbole, but fundamentally, nobody really wants to work hard for the exclusive benefit of everybody else.
Greed is an innate human trait.
So there would be money, it would just be less efficient. That's a fair enough claim, but I don't understand why I was downvoted for asking.
Socialism is not communism and isn't anarchism.
Those are not the same, but too many don't know what's the differrence.
Money only works when there is a base level of trust that later, money accepted will have some similar utility.
Because it would be stolen by the government. Ask people in post-Soviet countries about how Soviet governments were stealing money from their bank accounts, from all citizens collectively. No one believed in money under socialism in the USSR. The government could always pull a funny trick called "and now... it's gone". Be happy, comrade, that only your money is gone, you could also be in prison.
USSR operated under state capitalism, nothing like what any of the communists or socialists ever imagined. But I guess that is what USSR made socialism mean as a result.
BTW: Most of the world lives under state capitalism, not capitalism, not socialism, not any other form of economic system. The state has an unrestricted claim to any and all of your wealth.
Social democracy is Socialism[1].
European social democracies are among the top of the wealthiest countries in the world.
[1] https://en.wikipedia.org/wiki/Social_democracy
European countries did not get wealthy just because of their social democracy system. There is a lot of very painful history as well.
Interestingly enough, when detractors like to point out countries where communism "failed", it's always countries that did not have a rich history of colonialism and exploitation of cheap labor forces around the world.
Just a thought.
I was unlucky to see and live in socialism. European democracies are not socialism by a mile. They are capitalist countries with some socialist elements. Yes, it makes sense.
Social democracy is a Socialist philosophy and has been ever since the spring revolutions of 1848.
You seem to confuse capitalism with market economy. Germany's social market economy was conceived as an alternative to capitalism; a market economy with strong focus on unions and social fairness/justice. In other European countries is very similar.
Socialism core principles have always been égalite, solidarity and democracy. It's pretty silly to think that a highly hierarchical, unjust and undemocratic system has anything to do with Socialism.
Hint; it doesn't. It might say so on the marketing material ("Socialist Republic!") but that's just that - marketing to fool the numbnuts.