So inheritance tax?.
Or is there an argument that this is good for society?
Or is there an argument that this is good for society?
The problem with wealth, company any capex taxes has tended to be dynamic effects like capital flight. But, those aside, a 1% effective wealth tax on paoer/whiteboard, basically neutralises picketty's r>g, the driving force behind wealth disparities.
^ edit: in that theory
How would a wealth tax differ from a capital gains tax? The net effect would seem to be similar?
I don't agree with that framing, but even so if you look at the debate about income inequality today, you'll see people have issues even with earned wealth, in astronomical amounts (eg Bezos, Gates, Koch brothers, etc).
"His [Bill Gates] father was a prominent lawyer, and his mother served on the board of directors for First Interstate BancSystem and the United Way. Gates' maternal grandfather was J.W. Maxwell, a national bank president." Also wikipedia.
So these aren't exactly people who worked their way up from the gutter.
But yes some people probably do have problems with earned income, I still think the distinction is worth it though.
Isn't it the same as saying that income tax presupposes that all income is bad. We should tax wealth not because wealth is bad but because doing so might have a positive effect on society.
> How would a wealth tax differ from a capital gains tax?
capital gains tax taxes realised return on capital. wealth tax is based on the total wealth regardless of it's performance.
Re captial gains tax. Over the very long term, you would expect your investments to at least track inflation, and you would expect to sell of those investments to buy things. Its not clear to me that these 2 taxes necessarily end up very different. Should we not expect to get at least a flavour of what to expect by looking at capital gains tax?
(But there must be a lot of cases in which someone sells for a large sum of money a work of art or a copyright that they inherited and people then think: Hang on, was the value of that thing taken account of when the estate was distributed? Should additional inheritance tax be applied now, even though X years have passed and we really can't guess what the value would have been at auction X years ago?)
seriously: what else is there?
But there's a problem also for ordinary people, who have most of their assets in the form of their house. In the UK land isn't valued annually.* Unless your house is very similar to a nearby one that was sold recently, nobody really knows what it's worth. Speculation concerning what development might be permitted in the future can have a big influence on the value. It would be scary if some bureaucrat's guess were to significantly affect one's annual tax bill. And it would be expensive for everyone if that resulted in disputes going to court.
* Local taxation is based on the "rateable value" of property, but this is inaccurate, banded, often out-of-date, and only a small part of a typical family's total outgoings.
Switzerland, which tends to be viewed as a haven for the rich, has a wealth tax. It would appear to be a counterexample...
Note that it has other tax features which may make it appealing to the rich (no capital gains tax, e.g.).
In the Netherlands, there is an asset tax. Your assets (money, stocks, bonds, etc.) over a certain threshold are taxed 30% annually on an assumed investment gain of 4%, so effectively a 1.2% tax on everything over a threshold of a couple ten thousand euros.
I think the numbers are different this year, but nonetheless it certainly isn't infeasible.
Not that I'm a fan of it due to double taxation.
Does NL have capital gains taxes in addition to this asset tax?
There is no capital gains tax.
What would you say are the "society wide impacts"? I tend to subscribe to the view that money is the root of all evil[1], so at the extreme, a 100% inheritance rate would solve the problem.
[1]In the sense that money leads to power, increased education opportunities for children etc etc.
If the Son never inherited the Fathers money, he'll have to earn his own before bribing that politician.
If you take the view that the state requires $X per year to function. If the money doesn't come from inheritance tax, it has to come from somewhere. I don't know about you, but I'd prefer to pay my taxes when I'm dead.
If they want to spend it, fair enough.
This will make the wealthy enjoy their wealth more, but it will make society poorer while also making it less free.
If you think about it, someone earning a lot of money but not consuming it engages in altruistic behavior. You earn money by providing goods and services for others, but then instead of enjoying the money, you work at investing it and managing it to provide even more goods and services for others!
Maybe my son would like to open a travel agency. Maybe then I'd like to use that travel agency almost exclusively so that I could keep tabs on his progress and offer my advice. Oh look, his travel agency, despite being extraordinarily expensive, is very successful and now I don't have any money left to pay inheritance tax on...
The scarce workers who would have been employed elsewhere, doing something productive, wasted their time building the yacht. The materials that went into it were wasted. The engineers, managers that oversaw its construction wasted their effort.
Consuming scarce resources, rather than investing them, by its very definition makes society poorer.
The invested (saved, not consumed) resources that rich people have won't necessarily go to socially useful enterprises. Instead, they'll probably be invested in things whose main purpose is to create more capital for the capitalist class to invest, not to decrease human suffering. The two things have historically been correlated, but there's no guarantee that this will last forever, and good reason to think that it won't.
At some point (and maybe we've already reached it) we will have enough capital for everyone in the world to live a maximally happy life. Arguably, any investment beyond that point (beyond what is necessary to maintain that capital sock, and perhaps grow it at the same rate as population growth) is malinvestment, since if our goal is to maximize human happiness, additional capital is useless beyond that point, so we should use those resources to do something else.
The obvious problem with this line of thought is determining when we've got "enough" capital, and therefore when we can stop playing capitalism and whack up the gains. Obviously 1918 Russia was the wrong time and place to do that, but hindsight is 20/20.
Another issue is that a lot of our capital stock is not in the form of physical stuff, but institutions, contracts, and relationships that a socialist revolution would actually destroy. The reason Amazon is worth so much money is not because of all the physical stuff it owns, but because of the structure, contracts, and relationships within the company itself allow that physical stuff to be more productive than other physical stuff employed by other firms, and indeed even by the laws that allow firms to exist at all. Any "revolution" will obviously severely disrupt a lot of these relationships, from employer-employee relationships, to government contracts, IP laws, etc. Indeed, that's the whole point of a socialist revolution, but similar things on a smaller scale are faced with almost any progressive policy proposal: changing the social contract to be more beneficial to workers and redistribute society's wealth can actually reduce the amount of wealth in the society. That doesn't mean we shouldn't do it, since less wealth distributed more evenly will probably be a net positive for the majority of people, but we can't pretend this problem doesn't exist. It's a conundrum that I rarely see the Left wrestle with, but I think we need to.
Regarding wealth redistribution reducing wealth in society. Would you say that that is a short term blip, that may or may not lead to increased wealth in the future? A company restructuring can reduce productivity before increasing it.
Also you presuppose revolution, that isn't necessarily required. Post war Europe went quite far along that road democratically and peacefully, and seemingly in the short term successfully (I suppose the inverse of the scenario in my prior paragraph)
I'm not advocating a revolution, and meant to bring it up as one limit of left policy change. This exact problem (radical changes to relationships during a revolution destroying lots of wealth) is why I think a Russian-style revolution is a bad idea, unless the revolutionaries are making the conscious choice to create a post-revolution society that is drastically poorer than the pre-revolution one. I don't think most people (except extreme radicals) would support this goal. Any socialist revolution would therefore have to downplay or ignore this fact in order to succeed, which is precisely what happened in places like Russia, China, and Cuba in the 20th century. (To be fair, the Russians were the first to try this, so they didn't have anyone else to look at and learn this lesson.)
That doesn't mean incrementalist left policies don't have to grapple with the problem though. Single-payer healthcare, for example, would probably reduce the amount of wealth in society, since most of the value in private healthcare firms comes from the current structure of the healthcare market. A leftist should be OK with this and support single-payer anyway because most people will gain.
They were well aware of this [1]. That's part of the reason why most leading revolutionaries, including Lenin, saw the spread of the revolution to western European countries as a requirement for their (edit: I meant to write "its", but "their" is probably more accurate after all) long-term success. IIRC he remained deluded in the prospects for this until his death.
[1]:
There's probably a more direct source for this but here's one I remember. This is from "The Conquest of Bread" (1892), albeit an anarchist rather than a bolshevik, Peter Kropotkin was famous enough during that time to prove the point:
It is evident, as Proudhon has already pointed out, that the smallest attack upon property will bring in its train the complete disorganization of the system based upon private enterprise and wage labour. Society itself will be forced to take production in hand, in its entirety, and to reorganize it to meet the needs of the whole people. But this cannot be accomplished in a day or a month; it must take a certain time thus to reorganize the system of production, and during this time millions of men will be deprived of the means of subsistence.
Coldly understanding that "millions of men will be deprived of sustenance" while the new Socialist system takes place, and yet doing it anyway, is I guess just a reflection of how steely-eyed these radicals were. Still, my point stands that this was not how it was sold to the masses. Going out with a message of "Out with the bosses, we'll take all the riches ourselves!" is a much easier sell than "Listen, I know you are all desperately poor and suffering, but that will have to get even worse, and a lot of you are probably going to starve, before it gets better if we're going to build socialism."
Yeah, I mean, there's a lot of factors to take into account during that time ofc, most social upheavals will not come with an attached short-term economic benefit. I do not think that they necessarily thought that most would simply die either, but experience a generally hard time rebuilding. Tsarist Russia was a powder keg that were likely to blow up even without the brutal version served by the bolsheviks.
You're right, I didn't really mean to address your initial point about that, I'm just cherry-picking and adding some thoughts. Propaganda will always emphasize the positives and downplay the negatives as you wrote. In fact, and maybe I'm getting a bit side tracked, but Lenin and others of the more cynical revolutionaries of that time, and probably before and today, thought it might be necessary for things to get worse to reach the conditions needed for the revolution to succeed. Of course there's some amount truth to that, but it's nevertheless very much in line with the terror that followed in the means to an end fashion. On the other hand, Bertrand Russell, for example, while agreeing on the need for communism thought the price to pay through these bolshevik methods were just "too terrible" to justify it. So the spectrum of revolutionaries during that time was quite wide.
Most of the time it's very opposite. Unless with "consuming" you mean donating.
I'm interested how society would become less free. Would it not increase social mobility? Or are you thinking of something else?
By less free, I mean that anyone who wants to leave their children the fruits of their labour is now unable to do so. The more restrictions on individuals, the less free a society is. And it is a very big motivator for some people - many people value the standard of living of their children higher than their own.
But I do get your utilitarian argument. After all, every next dollar of our wealth we value less than the previous one. So in this sense, I can see why you would think that redistributing that wealth would make the society better off overall. But I think you misjudge the effects of consumption vs investment and of the incentives on the overall wealth of a society.
I think this is a fallacy. Freedom, when defined this way (taken to its extreme), is not desirable for society as a whole. It only helps the wealthy and powerful and works against the poor.
If you are poor or indebted, you are not really free, even if there are no individual restrictions. People in need will probably be inclined to "freely" take out loans, giving up their freedom. Wealthy people may want to keep a good portion of society in need so they'll always be "freely" working for them.
It generally involves becoming less materialistic than the average American, though.
The fruits of your labour argument is a good one which is why I would advocate a 100% inheritance tax.
I'm less convinced by your freedom argument, taken to its logical conclusion, murder should be legal because you're removing the rights of the murderer to do what they want. So I guess it comes down to where you draw the line?
Consumption v investment. There are good arguments each way, I don't know if higher inheritance tax would lead to higher of either. I think they tend to form a balance though.
And yet, there's a difference between, say, a 30% inheritance tax and a 100% inheritance tax. The 100% tax means that you cannot leave anything to your children. The 30% tax means that you cannot leave all of it to your children. One is more prohibitive (and therefore infringing) than the other.
I'm not sure I understood your point correctly, but most wealth that is passed between generations is passed in the form of investments, not cash, so that wealth is performing the same societal benefit as your pension. What I meant by long term risk was that rich kids can afford to start businesses, because if they fail, they can fall back on their family's wealth to bounce back.
I would avoid adopting the world view that money is the root of all evil (or leads to power...). If you gave everyone $1B, no one would be measurably more powerful than they are today, because everyone else can afford the same things they can, so prices would rise until an equilibrium is achieved (same goes for educational opportunities, etc, unless you cap teacher pay effectively holding teachers back).
Again, a 100% inheritance rate would make society more equal by taking away opportunities from those who had ancestors that worked hard to provide that opportunity for them, not by giving more opportunity to those who weren't so fortunate.
Put yourself in the life of a 65 year old with adult children. How would you feel about 80% of your death-day savings being taxed? What different choices would you make in your last decades as opposed to today?
Wouldn't a land value tax essentially end up like an expanded council tax?
Why is this binary? It could be terrible for society, and something which an inheritance tax cannot cure.
Or something awful for which cures would be worse. We could eliminate most cancers from society if we shot everybody on their 60th birthday... but few would regard this as an improvement. Ditto Maoism, etc. But there are other more incremental things we can, and do, try against cancer.
It allows one to put their children on the payrol, keep money in the family and prevent any outsiders to gain access to this capital through marriage, etc… You could invest most of the money and spend a minor amount on charity each year, allowing the capital to grow and avoid paying taxes. Money donated to the foundation is in many countries tax free as well, so it's another nice way to avoid paying too much income tax.
Whose conduct has been called criminal...
Theres nothing in principle to stop the state from increasing the arm length that the foundation should be held at, although that may lead to a loss of 'charitable' donations.
I'm not sure theres no point to taxes even if they're avoided. At the very least it sends a signal about what society finds acceptable.