>I also feel rather strongly that if children shouldn't inherit their parents' debt, then they also shouldn't inherit their wealth. The best way to accomplish that is a high inheritance tax.
There's a slight problem with this idea: how do you deal with people giving each other money? People frequently "inherit" money from their parents before they're dead, sometimes long before. If parents pay for their kids' college tuition, do you want to tax that as "inheritance"? What if they set up a trust fund? What about the money parents pay while their kids are under 18 just for their living expenses? What if parents buy their adult children a house? With today's housing market, a lot of Millennials and GenZers can't afford decent housing right out of college, so sometimes their rich parents will buy a house for them.
So assuming you don't want to tax some 40-60 year old parents when they buy their 18-30yo kids a car or house or college, where do you draw the line? What if they're 70+ and they give their 40+ kids a big cash gift?
Finally, you're also assuming the parents die at an old age. What if the parents die young? What if the kids are still in college and don't really have any money of their own, and suddenly their middle-class parents die in a car crash? Do the kids now need to drop out of school and get on welfare or try to find a cashier job because all the parents' resources go to the state?
The only way I see a high inheritance tax not being really cruel, and also not being rejected by the voters, is if it only targets truly wealthy people. Jeff Bezos's kids don't really need to inherit all his billions if he gets hit by a bus. If an inheritance tax takes 95% of his wealth, leaving his kids with "only" tens or hundreds of millions each, that's far more than enough for them to live on for the rest of their lives. But taking that much from even upper-middle-class people won't really leave much for their kids. But with so much of the nation's wealth concentrated in the hands of a relative handful of people, I don't think it's really necessary to target anyone besides them.
>There's a slight problem with this idea: how do you deal with people giving each other money? People frequently "inherit" money from their parents before they're dead, sometimes long before. If parents pay for their kids' college tuition, do you want to tax that as "inheritance"? What if they set up a trust fund? What about the money parents pay while their kids are under 18 just for their living expenses? What if parents buy their adult children a house? With today's housing market, a lot of Millennials and GenZers can't afford decent housing right out of college, so sometimes their rich parents will buy a house for them.
That's not a real problem with the idea of an inheritance tax. That an inheritance tax alone doesn't result in perfectly equitable wealth distribution doesn't mean there's any problem with it - it would certainly be more equitable than not having inheritance tax.
>The only way I see a high inheritance tax not being really cruel, and also not being rejected by the voters, is if it only targets truly wealthy people. Jeff Bezos's kids don't really need to inherit all his billions if he gets hit by a bus. If an inheritance tax takes 95% of his wealth
I actually think that's a class where a high inheritance tax would be most problematic. Do we want the government to suddenly gain controlling interests in Amazon or Google or any other massive private enterprise?
>I actually think that's a class where a high inheritance tax would be most problematic. Do we want the government to suddenly gain controlling interests in Amazon or Google or any other massive private enterprise?
Absolutely, yes! The whole point of a publicly-traded corporation is that the company is owned by lots of different people, not just one person. If one person owns most of the stock in a company that large, then they're doing something wrong. Having a high inheritance tax for billionaires would be good this way, by making them think twice about hoarding all that stock.
With a normal huge corporation in this scenario, it would take a bunch of people all dying at once for the government to suddenly gain a controlling interest. I'm not sure about Amazon, but I'm pretty sure Google is not more than 50% owned by one person.
>That an inheritance tax alone doesn't result in perfectly equitable wealth distribution doesn't mean there's any problem with it - it would certainly be more equitable than not having inheritance tax.
I don't see how it's really equitable at all, unless you restrict it to truly wealthy people, so that you avoid family dynasties from happening and continuing for generations. For middle-class people (who these days really do not have that much wealth), I don't see how this benefits society at all.
Also, you never addressed my question about how you handle gifts. This is typically how extremely wealthy people get around a lot of inheritance tax today. (Remember, we do have an inheritance tax now, and it only applies to multimillionaires IIRC. And they typically get around it with trusts, giving it to their kids before they die, etc.)
Honestly.. my first instinct would be to reform our tax system so that all income is treated equally by way of tax brackets. So small gifts under about $10,000 wouldn't be taxed much, but the rate would scale pretty quickly so that $100,000 might be taxed at 30% or something. I'd also vote to restore the pre-Reagan top marginal tax rates so that $1 million would be taxed at 50-90%.
And actually now that I write this out, that might all be sort of how it works now. Except that tax brackets have only been adjusted for inflation, not things like the wage stagnation since 2000 or the exponential rise in housing costs:
Also, capital gains is a flat (regressive) tax, and social security taxes (also flat) top out at an income of $132,900. If those were placed under progressive income tax brackets with no cap, I think many of these problems would go away.
At that point I'd be concerned about increased government spending. So we'd probably also need a hiatus on new expenditures for some number of years, or until certain metrics are met, like the national debt being paid down by some amount. Realistically though, the world is too complex for that kind of absolutism to actually work unfortunately.
I realize that this would be an inconvenience for middle class families trying to send their kids to college, etc. But if you look at the big picture, an increase in upper class taxes (especially inheritance tax) could pretty drastically lower everyone's tax bill. People would have way more money for gifts, and that money would recirculate more in the economy (the opposite of trickle-down economics).
>Also, capital gains is a flat (regressive) tax, and social security taxes (also flat) top out at an income of $132,900. If those were placed under progressive income tax brackets with no cap, I think many of these problems would go away.
This I think is an excellent point. So many wealthy people make far, far more than the SS cap; forcing them to pay more into the system would certainly shore it up a lot. And capital gains should be taxed no less than regular income, if not more since it's passive.
There's a slight problem with this idea: how do you deal with people giving each other money? People frequently "inherit" money from their parents before they're dead, sometimes long before. If parents pay for their kids' college tuition, do you want to tax that as "inheritance"? What if they set up a trust fund? What about the money parents pay while their kids are under 18 just for their living expenses? What if parents buy their adult children a house? With today's housing market, a lot of Millennials and GenZers can't afford decent housing right out of college, so sometimes their rich parents will buy a house for them.
So assuming you don't want to tax some 40-60 year old parents when they buy their 18-30yo kids a car or house or college, where do you draw the line? What if they're 70+ and they give their 40+ kids a big cash gift?
Finally, you're also assuming the parents die at an old age. What if the parents die young? What if the kids are still in college and don't really have any money of their own, and suddenly their middle-class parents die in a car crash? Do the kids now need to drop out of school and get on welfare or try to find a cashier job because all the parents' resources go to the state?
The only way I see a high inheritance tax not being really cruel, and also not being rejected by the voters, is if it only targets truly wealthy people. Jeff Bezos's kids don't really need to inherit all his billions if he gets hit by a bus. If an inheritance tax takes 95% of his wealth, leaving his kids with "only" tens or hundreds of millions each, that's far more than enough for them to live on for the rest of their lives. But taking that much from even upper-middle-class people won't really leave much for their kids. But with so much of the nation's wealth concentrated in the hands of a relative handful of people, I don't think it's really necessary to target anyone besides them.