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Comment by TheSpiceIsLife | Hacker News Reader

> Fascinating chart: more than half of all private wealth has been inherited in Germany, UK, Switzerland, France — trend: rising fast!

> Ever less private wealth is accumulated through own work, increasingly more through inheritance.

A massive part of people's motivation to work is to provide for their children. That an increasing portion of wealth is inherited rather than build in an individual's working life-time is indicative that the system is function as intended.

The graph seems to indicate there was a bit of a golden area after WWII up until the early nineteens, and that the nations included on the graph are returning the regular state of affairs.

But what does any of this mean?

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Modern inheritance should be inherently dissipative, as the estate is repeatedly divided among the heirs, amplified by death/inheritance/estate taxation. The problems arise when the wealth accumulation overpowers the dissipative effect of inheritance, combined with increasingly absurdly high wealth levels that go far beyond providing for children and grandchildren.

As for the "golden area" you mentioned; yes, the war(s) did function as great equalizing wealth redistribution force. Arguably bit of a blunt instrument to accomplish that.

Wealth naturally dissipates through the generations. What has changed the most is the birth rate of the wealthy.

If they went back to having a dozen children apiece, wealth would dissipate at least an order of magnitude per generation.

Depends on laws and customs.

Primogeniture concentrates inherited wealth in firstborn (usually male) offspring. [1]

[1] https://en.wikipedia.org/wiki/Primogeniture

OT but I grew up in a place where first borns would inherit the land that was good for farming and other siblings would get the less desirable land, usually on the coast. Apparently it would make siblings tear each other apart because the difference in land had a huge impact on a family’s wellbeing. Eventually, with tourism, the value of land flipped, making families that owned land by the coast become wealthy. Talk about external factors affecting upward mobility.

Wars, sickness and starvation have been great equalizers.

The last ones were decades ago and there is no sign of it coming back any time soon. We're living in unprecedented times.

Or was it the social-democratic politics that follow war, sickness and starvation?

Or if you're right-leaning maybe you would argue that it was the high growth that was a great equalizer.

Or perhaps a mix of these. I don't see social-liberalism going away in Europe. And while growth might not be same as it used to be, technology is likely to keep disrupting established businesses.

Wealth grows fast enough due to investment that splitting it up between children won't dissipate it.

Wouldn't the trend towards fewer children and smaller families decrease the dissipative effect? In the extreme case of a "one child" policy, inheritance would be amplified because the wealth of both parents (and presumably four sets of grandparents) would flow to a single individual. Similar to assortive mating, if wealthier families had fewer children relative to poorer families, then this would worsen inequality over time.

Often stated as "the rich get richer and the poor have children".

The War, maybe.. or perhaps the social-democratic policies that followed in many countries after the great depression and the war.

It helps that wealthier people have fewer children, so wealth dissipation affects poorer people dis-proportionally.

As always it's about moderation.

Saving wealth to take care of your children is one thing but this much seems excessive and ultimately means that inequality will continue to increase as wealth is trans-generationally hoarded.

Massive inequality also portends social unrest, plagues due to people who can't afford medical care, wars, etc etc

A massive part of people's motivation to work is to provide for their children. >That an increasing portion of wealth is inherited rather than build in an individual's working life-time is indicative that the system is function as intended.

No, it just signals that the tax system treats unearned income and wealth more favourably than earned income. Political choices.

How you feel about that depends upon how you feel about in increase in unearned income flowing to the wealthy I guess.

> the tax system treats unearned income and wealth more favourably than earned income.

The income was taxed when it was earned. What reason is there to tax it twice?

> how you feel about in increase in unearned income flowing to the wealthy I guess.

Or about how you feel about the government's use of it's citizen's resources. Why should wealth earned by the breadwinner of the family, not remain with the family? It's arguably better than expropriating citizen's wealth to fund expaditionary warfare.

Double taxation doesn't mean anything in this context.

We tax transactions, not specific euros. Income tax when an employer pays their employee. Inheritance tax once the money goes from the deceased to the heirs.

These are separate things! And no different than, say, VAT on that iPhone. Sure it's between family members , but in the vast majority of cases all parties are independent adults.

The land you inherit is not "justly yours". It was the previous owner's thing. You are getting it but it is not your divine right, except that you won the birth lottery by being born into this family.

Of course a lot of families also have smaller domains, and it makes since to have some lower limit... But let's not forget people affected by inheritance tax are overwhelmingly very rich. Most of the population ends up with nothing.

> The land you inherit is not "justly yours". It was the previous owner's thing. You are getting it but it is not your divine right, except that you won the birth lottery by being born into this family.

Of course those arguments apply to governments as well, since they don't derive their law-making authority by claim to divinity - at least in modern times. Why should a government be specially privileged over a citizens wishes to provide for their family and/or community after death?

> Of course those arguments apply to governments as well, since they don't derive their law-making authority by claim to divinity - at least in modern times.

You could use that statement to argue about anything a government does. Why does the inheritance tax need a special justification?

Why do laws that appropriate private citizens wealth need to be justified?

Well, the alternative is wonderful stuff like civil forfeiture law. Whereby a policeman without evidence or proof of criminal wrongdoing can take that $2000 in your glovebox in the name of a defacto beneficiary (the state), because on a balance of probabilities he thinks he has a better claim than you do.

>Why do laws that appropriate private citizens wealth need to be justified?

What moral authority does a private citizen have to own land in Manhattan created 3 billion years ago and made valuable by the infrastructure he didn't build and community he charges rent to?

I would argue that indigenous inhabits as private citizens have the better claim by virtue of tradition and generational succession, than the 'state' as defacto beneficiary and law-maker everytime. The dispossession of native peoples by colonial governments is just another example.

Government confiscation of private wealth in the name of perceived inequality, should be examined very carefully when modern economies are structurally indebted, and budget for foreign policy objectives over domestic improvement.

The income by the inheritor was never earned. Hence it's perfectly logical to tax it.

So you would be in favor of taxing someone's social security or charitable receipts - since the benefits are not earned?

Social security benefits are taxed.

Twice.

Taxing a transfer payment is an accounting fiction equivalent to simply providing a larger benefit. (Social Security, by the way, is simply deferred earnings. You may be thinking of Medicare or disability?)

I think you mean capital not income

But then it does not make sense to consider the size of the deceased's estate when deciding if the inheritance should be taxed. And the US does precisely that.

Yes it was. It was earned by the person who made the money.

Would you rather all the wealthy people in the world just blow all their money on yachts or something?

Because that is the alternative. Why bother saving money if it is all just going to be confiscated when you die. Instead you should just blow it all on ridiculous things that help nobody but yourself in the immediate time frame.

Or they spend it on politicians.

It doesn’t help “nobody”. It helps people that build yachts. And then the people who sell things to the people that build yachts. And on, and on.

Working people spend their money.

So would you rather yacht builders get more money, or would you rather people's children get a good education because their parents paid for it?

That's a false dichotomy, since the yacht builders will be taxed and taxes pay for a good education for all (in a far less arbitrary way than wealthy parents' charity).

Yes, I'd rather them blow all their money on yachts. Because then their money would be entering the economy where it would be used to pay for goods and services and employees.

You know what happens to the money when the government taxes an estate?

That money gets put back into the economy in the next calendar year. While it might be good for individuals to have savings, it's better for the economy when money gets spent. The reason that Gary Cohn got so many shrugs when he asked CEOs how many of them would expand businesses with the money from the tax cuts is simple: they hire more people when they have more demand. Making rich people richer or giving rich kids more of their parents' wealth does jack shit for the economy.

Why do you tax income? That's a disincentive to be productive, that's not good - we want people to be productive.

Taxing wealth is basically paying a rent to the society that allows that wealth to exist. Your land in manhattan is only worth $10m because society hasn't gone all Syrian. Your copyright holding over your film is only worth anything because we don't let people freely copy it.

When the wealth is owned by the people who aren't productive, you have a problem. It may be that those that are productive Leave and move elsewhere - who runs your hospital/golf course/power station then.

It may be that the productive say "enough is enough" and decide to invent the guileteen.

Either way when people have less to lose than you, it's a dangerous place to be.

Interesting idea.. so instead of taxing income, you would tax wealth carried from one year to another...

That would massively discourage saving. I'm not sure that's great in the long run. In the short run I'll probably lead to massive growth as every goes to burn their dollars on something :)

(Arguably it might be a low tax, might even limited to people with a lot of wealth)

Saving money is already discouraged by inflation. A wealth tax would be functionally equivalent to a fixed inflation rate, just the numerical values would be different.

Since the numbers would be going down instead of the increasing money supply devaluing savings, I guess people wouldn't like it, because losing wealth would actually feel like losing wealth.

Not really. Inflation reduces the value of money, but not assets. A wealth tax would tax assets as well.

Which is probably also why it would be hard to implement :)

Also I'm not sure discouraging invests is a good side effect..

But it's an interesting thought nonetheless.

This is why taxing wealth is done at the time of inheritance.

Easy to avoid if you have enough to be worried about.

That is kind of what we do with property taxes. Taxes on the value of the property from year to year.

And that's good - although fairer if it's only based on the value of the unimproved land, rather than the improvement. We don't want to stop people from demolishing a slum and building a nice house because the taxes will increase, we want them to discourage owning the slum, leaving it abandoned, and waiting for the land to appreciate in value.

saving is a way of trusting tomorrow's generation to repay you for work you did today. If tomorrow's generation don't feel part of that society then why do they owe you a living? You're only as valuable as how productive you are today, your savings are worthless.

However under your assertion, you are already massively discouraging productivity, by taxing it so high.

However rather than taxing monetary wealth via inflation (which targets those who can't hide their wealth in other assets), you tax the assets that are impossible to avoid, namely copyright protection (charge an exponential fee to keep the work in copyright) and land (if you own $10m of land, and your neighbour owes $100k, you should be paying 100 times more for the upkeep of that land, and you can't hide that off shore).

This means tax on dividends goes to zero, tax on productivity goes to zero, and it encourages people to invest and work, not sit there collecting money from just being rich.

why do people save money?

Big purchases, sure. But also as a safety net. As a retirement fund. To help send their kids to college.

The bit extreme extension to this is that if society had strong enough safety nets for everyone, nobody would need savings at all.

Such a tax would have a lower bound on wealth (that is how it works in all countries with wealth tax). Only wealth above a set limit (say 1 million dollars) would be taxed. It would not affect people's incentive to save. In fact, if it makes wealthy people spend more of their money, that could conceivably be a net positive on the economy as well (less stagnant money).

That would just lead to (further) portfolio diversification, where you buy assets abroad purely as a means to store value instead of keeping all your assets under a single country's control.

Each individual pays income tax once, when they obtain the income.

There’s no double taxation any more than it’s double taxation to tax my income then to tax the entrepreneurs who I do business with.

And while I agree that money staying with a family and creating economic inefficiencies and pointless disparities is better than war, that’s an absurd false dichotomy.

We hear a lot in these parts about corporate greed, but curiously nothing about state greed.

I'm not so simple-minded to think that when I pay taxes I can relate to a billionaire having to pay taxes

The powerful does not earn income, they seize the fortune, and those are not subject of tax system.

Let’s see how richer the trump family will become after the presidency...

You don’t. You tax the new income that old income generates. Frankly, all income should be taxed the same and there shouldn’t be deductions.

The income was taxed when it was earned. What reason is there to tax it twice?

I paid tax on my income, so when I buy milk at the store, the store shouldn't pay tax because the income was already taxed and the employees there shouldn't pay tax when they get paid, because the income was already taxed.

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